As Prices Rise, Bush Says He Won’t Repeal Gas Tax

Despite growing consumer anger over record gasoline prices, President Bush opposes repealing the federal gasoline tax because he believes it would be an ineffectual “quick fix,” the White House said Monday.

Although motorists are getting increasingly angry about paying $2 a gallon and more for gas, Bush’s “focus is on long-term solutions” to curbing fuel prices, said White House Press Secretary Ari Fleischer, referring to the president’s staunch opposition to repeal of the 18.4-cent-per-gallon tax.

“If any politician has a magic wand that they can wave over gas prices to lower them, the president would like to listen to them,” Fleischer told reporters on the same day the Energy Department reported that average gasoline prices in California reached a new high (without adjusting for inflation).

There has even been speculation that gasoline might reach $3 a gallon, at least in California and the Midwest, where prices already are well above the national average. But some experts argued Monday that those fears are overblown because supplies and imports of gasoline have been creeping higher lately, which should ease the upward pressure on prices.

“We’ve all heard the predictions of $3-a-gallon gasoline on the West Coast, and they’re nothing more than predictions,” said Mary Welge, a senior editor of Oil Price Information Service, a Lakewood, N.J., industry publication.

“There’s a lot of paranoia going around that gasoline is going to be in short supply this summer,” which would send pump prices surging even more, “but barring any unforeseen downtime at the nation’s refineries, we should see prices stabilize by midsummer,” she said.

For now, motorists and service station owners--who say they have no choice but to pass along the higher wholesale prices they have to pay to consumers--are getting more irked and frustrated by the day.

“I’ve heard of customers screaming at owners and cashiers, abusing equipment, throwing nozzles on the ground,” said Will Woods, executive director of the Automotive Trade Organizations of California, a Tustin-based group that represents gasoline retailers. “They’re taking it out on the wrong people.”

Woods, indicating that $3 gas is not so farfetched, also said oil companies have told dealers to be ready to convert their price signs in case they need to post a “3” in the first column.

Wherever prices may be headed, federal regulators Monday dismissed one theory behind the price run-ups of the last two years: alleged anti-competitive behavior by U.S. refiners.

The Federal Trade Commission announced the conclusion of a three-year investigation of West Coast gas prices, saying it found “no evidence of conduct by the refiners that violated federal antitrust laws.”

The commission had been investigating so-called redlining, in which independent distributors are prohibited from selling branded gasoline in certain areas, and zone pricing, in which refiners set wholesale prices by area. Consumer advocates contend the practices inflate prices.

Because any long-range energy push toward increased production is unlikely to produce tangible, short-term results, Fleischer and other senior White House aides are finding themselves somewhat on the defensive, striving to portray Bush’s agenda as that of a bold, forward-thinker.

“The president is now building a base for long-term solutions,” said Andrew H. Card Jr., White House chief of staff. Bush counselor Karen P. Hughes added: “This shows that the president is willing to address long-term challenges--and that he’s not as interested in a day’s headline as in years of progress.” Deputy counselor Dan Bartlett described the initiatives as “a bold start to the second 100 days.”

In articulating Bush’s long-standing opposition to a gas-tax repeal, the White House may be moving to preempt some congressional Republicans, many of whom clamored last year for such action when gas prices also spiked, approaching $2 a gallon in some parts of the country.

At the time, Bush did not join in those calls for repeal. Then-Sen. Spencer Abraham (R-Mich.)--now Bush’s energy secretary--advocated suspension, rather than repeal, of the tax.

Sen. Larry E. Craig (R-Idaho) was among those who last year backed the repeal. His spokeswoman, Sarah Berk, said Monday that Craig still favors a repeal, which she called “part of a larger solution to addressing the current energy crisis.”

Last year, attempts to repeal the tax were defeated amid heavy lobbying from the highway industry, which warned that reduced funding would imperil road projects and other infrastructures--a line of argument Fleischer also cited Monday.

In its regular report, the Energy Department said the average price of self-serve regular gasoline in California shot up an additional 7 cents a gallon in the last week, to a record $1.938; the price two months ago was $1.695 a gallon.

The average nationwide price rose to $1.703 a gallon from $1.626 a week earlier. California’s price typically is higher because of the state’s unique environmental laws covering gasoline production.

