May 1, 1996 in Nation/World

Feds Investigate Gas Price Hike Justice Department Launches Inquiry As Dole Calls For Temporary Roll-Back In Fuel Tax

Los Angeles Times
 

The U.S. Justice Department launched an antitrust investigation Tuesday to determine whether illegal collusion might be responsible for the recent surge in gasoline prices as GOP presidential candidate Sen. Bob Dole renewed his demand for a $4.8 billion-a-year roll-back of federal fuel taxes.

The Justice Department inquiry, which is being conducted by a five-member team of attorneys and economists, was initiated independently by Assistant Attorney General Anne K. Bingaman, head of the antitrust division, officials said, without prompting from the White House.

The action was, however, announced one day after President Clinton ordered the Energy Department to release 12 million barrels of crude oil onto the market from the government’s strategic petroleum reserve in an effort to hold down prices. And the inquiry came at a time when Republicans were stepping up their efforts to blame higher gasoline prices on the 1993 tax increase.

Dole, in his capacity as Senate majority leader, issued a joint statement with House Speaker Newt Gingrich, R-Ga., pointing out that the tax increase - part of a massive deficit reduction package - was approved without Republican support the year before the GOP won control of the House and Senate. The tax adds 4.3 cents per gallon to the price of gasoline.

“We believe American taxpayers are already taxed too much,” the Republican leaders declared. “With gas prices at their highest levels since the Persian Gulf War, Congress plans to vote on repealing the Clinton gas tax by Memorial Day weekend.”

The size and suddenness of the price increases were clearly factors in the Capital’s mounting obsession with energy prices. The cost of gasoline, while still low by historical standards, has risen some 12 percent in the last month alone.

But for energy experts whose memories stretched back to the gas lines and energy crises of the 1970s, the latest developments had a familiar ring. Even though most analysts insisted that the recent price increases are the result of impersonal market forces and may already be in the process of reversing themselves, the unique role of the automobile in American society has the power to turn any significant change in fuel prices into political dynamite.

“Oil is the most visibly priced product that consumers buy and there are not a lot of substitutes,” energy analyst Kevin Lindeman of Cambridge Energy Research Associates said. And most Americans cannot avoid the higher costs “without giving up some of their personal freedom” by not using their cars, he added.

The anxiety this basic fact stirs in Washington is all the greater in a presidential election year - especially one in which an incumbent Democrat is striving to protect an unexpectedly large lead in public opinion polls and the GOP challenger is trying to use his leadership position in the Senate to turn the tables.

What will come of the present flurry of activity is another matter.

So far as repealing the 1993 gasoline tax is concerned, Dole and Gingrich limited themselves to calling for immediate action only on a temporary roll-back through the end of this year. Permanent repeal should be part of future deliberations on the budget, they said. Dole acknowledged that any cutback in fuel taxes would have to be made up with new taxes or budget cuts elsewhere to avoid raising the deficit - a chancy proposition at best.

As for investigating the oil industry, it has been done repeatedly, and at least in modern times the results have been meager.

“You’ll get a quick and dirty report back that will say, this was due to market forces,” said Ed Rothschild, energy policy director of the consumer group Citizen Action, based in Washington. “That’s what we get back repeatedly.”

Washington energy lawyer William Demarest, like most other analysts, attributed the recent increases to temporary shortages of gasoline resulting from a host of factors. Chief among them: oil refineries, which produce heating oil during the fall and winter and swing over to making gasoline in the spring, did not make the switch as early as they usually do because last winter was unusually long and cold.

Also, because refiners had a bad year financially in 1995, analyst Lindeman said, they have tried to keep stockpiles low this year and produce products on a “just in time” basis to protect themselves against swings in market prices. This trend was reinforced by a widespread expectation that the U.N. ban on Iraqi oil would be lifted, raising supply and driving down prices.

Lindeman said firmness in gasoline prices may prove temporary. Global demand for crude oil declines during the summer, he noted, because most of the world does not share the U.S. passion for summer driving and air conditioning.

As a result, prices already could be at or near their peak, he suggested.

MEMO: Cut in Spokane edition

Cut in Spokane edition


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