Senators Scrutinize Gas Price Spikes

WASHINGTON - Senators in both parties demanded answers on post-Katrina gasoline prices at a hearing this week, as attorneys general in at least 35 states opened price-gouging investigations and the Federal Trade Commission began a formal review.

The Commerce Committee session was the second congressional grilling of the oil industry in two weeks, with lawmakers pressing executives on why pump prices jumped by as much as 50 cents within days of the storm — well before actual shortages reached most markets.

"Somebody was making money while families were paying $3 for gas," a senior Democrat said. "We want to know who, and we want to know why."

Industry witnesses pointed to the loss of 20 percent of Gulf refining capacity and two major pipelines, arguing that prices did exactly what they are supposed to do in a shortage — attract supply and curb demand.

Consumer advocates countered that stations raised prices on gasoline already in the ground, bought at pre-storm costs, and that the fastest increases came in markets far from any supply disruption.

The FTC review, ordered under pressure from Congress, will examine whether refiners restricted supply or manipulated markets — a charge the industry has beaten back in similar investigations after every price spike since the 1970s.

The political stakes are high: polls show gas prices are voters' top economic complaint, and several lawmakers have proposed a windfall-profits tax — an idea with little support among Republicans but growing appeal in both parties as oil companies report record earnings.

President Bush has urged conservation and asked his energy secretary to work with refiners to speed restarts. Four refineries remain closed; the department says most should be back within weeks.

State investigations are further along than Washington's. Several attorneys general have already subpoenaed station pricing records and warned distributors against what one called "storm profiteering."