Lawmakers want to know: Are oil companies gouging?

WASHINGTON — As crude-oil prices hit record highs on world markets Friday and average gasoline prices nationwide neared $3 a gallon, congressional leaders planned to ask President Bush to order investigations into possible price gouging by oil companies.

House Speaker Dennis Hastert, R-Ill., and Senate Majority Leader Bill Frist, R-Tenn., plan to send a letter to the president Monday asking him to direct the Federal Trade Commission (FTC) and Justice Department to investigate price gouging and instruct the Environmental Protection Agency to ease rules in order to help oil refiners produce adequate gasoline supplies, Hastert spokesman Ron Bonjean said.

Hastert and Frist's letter comes amid charges by some consumer groups and Democrats that oil companies have manipulated refineries and oil inventories to drive up prices. Hastert also took aim at the rich pay package for Exxon Mobil's retired chief executive, which he called "unconscionable."

Oil prices Friday climbed to a record, unadjusted for inflation, with benchmark crude rising $1.48 to settle at $75.17 a barrel on the New York Mercantile Exchange.

The average nationwide price of a gallon of unleaded regular gasoline Friday was $2.855, up more than 60 cents from a year ago, according to AAA's daily fuel-gauge report. In the Seattle-Bellevue-Everett metropolitan area, the average was $2.886, up 3.4 cents from the previous day and 38.7 cents from a month ago.

Democrats have been criticizing the administration as well as oil companies for failing to take action to dampen the surge in prices. Sen. Charles Schumer, D-N.Y., this week asked federal antitrust regulators to ensure that oil companies produce as much gasoline as possible before the summer driving season. In a letter to the FTC, he noted that U.S. oil refiners operated at 85 percent of capacity in the week ended April 7 — 13 percentage points less than between April and September 1998.

Other Democrats have called for oil companies to pay a "windfall profit tax," and have argued that Republicans are too close to oil companies to take tough action.

Bush has an opportunity to address the issue Tuesday, at a meeting organized by the pro-ethanol Renewable Fuels Association.

Likewise, Sen. Maria Cantwell, D-Wash., has scheduled a news conference at a Tukwila gas station Sunday to push for a ban on price gouging. She has introduced legislation to outlaw gouging, impose tougher fines and criminal penalties on violators, and give federal and state authorities new powers to protect consumers.

As pumps at scattered gas stations from New Hampshire to Virginia began to run dry, analysts and industry officials said occasional shortages and still-higher prices are possible in coming weeks. But they emphasized that the problem has more to do with delivery schedules than with a dearth of fuel.

Supply hiccups have occurred as refiners switch from the gasoline additive methyl tertiary-butyl ether (MTBE) to more environmentally friendly ethanol, mainly derived from corn. MTBE has been found to contaminate groundwater, and refiners are worried about lawsuits.

Instead of lack of supply, fuel distributors say, they are experiencing logistical challenges as terminal owners drain their tanks of MTBE-laced gasoline in preparation for the switch to ethanol blends. As a result, some retailers have had to wait longer than usual for deliveries and pumps have run dry — an outcome one distributor referred to as "ethanol hell."

Tim Hamilton, executive director of the Automotive United Trades Association, an Olympia nonprofit advocacy group for independent gas-station owners, accused oil companies of manipulating gasoline supplies — and prices — by creating artificial shortages.

Instead of being punished if they fail to meet consumer needs, he said, the companies make even more money if they drop the ball.

"It's not a free-enterprise market," Hamilton said.

Frank Holmes of the Western States Petroleum Association, an industry trade group, disagreed.

"The market is determining the price of gasoline," he said. "The price of crude oil is at record highs, and the price of gasoline tends to follow the price of crude oil. There's been literally dozens of investigations when the price has risen, and in all of them, there has been no determination of wrongdoing by the gasoline industry."

As pump prices rise, they threaten to crimp consumer spending.

"High energy prices — including prices at the pump — act like a tax on the American economy," Treasury Secretary John Snow said Friday.

A House GOP leadership aide said Hastert also responded to calls for hearings into the pay package for Lee Raymond, who retired as Exxon Mobil's chief executive in January. According to a proxy filing by the company last week, Raymond received $48.5 million in salary, bonuses and incentive payments last year, exercised more than $20 million in stock options in 2005, and in January received a lump-sum retirement payment of $98.5 million. The proxy said Raymond in 43 years of service had accumulated $183 million of stock holdings plus stock options worth a net of about $69 million at current prices.

"The speaker is very concerned about compensation packages given to executives like Raymond at a time when families are facing choices between putting food on the table and filling their car with gasoline," said Bonjean, Hastert's spokesman. "We met with Exxon Mobil and several companies last fall, and it seems that the message hasn't gotten through."

Compiled from The Washington Post, The Associated Press, Bloomberg News and Seattle Times staff reporter Jennifer Sullivan.