FTC issuing subpoenas into high gas prices, lawmakers say

WASHINGTON - A preliminary Federal Trade Commission inquiry found nothing to explain why drivers in Chicago and Milwaukee are paying as much as 65 cents more for a gallon of gas than other parts of the country, prompting the agency to open a formal investigation that will involve subpoenaing oil companies.

FTC Chairman Robert Pitofsky told some members of the Illinois congressional delegation Tuesday that the sudden price spikes are ''sufficiently questionable'' to warrant formal investigation into possible price gouging and collusion.

The agency will being issuing subpoenas by the end of the week, according to the lawmakers who attended the meeting.

An interim report is expected within 30-45 days, said Sen. Dick Durbin, D-Ill.

Meanwhile, ministers from the Organization of the Petroleum Exporting Nations were meeting Wednesday in Vienna, Austria, and it was widely believed that some increases in crude oil production would be approved. The Clinton administration has been quietly trying to move OPEC in that direction.

But analysts were anticipating only modest increases that likely would do little to drive down gasoline prices that have reached as high as $2.33 a gallon for regular grade in Chicago.

The Energy Department's weekly survey showed the cost of gasoline nationally increased 5 cents a gallon from last week to $1.68, a record high for a fourth week in a row.

''There is gouging on the part of the large oil companies,'' insisted Senate Democratic leader Tom Daschle of South Dakota. He and Rep. Dick Gephardt of Missouri, the top Democrat in the House, met with President Clinton last week to emphasize ''the seriousness of the matter,'' Daschle said.

The two leading Democrats reportedly raised concerns that if gasoline prices are not reined in, it could mean trouble for the presidential bid of Vice President Al Gore and for Democratic efforts to regain control of the House in November.

Republicans have lost no time in trying to tar the administration, the Environmental Protection Agency's cleaner gasoline rules and Energy Secretary Bill Richardson - already under attack because of security problems at the Los Alamos nuclear weapons lab in New Mexico - for the gasoline price surge.

''This is the kind of thing people get mad about, and they want action,'' said Senate Majority Leader Trent Lott, R-Miss.

At the request of the Clinton administration and members of Congress, the FTC has for the past week been conducting an informal inquiry into the steep gasoline prices. Until now the agency's actions amounted to fact-finding, with no threat of subpoenas.

Durbin said Pitofsky told him and other Illinois lawmakers that the agency's stepped-up probe could result in anything from exoneration of the companies connected with the refining, distribution and sale of gasoline to ''disgorgement,'' or the payment of any illegal profits to the federal treasury. Any potential criminal acts would be referred to the Justice Department for prosecution.

Gore, citing reports of huge profits by the oil companies this year, told a group of reporters ''the circumstances clearly warrant a broadened investigation to see if there is collusion.'' However, indications were the FTC was confining its investigation to the hardest-hit Chicago-Milwaukee corridor.

Pitofsky was unavailable for comment. FTC offices were closed for the day.

Sen. Peter Fitzgerald, R-Ill., who also met with Pitofsky, questioned whether the agency has enough evidence to start a formal investigation. He said the administration appears to be looking for ways to blame the oil companies.

Industry executives have strongly criticized suggestions that companies are colluding or gouging customers. They blame price increases on market conditions, tight supplies, transportation problems and complications in refining the newly required cleaner-burning gasoline, especially when ethanol is used in the blend as it is in Chicago and Milwaukee.

In other developments:

- In Indiana, Gov. Frank O'Bannon suspended for 60 days the state sales tax on gasoline. The reduction is expected to cut gas prices by about a dime, he said.

- Rep. James Sensenbrenner, R-Wis., chairman of the House Science Committee, released a Congressional Research Service memo saying that the use of ethanol in the clean-air program was responsible for about 25 cents of the recent spike. Pipeline problems account for another 25 cents, according to CRS.

Several governors have urged the EPA to lift the new, stricter clean-air rules.

The White House, trying to stem political fallout in the Midwest, which is viewed as pivotal to Democratic hopes in the November elections, rejected suggestions that the EPA's requirement for cleaner fuel in areas with severe summer ozone problem is to blame.

''That's an argument that just doesn't stand the test of logic,'' White House press secretary Joe Lockhart said.

The EPA has said the cleaner gasoline should have added 3 cents to 8 cents to the cost of a gallon of fuel.

On the Net:

AAA nationwide gasoline price charts: http://aaa.com/news12/prmain.html

Energy Information Administration: http://www.eia.doe.gov

Environmental Protection Agency: http://www.epa.gov/otaq.rfg.htm