Commission Finds No Evidence Oil Companies Broke Law
Tuesday, May 08, 2001
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WASHINGTON ? There is no evidence that major oil refiners violated antitrust laws in marketing West Coast gasoline, the Federal Trade Commission concluded Monday, closing a three-year investigation.
The FTC findings came as the nation faced a new round of price shocks at gasoline pumps, including talk of possible $3-a-gallon gasoline in California and parts of the Midwest this summer.
A spokesman for President Bush said Monday there is little the president can do to keep gasoline prices from going up. Bush is staunchly opposed to interfering in energy markets. There is no "magic wand that (a politician) can wave over gas prices to lower them," said White House press secretary Ari Fleischer.
The FTC investigation began three years ago after complaints about widely varying gasoline prices in different parts of California even though the region is essentially a single market producing similar blend gasoline.
The investigation covered wholesale gasoline markets in California, Arizona, Nevada, Oregon, and Washington.
While the FTC acknowledged the existence of "zone pricing" in some limited areas, it said it "found no evidence of collusion between oil companies" nor any evidence of agreement on pricing "at any level of supply."
Zone pricing is the practice where refiners set uniform wholesale prices when they supply branded gasoline directly to their company-operated and leased service stations within a small, but distinct geographic area.
Despite these practices, the FTC said it found that no refiner "had the ability profitably to raise prices market-wide or reduce output at the wholesale level" so as to raise gasoline prices.
It also found no evidence, as had been alleged, of "redlining" in a particular metropolitan area in an attempt to increase market-wide prices.
The findings were approved unanimously in a 4-0 vote.
Nevertheless, one commissioner, Mozelle W. Thompson, said in a statement that he remained "somewhat troubled" by the "practice of site-specific redlining" used by some refiners in their distribution strategies.
Even this activity would only be illegal, acknowledged Thompson, if it produced higher than otherwise justified wholesale prices, and no such finding could be shown.
"Just because something is not illegal doesn't mean that it does not cause harm to the consumer," responded Sen. Ron Wyden, D-Ore., who had pressed for an FTC investigation several years ago into West Cost gasoline pricing practices.
The FTC investigation confirms "that there are anticompetitive practices taking place," Wyden insisted.
He said the industry "will try to exploit this opinion" and justify the high gasoline prices this summer. It gives them "a green light to raise prices even higher," said Wyden.
The nation's average price of gas, including all grades and taxes, was $1.76 per gallon at the end of last week, up 5 percent from April 20, according to the Lundberg Survey, which tracks prices at 8,000 service stations across the country.
The FTC report on its investigation of West Coast refiners followed release of another FTC report in March into the run-up of gasoline prices in the Midwest last summer. Prices soared beyond $2 a gallon in the Chicago and Milwaukee areas because of tight supplies last summer.
The FTC in that report also found no evidence of market collusion or violation of antitrust laws, but warned with another year of tight supplies similar price spikes could occur this summer.
Tuesday, May 08, 2001
Email this Article
WASHINGTON ? There is no evidence that major oil refiners violated antitrust laws in marketing West Coast gasoline, the Federal Trade Commission concluded Monday, closing a three-year investigation.
The FTC findings came as the nation faced a new round of price shocks at gasoline pumps, including talk of possible $3-a-gallon gasoline in California and parts of the Midwest this summer.
A spokesman for President Bush said Monday there is little the president can do to keep gasoline prices from going up. Bush is staunchly opposed to interfering in energy markets. There is no "magic wand that (a politician) can wave over gas prices to lower them," said White House press secretary Ari Fleischer.
The FTC investigation began three years ago after complaints about widely varying gasoline prices in different parts of California even though the region is essentially a single market producing similar blend gasoline.
The investigation covered wholesale gasoline markets in California, Arizona, Nevada, Oregon, and Washington.
While the FTC acknowledged the existence of "zone pricing" in some limited areas, it said it "found no evidence of collusion between oil companies" nor any evidence of agreement on pricing "at any level of supply."
Zone pricing is the practice where refiners set uniform wholesale prices when they supply branded gasoline directly to their company-operated and leased service stations within a small, but distinct geographic area.
Despite these practices, the FTC said it found that no refiner "had the ability profitably to raise prices market-wide or reduce output at the wholesale level" so as to raise gasoline prices.
It also found no evidence, as had been alleged, of "redlining" in a particular metropolitan area in an attempt to increase market-wide prices.
The findings were approved unanimously in a 4-0 vote.
Nevertheless, one commissioner, Mozelle W. Thompson, said in a statement that he remained "somewhat troubled" by the "practice of site-specific redlining" used by some refiners in their distribution strategies.
Even this activity would only be illegal, acknowledged Thompson, if it produced higher than otherwise justified wholesale prices, and no such finding could be shown.
"Just because something is not illegal doesn't mean that it does not cause harm to the consumer," responded Sen. Ron Wyden, D-Ore., who had pressed for an FTC investigation several years ago into West Cost gasoline pricing practices.
The FTC investigation confirms "that there are anticompetitive practices taking place," Wyden insisted.
He said the industry "will try to exploit this opinion" and justify the high gasoline prices this summer. It gives them "a green light to raise prices even higher," said Wyden.
The nation's average price of gas, including all grades and taxes, was $1.76 per gallon at the end of last week, up 5 percent from April 20, according to the Lundberg Survey, which tracks prices at 8,000 service stations across the country.
The FTC report on its investigation of West Coast refiners followed release of another FTC report in March into the run-up of gasoline prices in the Midwest last summer. Prices soared beyond $2 a gallon in the Chicago and Milwaukee areas because of tight supplies last summer.
The FTC in that report also found no evidence of market collusion or violation of antitrust laws, but warned with another year of tight supplies similar price spikes could occur this summer.
