President Clinton warned today that rising gasoline prices were straining the budgets of some Americans and will "rifle through" the U.S. economy if left uncontrolled.
As pump prices in the Midwest failed to move downward in the face of dramatically lower wholesale prices in recent days, Clinton said there is "no economic explanation" for the gasoline price run-up since June 1. He promised that the government will wage an aggressive inquiry into the oil industry's pricing practices.
Speaking to reporters at the White House before leaving on a western fundraising trip, Clinton said the rising world prices of crude oil do not explain the rapid price increases at the pump. Nor do new federal anti-pollution mandates for gasoline blends account for more than two or three cents per gallon, he said.
While Clinton did not explicitly point a finger at presumptive Republican presidential candidate George W. Bush, he made it clear that he thought the source of the gasoline price problem were the Texas governor's oil industry friends and supporters.
The emergence of record-high gasoline prices as a key issue in the presidential campaign also prompted Republican leaders on Capitol Hill to renew their attacks on Clinton--and by extension on Vice President Gore as the presumptive Democratic presidential nominee--for failing to fashion a comprehensive energy policy and to fully exploit available domestic oil sources.
Senate Majority Leader Trent Lott (R-Miss.) blamed the administration for not doing more to promote energy independence and reiterated his support for a variety of initiatives, including opening the Arctic National Wildlife Refuge to oil exploration.
"All their actions have been . . . to ignore our dependence on foreign oil," Lott said at a news conference. He dismissed administration energy proposals as likely to provide only "infinitesimal amounts of benefits" and said the administration was wrong to blame price-gouging by oil companies. The price increases have "really been driven by the fact that we're just dependent on OPEC oil," Lott said.
Lott's remarks came as House Republicans planned a series of regional news conferences aimed at highlighting rising gas prices and attacking the administration's energy policies.
Lawmakers from northeastern states urged Clinton to dip into the Strategic Petroleum Reserve, arguing that it is the only way to offer their constituents immediate relief. "What we're witnessing is a complete failure of leadership by this administration," said Rep. Sue W. Kelly (R-N.Y.), who called Clinton's policy "too little, too late."
A bipartisan group of lawmakers offered another solution: Sue OPEC under U.S. antitrust laws for price-fixing. A Senate bill introduced yesterday, and a House bill to be introduced today, would rewrite antitrust and sovereign-immunity laws to permit an antitrust lawsuit against oil-producing countries.
House Speaker J. Dennis Hastert (R-Ill.) decried the Environmental Protection Agency's requirement for reformulated gasoline in the Midwest, saying, "The facts are clear: When the EPA instituted its new regulations, gas prices went up. History teaches us that government regulations increase costs, and these high gas prices are an unintended consequence of the Clinton-Gore energy policy."
Meanwhile, critics of the oil industry remain skeptical of the theories offered to explain why the dramatic declines in wholesale gasoline prices last week in Chicago, Milwaukee and St. Louis have not been matched by retail price reductions at the pump. The three cities were among scores of urban areas across the country that were required by federal environmental law to sell a new blend of cleaner-burning fuel to combat severe summertime pollution.
Oil companies have blamed rising gas prices partly on refinery production problems encountered in making the newer reformulated gasoline, particularly in parts of the Midwest, where corn-based ethanol has been used as an additive.
The New Jersey-based Oil Price Information Service (OPIS), a private firm that tracks the "downstream" petroleum market, said wholesale prices in Chicago peaked at $1.60 a gallon on June 15 and then fell 29 cents to $1.31 by Wednesday. However, the average price at the pump increased by two cents, to $2.13 a gallon, the same week, and many service stations were selling self-serve regular today for nearly $2.30 a gallon, or 66 cents above the $1.64 national average.
Pump prices in Milwaukee also increased during the week, even though wholesale prices declined 25 cents. In St. Louis, wholesale prices declined 13 cents, while retail prices went up 4 cents during the same period.
Ben Brockwell, OPIS Midwest editor, attributed the price disparities to marketing lags that he said routinely last for weeks during times of fluctuating wholesale prices. Even when wholesale prices rise dramatically, retailers often postpone passing the higher cost to consumers because of uncertainty over how long the increases will last, he said.
Brockwell said he expects the wholesale price in Chicago to drop another 20 cents next week, to about $1.10, and then "settle out, as the market quiets down," to slightly under $2 a gallon at the pump. Taxes in Illinois total 58 cents a gallon; when that amount is combined with 14 cents in typical operating costs, 10 to 13 cents in retailer's profit and a wholesale price of $1.10, a pump price of as much as $1.95 a gallon would result.
John Filmy, director of policy analysis and statistics for the American Petroleum Institute, said price reductions are "working [their] way through the system," but that "logistical problems" sometimes cause delays. In some cases, he said, service station operators have filled underground tanks with higher-priced fuel and cannot yet lower their pump prices.
Claiborne reported from Chicago. Staff writers Helen Dewar, Juliet Eilperin and James V. Grimaldi in Washington contributed to this report.