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Suspicion at the Gas Pump

March 15, 2003

Oil company executives swear that tight supply and strong demand, not price gouging, are pushing gasoline prices sky-high. But it's a frustratingly familiar refrain. Substitute "electricity" for "gasoline," "generating plant" for "refinery" and "pipeline" for "oil tanker" and it's easy to suspect that someone is taking drivers for a costly ride.

No one doubts that bigger forces are at play: The potential war in Iraq is pushing up crude oil prices; a Venezuelan strike disrupted oil shipments; even the expensive reformulation of gasoline to meet California's summer air-quality requirements has been complicated by a federal mandate to switch from the fuel additive MTBE to ethanol.

But the litany also includes troubling word of ill-timed and particularly long maintenance closures at refineries, leading directly to higher pump prices. The steepest hikes are in California, breeding suspicion among consumers that oil company executives are borrowing from the energy industry by manipulating refinery costs to pad profits.

Gasoline prices seem to skyrocket on the thinnest rumor of bad news -- but fall like a feather in an updraft once things stabilize. The industry adds to the problem by refusing to reveal how prices are determined.

Pump prices were deregulated in the 1980s, so consumer groups and the government have little regulatory recourse beyond anti-gouging laws. Violations are hard to prove, but the more eyes on the problem the better. Gov. Gray Davis, burned politically by his early inaction during the energy crisis, wasted no time in his request Thursday that state agencies investigate gasoline pricing. The federal General Accounting Office should also heed Sen. Barbara Boxer's (D-Calif.) call for an investigation.

This isn't simply about irate motorists. Consumers have been the driving force behind the U.S. economy, and record gas prices leave most with no choice but to pay. That is creating an unwanted drag on an already weak economy. If even slight pricing games are being played, it's a cost the country can ill afford to bear.

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