Sen. Schumer Argues for FTC Probe of Oil Companies

Oil companies may be holding back on gasoline production amid soaring prices in order to bolster their bottom line and should be investigated, U.S. Senator Charles Schumer said Tuesday.

The New York Democrat pointed to a 15 percent rise in pump prices to $2.97 a gallon in New York City over the past month.

"The oil companies are just raising the prices up and up and up. The question is are they doing this based on the laws of supply and demand or is something else at work," Schumer told reporters over the din of city traffic at a press conference in front of a Manhattan gasoline service station.

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Refiners are currently processing at about 85 percent of their capacity, Schumer said, adding that they should be running at about 90 percent.

Oil companies have stepped up refinery maintenance ahead of the traditional U.S. summer driving season after hurricanes slammed plants along the Gulf Coast last year and to prepare for the phasing in of new greener fuel specifications this year.

But Schumer said following a wave of mergers by top oil companies in recent years, gasoline prices were easier to manipulate, increasing the need for Congress to make sure the industry is not ripping off consumers.

"Oil companies should be using their maximum refining capacity instead of possibly minimizing it, and the FTC needs to make sure this process is completely transparent so that prices don't continue to shoot up," Schumer said.

Oil industry groups say refiners have been forced to perform more maintenance this year to modify units to produce fuel that meets new government emission requirements.

"Refinery utilization is low of because of the lingering effects of hurricanes and major specification changes for fuels this year," John Felmy, chief economist for the American Petroleum Institute, told Reuters.

FTC officials have said rising gasoline prices are mostly the result of higher crude prices on the world market and have nothing to do with industry mergers.

U.S. oil prices traded at an all-time high near $71 a barrel Tuesday due to concerns over supplies from OPEC members Iran and Nigeria, pushing up gasoline prices further.

Energy experts say it is unclear how high gasoline prices would have to climb to make vacationers shift their summer driving plans. Schumer said some forecasts showed U.S. motorists could pay up to $4 a gallon, and said some consumers were already modifying their behavior.

"People are making plans to now to cut back on their vacation, they are cutting back on purchases all because gasoline prices are high," he said.

President Bush said Tuesday his administration is concerned about gasoline costs and pledged the government would keep a close watch out for profiteering.

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