U.S. gasoline producers blame Washington for high prices Murphy: "We're very confident that what is happening is a normal reaction to a market system" June 16, 2000 Web posted at: 1:40 p.m. EDT (1740 GMT)

---------- In this story:

Illinois governor: 'Prices went sky-high'

Alleged price gouging

Second federal investigation ordered

From staff and wire reports

WASHINGTON -- A senior manager for an industry trade group said Friday that federal regulations -- not U.S. petroleum producers -- are to blame for skyrocketing gasoline prices in Chicago and Milwaukee.

The finger-pointing comes after federal officials and lawmakers met in Washington on Thursday to determine why drivers in both cities are paying nearly 40 cents more per gallon than the rest of the nation.

"We're very confident that what is happening is a normal reaction to a market system," Edward Murphy, a senior manager for the American Petroleum Institute, told CNN. "At the base of that is problems with the regulations that the (Clinton) administration has imposed on the industry."

On June 1, gasoline companies were required by federal regulations to begin selling a cleaner-burning fuel that the industry says is more expensive to make.

President Clinton on Friday said he was "frustrated" and "quite concerned" about the exploding gasoline prices in the two cities on Lake Michigan.

"So we know that it would be more expensive for a little while till the transportation and the refinery problems were solved," Clinton said on NBC's "Today" show. "What we don't know is whether there was any price gouging."

Meanwhile, a bipartisan group of U.S. senators on Friday demanded that the Clinton administration force the Organization of Petroleum Exporting Countries (OPEC) to increase oil production as a way to lower gasoline and home heating oil prices.

If OPEC refuses to increase output, the senators said, the White House should attempt to reduce oil prices on its own by releasing the nation's emergency oil reserves.

"If we do nothing and OPEC continues to constrict the supply of oil the average American will pay $1,000 more this year than they did last year out of their pockets," Sen. Charles Schumer said at a Capitol Hill news conference.

A White House spokesman told CNN that releasing the nation's oil reserves is not actively being considered.

Illinois Gov. George Ryan has asked the Environmental Protection Agency to suspend its new clean-gas regulations.

"The prices went sky-high on June 1," Ryan said, "and that's when the new regulations were changed by the EPA."

EPA Secretary Carol Browner -- who met Thursday with House Speaker Dennis Hastert, R-Illinois, and other lawmakers from Illinois, Wisconsin and Indiana -- said a preliminary federal investigation had turned up "no reasonable answer" for the rising prices.

"The oil companies ... owe us an answer," Browner said.

Alleged price gouging Browner is giving the Federal Trade Commission information gathered in recent days by field investigators in Chicago and Milwaukee. The FTC -- which Browner said may have more success because it has subpoena powers -- already had announced it would examine whether price-fixing or collusion in the oil industry was driving up prices.

Browner talks to reporters on Capitol Hill on Thursday after a meeting with lawmakers to discuss soaring gas prices "There has never, never been an instance found where any sort of anti-competitive behavior led to price increases in this industry," the American Petroleum Institute's Murphy told CNN.

But Sen. Dick Durbin, D-Illinois, said the industry is gouging the public.

"It's an increase directly attributable to profit-taking by the oil companies," Durbin said.

Hastert said he hasn't yet reached that conclusion but expects to learn more next week during a private meeting with representatives from the Clinton administration and lawmakers from both parties, he said.

Browner said the average price for regular gas in Chicago and Milwaukee on June 12 was $2.04 per gallon; the average nationwide was $1.62. In cities where cleaner-burning fuel is required -- excluding Chicago and Milwaukee -- it was only $1.63.

Second federal investigation ordered Also Thursday, the White House ordered the Transportation Department to look into whether supply problems are contributing to the problem, White House spokesman Jake Siewert said.

The oil industry said supply problems have been caused by: a patent dispute over the process to make the cleaner-burning gasoline, a major oil pipeline break three months ago, the start of the high-demand summer driving season, and higher costs for crude oil.

But Browner said tight gasoline supplies were not the reason behind the high gasoline prices. Total gasoline stocks in the Midwest are 650,000 barrels higher than last year.

The federal reformulated gasoline program requires that fuel sold in selected U.S. cities be blended with an oxygenate that makes it burn cleaner. Tighter pollution-reduction goals this year require ethanol -- which is used in Chicago and Milwaukee -- to be mixed with a more expensive gasoline, which the oil industry blames for the soaring prices.

Correspondent Fred Katayama, The Associated Press and Reuters contributed to this report.

http://www.cnn.com/2000/US/06/16/gas.prices.02/index.html

-- Martin Thompson (mthom1927@aol.com), June 16, 2000