www.sfgate.com Edward Epstein, Chronicle Washington Bureau Friday, March 7, 2003

Washington -- Two Bay Area members of Congress are calling for federal action to drive down the sky-high price of gasoline, but their odds of success seem slim.

Rep. Mike Thompson, D-St. Helena, a longtime critic of oil companies' practices, has introduced legislation that would force refiners to stop discrimination against independent stations and halt what he says is the practice of manipulating prices by zones to keep pump prices high or undercut competitors.

And Sen. Barbara Boxer, D-Calif., on Thursday asked the General Accounting Office, Congress' investigating arm, for an inquiry into gasoline prices in California, which are the highest in the nation.

Boxer, in a letter to the GAO, said she particularly wanted to know whether there had been an unusual cluster of refinery shutdowns that could result in tighter supplies and higher prices. Boxer also wrote the seven biggest refinery operators in California, asking for a list of the number of hours their refineries have been shut in recent months.

Thompson's legislation, which he had introduced in the previous session of Congress, has quickly drawn 20 House co-sponsors, all Democrats. It will be furiously opposed by oil companies, who deny price gouging. The oil companies argue that the recent spike in costs to motorists has been brought on by a looming war in Iraq, turmoil in Venezuela and a cold winter on the East Coast, all of which had driven the world price of oil to $37 a barrel Thursday.

The federal government warned Thursday that nationwide gasoline prices could hit record levels in April, with the average pump price topping the record $1.71 a gallon reached in May 2001. California's prices already are at record levels, with the statewide average for a gallon of regular unleaded hitting $2.04 on Tuesday, and prices reaching an average of $2.19 in San Francisco.

Thompson, who introduced similar "divorcement" legislation when he was a state senator, said prospects for his bill were "slim to none, and none just left town."

"I don't have any expectation this will become law, but the motoring public needs to know that the companies are doing this to them," he said.

According to Thompson and Dennis DeCota, executive director of the California Service Station and Automotive Repair Association, regional zone pricing involves the use of demographics -- income levels, local competition --

to manipulate the price for gasoline in a specific neighborhood. They say it amounts to oil-industry redlining.

But at ChevronTexaco, the San Ramon multinational that is the second- largest gasoline retailer in California, the explanation is much more benign.

"Zone pricing refers simply to the practice of pricing competitively in localized markets," ChevronTexaco executive David C. Reeves told a Senate investigating committee in April 2002. "It means identifying an area where we believe there are competitors to Chevron-branded stations and pricing our gasoline to allow our stations to compete for the business in that area."

"We are confident that it results in lower, not higher, prices for consumers," Reeves added.

Of the 8,500 gas stations in California, 6,500 are independently owned, although most have exclusive agreements to carry one brand and buy their gas at the zoned price. Thompson wants to free them to pay the "terminal price," meaning they could buy their gas on the wholesale market from middlemen or "jobbers" who pick up gas at terminals in Richmond, San Jose, San Bruno and Sacramento.

"The basic California situation is that there are only six or seven suppliers who control 90 percent of the production. They act in unison. It's an oil-igopoly," said DeCota, who owns a Union 76 station in San Anselmo. He was selling unleaded regular for $2.22 a gallon on Thursday.

In her letter to the refiners, Boxer alleged that their behavior raised echoes of the state's energy crisis.

"This is reminiscent of the electricity crisis when generators took their plants offline for 'routine maintenance' at a rate higher than normal," Boxer wrote. "We now know that these generators were holding back electricity to artificially increase the price."

Nicole Hodgson, a ChevronTexaco spokeswoman, said that more than two dozen state and federal investigations over the past two decades had uncovered no evidence of wrongdoing.

Those investigations, Hodgson said, "have reached the same conclusion: that there has been no wrongdoing on the part of industry and that refiners have not engaged in illegal conduct."

E-mail Edward Epstein at eepstein@sfchronicle.com.

www.bayarea.com Posted on Fri, Mar. 07, 2003 By Andrew Bridges ASSOCIATED PRESS

LOS ANGELES - Sen. Barbara Boxer called Thursday for a federal investigation into California's soaring gasoline prices amid concerns the market is being manipulated in ways reminiscent of the power crisis that convulsed the state two years ago.

In a letter to U.S. Comptroller General David M. Walker, the California Democrat asked the General Accounting Office to look at news reports that oil companies are taking more refineries than normal off line for maintenance. Such a move presumably would curtail the state's gasoline supply and send prices spiraling upward.

"I am extremely concerned about the rising gasoline prices in the state of California, and I call on you to investigate this situation, particularly with regard to the possible manipulation of supply due to idle refineries," Boxer wrote.

