09.15.06

Cantwell Asks for Inquiry into High Eastern Washington Gas Prices

With $3 per Gallon Average, Eastern Washington Has Highest Prices in State, Among Highest in Nation

WASHINGTON, DC – Friday, U.S. Senator Maria Cantwell (D-WA) asked the Federal Trade Commission (FTC) to investigate the significant gas and diesel price disparities between eastern and western Washington, and the disproportionately high prices in the eastern portion of the state. While regular gasoline in western Washington is currently available at many locations for less than $2.70 per gallon, Spokane-area drivers pay an average price of $3.04. Spokane-area diesel fuel, important to farmers and other low profit-margin businesses, averages $3.46 per gallon at present. Cantwell is particularly concerned with the price disparity given that historic data show Seattle and Spokane gasoline prices are usually very similar.

“These prices—some of the highest on record in eastern Washington—are hurting local families, the region’s agriculture, and our entire state economy,” said Cantwell. “We need to improve transparency and get to the bottom of these prices. We also need to invest in home-grown biofuels to give consumers reliable, stable alternatives to oil and provide some competition at the gas pump.”

In a letter sent Friday, Cantwell asked the FTC to look into whether current price differences between the Spokane and the Seattle/Tacoma areas exceed historical averages, how the local market concentration and ownership structure of fuel retailers in the Spokane area compares to the Seattle/Tacoma area, the factors contributing to the slower pace at which gasoline prices are falling in Spokane, and why local diesel fuel prices are currently higher than gasoline prices.

“Given my concerns and the financial burden these elevated prices are having on my constituents, I urge the Commission to promptly investigate the gas price anomalies currently facing drivers in my state,” Cantwell wrote. “Given the marked difference in gas prices and the impact these types of disparities have on families, businesses, farmers, and our economy as a whole, I look forward to your prompt response.”

Cantwell has fought continuously to get to the bottom of years of rising fuel costs. Last year, Cantwell proposed legislation now co-sponsored by nearly a third of the Senate that would make gas price-gouging a federal crime. Her measure garnered 57 votes when it was considered last fall—including the support of 13 Republicans—but required 60 votes for Senate passage at the time. Cantwell’s legislation would outlaw gas price-gouging at all levels, impose tougher fines and criminal penalties on violators, and give federal and state authorities new powers to go after companies that manipulate prices. Cantwell also joined Senators Dianne Feinstein (D-CA) and Olympia Snowe (R-ME) earlier this year in introducing bipartisan legislation (S.2642) to enhance transparency in energy commodity trading—up to 80 percent of which is currently taking place beyond the reach of federal regulators thanks to the ‘Enron’ loophole. Both pieces of the Cantwell legislation are expected to come up for consideration when Senate leadership agrees to take up legislation to reauthorize the Commodity Futures Trading Commission.

Cantwell has also worked to increase our nation’s energy independence, promote greater use of domestically produced biofuels, develop a biofuels industry in Washington state with the help of local crops and agriculture waste, increase the availability of flex-fuel vehicles and biofuel pumps, and improve national fuel economy standards. In June, Cantwell introduced her bipartisan Ten-in-Ten Fuel Economy Act (S.3543), which would increase combined corporate average fuel economy (CAFE) standards to 35 miles per gallon by 2017 for all passenger cars and light trucks, including sport utility vehicles. She has also sponsored comprehensive energy legislation (S.2829) that provides specific legislative measures to reach a national goal of reducing domestic oil consumption equivalent to 40 percent of America’s projected imports in the next 20 years.

[The text of Cantwell’s letter to the FTC follows below]

September 15, 2006

The Honorable Deborah Platt Majoras
Chair
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580

Dear Chairwoman Majoras:

I am writing to formally request that you investigate significant gasoline and diesel price disparities between two areas within Washington state. According to consumers who have contacted my office and available reports, the price of petroleum products in and around Spokane remains elevated compared to those in western Washington. Data show that, previous to March 2006, gasoline prices in Seattle and Spokane have closely tracked one another over the past few years. However, even as the price of gasoline in western Washington has declined somewhat in recent weeks—mirroring to some extent the decline in crude oil and gasoline futures contracts—petroleum prices in eastern Washington remain stuck at almost unprecedented levels for the month of September. Given the complex factors that may be contributing to this situation, I believe these price disparities warrant close scrutiny by your Commission.

According to consumer reporting, regular grade gasoline in western Washington is now available at some locations for prices below $2.70 per gallon, with some prices as low as $2.55. In contrast, American Automobile Association data shows that regular grade gasoline prices in Spokane, , now average $3.04. Spokane’s diesel fuel prices, critical to many low-margin businesses and farmers, are similarly inflated at $3.46 per gallon. These prices are significantly higher than average gasoline prices in the Seattle-area, which are at $2.83 for regular grade in the region as a whole. The same holds true in the Tacoma area, where prices are currently averaging $2.78 for a gallon of regular grade gasoline. While the decline in prices in these areas is a welcome relief for local consumers, it has left many of my constituents in the Spokane region wondering why prices in their community have not followed a similar pattern.

As you know, I have challenged the Federal Trade Commission on numerous occasions to be more vigilant and pro-active when looking at price discrepancies like those that currently exist within my State. I have also raised concerns about the fact the Federal Trade Commission’s analyses of market concentration and its impact on gasoline prices have been contradicted by the Government Accountability Office.

Similarly, I joined other members of the Senate Commerce Committee last May in expressing concerns about the redactions and lack of thorough analysis contained in the Commission’s Congressionally-mandated investigation of possible gasoline price gouging. In my view, the study omitted analysis of important causal factors that can contribute to price differentials between geographic regions. Specifically, it is necessary to assess not just refinery output and profits in the aggregate, but also the prices refiners charge non-refining wholesalers and distributors that serve a given area; the pattern of pricing movements refiners dictate to these suppliers; differences between branded and unbranded rack prices; and the ownership structure of retail stations within an area, given that refiners may charge different prices depending on their contractual relationships with other entities in the supply chain.

Due to these complicated dynamics and the price differentials currently experienced by consumers in my state, I’d like the Commission to provide answers to the following questions:

  • Does the Commission agree that the current price differential for gasoline and diesel between the Spokane and Seattle/Tacoma areas exceeds historical averages?
  • In the Commission’s view, how does the level of market concentration and the overall ownership structure of fuel retailers in the Spokane area compare to the Seattle and Tacoma areas?
  • What specific factors are currently contributing to the slower pace at which fuel prices are falling in Spokane, compared to these areas in western Washington?
  • Why are diesel fuel prices demonstrably higher than more refined types of petroleum fuels?

Given my concerns and the financial burden these elevated prices are having on my constituents, I urge the Commission to promptly investigate the gas price anomalies currently facing drivers in my state. Given the marked difference in gas prices and the impact these types of disparities have on families, businesses, farmers, and our economy as a whole, I look forward to your prompt response.

Sincerely,

Maria Cantwell
United States Senate


Cc: Commissioner Pamela Jones Harbour
Commissioner Jon Leibowitz
Commissioner William E. Kovacic
Commissioner J. Thomas Rosch

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