Attorney General's Office Concludes Gas Price Investigation

DES MOINES-- Attorney General Tom Miller said today that his office has concluded its investigation of last summer's automobile gasoline price spikes. Miller's office worked with the Federal Trade Commission in its investigation of the issue. Neither Miller's office nor the FTC found evidence of illegal price fixing in their investigations.

The FTC recently announced its findings that the June 2000 retail gas price increases resulted from numerous factors, none of which indicated illegal collusion by gas producers or other violations of antitrust laws. According to the FTC report, factors behind the price spike included production problems, reduced supplies, pipeline outages, reduced flow of gas, low inventories, increased demand, increased crude oil prices, and supply diversions to St. Louis because of an EPA waiver.

"Unfortunately, the supply decrease happened during the summer travel period, when consumer demand was at its highest," Miller said. "Like the FTC, we did not find any evidence that the price increases resulted from illegal price collusion."

Miller noted that the supply of ethanol was not found to be a factor contributing to the spike in prices. "We said when we began the investigation that we did not think ethanol was a factor behind the price increases, and that belief was confirmed both by our investigation and the FTC's."

Miller discussed the dynamics that caused and permitted the sharp spike in gasoline prices: "Inventories were low and other problems occurred in the Midwest that made demand greater than supply, and this presented the opportunity for a price spike. Companies generally seem to be more aggressive now than they were a few years ago in taking advantage of price spikes and driving prices higher. Last summer's Midwest gasoline prices and the current California electricity situation are recent examples. In addition, supplier companies now appear more willing to withhold some supply to keep prices higher and hold them higher for a longer period of time. The FTC found that this occurred in last summer's gas price increases and it is alleged in California today," Miller said.

"These are obviously not good developments for consumers. However, large price spikes and withholding supply are legal under deregulation - as long as collusion doesn't occur in the withholding," he said.

The FTC Report said that its investigation was coordinated with the offices of the attorneys general of several Midwestern states, including Iowa. Miller added that, as part of his investigation, representatives of his office met with gas producers, gas retailers, corn producers, representatives of the Iowa Department of Natural Resources and others, and visited Iowa cities to check out allegations of questionable local price hikes and review prices.

Miller said his office looked at possible illegal collusion between businesses that are supposed to be competitors. He said investigators did not attribute gas price hikes in certain communities to illegal collusion or agreements between local competitors. The Attorney General's Office in the past has filed cases alleging illegal collusion among gas retailers in Iowa.

Miller said his office will continue to look into any possible collusion where gas sellers might try to take advantage of shortages with agreements to keep prices even higher. He also urged Iowans to contact his office especially if they have any inside information about illegal price fixing in Iowa communities.

"Sometimes prices are higher in one community than another," Miller said. "That is not necessarily evidence of price fixing. But if there is evidence that retailers have joined forces to set prices artificially high, that is an antitrust violation." Miller said Iowans may contact his office with any evidence of illegal price fixing by calling 515-281-5926.

"Although the investigation of the 2000 gas price spikes is concluded, we will continue to work with Iowa organizations, other attorneys general and the FTC to remain vigilant in watching for any kind of illegal behavior in the sale of gasoline," he said. He said energy price issues and antitrust considerations are an area of frequent collaboration and information-sharing among state attorneys general and U.S. officials.

Miller noted that the Energy Bureau of the Iowa Department of Natural Resources has projected that forces of supply and demand could push retail gas prices to $2.00 a gallon or higher this summer. He also distributed a "Consumer Advisory" with tips on how Iowans can reduce gasoline consumption and demand and thus contribute to keeping prices lower, including measures such as keeping tires inflated properly, avoiding "jackrabbit starts" and pacing driving to increase fuel economy.

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