State legislators grill oil industry lobbyists about gas prices

Jul 13, 2000 02:00 AM

When gas prices did the unthinkable and jumped north of $ 2 per gallon, oil companies cited various reasons: low supply, high demand, pipeline breakdowns and cleaner-air rules.
Now that prices have dipped more than 30 cents per gallon, oil companies contend it's simply a matter of supply gaining ground in its race with demand. But the other factors - clean-air laws requiring a new gas recipe and high summer demand - remain a constant, which led a group of state legislators to question whether the explanation rings true. "None of this explains the spike in the previous 30 days or the drop the last two weeks," said State Rep. Lou Lang, a Skokie Democrat. "People saw inexplicable prices jumping to the moon and then inexplicable prices coming down."

State legislators grilled the oil industry lobby at the Thompson Centre in Chicago in the first of several public hearings on gas prices and whether the industry colluded to keep them high. The panel asked an oil industry lobbyist to do some simple math to explain pump prices that reached $ 2.13 a gallon three weeks ago and stood at $ 1.76 per gallon, according to a AAA-Chicago Motor Club survey.
The panel, led by State Rep. Julie Hamos, an Evanston Democrat, also plans to call gas company leaders for firsthand testimony on what caused the rapid price increases that gave Chicago the highest gas prices in the nation. Chicago ranks 12th.
David Sykuta, executive director of the Illinois Petroleum Council, broke down the recent price increase this way: up to 16 cents per gallon for clean-air laws changing the gas recipe, 30 cents per gallon due to a tight gas supply and another 10 cents from sales tax on the higher-priced gasoline. Conversely, Sykuta said, when the pipelines were fixed, the gas supply increased and the sales tax removed, pump prices fell. The wholesale price for gas fell from $ 1.40 a gallon to about 90 cents a gallon, he said, and the savings has been trickling down to consumers.

"Every time there's a gas price spike, somebody investigates," said Sykuta, estimating he's been through 15 such probes since the 1970s. "The results always come back that it's a supply-and-demand issue." But legislators said Sykuta's math doesn't add up, pointing out that the Environmental Protection Agency estimates it only costs oil companies 4 to 7 cents a gallon for the new, cleaner-burning gas. They also pointed to a total gas price increase of 80 cents a gallon or more from a year ago - more than the 56 cents Sykuta could explain.
The politicians also took partial credit for the dip, saying the suspension of the state tax pressured oil companies to lower prices. Sykuta denied there was any pressure or collusion among the 5,400 gas stations in Illinois. "This is the most competitive industry in the world," he said. "It is structurally impossible to promote a gouged price." Norma Cooper, a spokeswoman for AAA, said the reason for the price dip likely is a combination of political pressure and wholesale prices dropping.

Source: Daily Herald
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