Wednesday, June 21, 2000

Indiana suspends gas tax

FTC launches collusion, gouging probe

From staff and wire reports

        With gasoline prices in the Midwest surging past $2 a gallon, Gov. Frank O'Bannon of Indiana suspended the state's gas tax Tuesday for two months and warned he may seek an inquiry into possible price gouging by oil companies.

        Mr. O'Bannon, who said the tax break — which begins July 1 — would reduce the price of gasoline in his state by as much as 10 cents a gallon, demanded to know why gas stations in Indiana are charging record prices, exceeding the national average by as much as 50 cents a gallon.

        The move came as the Federal Trade Commission opened an investigation into the price increases in the Midwest, which have drivers in Chicago paying an average $2.13 a gallon, a 55-percent increase since January.

        “Hoosiers can't afford to wait on federal and state investigators to tell us why the Midwest is being hit so hard,” Mr. O'Bannon said.

        Vice President Al Gore said in Lexington on Tuesday that profit reported by oil companies earlier this year suggested “big oil is gouging American consumers.”

        “I think we need a broader investigation on antitrust grounds on possible collusion, possible price gouging,” he said.

        Phil Matthews, an employee of the Harrison Shell Station, about a mile from the Indiana border, said he didn't think lower gas prices in Indiana would change much at his station.

        “They have to drive all the way over there to get gas,” he said. “It's not worth it to drive more, just to save a few cents. And there really aren't that many gas stations that close.”

        At his station, unleaded regular was $1.88 Tuesday night, and premium was $2.13.

        At the BP station on Winston Avenue in Covington, unleaded regular was $1.85 and premium was $2.06.

        But Kentucky State Rep. Jim Callahan, R-Southgate, doubted the commonwealth would follow Indiana's lead.

        “The question to me is what do we take out of the budget to allow for this to be done,” he said. “You would be creating a hole somewhere....”

        In Indiana, money from the sales tax on gas goes to the state's general fund. Mr. O'Bannon said a 60-day suspension of that tax would likely cost the state $11 million. But, he said, the high cost of gas has already provided the state with more than enough money to absorb the $11 million loss.

        U.S. Rep. Ted Strickland, D-Ohio, said that while there has been some discussion of the federal gas tax being removed or partially removed, he has not been in favor of it.

        “Ohio would lose many millions of dollars in highway funds, and I believe that that's the position that's been embraced by both of our senators,” he said. “I certainly am concerned about the price of gasoline, but it seems to me that the major reason for these inflated prices is an effort to gouge the public on the part of the oil industry.”

        As for the Indiana governor's action, “it seems to be a reasonable conclusion, and it's probably easier for an individual state to take that unilateral action within the state,” the Lucasville lawmaker said.

        The FTC will issue subpoenas for testimony from oil company executives beginning next week, officials said Tuesday. The investigation, which could take as long as six weeks, will be conducted by the FTC's Bureau of Competition, which has already been looking into whether higher prices in California resulted from collusion between gasoline refiners or distributors.

        Sen. Richard J. Durbin, D-Ill., told the Associated Press the investigation would send “a clear signal to the oil companies to bring down prices immediately.”


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