EPA: Wholesale Gas Prices Drop

Thursday, June 22nd 2000, 12:00 am
By: News On 6

WASHINGTON (AP) — Wholesale gasoline prices have dropped more than 25 cents a gallon over the past week in cities where prices at the pump are still over $2 and, in fact, have gone up a couple of pennies. The industry says retailers just haven't yet caught up to the decline.

``Why are the consumers not seeing the benefit?'' Carol Browner, head of the Environmental Protection Agency, asked Wednesday as she met with oil company executives and lawmakers from six Midwestern states.

Afterward she said the meeting ``did not produce any real answers.''

High gasoline prices became an issue in the presidential race, with Vice President Al Gore blaming the oil companies and his Republican rival, George W. Bush, saying the Clinton administration is at fault for failing to persuade oil exporters to increase production.

Although he blamed poor diplomacy, Texas Gov. Bush, a former oilman himself, also said it was ``fair'' and ``healthy'' for the government to investigate the price spike.

Gore suggested price gouging. ``Big oil may have gotten too big,'' he said Wednesday. He quickly added he was not suggesting a break up of oil companies.

Browner's office produced figures from OPIS Energy Group, a private company that tracks national energy prices in detail, that showed a dramatic decline in wholesale gasoline prices in the Chicago, Milwaukee and St. Louis areas over the past week. All three areas are among cities that have been required to sell only a new blend of cleaner gasoline because of severe summer pollution problems.

According to the figures, wholesale prices in Chicago peaked at $1.60 a gallon on June 15 and dropped to $1.41 on Tuesday, plummeting an additional 10 cents the next day to $1.31, a drop of 29 cents. Meanwhile, retail prices at the pump increased by two pennies to $2.13 during the same week.

Retail prices in Milwaukee also increased slightly during the week to $2.02 on Wednesday, while wholesale prices fell from $1.58 on June 15 to $1.33, a decline of 25 cents. St. Louis saw wholesale prices decline by 13 cents, while retail prices went up nearly 4 cents during the same period.

The average price of gasoline for the nation on Wednesday was $1.64 a gallon, according to the American Automobile Association.

Browner said she was struck by the fact that the decline in wholesale prices coincided with demands for an investigation of Midwest gasoline prices by the Federal Trade Commission. The EPA and Energy Department had urged the FTC to begin such an investigation on June 15. The agency disclosed on Tuesday that a formal investigation has begun.

``No one has explained to us why these prices were so high, why when we call for an explanation, when we call for an investigation ... suddenly the prices begin to drop,'' said Browner.

Oil industry spokesmen denied any connection.

``The market is working. The prices are falling,'' said Red Cavaney, president of the American Petroleum Institute, the oil industry trade group. Cavaney said numbers he has seen showed that the decline in wholesale prices actually began about a week earlier than cited by Browner.

The Federal Trade Commission as part of its formal investigation is expected to examine, among other things, wholesale and retail price fluctuations and whether they indicate any collusion among oil companies, refiners, distributors and wholesale and retail marketers.

Cavaney rejected suggestions that oil companies are illegally setting prices or otherwise gouging consumers. High gasoline prices in the Midwest were the result of ``a whole set of circumstances'' from distribution problems and low inventories to higher crude prices and difficulties in blending the cleaner burning gas using corn-based ethanol, he said.

The ethanol industry has accused the oil industry of trying to make the corn-based fuel a scapegoat for high prices when the EPA says ethanol blended cleaner gasoline should add only about 8 cents to the price.

Browner also insisted Wednesday that the cleaner gasoline, required by the EPA in urban areas with the most severe summer smog, should not have caused prices to jump 30 to 50 cents a gallon in the Chicago and Milwaukee areas.

``You literally have hundreds of cities and towns across the country selling cleaner gasoline, why is it in only two cities are we seeing these kind of price spikes?'' asked Browner.