Pump prices fuel frustration

With gasoline and oil prices soaring to record levels, Congress prepared yesterday to take action and a government official pinpointed three reasons motorists were feeling such pain - refinery outages, higher demand and decreased imports.

The House today will take up legislation that makes gasoline-price gouging a federal crime, House Majority Leader Steny Hoyer (D., Md.) said yesterday.

Companies found to have charged "unconscionably excessive" prices could face fines of up to $150 million, according to the sponsor of the price-gouging legislation, Rep. Bart Stupak (D., Mich.). The legislation has more than 120 cosponsors.

At a hearing yesterday of the House energy and commerce subcommittee, which Stupak chairs, a chart was distributed showing that average gasoline prices have more than doubled since President Bush took office in January 2001, when the average price was $1.47 a gallon.

Since the end of January, gasoline prices have risen 94 cents a gallon, "adding about $20 billion to consumers' total gasoline bill, or about $146 for each passenger car in the U.S.," Thomas McCool, director of applied research and methods for the Government Accountability Office, said in separate testimony yesterday for the House subcommittee on oversight and investigations.

The causes of the "lion's share" of the recent climb are refinery outages, increased demand and decreased imports, William Kovacic, a Federal Trade Commission commissioner, said in written testimony for the energy subcommittee.

On Monday, the national average pump price for regular gasoline rose 1.3 cents to a record $3.209 a gallon, AAA said yesterday on its Web site. It was also a record inflation-adjusted price, beating March 1981's $1.417 a gallon, which equals $3.20 today.

In the five-county Philadelphia area, the average price on Monday was $3.10 a gallon, up a penny from Friday and 24 cents from a month ago, according to AAA Mid-Atlantic. The area consists of Philadelphia and the four surrounding counties in Pennsylvania.

In the three suburban counties in South Jersey, Monday's average was $2.93 a gallon, up a penny from Friday and 27 cents in the last month.

"I wish we had better news," said Cathy Rossi at AAA Mid-Atlantic, the nation's fifth-largest auto club with 3.8 million members. It tracks daily gas prices.

"It's likely we will continue to see gas prices go up somewhat through the middle of summer, and then hopefully come down," Rossi said. "We need to see more of a cushion with gas inventories going into the summer driving season."

While this is the third consecutive summer of soaring prices, most motorists don't appear to be changing their driving plans from last year, she said.

"We didn't have natural disasters or a harsh winter, and there was no geopolitical unrest that would have significantly impacted prices," Rossi said. "The problem this year has been the number and frequency of refinery outages. In light of the big profits that the industry has been reporting quarter after quarter, it raises concerns about skyrocketing prices."

U.S. gasoline supplies in the first two weeks of May were at the lowest levels since October 2005, right after Hurricane Katrina, Tim Evans, an energy analyst at Citigroup Global Markets, said last week.

Demand for gasoline in the United States peaks when vacationers take to the roads between the Memorial Day holiday, which is this weekend, and the Labor Day holiday at the start of September.

Meanwhile, the Organization of Petroleum Exporting Countries has cut production by its 11 members subject to quotas this year.

"As pump prices rise, both chambers of Congress will be moving quickly this week to send voters onto the roads for the summer driving season with fresh evidence that lawmakers are fighting gasoline-price manipulation on every front," Kevin Book, senior analyst with Friedman Billings Ramsey & Co., said in a research note yesterday.

House lawmakers approved legislation yesterday that would allow the federal government to sue OPEC under antitrust laws.

The Senate Commerce Committee earlier this month approved its version of price-gouging legislation. That bill is expected to go to a vote by the full Senate next month as part of a broader package of energy measures.

At his subcommittee hearing, Stupak said consumers wanted to know "why gas prices have continued to be at record high levels even as the price for a barrel [of crude oil] is lower than last year."

Last month, crude oil was at $63 a barrel - $7 less than the $70 a barrel price in April 2006, he said.

Meanwhile, the price of gasoline at the pump was more than 50 cents a gallon higher last month than a year earlier.

"Clearly, this year's run-up in gas prices has not been the result of crude-oil prices," Stupak said.

Stupak said the profit margin between a barrel of crude oil and a barrel of refined gasoline - known as the crack spread - has gone from the historic level of $8 to $9 a barrel to around $36 a barrel.

"Big oil companies are reaping record profits," he said. During the first three months of 2007, he said, Royal Dutch Shell's profits were $7.3 billion, Chevron Corp. made $4.7 billion, ConocoPhillips made $3.5 billion, and ExxonMobil Corp.'s profits were $9.2 billion.

"Across our nation, people are struggling to pay to fill their gas tank and their frustration with gas prices is boiling over," Stupak said.

At the hearing, a statement against the "Federal Price Gouging Prevention Act" was distributed by the Competitive Enterprise Institute, a nonpartisan advocacy group for "the principles of free enterprise and limited government."

"If we want to go back to the gas lines of the'70s, this is a good way to do it," said Marlo Lewis, a senior fellow at the institute. "Constraining the ability of gas companies to set prices according to supply and demand is a recipe for rationing. In the end, there will be less gas available and the people who get it will be those most prepared to wait in line."

"Legislation to curb 'price gouging' is a solution in search of a problem," said Charles T. Drevna, executive vice president of the National Petrochemical and Refiners Association.

In another prepared statement distributed at the hearing, the head of the refinery industry's trade group said dozens of federal investigations had never turned up evidence of market manipulation in the industry.