U-Turn On Gas Prices Probe

Director Tom Shadyac, left, poses with actors Kevin James and Wanda Sykes at the party after the premiere of Universal Pictures' "Evan Almighty" at the Gibson Amphitheatre and CityWalk Cinemas on June 10, 2007, in Universal City, Calif. GETTY

After abandoning two gas price investigations last year by saying there was no conspiracy, the Federal Trade Commission now says it will monitor thousands of gas stations in 360 cities nationwide, to learn the cause of price spikes, reports CBS News Correspondent Wyatt Andrews.

Just last week, the Senate released findings that the oil industry has pushed up gas prices, not by fixing prices, but by restricting the amount of oil the industry makes into gasoline. Consumer advocates say that because of oil company mergers the five top oil conglomerates have kept prices high by keeping refining low.

"You can intentionally withhold a critical commodity like gasoline from the marketplace in order to drive prices up and it is not illegal," said Tyson Slocum of the consumer group Public Citizen.

But Wednesday in California, a federal judge accepted a lawsuit on this very issue – whether refinery restrictions have harmed consumers even if there's no blatant conspiracy.

San Diego attorney Tim Cohelan says deliberate industry wide-supply controls cost Californians an extra 40-cents per gallon.

"It's an actual trust," says Cohelan. "It's a series of relationships between these suppliers that control the gasoline from the refinery gate down to the gas tank of consumers, and they are all sharing monopoly profits.

Despite repeated investigations, the oil companies have always been cleared of charges that they fix prices. What's new is the question of whether they're fixing supplies.

And now for the first time the FTC is actively watching.

FTC Chairman Timothy Muris said the agency has begun using a statistical model that is expected to track price spikes as they happen to identify factors contributing to the price fluctuations.

Retail prices have increased substantially since the first of the year, although they have leveled off in recent weeks. The average price of regular gasoline this week was $1.40 a gallon, 31 cents cheaper than at the same time a year ago, according to the Energy Information Administration.

The American Petroleum Institute, the major oil companies' trade group, told the FTC at a Washington conference Thursday that the price of regular grade gasoline has held steady over the last two weeks.

John Felmy, the API's chief economist, attributed the price increases this year to higher crude oil prices and the many blends of gasoline required for clean air purposes.

The new statistical model, said Muris, the FTC chairman, "will allow FTC staff to identify and track gasoline price spikes on a real-time basis and to identify as quickly as possible the contributing factors."

He said the commission plans to release two reports this year on the impact of industry consolidation on competition and pricing and the complex combination of factors that go into determining prices of all refined petroleum products.

The FTC in recent years has conducted several formal investigations into gasoline pricing practices in the California and Midwest markets and concluded each time that there was no collusion among suppliers or violation of antitrust laws.

A recent staff investigation by the Senate Governmental Affairs investigations subcommittee concluded that oil companies, while not colluding, tended to manipulate supplies to keep prices high in tight markets. In part, they are able to do so because of the reduced number of competitors now in the industry, the report said.

A group of oil executives said at a Senate hearing last week that gasoline prices reflect market conditions, and refineries have worked aggressively to maintain supplies in a tight market.
  • Joel Roberts

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