Government investigating sharp rise in gas prices

By Gus Bode

WASHINGTON (KRT) – The federal government is investigating the recent 12-cent-per-gallon spike in gasoline prices to an all-time high, Energy Secretary Spencer Abraham announced Wednesday.

Last week, gasoline prices hit an average of $1.75 a gallon after the one-week surge, raising concerns that the oil industry might be taking advantage of the Northeast power blackout, the war in Iraq and other factors.

“The nature of this (price) fluctuation struck me as being unusually large … and in need of greater explanation,” Abraham told the House Energy Committee. He said his department’s toll-free consumer hot line (800-244-3301) had been flooded with complaints about soaring gasoline prices.

Advertisement

Market factors could be to blame for the spike, Abraham said, citing temporary shutdowns of six oil refineries during last month’s electricity blackout in the Midwest and Northeast. In addition, a gasoline pipeline in the Southwest was disrupted and late-summer vacation driving pushed up the demand for gas.

Deputy Energy Secretary Kyle McSlarrow said some increase in gasoline prices was predictable but not one so big and fast. The Energy Department and the Federal Trade Commission will work together to investigate why gas prices rose so quickly. “The question is, and what we’ll look into and work with our colleagues at the FTC about, is whether anybody took advantage of the situation in terms of market manipulation,” McSlarrow said.

“We’ll hopefully get some additional insight into whether or not this was really a market reaction only or if other factors were involved,” Abraham said.

Their comments came during a hearing into what caused the massive electricity blackout Aug. 14 that plunged millions into the dark in New York, Ohio, Michigan and Canada. Abraham and other officials said they hadn’t finished their second-by-second investigation into what happened.

The governors of Michigan and Ohio urged lawmakers to pass legislation quickly to require upgrades of the nation’s electrical transmission grids, the privately owned networks on which power is distributed. Some parts of the grids date from the 1950s and can’t handle today’s power demands.

“Congress must respond swiftly to institute measures to stabilize and protect our electrical transmission systems,” said Michigan Gov. Jennifer Granholm, who blamed human error, inadequate maintenance of the power lines and deregulation of the utility industry for the power failure.

Granholm joined Democrats in the House of Representatives in calling on Congress to pass stand-alone legislation mandating that utility companies upgrade the grid. Congress’ Republican leadership and the Bush administration prefer to push for a broader “comprehensive energy policy” measure that would give tax incentives to utility companies to modernize their electricity networks voluntarily.

Advertisement

The Republican-backed approach would include controversial measures unrelated to electricity reliability, such as opening the Alaska National Wildlife Refuge to oil drilling and authorizing a 3,600-mile natural-gas pipeline from Alaska to the continental United States. Retaining such controversial proposals threatens to delay or block any energy measure aimed at improving the electrical grid.

Advertisement