06/22/2000 18:20:00 ET UPDATE 1-Midwest gasoline nightmare begins to fade

NEW YORK (Reuters) - The Midwest gasoline nightmare is finally fading as retailers on Thursday slowly lowered their record-high pump prices in line with a downswing in wholesale costs. Regular gasoline at several Citgo stations in Chicago fell about six cents per gallon at the pumps on Thursday to under $2 a gallon for the first time in weeks, station operators told Reuters.

A BP Amoco station operator said that first thing Thursday morning, Chicago-area pump prices for regular gasoline fell by as much as 10 cents per gallon.

"I'm sure they're falling already," said Dan Gilligan of the Petroleum Marketers Association of America (PMAA), a gasoline retailing group. "The retail prices will always follow wholesale."

Wholesale gasoline prices in the heartland have slipped as much as 40 cents a gallon since Monday -- correcting from runaway highs that had gas stations in Chicago, Detroit and Milwaukee charging as much as $2.30 a gallon, or more than 50 cents above the national average of $1.68 a gallon.

The wholesale slide was attributed thinly to a refinery restart in Illinois and new supply shipments coming to the rescue, but some market sources noted that it happened just as the Federal Trade Commission launched its probe into possible price-fixing among oil companies in the region.

The high gasoline prices in the Midwest have led to a consumer outrage loud enough to catch the attention of front pages nationwide, and, more recently, it has become a hot issue in the presidential race between Vice President Al Gore and his Republican rival, Governor George W. Bush of Texas.

Gore said Wednesday he suspects oil companies colluded to bring prices higher in the Midwest, while Bush said he blamed the gasoline spike on the Clinton administration's energy policy.

The FTC said it will ask up to nine oil firms operating in the Midwest to explain the price spike and submit a report to Congress in late July.

Retailers in the Midwest said that even as retail prices have fallen slightly, the wholesale gasoline slide could take several days to be fully represented at the pumps as marketers sell off the more expensive batches of gasoline still in the supply tanks.

"It can sometimes take several days for a shift in wholesale prices to reach the gas station because marketers still have inventories that they bought at a higher price," said Robert Bartlett, director of the Petroleum Marketers Association of Wisconsin.

Bartlett added, however, that he saw retailers shifting their numbers already.

"A lot of guys are moving back out of the two dollar range," he said.

In Chicago, where wholesale prices have fallen the steepest, from $1.50 a gallon to Thursday's $1.07 a gallon, the American Automobile Association (AAA) expects consumers to see some increasingly welcoming pump prices.

"Just on my way to and from work I've noticed a softening in the prices," said AAA Chicago spokeswoman Norma Cooper. "We're definitely hoping that drivers can get some relief."

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-- Martin Thompson (mthom1927@aol.com), June 22, 2000