Soaring Midwest Gas Prices to Be Probed

WASHINGTON — The Federal Trade Commission has opened a formal investigation into soaring gasoline prices in some areas of the Midwest and will begin issuing subpoenas to oil companies by the end of the week, congressional sources said Tuesday.

FTC Chairman Robert Pitofsky told members of the Illinois congressional delegation that the sudden price spikes in the Chicago and Milwaukee areas and elsewhere are questionable enough to warrant a formal investigation into possible price gouging and collusion, according to one lawmaker present.

“The fact that they’re moving forward with this investigation will be a clear signal to the oil companies to bring down prices immediately,” said Sen. Richard Durbin (D-Ill.), who was among those who met with Pitofsky on Capitol Hill.

Durbin said Pitofsky told him and other Illinois lawmakers that the agency will now pursue a formal investigation and begin issuing subpoenas to companies connected with the refining, distribution and sale of gasoline by the end of the week.

Pitofsky was unavailable for comment.

The White House, trying to stem political fallout in pivotal Midwest states, had foreshadowed an investigation earlier Tuesday. It said industry arguments blaming new environmental rules for the soaring prices do not stand the test of logic and that more investigation of oil company practices is needed.

While Durbin and some other Democrats hailed the FTC decision to pursue the matter, Sen. Peter Fitzgerald (R-Ill.) 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 in collusion or gouging customers. They blame price increases on market conditions, tight supplies, transportation problems and complications in refining newly required cleaner-burning gasoline.

In other developments:

* Vice President Al Gore asked Environmental Protection Agency chief Carol Browner and Energy Secretary Bill Richardson to meet with the governors of states most affected by high pump prices, including those from Illinois, Wisconsin and Michigan, to see how gas price problems might be eased. Several governors have urged the EPA to lift new requirements for cleaner gasoline.

* In Indiana, Gov. Frank L. 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.

* Oil analysts anticipated that the Organization of Petroleum Exporting Countries, meeting today, will approve only modest increases in production. The analysts predict any action will fall short of what is needed to drive down gas prices.

The administration was quietly trying to persuade OPEC ministers to increase crude oil production at the meeting in Vienna, Austria. It is widely believed that some production increases will be approved, but the additional oil may 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 the fourth consecutive week.

House Speaker J. Dennis Hastert (R-Ill.) said the EPA, in areas hit by major price increases, such as Chicago and Milwaukee, should lift its requirement on the use of cleaner gasoline.