Boxer also sent letters to the state's seven largest oil companies, asking for records that show how many hours their refineries were off-line over the last four months and during the same time period a year ago.

"This is reminiscent of the electricity crisis when generators took their plants off-line for 'routine maintenance' at a rate higher than normal," Boxer wrote.

Nicole Hodgson, a spokeswoman for San Ramon-based ChevronTexaco Corp., said the company had not yet received the letter and could not comment. She did say that more than two dozen similar state and federal investigations conducted over the last two decades uncovered no evidence of wrongdoing.

"Refiners have not engaged in illegal conduct," Hodgson said.

Telephone messages left for the other companies -- ConocoPhillips, Tesoro Petroleum Corp., Shell Oil Co., ExxonMobil Corp. and Valero LP -- were not immediately returned.

The average retail price of gas in California hit $2.04 this week, an all-time record for the state. (When adjusted for inflation, however, prices are still lower than they were during the Iran hostage crisis.)

The oil industry attributes the price hike to rises in the cost of crude, now at a two-year high. Although supply remains steady, some say the jump is partly due to jitters about war in the Middle East and civil unrest in Venezuela.

www.kansas.com Posted on Fri, Mar. 07, 2003 H. JOSEF HEBERT Associated Press

WASHINGTON - Gasoline prices are expected to continue their upward climb and reach a record national average of $1.76 a gallon in April, according to an Energy Department forecast.

It predicted gas prices will average about $1.70 a gallon for regular brands through the summer driving season.

Gasoline prices have soared during the past month because of high crude oil costs, heavy demand for heating oil and tight inventories of crude as well as most petroleum products.

Already many parts of the country have been paying $2 or more at the pump. This week prices soared on the West Coast, where refining problems added to the price spike.

Gasoline prices increased to an average of $1.68 a gallon nationally this week, a hike of nearly 3 cents from last week and 54 cents higher than a year ago. Prices on the West Coast took the biggest jump, increasing by 8.5 cents to $1.93 a gallon, the Energy Information Administration said Thursday.

"With the driving season beginning next month, pump prices are expected to continue to rise," said the EIA in a short-term energy forecast released Thursday.

The EIA said gasoline inventories remained tight, close to the lower end of the five-year average. This "is one of the reasons current pump prices are high," said the EIA, the department's statistical agency.

The $1.76 a gallon forecast for April would be a nickel more per gallon than the record high of $1.71 set in May 2001, said the agency.

These prices would still be somewhat of a bargain compared to gasoline costs in 1981 if inflation were taken into account, the EIA noted. Using today's dollar, motorists were paying the equivalent of $2.90 a gallon in March 1981, said the EIA.

The EIA said crude oil prices in February "moved higher than expected pushed by fears of war in Iraq, lower inventories (and) slow recovery of Venezuela's exports." The price of West Texas Intermediary, a benchmark crude, averaged $36 a barrel, a level not seen since October 1990, just months before the start of the Gulf War, the agency said.

Alluding to possible fighting in Iraq, the report said that "even without additional disruptions to world (oil) supply in the near term, prices are likely to remain on the high side and subject to substantial volatility through 2003."

Cold weather and tight supplies of both natural gas and heating oil caused residential heating bills to soar this winter.

The government estimated that if normal temperatures prevail through the end of this month, residential heating bills, compared with last year's cost, will be up by 30 percent for homes using natural gas, 60 percent for homes using oil, and 25 percent for homes using propane.

The cost of heating oil climbed to $1.83 cents a gallon this week, or 68 cents higher than a year ago, the government said. Propane increased to $1.72 a gallon, 60 cents more than a year ago. Natural gas prices have receded somewhat, but remain high.

ON THE NET Energy Information Administration: www.eia.doe.gov

www.unionleader.com The Associated Press

JOHN KERRYHAMPTON - Calling the Bush administration "frozen in the ice of indifference," Massachusetts Sen. John Kerry said the president's failure to tap home heating oil reserves puts New Hampshire jobs in jeopardy.

In a speech prepared for delivery Friday, the presidential hopeful said the state faces a similar scenario to 1991, when a spike in energy prices before the Gulf War helped push the region into a severe recession.

"What's happening today sounds all too familiar. It's like the movie 'Groundhog Day,'" Kerry said in remarks prepared for the Hampton Democratic Committee's Jefferson-Jackson dinner. "But New Hampshire can't afford six more weeks of a snowy winter if the Bush Administration is frozen in the ice of indifference."

In a letter being sent to Bush on Friday, Kerry urged the president to release oil from the Northeast Home Heating Oil Reserve to cope with increasing oil prices in New England.

He said anecdotal evidence suggests that high oil prices have drained more than half a billion dollars from New England's already sluggish economy. The prospect of war with Iraq, decreased production in Venezuela and low stocks have led to prices 52 percent higher than last year, he said.

