Low gas inventories could bring more summertime price jumps

Saturday, March 31st 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ Expected low inventories of gasoline could set the stage for regional supply problems and another summer of high fuel prices, government and industry experts told lamakers Friday.

The federal Energy Information Administration reported that stocks of gasoline going into the heavy driving season are expected to be below last year's levels.

This ``could set the stage for regional supply problems that once again could bring about significant price volatility, especially in the Midwest and on both coasts,'' said John Cook, director of the EIA's petroleum division.

With little cushion from inventories, any unexpected problems with supply, increased demand, refinery problems or pipeline interruptions could spark a run-up in prices, he told the House Commerce energy subcommittee.

In separate testimony, Gregory King, executive vice president of San Antonio-based Valero Energy Corp., said a shortage of MTBE, an additive that makes gas burn cleaner, could add to supply problems in some urban areas where the additive is needed in gasoline to meet air quality requirements.

High natural gas prices and increased demand have made less gas available for making MTBE, so stocks of the additive in February were 22.4 percent lower than at the same time a year ago, according to EIA. The agency said MTBE production has been 9.2 percent below last year's levels.

Warnings of potential gasoline shortages this summer also came in a report issued Friday by the Federal Trade Commission on last year's Midwest gasoline price spikes.

The FTC cited a variety of reasons, including poor planning by industry, pipeline problems and requirements for cleaner gasoline, for high prices last year that soared past $2 a gallon in Chicago, Milwaukee and Detroit.

``There is no evidence that the price increases were a result of conspiracy or any other antitrust violation,'' FTC Chairman Robert Pitofsky said in a statement.

But the report said there were ``conscious but independent choices'' made by market participants, often to maximize profits, that contributed to the price spikes.

``Unless gasoline demand abates or refining capacity grows, price spikes are likely to occur in the future in the Midwest and other areas of the country,'' the FTC report warned.

Some Republican lawmakers cited the FTC report Friday as evidence that last summer's price increases largely were due to Clinton administration requirements for a new blend of cleaner burning gasoline. The report listed that as only one of a number of causes.

House Speaker Dennis Hastert, D-Ill., said the investigation showed that the Clinton administration's ``rigid environmental regulations'' and ``incoherent energy policy'' were major factors in the price increases.

The report demonstrated that the Clinton administration's refusal to waive reformulated gas requirements for the Milwaukee and Chicago areas ``stuck Midwest drivers with last summer's high gas prices,'' said Rep. F. James Sensenbrenner, R-Wis.