Federal regulators have cleared the oil industry of manipulating gasoline prices, but some drivers and consumer advocates continue to doubt the industry’s innocence.
U.S. oil markets that sent gasoline prices soaring to record highs last September worked properly in the aftermath of Hurricanes Katrina and Rita, the Federal Trade Commission said in a report Monday.
Local industry representatives said the report showed how well market forces work.
“What happened after the hurricanes was a case of free markets working very, very efficiently,” said Steve Douglas, general manager of supply and marketing for the Suncor refinery in Commerce City. The refinery supplies 35 to 40 percent of Colorado’s motor fuels.
The hurricanes knocked out refineries, which led to gas shortages. With demand chasing a suddenly diminished supply of gasoline, prices climbed, and consumers reacted by using less gas, Doug las said.
If the market hadn’t reacted, there would have been severe gas shortages and some stations could have been forced to close, he said.
Colorado’s average gas price for regular unleaded soared to a record $3.04 a gallon Sept. 5. The average fell to $2.18 in December, then peaked at $2.84 this month before dropping to Monday’s $2.81, according to AAA. The national average Monday was $2.89.
Rex Wilmouth, director of the Colorado Public Interest Research Group, questioned the report’s findings.
“It is pretty ironic that at a time when oil companies are making obscene amounts of profit … we are not finding any manipulation in the market,” said Wilmouth.
The world’s five largest oil companies, including Exxon Mobil Corp. and BP Plc, earned about $29 billion in the first quarter of this year.
Consumer groups said the report failed to consider the effect that consolidation of big oil companies has had on prices.
“The FTC’s price-gouging investigation failed to expose one of the single largest factors influencing oil and gas prices today – the lack of competition,” said Ann Wright, a policy analyst for Consumers Union.
The concentration of big oil companies makes it hard for consumers to escape high prices, said Al Hoke, a retired Broomfield businessman who was pumping $2.67-a-gallon unleaded into his Ford van Monday.
“Once they get the public conditioned to a certain price … then they will jack it up again,” he said. “The general public is dumb as a rock. They follow along like lemmings.”
Prices are expected to decline to about $2.50 a gallon in the fall, said Bryant Gimlin, energy risk manager at Gray Oil Co. in Fort Lupton. This summer, when Americans are vacationing and gas use is high, prices should hover at the current level.
Some drivers said they are no longer optimistic that prices will ever sink.
Barbara Pierson of Arvada sold her Ford Expedition last year because it got only 11 miles per gallon. Now she’s driving a Honda minivan that gets 22 mpg.
“I think (prices) will fluctuate within 50 cents for a while,” she said.
The report found that 15 companies, including refiners, wholesalers and retailers, charged prices in September that could not be attributed to higher costs or global oil-market trends, suggesting price gouging. But regional or local market trends “appeared to explain the pricing of these firms in nearly all cases,” the commission said in a press release.
Steve Levine of Arvada is more suspicious of oil-producing nations than he is of the American oil industry.
“I think all these other countries are gouging us because they know we’ve got money,” he said.
Denver Post wire services contributed to this report.
Staff writer Tom McGhee can be reached at 303-820-1671 or tmcghee@denverpost.com.
