Politicians gird for gas wars

By Sean Hao
Advertiser Staff Writer

High gasoline prices are raising charges of gouging, threats of investigations, stepped-up regulation and even a lawsuit — and that's not even counting what's happening in Hawai'i, where drivers and state officials have griped about pump prices for years.

Members of Congress and states from California to Florida are threatening action against the oil industry as prices hit record highs across the nation.

Hawai'i has been in the forefront of the fight, poised to enact the nation's only gasoline price caps this summer. In the mid-1990s, the state unsuccessfully sued oil companies over antitrust allegations.

Now Florida appears to be taking a stand out of concern that rising gas prices will harm the state's tourism and agriculture industries. In March, Florida Attorney General Charlie Crist held a meeting with five oil companies joined in a conference call with representatives from 40 attorneys general offices, including Hawai'i's.

Dissatisfied with the oil companies' explanations for a national spike in prices, Crist raised the possibility of a lawsuit against the industry. "We are looking at options," said JoAnn Carrin, spokeswoman for the Florida attorney general. "Everything is on the table, but I wouldn't speculate as to what action might be forthcoming."

Florida isn't alone in questioning the oil industry's pricing practices:

• Arizona Attorney General Terry Goddard is seeking the help of six Western states, Hawai'i included, to address the problem.

• California Attorney General Bill Lockyer is conducting an ongoing investigation into the state's highly volatile gasoline market. California has the highest average prices in the country — a ranking typically held by Hawai'i.

• Ten Democratic governors (Arizona, Washington, Iowa, Wisconsin, Kansas, Delaware, Indiana, Michigan, New Mexico and Missouri) recently sent a letter to President Bush seeking an explanation for the recent rise in gasoline prices.

• In Congress, several senators are pushing for a bill that would allow the federal government to pursue antitrust lawsuits against the Organization of Petroleum Exporting Countries for alleged price gouging.

• In March, Nevada Gov. Kenny Guinn and the state's congressional delegation asked the Federal Trade Commission to monitor the Nevada, California and Arizona petroleum markets. In FTC testimony before Congress earlier this month, the agency said a recent investigation into West Coast prices found no illegal, anti-competitive activity.

In the past decade, 29 investigations into gasoline prices in the United States have found no evidence of anti-competitive oil industry practices, said Dave Fogarty, a spokesman for the Western States Petroleum Association, which represents Chevron, Shell and other oil companies that operate in Hawai'i and on the Mainland.

High gasoline prices are "a legitimate concern," Fogarty said. "We welcome the questions. We're confident the industry is very competitive and gasoline prices are based on the marketplace."

The industry cites numerous factors for the recent rise in prices at the pump, including rising crude-oil prices, new clean-air standards for gasoline, increased summer demand and concerns about future supplies.

Some concern has arisen after regional price spikes resulting from refinery shutdowns, pipeline failures or incidents leading to shortages. The question raised in Florida, Arizona and elsewhere is why the industry cannot anticipate and avoid such shortages.

Industry representatives pegged Florida's price spike to problems in the Middle East, rising crude oil prices, disrupted shipments and rising demand in China, according to a report in the Florida-Times Union.

Also coming into play is the upcoming elections, said David Hackett, an energy consultant for the California Energy Commission.

"The political reactions to the high prices have everything to do with politics," said Hackett, president of Stillwater Associates, an oil-industry consultancy based in Irvine, Calif., that recently completed a report critical of Hawai'i's pending gas-price caps.

"It's a lot easier to blame anti-trust things and collusion, as opposed to doing the hard work to figure out what's going on."

Ted Clause, who investigated the industry as head of the Hawai'i attorney general's antitrust division, agrees that politics plays into the debate.

But he sees legitimate concerns about how the industry behaves. Part of the problem is that there is no easy explanation for how gasoline prices are set, Clause said. "It's awfully hard to tell exactly what's going on in the oil industry."

Referring to Hawai'i's antitrust settlement with local oil companies, Clause said: "If I were in the attorney general's office in Florida, California, New York or Pennsylvania, I'd be real interested in what happened here."

"The real issue is whether anybody can get the oil companies to come clean with the straight facts on to what extent they control price-setting in various markets," he said.

Carrin, with the Florida attorney general's office, said it's likely Florida will consider Hawai'i's experience as it weighs what to do next. "I would imagine our staff is looking historically at litigation that has taken place," she said.

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.