U.S. government asks refiners to explain higher gas prices Answers include cleaner fuel requirement, increased demand June 12, 2000 Web posted at: 9:22 a.m. EDT (1322 GMT)

-------------------------------------------------------------------------------- In this story:

National average rises to $1.67 ...

... but gas is just $1.39 in Phoenix

Gas now still cheaper than 1981

WASHINGTON (CNN) -- Questioning why gasoline prices now top more than $2 a gallon in Chicago and Milwaukee -- two cities required to use a cleaner-burning, reformulated fuel -- federal officials will meet Monday with oil refiners who supply the region. "The questions are: Is it a function of the market, is it glitches with the new clean, reformulated gasoline, or is it collusion or price gouging?" asked Energy Secretary Bill Richardson.

"Prices of gasoline in the Midwest are unacceptably high," he said after appearing Sunday on CNN's Late Edition.

Richardson and Carol Browner, head of the Environmental Protection Agency, will meet in Washington with refinery representatives.

In a letter requesting the meeting, the two federal agencies said supplies of gasoline in the two cities were adequate to meet demand and asked refiners to explain their costs in producing reformulated gasoline.

The letter was sent to BP Amoco, Exxon Mobil, Phillips Tosco Corp., Marathon Ashland Petroleum, Citgo and privately held Koch Petroleum.

National average rises to $1.67 ... According to a national survey, the average price for regular unleaded gasoline in some major U.S. metropolitan areas exceeds the $2-a-gallon mark, reaching $2.04 in Milwaukee and topping off nationally at $2.13 in Chicago.

Nationwide, gasoline prices climbed 8.82 cents a gallon in the past three weeks as the new, reformulated gas made its way to the pumps.

High crude oil prices, rising demand and new antismog regulations affecting 17 metropolitan areas pushed the nationwide average cost for regular gasoline to $1.67 a gallon as of last Friday, said analyst Trilby Lundberg.

That compares to the May 19 Lundberg Survey of 10,000 stations nationwide that found a national average of $1.58.

"We are in a nightmare of patchwork-quilt environmental regulations which wreak havoc with gasoline supply and price stability," Lundberg said. "The wide variety of regulations affecting formulas has created wide price disparities around the country and made distribution of gasoline more problematic."

... but gas is just $1.39 in Phoenix Metropolitan areas with some of the worst air pollution in the nation were required by June 1 to start using a new kind of gas that is designed to preserve air quality.

Dealers in the Midwest, where many cities use a kind of reformulated gas that is blended with the corn derivative ethanol, are paying 26 cents more at wholesale, Lundberg said. Consequently, some retailers have sacrificed profit margin to remain competitive.

In Chicago, one of the 17 metro areas affected by the new regulations, the average price for a gallon of self-serve regular was $2.13, Lundberg said. That price marks the first time on record that a city's overall average price for gas has topped $2, she said.

By contrast, Phoenix came in with the lowest average price with a gallon of self-serve regular costing $1.39.

Gas now still cheaper than 1981 Lundberg predicted gasoline prices might drop slightly in coming weeks, especially if the Organization of Petroleum Exporting Countries decides to increase production this month.

But the price won't come near last year's weighted average on June 11 of $1.19.

Although the latest prices appear to be the highest on record, they are actually lower than gas prices were at their peak in 1981, Lundberg said. The March 1981 national average price, adjusted for inflation, was $2.66, she said

http://www.cnn.com/2000/US/06/12/gas.prices.01/index.html

-- Martin Thompson (mthom1927@aol.com), June 12, 2000

Answers

WIRE:06/12/2000 18:11:00 ET Refiners wash hands of 'unfair' Midwest gasoline prices

NEW YORK (Reuters) - Under fire from environmental regulators and consumers alike, U.S. oil refiners on Monday refused to take the blame for soaring prices of clean-burning gasoline in the U.S. Midwest. Oil firms rejected Monday's claim from the Environmental Protection Agency (EPA) that the record-high prices they are charging U.S. motorists, especially in Illinois and Wisconsin are "unfair and inappropriate."

"We told them (EPA) very clearly that prices would be higher," said the American Petroleum Institute's (API) President Red Cavaney told Reuters on the sidelines of oil conference in Calgary.

Refiners have said the new anti-smog reformulated gasoline (RFG) which the EPA mandated be sold at roughly a third of the nation's pumps by June 1, is more difficult to produce than conventional blends and cannot be produced in the same amounts, causing supply shortages and high prices.

The EPA met Monday with refiners that supply the Midwest to demand an explanation for why prices in the region are so high.

"We think the prices that are being charged are unfair and inappropriate," said Robert Perciasepe, an assistant EPA administrator. "Our analysis shows adequate supplies and the cost of producing fuel isn't anywhere the the prices we're seeing at the pump."

"Our companies have nothing to gain from (unfair pricing)," said API spokesman Juan Palomo. "Our companies are doing the best they can to get the gasoline out to consumers, despite all the regulations that make it so difficult."

Retail prices for gasoline have broken $2 a gallon in a number of Midwest cities where the anti-smog gasoline is required, roughly 40 cents higher than the national price for gasoline.

The Midwest region has been further blighted by a series of pipeline disruptions since late winter, which have reportedly put suppliers behind on their inventories.

Chicago, St. Louis, and Milwaukee gasoline marketers asked for waivers from the EPA that would have allowed them an extension on the June 1 RFG deadline, but only St. Louis was granted one.

Among the refining companies asked to , Phillips Petroleum , Tosco Corp. , Marathon Ashland Petroleum , Citgo and Koch Petroleum.

Exxon Mobil declined comment on the EPA's statement, while Phillips said they didn't attend the meeting.

Tosco said Monday that it couldn't be responsible for unfair pricing as all of the gasoline it produces at its Illinois refinery is sold directly to the Equiva Trading Company, a downstream venture owned by affiliates of Royal Dutch/Shell Texaco and Saudi Aramco.

"We're completely out of the market, so we have nothing to do with this," said a Tosco spokesman.

Other refining companies were not immediately available for comment.

http://abcnews.go.com/wire/US/reuters20000612_3059.html

-- Martin Thompson (mthom1927@aol.com), June 12, 2000.