No relief in sight to rising gasoline prices in U.S.

Tuesday, June 20, 2000 | 11:13 a.m.

SUN WIRE REPORTS

CHICAGO -- Oil and ethanol industry executives blamed one another for rising gas prices Monday at a congressional panel designed to examine why drivers are paying more than $2 a gallon in cities such as Chicago and Milwaukee.

Few left the special hearing convened by Illinois Democrats with much hope for a resolution.

"I think this could be a serious situation throughout the summer," said Eric Vaughn, president of the Renewable Fuels Association, a Washington-based group representing ethanol producers.

In a separate briefing in New York, American Petroleum Institute President Red Cavaney cited "six or seven different variables" for the higher Midwest prices -- everything from ethanol to the increase of crude prices to above $30 a barrel to pipelines that have been out of commission.

But members of Congress, the Environmental Protection Agency and a spokesman for the ethanol industry disputed the explanations and even accused the oil industry of trying to sabotage ethanol's use as an additive.

Panel members said the industry should be charging no more than an additional 8 cents a gallon for gas that has ethanol in it instead of MTBE, a controversial additive used in most states that some environmentalists believe contaminates water supplies.

The meeting came just two days before ministers from the Organization of Petroleum Exporting Countries are scheduled to meet to discuss raising production by about 500,000 barrels a day -- or about 2 percent of the countries' total production.

However, Energy Secretary Bill Richardson said today that OPEC should "keep an open mind" on whether to increase oil production when it meets Wednesday.

Richardson said he "continues to keep oil-producing nations abreast" of record gasoline prices in the United States, and thinks OPEC should take low international oil stocks into consideration as it considers supply increases.

The secretary, who has taken a low-profile approach in advance of this OPEC meeting after he was criticized for openly lobbying energy ministers to boost production before their March meeting, would not discuss with reporters how much oil the United States would like to see added to global supply.

"This tight supply situation is not good enough for consuming or producing countries," Richardson said in a speech to the National Petroleum Council, an industry group that advises the Energy Department. "We are looking at continued tight supply."

But analysts have suggested that even if the increase is approved, it could be several weeks before enough oil is produced to help lower gas prices.

Rep. Luis Gutierrez, D-Ill., said he would ask Attorney General Janet Reno and her staff to look for any signs of price-fixing in the oil industry. The Federal Trade Commission is already investigating.

Cavaney defended the industry, saying it was being blamed as a scapegoat even though no proof existed of the companies' alleged price manipulation.

He pointed to an FTC investigation over higher gas prices in California earlier this year that he said was a result of refinery fires.

"The attorney general of the state of California and the federal government's General Accounting Office did investigations to determine if there was any evidence of gouging on the part of our industry," Cavaney said. "Both of those reports have been filed in the last several weeks, giving the industry a very clean bill of health."

The summer price surge has politicians worried in this election year.