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Energy Department launches inquiry into soaring gas prices
WASHINGTON -- The Energy Department is investigating whether price gouging was involved in the unusually large gasoline price jumps that followed the Northeast power blackout and continued through the Labor Day weekend.
Energy Secretary Spencer Abraham told lawmakers complaining about the skyrocketing prices at gas pumps that the department began an inquiry this week to determine whether factors other than normal market conditions played a role in the price increases. If irregularities are found, the information could be turned over to the Justice Department or the Federal Trade Commission.
Gasoline prices, on a national average, reached a record $1.75 cents a gallon last week, jumping more than 12 cents a gallon from the week before. In some areas the run-up was even higher, with drivers reporting price increases of a dime a gallon overnight.
Abraham told a House hearing on the electricity blackout that while gasoline prices normally increase in the days leading up to the heavily traveled Labor Day weekend, the recent price spikes "struck me as being unusually large," prompting a decision to look into the matter.
He said the investigation was just beginning and that he couldn't make any judgment on whether there were any improper activities involved or to what extent the blackout influenced prices.
"We will hopefully get some additional insight ... on whether this was really a market reaction only or if other factors were involved," he told lawmakers during an Energy and Commerce Committee hearing. Abraham gave no indication when any findings will be made public, saying that the inquiry only began on Tuesday.
At least seven U.S. and Canadian refineries were briefly shut down because of the Aug. 14 power outage from Michigan to New York state and parts of Canada. Industry officials said at the time the shutdowns should cause only modest price increases, since production resumed fairly quickly and some of the largest refineries were not affected by the blackout.
But between Aug. 18 and 25, the average retail price for regular unleaded gasoline shot up 12 cents per gallon, the biggest one-week increase ever, according to the DOE's Energy Information Administration. In some regions the price spikes were substantially higher, and in some cases prices jumped a dime a gallon overnight.
Deputy Energy Secretary Kyle McSlarrow said a variety of factors have put upward pressure on gasoline prices. They include the normal high summer demand leading up to Labor Day, higher crude oil prices, generally low gasoline stock and disruptions such as a broken gasoline pipeline in Arizona, refinery problems in California and the blackout-related refinery shutdowns.
"We have very low gas inventories. We have no margin for error," said McSlarrow.
Nationwide, supplies of gasoline remain extremely tight. For the week ending Aug. 22, the latest period surveyed by the government, commercial inventories stood at 191.2 million barrels, 8 percent below levels a year ago and the lowest level since November 2000 -- a time of year when gasoline demand is substantially lower than during the summer driving season.
This week, wholesale gasoline markets indicated that retail prices at the pump may soon retreat as they normally do after Labor Day.
On Wednesday, unleaded gasoline for October delivery finished the day at 84.1 cents per gallon on the New York Mercantile Exchange, 19 cents a gallon less than a week ago when September gasoline futures traded at $1.03. October crude oil futures also declined, closing Wednesday at $29.49 per gallon, compared with $31.21 a week ago.
It could take a couple of weeks for the post-Labor Day drop-off in gasoline futures prices to filter down to retail markets, but analysts said the worst is most likely over for motorists. A year ago, retail prices averaged about $1.41 per gallon, nearly 35 cents a gallon less than last week's record high mark.