Gas prices drop in state -Energy Secretary Abraham says dip could mean worst is over

<a href=www.sfgate.com>SFGate.com Verne Kopytoff, Chronicle Staff Writer Tuesday, April 1, 2003

Energy Secretary Spencer Abraham pointed Monday to a modest dip in gasoline prices during the past two weeks as a sign that record high fuel costs may be ebbing.

In interview in San Jose, Abraham called the drop good news. But he declined to say whether illegal market manipulation caused prices to jump in the first place, as some consumer groups have said.

Instead, Abraham cited a number of benign explanations for the sticker shock at the pump, ranging from tensions over the war in Iraq to a cold winter on the East Coast to a workers' strike in Venezuela. He added that his agency wants to hear from anyone with evidence of gouging so the information can be forwarded to the proper authorities.

Abraham's comments came against the backdrop of the federal government's disclosure Monday that California gas prices have dropped for the second straight week. During that period, the average price for a gallon of unleaded in the state has dipped to $2.13 after hitting a record $2.15 on March 17, according to weekly surveys by the Energy Information Administration.

"The trend is at least starting to move in the right direction," Abraham said.

He was in Silicon Valley to support technology and alternative energy by attending an annual information technology conference. His department has been the focus of several major debates during the past couple of years. They included the California energy crisis and the ensuing findings that a handful of energy companies were to blame, proposals to drill for oil in the Arctic National Wildlife Refuge and, most recently, high gasoline prices.

For its part, the Department of Energy has avoided accusing oil companies of purposely driving gas prices higher. In fact, the Energy Information Administration, part of the Energy Department, said in a report last month that there is no evidence the oil industry is engaging in profiteering. It described refiner margins as strong, but added that they are within normal levels.

Abraham said that California's status as one of the most expensive places to buy gas is at least partly a product of its unique smog-reducing fuel blend,

which makes importing additional gasoline from outside the state difficult. The blend recently switched from MTBE to ethanol, causing refinery disruptions and contributing to the current price increase.

Gov. Gray Davis and Sen. Barbara Boxer, D-Calif., have called for separate investigations into California's high gas prices. Abraham said his agency has no investigative arm or regulatory authority over the matter.

Nationally, gas prices have gone down far faster than in California. An average gallon of unleaded in the United States now costs $1.65, down nearly 7 cents during the past two weeks.

Abraham underscored his department's role in maintaining the National Petroleum Reserve, which holds millions of gallons of oil. He said, as he has repeatedly over the past couple months, that he would allow it to be tapped only in an emergency.

"We work to make sure that we are prepared to use the strategic reserve if we need to do so and if a severe disruption in supply takes place," Abraham said.

Charles Langley, gasoline project manager for the Utility Consumers Action Network, a public interest group in San Diego, said the small dip in gas prices by a penny or two is hardly comforting. He said that refiners, especially those with their own chain of service stations, are still gouging drivers.

Oil prices have declined by about $6 per barrel from their 12-year highs reached last month. It usually takes gasoline prices about two weeks to a month to react to a drop in oil prices.

"We're not being screwed as badly as we were," Langley said. "But really, prices ought to plummet."

E-mail Verne Kopytoff at vkopytoff@sfchronicle.com.