U.S. Opens Probe of Gas Price Hikes

The Justice Department launched an antitrust investigation Tuesday to determine whether illegal collusion might be responsible for the recent surge in gasoline prices as GOP presidential candidate Bob Dole renewed his demand for a $4.8-billion-a-year rollback of federal fuel taxation.

The Justice Department inquiry, which is being conducted by a five-member team of attorneys and economists, was initiated independently by Assistant Atty. Gen. Anne K. Bingaman, head of the antitrust division, officials said, without prompting from the White House.

The action was, however, announced one day after President Clinton ordered the Energy Department to release 12 million barrels of crude oil onto the market from the government’s strategic petroleum reserve in an effort to hold down prices. And the inquiry was announced when Republicans were stepping up their efforts to blame higher gasoline prices on the 1993 tax increase.

Dole, in his capacity as Senate majority leader, issued a joint statement with House Speaker Newt Gingrich (R-Ga.) pointing out that the tax increase--part of a massive deficit-reduction package--was approved without Republican support the year before the GOP won control of the House and Senate. The tax adds 4.3 cents per gallon to the price of gasoline.

“We believe American taxpayers are already taxed too much,” the Republican leaders declared. “With gas prices at their highest levels since the Persian Gulf War, Congress plans to vote on repealing the Clinton gas tax by Memorial Day weekend.”

The Kansas senator went so far as to suggest on the Senate floor that he might accept some version of the Democratic plan for increasing the minimum wage, which he has relentlessly opposed in recent weeks, if Clinton and congressional Democrats would join in cutting the fuel tax.

The size and suddenness of the price increases were clearly factors in the capital’s mounting obsession with energy prices. The cost of gasoline has risen about 12% in the last month--and substantially more than that in California.

But for energy experts whose memories stretched back to the gas lines and energy crises of the 1970s, the latest developments had a familiar ring. Even though most analysts insisted that the recent price increases are the result of impersonal market forces and may already be in the process of reversing themselves, the unique role of the automobile in American society has the power to turn any significant change in fuel prices into political dynamite.

“Oil is the most visibly priced product that consumers buy and there are not a lot of substitutes,” energy analyst Kevin Lindeman of Cambridge Energy Research Associates said. And most Americans cannot avoid the higher costs “without giving up some of their personal freedom” by not using their cars, he added.

The anxiety this basic fact stirs in Washington is all the greater in a presidential election year--especially one in which an incumbent Democrat is striving to protect an unexpectedly large lead in public opinion polls and the GOP challenger is trying to use his leadership position in the Senate to turn the tables.

What will come of the present flurry of activity is another matter.

So far as repealing the 1993 gasoline tax is concerned, Dole and Gingrich limited themselves to calling for immediate action only on a temporary rollback through the end of this year. Permanent repeal should be part of future deliberations on the budget, they said. Dole, the presumptive GOP presidential nominee, acknowledged that any cutback in fuel taxes would have to be made up with new taxes or budget cuts elsewhere to avoid raising the deficit--a chancy proposition at best.

As for investigating the oil industry, it has been done repeatedly, and at least in modern times the results have been meager.

“This is like looking for a needle in a haystack. The amount of money spent investigating the oil industry during the energy crisis of the 1970s was staggering. And to no avail,” said Washington energy lawyer William Demarest. Demarest was a senior aide to Rep. John D. Dingell (D-Mich.), who led many of those inquiries.

“We found some minor irregularities,” he said, but no major wrongdoing was ever found.

“I know of no case . . . where a major oil company has been successfully prosecuted for conspiracy on retail petroleum products . . . in the last 20 years,” said energy economist Philip Verleger Jr. at Charles River Associates in Washington.

“You’ll get a quick and dirty report back that will say, this was due to market forces,” said Ed Rothschild, energy policy director of the consumer group Citizen Action, based in Washington. “That’s what we get back repeatedly.”

“There is a frustration here that is unique to inside the Beltway,” Demarest said. “Washington cannot accept the fact that it cannot control markets. There has always got to be a conspiracy. There must be bad actors.”

Demarest, like most other analysts, attributed the recent increases to temporary shortages of gasoline resulting from a host of factors. Chief among them: Oil refineries, which produce heating oil during the fall and winter and swing over to making gasoline in the spring, did not make the switch as early as usual because last winter was unusually long and cold.

Also, because refiners had a bad year financially in 1995, analyst Lindeman said, they have tried to keep stockpiles low this year and produce products on a “just in time” basis to protect themselves against swings in market prices. This trend was reinforced by a widespread expectation that the United Nations ban on Iraqi oil would be lifted, raising supply and driving down prices.

Lindeman said firmness in gasoline prices may prove temporary. Global demand for crude oil declines during the summer, he noted, because most of the world does not share the U.S. passion for summer driving and air conditioning.

As a result, prices already could be at or near their peak, he suggested.

Collusion and price-fixing cases are difficult to prove, said Thomas Dove, a deputy attorney general for California. “It is an extraordinarily complicated industry, the control of which is only partly in the hands of the executives,” he said.

Meanwhile, California lawmakers, feeling the election-year heat of constituent anger over gasoline prices, threatened to revive California’s electric car mandate and push for other “zero emission” vehicles as a way of striking back at oil companies.

“It’s time for the Legislature to get off its duff and start doing things to hurt the refineries like the refineries are hurting the people of this state,” said state Sen. Daniel E. Boatwright (D-Concord) at a special hearing into the causes of the gasoline price hikes.

“I think at this point . . . it’s time to reverse the electric car situation,” Boatwright told a joint hearing of the Senate Transportation and Energy committees.

In March, the state Air Resources Board repealed the requirement that all automobile manufacturers sell electric cars in California starting next year. Instead, the board settled on working out voluntary agreements with car makers.

It was unclear whether a revival of electric cars could win approval of both houses of the Legislature and Gov. Pete Wilson.

Times staff writers Patrick Lee in Los Angeles, Janet Hook in Washington and Carl Ingram in Sacramento contributed to this story.

* NO RELIEF: Gasoline futures prices fall, but pump prices are not expected to follow soon. D1