Official Denies Spill Spurred Gas Price Hikes : Top Energy Dept. Aide Cites Other Factors

A top Energy Department official told a Senate hearing Monday that the massive Valdez oil spill had no lasting or permanent effect on gasoline prices.

Instead, said Deputy Energy Secretary W. Henson Moore, the recent 18-cent-a-gallon increase in the cost of gasoline at the pump stems from crude oil cost increases that began last October. Most of the price hikes did not appear at local gasoline stations until after an Exxon tanker ran aground near Valdez, Alaska, on March 24 and spilled more than 10 million gallons of oil.

Moore’s explanation was greeted with derision by Sen. Howard M. Metzenbaum (D-Ohio), who charged that oil companies took advantage of the tense situation to exploit customers.

“There’s tremendous rumbling out there among the American people,” said Metzenbaum, chairman of the Senate Energy subcommittee on regulation. “They think they’re getting ripped off.”

Speaking for the Bush Administration, Moore insisted that the Valdez incident “had nothing to do with it (the price hikes) but a psychological impact.”

Oil companies should have done a better job of explaining why prices were rising, Moore said. The price of crude oil has risen steadily since last October, and there was strong seasonal demand for gasoline, he said.

Competitive Market

Exxon, the lone oil company to accept Metzenbaum’s invitation to testify, apologized again for the oil spill and insisted that it had no control over sharply rising prices.

“The idea that Exxon raised prices to profit from the spill is completely unfounded,” said Joe T. McMillan, Exxon senior vice president. “Gasoline prices are set by the interactions of thousands of individual sellers and buyers who operate in a very competitive market.”

After the temporary supply shortage caused by the loss of oil at Valdez, Exxon bought foreign crude for processing at its Benicia, Calif., refinery and shipped gasoline from Gulf Coast refineries to California. The company’s wholesale price to West Coast dealers last week was 8 cents a gallon below last September’s charge, he said.

Sen. Alan Cranston (D-Calif.), appearing before the committee as a witness, complained that “the numbers don’t add up. It’s bad enough that the environment and wildlife have been victimized by this tragic oil spill. California drivers--and drivers throughout the nation--should not be added to the list of innocent victims.”

Gasoline prices jumped “for no apparent reason,” Cranston said. He noted that the oil spill was equal to a scant 17 hours of the nation’s annual oil consumption.

Another California witness, Rep. Jim Bates (D-San Diego), said: “Depending on the brand of gasoline and location, gasoline prices have increased from 10 to 27 cents per gallon on the West Coast. Yet crude oil prices at the wellhead have risen only 2 to 3 cents per gallon in California.”

California officials have long argued that oil companies set artificially low prices for the crude oil they buy in California, reducing the royalties paid to state and federal governments.