Attorney General rips 2005 gas price hike - East Valley Tribune: East Valley Local News

Attorney General rips 2005 gas price hike

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Posted: Thursday, April 27, 2006 6:12 am | Updated: 4:56 pm, Fri Oct 7, 2011.

Arizona Attorney General Terry Goddard said Wednesday that some gas wholesalers and retailers doubled or tripled their profits last summer, in part because they took advantage of supply worries in the wake of Hurricane Katrina.

In a report released Wednesday, Goddard said he found “profiteering” at various levels between the time oil is refined and when it reaches consumers at the pumps. He limited the price-gouging accusations to mostly wholesalers and retailers that operate in Arizona, and he did not name any of the biggest U.S. oil companies.

Goddard issued subpoenas to 45 Arizona companies as part of his investigation into gas price gouging. He said wholesalers and retailers typically take profits of anywhere from 8 to 12 cents per gallon.

“Data provided by certain Arizona wholesalers and dis- tributors indicated that they were able to increase their gross margins to 20 or 30 cents per gallon on some sales post-Katrina,’’ the report states.

The report came as gasoline prices again reached above $3 a gallon, though not for the same reasons that caused the hike last year.

But Goddard said both situations point out the weakness of current state laws to deal with businesses that take unfair advantage of situations to boost their profits on needed commodities like gasoline.

He is pushing for more authority to enforce anticompetitive business practices.

Andrea Esquer, a spokeswoman for Goddard, said investigators believe last summer’s gas price hike was almost exclusively profits, because the gross margin for retailers was computed even after considering the higher costs they paid to wholesalers.

Oil industry executives have, for the most part, pointed to rising crude oil prices and other costs as the reason for the increase in retail gas prices.

In Arizona, industrywide gas supply problems are compounded by a limited storage and delivery system, Goddard said.

And some wholesalers, anticipating a shortage, began selling only to their branded customers — and sometimes giving them only a fraction of their needs, he said.

Goddard said Arizona lacks the kind of law that would keep companies from taking unfair advantage of these kinds of shortages.

“Other attorneys general, such as in Florida, had antiprice gouging laws that enabled them to halt unconscionable price hikes after Hurricane Katrina and to obtain restitution for consumers who were charged unconscionable markups over cost,’’ he said.

Andrea Martincic, executive director of the Arizona Petroleum Marketers Association, which represents gas retailers, refused to comment on the report. Repeated calls to lobbyists for the Western States Petroleum Association were not returned.

According to Goddard, the average price for unleaded gasoline in Arizona on Aug. 1 was $2.39. By Sept. 6, it had skyrocketed to $3.12.

Goddard said little, if any, of the retail price hike could be attributed to rising prices for crude oil. In fact, he said, the shortage the nation was facing was in refined gasoline, not crude oil. What did go up, he said, was the refinery profit margins.

A report by the California Energy Commission showed average gross profit margins for California refineries — where much of Arizona fuel comes from — rose from 49 cents per gallon to $1.15 a gallon, or 135 percent, after Katrina hit.

Gov. Janet Napolitano on Tuesday called current gas prices “outrageous’’ but said that, at least this time, it is a national problem. “As high as gas is in Arizona, we’re about average for the country,’’ she said.

Napolitano said government regulation would not be necessary if companies were actually competing with each other. She said, though, “this is not a truly competitive market.’’

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