Lawmakers probe skyrocketing gasoline prices
HARRISBURG – Gasoline producers and retailers Wednesday attributed the recent 60-cent hike in Pennsylvania fuel prices, in part, to retailers charging customers more to cover an expected increase in wholesale prices on their next loads. The gas company associations also said gas prices reached an all-time high because of a larger and complicated chain of events that started with Hurricane Katrina knocking out supplies, and continued into the commodities market last Tuesday, which ratcheted up unleaded gas prices in anticipation of a gas shortage. Demand remained strong, even as supplies slowed down, the associations said.
Wednesday’s average unleaded gas price in Pennsylvania reached $3.22 per gallon, according to the American Automobile Association.
“I could see the wave coming then,” said John Kulik, vice president of the Pennsylvania Petroleum Marketers and Convenience Store Association. “People say prices overnight went up … I would say look at the record on [last] Tuesday and you could the seeds being sown.”
The comments came at a House Republican Policy Committee hearing, in which lawmakers sought to ferret out whether Pennsylvania consumers were taken advantage of in the aftermath of the nation’s greatest natural disaster.
Some lawmakers would like to see a temporary freeze or reduction of the state’s 30-cent per gallon gas tax – the highest in the nation – to lower prices. Others at the hearing concluded that focusing on supplies – by allowing the construction of refineries or relaxing environmental standards – is the best way to go in the future.
A few also perked up at the mention of a New Jersey law, which requires retailers to keep the same gas price for a 24-hour period, avoiding what became an upward yo-yo in prices multiple times a day at many Pennsylvania pumps.
Rolf Hanson, executive director of the Associated Petroleum Industries of Pennsylvania, assured the committee that fixes to refineries and supply lines will eventually bring gas prices back down. Oil producers on the Gulf Coast have now restarted four of the 10 refineries that were shut down, and the two oil pipelines serving the East Coast are running, though not yet at full capacity, he said.
“As supplies continue to increase, historically that has shown prices will go down,” Hanson said.
Still, lawmakers were wary that they were getting the full picture.
“I think the oil companies in this state and the country took advantage of a situation and took prices up much higher than they needed to go,” said Rep. Stephen Barrar, R-Chester.
Barrar also wanted to know about the possibility of oil drilling in Lake Erie as a means to increase supplies.
And Rep. Kathy Watson, R-Bucks, questioned how gas prices could go up repeatedly in a single day when that never happens with milk, eggs, or other essentials.
“When I’m looking at this, I’m thinking something else is going on,” she said.
Hanson said a lot of variables go into wholesale and retail pricing, and he and Kulik said that last week’s jump at the pump was due to retailers expecting future wholesale price spikes.
“I know in this period of time, they were getting price increases two, three, and four times a day from suppliers,” Kulik said. “It is in anticipation of what prices will be next.”
Both association officials, as well as a spokesman for Pennsylvania-based retailer Sheetz warned against dropping the gas tax. They said retailers and lawmakers could be on the hook with consumers if gas prices nevertheless went up.
“I do believe retailers would pass on the reduction, but I’m not sure the consumers would see it,” said Mike Cortez, corporate counsel for Sheetz. “The public would feel cheated and outraged at both the Legislature and at retailers.”
Contrary to reports of over 1,000 complaints of price gouging in Pennsylvania, Cortez said retailers like his have been shopping around for the lowest wholesale prices, and in some cases sold premium or mid grade gas as regular, unleaded to keep supplies flowing.
He complained about the news of price gouging and gas shortages.
Retailers, he noted, make up only 10 percent the overall gas price.
“In times of adversity, we must be very careful that the things that public officials say must not inadvertently make situations worse or put people in harm’s way,” he said. “Talk of gas rationing makes people fear that rationing will occur. Talk of price gouging by retailers makes people fear that price gouging is occurring.”
Several lawmakers also supported the idea of encouraging new refineries in Pennsylvania, and having the state use one, and not three, forms of gasoline. The Pittsburgh and Philadelphia areas are required to use two types of reformulated gasoline to reduce ground level ozone and meet federal air quality standards, while the rest of the state uses a lesser octane gasoline mixture.
“What we are paying for is this insane regulation that’s forcing us to manufacture all these different types of fuel,” said Rep. Eugene McGill, R-Montgomery. “We continue to regulate ourselves right into a hole.”
Gov. Ed Rendell said Wednesday he will be talking with lawmakers about gas prices, but sees that the worst as over.
“The reports I’ve been getting is gas prices will continue to go down,” he said. “One thing I don’t intend to let drop is the investigation of retailers. If individual retailers took advantage of the situation, I want to see them prosecuted.”
Alison Hawkes can be reached at 717-705-6330 or ahawkes@calkins-media.com