FTC to monitor gas prices more closely

By HIL ANDERSON, UPI Chief Energy Correspondent  |  May 8, 2002 at 7:22 PM
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LOS ANGELES, May 8 (UPI) -- Federal regulators Wednesday vowed to monitor the movement of prices at the pump in a more timely fashion to ferret out any unusual spikes and slumps, with another summer of potentially volatile gasoline prices getting under way.

Federal Trade Commission Chairman Timothy Muris opened a two-day Washington conference on the gasoline market by announcing the development of a statistical model based on retail prices in 360 cities as well as the "rack" prices paid at terminals in 40 major urban areas where tanker trucks are loaded.

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

Summer is the time of year when gasoline prices historically take significant hikes because the vacation season means more vehicles on the road and environmental regulations require a clean-burning reformulated gasoline that costs more than the fuel used during the winter months.

The timing and extent of the price increase varies from region to region, which has raised suspicions on the part of lawmakers and consumers that the oil companies manipulate supplies in order to boost prices.

"As prices at the pump sharply rise and fall with seemingly increasing regularity, consumers raise questions about the causes of price volatility," Muris said. "They also ask what drives the average level of gasoline prices."

The FTC said the data would come from Oil Price Information Service, a New Jersey company that supplies such information to the oil industry on a daily basis for use in setting contract prices.

John Felmy, chief economist for the American Petroleum Institute, told the FTC that crude oil prices had a significant impact on gasoline prices, but also pointed out that not all areas of the country use the same gasoline formula.

According to the API, government regulations require the oil industry to make 19 different types of gasoline in order to meet environmental standards in different parts of the country. The effect is that refiners find it more difficult to use gasoline made to one specification to cover a supply shortage in an area that has different regulations.

There are other factors that can limit supply, primarily mechanical problems that cut production at refineries or shut down the pipelines that carry fuel.

Felmy also told the commission that pump prices nationwide had largely held steady during the past four weeks at around $1.40 per gallon, 30 cents below the same period last year. Prices had surged higher since December as Middle East tensions pushed crude up by 55 percent.

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