Soaring gas prices bring grumblings of gouging

www.troyrecord.com By:, The Associated Press February 21, 2003

The middle of winter looks more like the heart of summer at gas stations nationwide, as fuel prices surge past $2 a gallon in some places and motorists grumble about being gouged.

Political instability in Venezuela and the prospect of war in Iraq are triggering price hikes that normally don't kick in until the peak driving season. And experts warn prices could shoot up even more as the political situations and the weather heat up. The average retail price for a gallon of regular unleaded, $1.66, has risen 56 cents since the beginning of the year. But because wholesale gas prices have increased just 14 cents over the same period of time, some consumers suspect oil companies are trying to cash in on market uncertainties. "I think it's just an excuse to raise prices," said Corina Alba, 22, of Anaheim, Calif. Sen. Charles Schumer, D-N.Y., called on the Federal Trade Commission this week to investigate industry practices. In a letter to FTC chairman Timothy Muris, the senator said: "It appears as if price gouging is taking place across the country." The American Automobile Association supports Schumer's request, but stopped short of using the word gouging. "We feel that most of the increase has been due to fear and speculation, rather than any change in the supply or demand for crude oil or gasoline," AAA spokesman Jeff Sunstrom said. Regardless of the reasons, Sunstrom said today's high prices could be a harbinger of even costlier fuel by the end of April. Tom Kloza, director of Oil Price Information Service, a Lakewood, N.J., publisher of industry data, said the imports lost after Venezuela's oil workers went on strike in December have not been adequately replaced and that could be a problem when the weather heats up and demand rises. Gas prices typically rise during spring, when refiners shift from winter- to summer-grade fuel. The switch to cleaner-burning gas requires shutting down equipment, scrubbing it clean and starting it up all over again - a process that causes supplies to contract and prices to move higher even under the best conditions. The impact of this switch already has been magnified by the possibility of a U.S.-led invasion of Iraq, analysts said. The petroleum industry contends gasoline prices are higher mainly because of traders' fears of supply disruptions in the event of a war in Iraq and the impact of the Venezuelan oil strike. "The fundamental thing is that crude prices have gone up dramatically," said John Felmy, chief economist at the American Petroleum Institute. About 40 percent of the retail cost of gasoline is attributed to the price of crude oil, which has risen 19 percent since the start of the year to $36.79 per barrel. Gas station owners say they are frustrated by accusations of profiteering and insist they are not to blame. They say suppliers have been raising their "rack" prices for weeks and that station owners are merely passing along those increases to customers. "I realize that the price of a barrel of oil has gone up tremendously, but the way that rack prices have gone up for the last two weeks is just not right," said Richard Loeber, owner of a gas station in Union Beach, N.J. Loeber said his supplier has raised the rack price by 16 cents a gallon in less than three weeks and that he has maintained his 8-cent-per-gallon margin all along. "People know they're getting gouged, but believe me, it's not from the dealers," Loeber said.