Drivers See Slip in Gas Prices

Retail gasoline prices fell in California and most of the nation during the last week, the first substantive easing since February, federal figures indicated Monday.

The Federal Trade Commission, meanwhile, said in a report released Monday that it found more than a dozen instances of gasoline price gouging among the record-high fuel prices that hit consumers last year in the wake of hurricanes Katrina and Rita. It concluded, however, that most of the extreme increases were explainable and that there was no widespread effort to manipulate the market.

Last year’s hurricane-induced record was shattered this spring in California, and after weeks of price jumps, the statewide average slipped 7.5 cents to $3.255 on Monday for a gallon of self-serve regular, according to the Energy Department’s weekly survey. The nationwide average fell 6.4 cents to $2.883 a gallon.

California’s average is down from the record $3.332 a gallon May 8 and remains 82.1 cents higher than a year earlier. The U.S. average, which is 75.8 cents higher than last year, never broke the record set Sept. 5 after the hurricanes disrupted fuel production.

Experts have blamed the recent run-up on higher crude oil prices and commodity traders’ fears that a shift by refiners to ethanol-blended gasoline in some regions would trigger supply problems. The increases in California, where ethanol has been in use for years, have yielded sharply higher refiner margins and left the state Energy Commission grasping for explanations.

California Atty. Gen. Bill Lockyer recently issued subpoenas to in-state refiners to investigate the pricing issue, and he plans to begin deposing oil executives June 5, spokesman Tom Dresslar said.

The FTC’s 222-page report, ordered by Congress last year, is a postmortem on the price spike from last fall and represents the latest in a string of U.S. gasoline-price investigations to find no evidence of illegal behavior by oil companies.

Bob Slaughter, president of the National Petrochemical and Refiners Assn., hailed the trade commission’s report, calling it “a vindication of the refining industry’s activities in a very abnormal situation.”

But legislators and consumer groups blasted the FTC’s nine-month investigation as a squandered opportunity to uncover flaws in the nation’s increasingly volatile fuel market. Oil companies’ earnings reports indicated that the post-hurricane period was among the most profitable ever for refiners.

“This is business as usual from the FTC,” Sen. Barbara Boxer (D-Calif.) said in a statement. “This report is a lot of work that says nothing, and the oil companies are laughing all the way to the bank.”

Boxer and other legislators promised to greet FTC Chairwoman Deborah Platt Majoras with tough questions about the report during a gasoline price hearing today before the Senate Commerce Committee.

The trade commission said it had analyzed price and financial data as well as other information covering 30 refiners, 23 wholesalers and 24 single-location fuel retailers. It looked for evidence of price gouging, which the commission defined as any rise in average prices from August to September that could not be explained by a corresponding increase in costs or by national or international market trends.

In its report, the FTC said it found “no instances of illegal market manipulation,” saying that the price increases and company reactions after the hurricanes were “consistent with competition.”

Still, it cited 15 actions involving seven refiners, two wholesalers and six retailers that fit the definition for price gouging.

But, the report said, “other factors, such as regional or local market trends, appeared to explain the pricing of these firms in nearly all cases.”

The commission did not provide details of the instances it investigated and did not identify the companies involved.

In a separate statement on the FTC report, Commissioner Jon Leibowitz noted that a few refiners more than doubled their operating margins “in ways not attributable to increased costs following the hurricanes.” He added that it was “equally troubling, however, that most other refiners who did not technically meet the price-gouging test enjoyed markups of similar magnitude.”

Leibowitz, who nonetheless endorsed the report, concluded that “the behavior of many market participants, on balance, leaves much to be desired.”

Slaughter of the refiners group countered that “the mere fact that an entity makes profits in an abnormal market situation is not evidence of wrongdoing on that entity’s part.”

Mark Cooper, research director at the Consumer Federation of America, criticized the report for looking for old-fashioned price collusion in a market that he said is so uncompetitive that refiners can control prices and supplies through legal actions.

“The industry has become so concentrated that they do not have to collude to raise the price of gasoline,” Cooper said. “Each company acts individually and knows full well that its brethren will act in parallel fashion.”

In its investigation, the trade commission also reviewed data covering U.S. refining capacity, oil company inventories and infrastructure control issues, as well as the role of commodity speculators in affecting oil and gasoline prices.

Sen. Ron Wyden (D-Ore.) and others have often accused oil companies of shaping the current retail market -- and bolstering refining profits -- by failing to expand refineries to meet growing demand, keeping smaller inventories of fuel and moving supplies to maximize income.

Critics also have suggested that speculative trading in oil and fuel markets has driven up pump prices.

The commission, however, said it found no evidence to support any of those assertions.