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Senator calls for gasoline price-fix probe
Americans are spending hundreds of millions more at the pump; industry says it isn't withholding any supply.
By Steve Hargreaves, staff writer

NEW YORK ( - As American drivers shell out more and more money at the pump with each passing day, some are asking whether big oil companies are scheming to withhold supplies in order to boost prices.

New York Senator Charles Schumer, speaking in front of a Hess station in Manhattan, called Tuesday for a federal investigation to see if oil companies and refiners are deliberately withholding gasoline production, taking advantage of the normal switch from winter gas to summer gas in an attempt to bid up prices.

"The bottom line is they are producing at 85 percent capacity when they should be producing over 90 percent," said Schumer. "Are they scaling back production? Only by subpoenaing the companies and looking in their books will we get that answer."

Schumer's call comes as oil prices broke record highs and gasoline prices trailed close behind.

The average price of a gallon of regular gasoline reached $2.79 Tuesday, just 26 cents shy of its all time high of $3.05, which was reached last August in the wake of Hurricane Katrina, according to AAA (formerly known as the American Automobile Association).

And the summer driving season is just beginning, which could mean Americans will end up paying even higher prices by June or July.

Already, Americans on a whole are spending $212 million more per day on gasoline than they spent last year, and $522 million more per day than they spent in 2002, according to the Oil Price Information Service, publisher of an industry newsletter.

But whether Sen. Schumer's proposal will result in lower prices at the pump in a matter of debate.

A spokesman for The Federal Trade Commission, which is the agency that would look into Schumer's request, said it will take the senator's letter seriously and will respond appropriately, although the spokesman couldn't give a timeline or any other information because the agency had yet to review the letter.

However, the FTC spokesman did point out that two previous investigations into unfair business practices by the oil industry conducted in 2000 and 2001 turned up no evidence of wrongdoing.

Results of another investigation, centered around price fixing in the wake of Hurricane Katrina, are expected next month.

For their part, representatives for the oil industry flatly denied Schumer's suggestions.

"Prices are high, there is no incentive to hold [gas] back," said Bill Bush, a spokesman for the American Petroleum Institute. "If you have a gallon of gas, you want to get it out in this market."

Bush said refineries are only operating at 85 percent capacity because some are still recovering from last fall's hurricanes along the Gulf Coast. He added that some refineries are undergoing more maintenance than usual this spring - maintenance that was put off following the hurricanes in order to avoid taking the refineries off-line at the time.

John Felmy, the Institute's chief economist, said Schumer's call was "nothing more than political rhetoric with no basis in fact."

Felmy suggested Schumer stop the political grandstanding and call for things that will actually bring down gas prices, which he said include more domestic oil production, greater conservation efforts and provisions to make it easier to build more refineries.


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