Published Wednesday, June 28, 2000

Oil Execs Testify Before House

By H. JOSEF HEBERT / Associated Press Writer

WASHINGTON (AP) -- Oil company executives insisted Wednesday in congressional testimony that short supplies and high demand caused the skyrocketing gasoline prices in the Midwest and strongly denied any collusion to drive up prices.

The chairman of the Federal Trade Commission, which is investigating the gasoline pricing, said the agency has begun issuing subpoenas to refiners, pipeline operators and others in the production and distribution chain to try to determine if companies acted illegally in raising prices.

So far there isn' t " any obvious complete explanation, " FTC Chairman Robert Pitofsky told members of the House Commerce Committee. While he promised an interim report by the end of July, he warned the investigation " is not a quick fix" to solving the price spike mystery.

High oil and gasoline prices and what is being done about them dominated no fewer than three House committees Wednesday with administration witnesses jumping from one hearing to the next. Some lawmakers, mostly Democrats, accused the industry of price gouging, while Republicans largely blamed EPA regulations for cleaner burning gasoline and a lack of domestic oil production.

Oil company executive, testifying for the first time on Capitol Hill since the high Midwest gasoline prices unleashed an uproar among lawmakers two weeks ago, said they are unfairly being vilified.

" We are doing everything we can to meet our supply commitments during this peak driving season, " insisted Ross Pillari, vice president for BP Amoco, adding that the supply system " has become very stressed" and any unusual event " can cause product shortages."

The oil executives and key Clinton administration officials, appearing before the House Commerce Committee, disagreed sharply over the impact government-mandated cleaner burning gasoline has had on supplies and prices in the Midwest.

Both Energy Secretary Bill Richardson and EPA Administrator Carol Browner said no explanation had yet been given why the new blend of cleaner gas should have caused a steep price increase when the new fuel should cost no more than 8 cents to produce. Reformulated gas outside the Midwest is about the same as conventional gasoline, said Browner.

" We know that the cleaner burning gasoline is not the problem. We know ethanol (an additive to the gas, especially in the Midwest) is not the problem, " she insisted.

But Jerry Thompson, senior vice president of Citgo Petroleum Corp., complained about a " patchwork quilt of regulations" that is forcing refiners to produce many different blends of gasoline in different parts of the country. This prevents easy movement of fuels into areas with shortages, he argued.

Another executive, J. Louis Frank, president of Marathon Ashland Petroleum Co., blamed the " fragile nature" of gasoline refining and distribution in parts of the Midwest where a fourth of the demand must be met from outside the region.

Thompson said that refinery and distribution problems this spring exacerbated the supply picture in the Midwest just as the industry was preparing for the heavy summer driving season.

Refiners " no longer have the flexibility to quickly shift supply to areas of greatest need, " Thompson argued.

But the oil executives acknowledged that while refineries are running at full capacity now -- about 96 percent in the Midwest, according to the Energy Department -- some refiners pulled back on producing reformulated gasoline this spring.

Thompson said one Citgo refinery had the ability to produce 15, 000 barrels per day of summer grade, cleaner burning gasoline, but production was cut to 4, 000 barrels a day to avoid problems with a patent controversy. (PROFILE (CO:BP Amoco PLC; TS:BPA; IG:OIL;)

http://www2.startribune.com/stOnLine/cgi-bin/article?thisStory=82022407

-- Cave Man (caves@are.us), June 28, 2000