Gasoline Prices 

The high cost of gas and fuel in Northern Michigan is an issue I have long been concerned with.  All Americans have been hit hard by the high price of gasoline, but nowhere is the impact more evident than in rural areas such as northern Michigan, with its long driving distances.   

As of March 25, 2002, nationwide prices for gasoline surged a record 14 cents over the prior two weeks, in the largest two‑week jump in 50 years.  This is on top of a nearly 9‑cent‑a‑gallon increase in the two previous weeks.  These numbers are from a Lundberg Survey of 8,000 stations nationwide.  The national average for regular at self‑serve pumps as of Friday, March 25, was $1.35 for regular, $1.44 for mid‑grade and $1.53 for premium, according to Lundberg.  Already, prices have climbed again. 

Part of the price increase is likely because of OPEC agreed‑on production cuts that will last through June, the seasonal change to different gas formulations with a related draw‑down of inventory before the change, the beginnings of an economic recovery, and perhaps, increased motor vehicle traffic because of reduced air travel.  Even industry analysts acknowledge that the potential for continued volatile prices, as in the past two years, is still there.  

I was very active in 2000 and 2001 in encouraging the Federal Trade Commission (FTC) to investigate price spikes for gas and oil in the Midwest that occurred in the summer of 2000.  The FTC report, issued on March 30, 2001, found no illegal price fixing among manufacturers, but it described action by individual refiners and oil companies to Agame the system@ and maximize profit. 

I believe that the FTC report doesn=t deal with the real issue ‑ exorbitant oil company profits arising from higher gasoline and oil prices.  I co‑sponsored the Gasoline Price Spike Act of 2001, to tax the oil industry on these windfall prices when they are above a reasonable rate of return.  This bill would also make reformulated gasoline more widely available and less expensive, and would provide a $6,000 tax credit to buyers of American‑made ultra efficient vehicles.

Senator Carl Levin recently completed Senate subcommittee hearings into the same 2001 summer price spikes and into market conditions which have boosted the average gallon price since early January of this year.  The subcommittee's investigation suggested that mergers and consolidations in the industry, as well as  industry practices such as zone pricing, manipulation of the gasoline supply to maximize profit,  and price setting in response to competitors rather than costs of production have contributed to high prices.  Senator Levin suggested that these practices, while not presently illegal, ought to be considered an "anti-competitive act".