Regardless, said analyst Trilby Lundberg, “chances are that future [price] hikes will be smaller or nil” this summer. The driving season traditionally kicks off on Memorial Day weekend.

That’s mainly because U.S. oil refineries are running full tilt, which together with the extra imports should keep supplies plentiful enough to meet drivers’ summer demand, said Lundberg, editor of the Camarillo-based Lundberg Survey, which tracks pump prices.

Said George Littell, an energy consultant in Houston: “There was a big hue and cry about this time last year, a lot of anxiety.” He predicted that this year, as last, soaring gas prices “will be a real dead issue by the Fourth of July. By Labor Day, the subject will be forgotten.”

Nevertheless, analysts cautioned that prices have not yet peaked, because gasoline supplies remain tight.

This time it’s not a crude oil shortage, though the commodity’s relatively high price contributes to the high price of gasoline. Rather, it’s more a case of motorists’ demand for gasoline outpacing the production ability of U.S. refineries, analysts said.

In California and the Midwest, especially, any refinery disruption--such as a fire or unplanned shutdown--could make the $3-a-gallon scenario more likely, analysts said. A recent fire at an Illinois refinery has contributed to that region’s price surge.

And in California, the threat of a refinery shutdown is heightened by the state’s electricity crisis, on display Monday with rolling blackouts throughout the state. Gasoline refineries, terminals and pipelines are not exempt from rotating outages in the territories served by Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric.

Several GOP congressmen urged California officials to exclude refineries from blackouts during Stage 3 power emergencies this summer.

“Cutting electricity from refineries will add to the energy crisis in California by endangering the supply of gasoline and driving gasoline prices even higher,” Rep. Dan Burton (R-Ind.), chairman of the House Government Reform Committee, wrote in a letter to Gov. Gray Davis that also was signed by Reps. Stephen Horn (R-Long Beach) and Doug Ose (R-Sacramento).

Otherwise, additional gasoline supplies now expected to reach the market should mean “the price increases we’ve seen to date will probably slow down and start to turn around” during the summer, said David Costello, an Energy Department economist.

The agency predicts that the U.S. price for regular gasoline will average $1.60 a gallon for the entire summer, which would set a record but amount to only 7 cents above last summer’s average, Costello noted.

As of Friday, U.S. gasoline prices jumped to an average $1.76 a gallon, up 8.6 cents from two weeks earlier and the highest ever without adjusting for inflation, the Lundberg Survey said. However, if prices are adjusted for inflation, they currently remain about $1 a gallon below their prices in early 1981, it said.

That’s of little consolation to motorists, who measure their pain at the pump in real dollars. Analysts are watching closely to see what psychological effect the higher prices are having on consumers. Gasoline at a certain price level would translate into less driving and more conservation, and could become a drag on the U.S. economy, as consumers spend less elsewhere to offset the higher prices they are paying at the pump.

So far in California, though, consumers have absorbed the shock of paying more than $2 a gallon for many grades of gas without a noticeable pullback in driving--even if the prices have them, and service station owners, grumbling.

“It’s frustrating,” said Andre Van der Valk, owner of three Shell and two Texaco stations, most in the San Fernando Valley. “I feel sorry for the working man who needs his car to drive to work. It makes me sick that my prices have to be so high, but there’s really nothing I can do.”

Carroll Hansen, who owns a Shell station in Bel-Air, said every other customer has something to say about his prices--and that he’s sorry he can’t provide more of an explanation.

“I just wanna pass along the Shell corporate phone number,” he said. “And say, ‘Here, you find out.’ ”

And after Hansen bumped up his price for regular unleaded by 4 cents a gallon Monday, to $2.05, he said he got “the same sickening feeling I have every time I raise my price.”

*

Peltz reported from Los Angeles, Chen and Simon from Washington. Times staff writers Sarah Hale and Nancy Rivera Brooks in Los Angeles and Lianne Hart in Houston contributed to this report. Times wire services were used in compiling this report.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Pain at the Pump

Gasoline remains at record highs in California and around the country, with retail prices in some markets consistently topping $2 a gallon. Weekly prices for California and the U.S.:

*

California average Monday: $1.938

U.S. average Monday: $1.703

Source: Energy Information Administration