"I'm greatly concerned over how higher oil prices, and especially the rise in heating oil prices, may harm the overall economy, small and large businesses and family budgets in New England," he wrote.

Kerry was among a bipartisan group of senators who sent a similar letter to Bush last month. In that letter, the group noted that about 69 percent of the nation's 7.7 million households using heating oil are in the Northeast, and that the reserve was created to help families through such rough times.

New Hampshire Republicans Sen. Judd Gregg and U.S. Rep. Charles Bass have been among those urging Bush to release the oil reserve.

Last week, Energy Secretary Spencer Abraham dismissed a request by a group of New England heating oil companies that the government make available some of the 2 million barrels of heating oil from the Northeast reserve.

He told senators that emergency oil stocks will not be used to dampen soaring energy prices unless severe supply shortages arise.

www.sfgate.com Edward Epstein, Chronicle Washington Bureau Thursday, March 6, 2003

Washington -- Two Bay Area members of Congress are calling for federal action to drive down the sky-high price of gasoline, but their odds of success seem slim.

Rep. Mike Thompson, D-St. Helena, a longtime critic of oil companies' practices, has introduced legislation that would force refiners to stop discrimination against independent stations and halt what he says is the practice of manipulating prices by zones to keep pump prices high or undercut competitors.

And Sen. Barbara Boxer, D-Calif., on Thursday asked the General Accounting Office, Congress' investigating arm, for an inquiry of gasoline prices in California, which are the highest in the nation.

Boxer, in a letter to the GAO, said she particularly wanted to know whether there had been an unusual cluster of refinery shutdowns that could result in tighter supplies and higher prices. Boxer also wrote the seven biggest refinery operators in California, asking for a list of the number of hours their refineries have been shut in recent months.

Thompson's legislation, which he had introduced in the previous session of Congress, has quickly drawn 20 House co-sponsors, all Democrats. It will be furiously opposed by oil companies, who deny price gouging. The oil companies argue that the recent spike in costs to motorists has been brought on by a looming war in Iraq, turmoil in Venezuela and a cold winter on the East Coast, all of which had driven the world price of oil to $37 a barrel Thursday.

The federal government warned Thursday that nationwide gasoline prices could hit record levels in April, with the average pump price topping the record $1.71 a gallon reached in May 2001. California's prices already are at record levels, with the statewide average for a gallon of regular unleaded hitting $2.04 on Tuesday, and prices reaching an average of $2.19 in San Francisco.

Thompson, who introduced similar "divorcement" legislation when he was a state senator, said prospects for his bill were "slim to none, and none just left town."

"I don't have any expectation this will become law, but the motoring public needs to know that the companies are doing this to them," he said.

According to Thompson and Dennis DeCota, executive director of the California Service Station and Automotive Repair Association, regional zone pricing involves the use of demographics -- income levels, local competition -- to manipulate the price for gasoline in a specific neighborhood. They say it amounts to oil-industry redlining.

But at ChevronTexaco, the San Ramon-based multinational that is the second-largest gasoline retailer in California, the explanation is much more benign.

"Zone pricing refers simply to the practice of pricing competitively in localized markets," ChevronTexaco executive David C. Reeves told a Senate investigating committee in April 2002. "It means identifying an area where we believe there are competitors to Chevron-branded stations and pricing our gasoline to allow our stations to compete for the business in that area."

"We are confident that it results in lower, not higher, prices for consumers," Reeves added.

Of the 8,500 gas stations in California, 6,500 are independently owned, although most have exclusive agreements to carry one brand and buy their gas at the zoned price. Thompson wants to free them to pay the "terminal price," meaning they could buy their gas on the wholesale market from middlemen or "jobbers" who pick up gas at terminals in Richmond, San Jose, San Bruno and Sacramento.

"The basic California situation is that there are only six or seven suppliers who control 90 percent of the production. They act in unison. It's an oil-igopoly," said DeCota, who owns a Union 76 station in San Anselmo. He was selling unleaded regular for $2.22 a gallon on Thursday.

In her letter to the refiners, Boxer alleged that their behavior raised echoes of the state's energy crisis.

"This is reminiscent of the electricity crisis when generators took their plants off-line for 'routine maintenance' at a rate higher than normal," Boxer wrote. "We now know that these generators were holding back electricity to artificially increase the price."

Nicole Hodgson, a ChevronTexaco spokeswoman, said that more than two dozen state and federal investigations over the past two decades had uncovered no evidence of wrongdoing.

Those investigations, Hodgson said, "have reached the same conclusion: that there has been no wrongdoing on the part of industry and that refiners have not engaged in illegal conduct."