Blame EPA for Oil Companies’ “Price-Gouging”: Lieberman Op-Ed

Distributed by Bridge News Service

April 5, 2001

WASHINGTON–Last June, drivers in Chicago and Milwaukee became the first Americans to pay over $ 2 a gallon for gas. While not quite a record in inflation-adjusted terms, it was a regrettable milestone nonetheless. The skyrocketing price of gasoline was the summer's biggest news item, second only to the presidential race.

While some blamed Environmental Protection Agency regulations, many in the Clinton administration pointed fingers at the major oil companies. Vice President Gore endorsed a Federal Trade Commission investigation to determine whether, in his words, "big oil is gouging American consumers." Nine months later, the FTC investigation has come up empty-handed.

It's now beyond dispute that big government, not big oil, deserves most of the blame for the great gas crunch of 2000. While the FTC investigation was underway, the real causes of the price rise started becoming clear.

Analysts agree that the increase in the cost of oil was a factor. After staying below $ 20 a barrel throughout much of the 1990s, oil shot up above $ 30 in 2000, largely due to strong global demand and a resurgent OPEC.

But high oil prices alone cannot explain all of the increase at the pumps, and are certainly not the reason the cost of gas in Chicago and Milwaukee far exceeded the national average.

The Midwestern situation was greatly exacerbated by environmental regulations. Reformulated gasoline (RFG), a special blend required under the 1990 amendments to the Clean Air Act, must be used in the nine metropolitan areas with the most serious smog problems, including Chicago and Milwaukee.

Midwestern RFG differs from that used elsewhere in that it contains ethanol. On June 1st, strict new EPA standards for RFG took effect. These requirements initially proved very difficult to meet with the ethanol- containing RFG blends sold in Chicago and Milwaukee.

According to a June 28 Congressional Research Service report, "as much as 25 to 34 cents, roughly estimated, could have been due to the unique RFG situation in Chicago-Milwaukee."

As long as the FTC investigation of "big oil" was in progress, the EPA could use it to divert attention away from RFG. When confronted with oil industry assertions that the onerous RFG regulations were to blame, EPA Assistant Administrator Robert Perciasepe said that the Federal Trade Commission was "investigating these companies for fooling around with the supply."

Agency spokesman Dave Cohen was even more direct, telling reporters "we're suspicious of gouging."

Throughout the summer and fall, Gore voiced similar concerns, usually after reminding voters that George Bush and running mate Dick Cheney were former oil men. "One of the central choices we face in this election is whether we will have a president who's willing to stand up to the big oil interests and fight for our families," said Gore, promising to "put an end to the big oil price gouging."

Copyright © 2001 Knight Ridder/Tribune Business News

Copyright © 2001 Bridge News