New gas price surges not out of question

Officials fear heating costs could skyrocket this year

Friday, July 14, 2000

By Jennifer Loven The Associated Press

WASHINGTON  Record-high gasoline costs in the Midwest have moderated, but a Clinton administration energy expert warned on Thursday that other areas might see price surges this summer. Crude oil prices remain high, gasoline inventories are still low, refineries are operating at near-capacity and demand is not expected to decline, John Cook, the Federal Energy Information Administration's petroleum division director, told the Senate Energy Committee.

That combination leaves little room for supply disruptions without triggering other dramatic price spikes, he said.

Motorists on both coasts are particularly vulnerable. Though stocks of gasoline are recovering to near-normal levels in the Midwest, those on the East Coast are 8 percent below their 5-year average and California inventories have dipped 6 percent, Cook said.

"We may experience more volatility before the summer is over," he said.

The price of a gallon of regular gas averaged $1.59 nationwide Thursday, still 43 cents higher than a year ago, the EIA said. At some Chicago-area stations, prices peaked at $2.33 a gallon in June, before falling to an average of $1.73 a gallon Thursday, according to AAA.

Now, Cook and others are warning the stage may be set for a repeat this winter of last year's sharp price hike in home heating costs.

Stocks of heating oil are about half what they were a year ago and natural gas inventories are down about 20 percent. While this is normally a time when suppliers begin stockpiling fuel for the winter, oil refineries instead are pumping out as much gasoline as possible.

"It's clear we have a crisis. It's not getting better, it's getting worse," said Sen. Frank Murkowski, R-Alaska, the committee chairman. "It's not just gasoline. It goes much further than that. But the American public is not aware  they haven't awakened."

Echoing other Republicans, Murkowski accused the Clinton administration of failing to pursue increased domestic oil production aggressively.

Bob Slaughter, general counsel for the National Petrochemical and Refining Association, said a "regulatory blizzard" of costly and confusing federal environmental requirements have reduced the incentive for refiners to build capacity.

"The system is stretched to the breaking point," he said.

President Clinton has faulted Congress for failing to support his proposals to increase spending for research into renewable energy and increased fuel efficiency.

Meanwhile, Richard Parker, director of the Federal Trade Commission's bureau of competition, said subpoenas have been issued to numerous oil companies as the agency investigates whether collusion was a factor behind the Midwest gasoline price surges. He predicted the agency would receive "hundreds of boxes" of information that would take months to examine.

The FTC plans to issue an initial report by the end of the month.

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