Price-gouging suspicions grow

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The San Diego Union-Tribune (California)

Suspicions about price gouging grew across the country yesterday as gasoline prices rose sharply even in areas far removed from the direct damage caused by Hurricane Katrina.

In California, consumer groups and AAA said fuel prices were rising at extraordinary rates, with the increases coming on top of what had already been record prices.

The Auto Club of Southern California reported that prices have risen up to 10 cents per day since the hurricane.

“Prices rose 4 cents today (in San Diego), and that is not unusual lately,” said Carol Thorp, a spokeswoman for the club. “There is profit-taking; no one can avoid that conclusion.”

The Utility Consumers’ Action Network said its San Diego-area average-price index had risen 12 cents in less than a week to $ 2.95 per gallon for regular.

Some stations had raised prices 25 cents over five days, said UCAN, which called the increases unprecedented in its nine years of monitoring the local market.

In a letter late Wednesday to the California Energy Commission, the group asked for an investigation into price spikes, saying it was concerned that companies were “using the devastation in the South as a cover for profiteering here in California.”

Joseph Desmond, chairman of the California Energy Commission, which monitors the state’s petroleum market, said he did not believe price gouging has been a problem in the state. He said many of the biggest increases in recent days have been at independent unbranded stations, which are more vulnerable to the volatility of spot fuel markets.

Hurricane Katrina has halted or curtailed production for more than five days at at least eight U.S. refineries, holding more than 10 percent of the nation’s refining capacity.

Desmond said there is no state law regulating gasoline prices, absent a declaration of emergency by the governor. Increases can be capped in an emergency, he noted.

Desmond said the commission would continue to monitor the market and pass along any suspicious information to the state attorney general.

“We take seriously the concerns,” he said.

Michael Shames, UCAN’s executive director, agreed with that legal opinion and called upon Gov. Arnold Schwarzenegger to issue such a declaration.

“The governor has wide latitude in declaring an emergency,” he said.

A spokesman for Attorney General Bill Lockyer said the office was monitoring price increases and the extent to which Hurricane Katrina can legitimately explain them.

Tom Dresslar, a spokesman for Lockyer, noted a significant revision in how experts characterize the relationship of California’s gasoline market with the rest of the nation.

“When prices were higher here than elsewhere, we were told that California’s market is an island,” Dresslar said. “Now, all of a sudden, we’re not an island. Those are the questions we’re asking.”

California regulations require a special smog-reducing blend of gasoline that is capable of being produced only by in-state refineries and a handful of others

A spokeswoman for the Western States Petroleum Association, Anita Mangels, said higher gas prices are being caused by higher prices for crude oil.

“We are constantly in a volatile situation because of the tight worldwide supply-and-demand balance,” Mangels said.

She added that while oil company profits look “huge,” they are in line with those of other industries.

The Foundation for Taxpayer and Consumer Rights in Santa Monica asked President Bush to press oil companies to cap the price of gasoline. The group is also calling for what it called a windfall oil industry profits “rebate,” which would be a tax on profits that is returned entirely to consumers.

The foundation also said it has completed a study that found more than 90 percent of the run-up in California prices this year had gone to corporate profits, not to higher costs of production.

Around the country, meanwhile, authorities are looking at whether gas stations are breaking state anti-gouging laws or federal laws by unnecessarily raising prices.

Michigan and four other Midwestern states asked the U.S. Federal Trade Commission to investigate whether gas stations and their suppliers are improperly raising prices.

In a letter yesterday to FTC Commissioner Deborah Platt Majoras, Michigan Attorney General Mike Cox and the attorneys general of Illinois, Iowa, Missouri and Wisconsin asked the agency to review whether gas stations unlawfully raised prices or energy companies reduced refinery capacity after the hurricane ripped through the Gulf Coast this week, said Allison Pierce, Cox’s spokeswoman.

The letter asked the FTC to determine “whether there are any patterns in wholesale or retail gas prices not explained by crude oil prices and other relevant factors.”

FTC spokesman Mitch Katz said the agency lacks statutory authority to take action against price gouging. The FTC’s authority under antitrust laws is to investigate price increases that are the result of collusion among competitors, he said.

“Price gouging is not within our mandate,” he said. “Price gouging is not necessarily illegal” under federal law, although at least 23 states outlaw it, he said.

President Bush said during a televised news conference yesterday that until power is fully restored to refiners and pipelines, “it’s going to be hard to get gasoline to some markets.”

While it could be weeks before all eight of the Gulf refineries that shut down are back in action, some key pipelines — owned by Colonial Pipeline Co. and Plantation Pipe Line Co. had resumed partial service yesterday. However, analysts said it would take days, if not longer, for the supply constraints to be worked out of the system.

Tom Kloza, an analyst at the Oil Price Information Service in Wall, N.J., predicted: “This will get worse before it gets better.”

Gasoline futures surged for the fourth day in a row on the New York Mercantile Exchange, sending prices 25 percent higher in less than a week.

Unleaded gasoline for October delivery settled at $ 2.409 per gallon, an increase of more than 15 cents.

Oil prices climbed, too, even though traders say they are less concerned about the shutdown of petroleum platforms in the Gulf of Mexico than they are with the closure of refineries and pipelines. Nymex crude futures rose 53 cents to settle at $ 69.47 a barrel.

The Bush administration began loaning oil from the U.S. Strategic Petroleum Reserve yesterday and relaxed environmental restrictions on the type of gasoline sold during summer. Analysts said these steps would have only a marginal impact on supply.

Also lifting gasoline futures was word that U.S. wholesale gasoline suppliers have been limiting the amount of fuel they sell to retailers in certain markets to make sure retailers do not take delivery of more than they need.
Bloomberg News and The Associated Press contributed to this report.

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