FUEL PRICES; GASOLINE;

GASOLINE;

You wanted to know what state agencies are doing about the recent retail gasoline price spike. You also wanted to know how gasoline businesses justify raising the price of gasoline after it has been delivered to the station.

SUMMARY

The federal Energy Information Agency forecasted that gasoline prices would average $ 1. 56 this summer, more than 10¢ per gallon higher than the previous summer’s prices. Instead, the average price for regular unleaded self-service gasoline was over $ 1. 80 in New England by the beginning of September.

The Department of Consumer Protection is surveying gasoline distributors and retailers to determine exactly when prices surged and by how much. The attorney general has requested an investigation by the federal energy secretary.

Retail gasoline station owners set their own prices. Each is free to determine what factors to consider.

GASOLINE PRICE SPIKE

In April 2003 the federal Energy Information Administration (EIA) issued its gasoline price forecast for the summer. EIA anticipated that the retail price of a gallon of regular unleaded self-serve gasoline would be $ 1. 56. It noted that forecasting is uncertain, and that prices may be 16 cents more or less than the forecasted amount. A copy of the forecast is enclosed.

In the first week of May 2003, the average retail price for such a gallon of gasoline was $ 1. 57. In the first week of August 2003, it was $ 1. 55. By the first week of September, it was $ 1. 81. Chart 1 displays the rapid price increase that took place in the second half of August. The information is compiled by the EIA and is available on its website (http: //www. eia. doe. gov/oil_gas/petroleum/data_publications/wrgp/mogas_history. html).

DEPARTMENT OF CONSUMER PROTECTION

The Department of Consumer Protection (DCP) is surveying 20% of the retail gasoline service stations gathering price data for the period of August 1 to August 28. It is also collecting price data from all licensed gasoline wholesalers and distributors for the same period. DCP is still collecting information. It anticipates compiling the data in the second half of September and reporting soon thereafter. The Office of Policy and Management is coordinating its efforts with DCP’s.

THE ATTORNEY GENERAL

Attorney General Blumenthal wrote to Energy Secretary Spencer Abraham asking the secretary to investigate “the drastic and dramatic ongoing surge in gasoline prices…” He noted that the increase in the spot market price of gasoline has been blamed on (1) the Arizona pipeline rupture, (2) the northeastern electricity blackout, and (3) refinery maintenance but said that these events would not justify the humongous and unprecedented price surge. He suggested that he and the energy secretary propose legislation together to ensure that the major oil companies do not contribute to artificial price increases by withholding gasoline. A copy of the attorney general’s letter is enclosed.

SETTING THE PRICE OF GASOLINE

Under Connecticut law, gasoline producers and refiners may not, with a few exceptions, operate gasoline stations (CGS §§ 14-344a to 14-344d). Gasoline station owners themselves set the price of gasoline. In a free market, station owners undoubtedly consider many factors when setting their price. These may include the prices charged by competitors and their anticipated future cost to acquire gasoline.

DD: eh