Consumer watchdog group says state dropped the ball

Posted: Sunday, November 24, 2002

JUNEAU - An attorney general's investigation into high gas prices that came up empty this week is another example of the state's failure to protect Alaskans from predatory businesses, the head of a consumer watchdog group said on Friday.

Stephen Conn, executive director of Alaska Public Interest Research Group, chided the state for not following the lead of Hawaii, which settled a lawsuit filed against gas companies over price-fixing allegations.

Alaska shares the distinction of having the highest gasoline prices in the nation along with Hawaii. This despite the state's oil wealth and capacity to refine its own gasoline.

Hawaii settled a $2 billion price-fixing lawsuit brought against divisions of Chevron, Shell, Texaco, Unocal and Tosco and two other companies in 1998 for $35 million.

Hawaii Gov. Ben Cayetano this year signed into law a bill making that state the first to institute a price cap on gasoline.

Supporters of the measure argued that research done for the price-fixing lawsuit showed there is no economic reason why Hawaii's gasoline prices are typically among the nation's highest.

Conn cited the Hawaii investigation and blasted Gov. Tony Knowles for not doing a better job of protecting consumers. The Democrat governor fought for the BP-Arco merger and a merger between the state's two largest retailers, Carrs and Safeway, Conn said.

"We have an administration that has proven to be consistently gutless where monopolies are concerned," Conn said. "Price gouging is real and everybody knows it."

Bob King, a spokesman for Knowles, defended the investigation and said it fulfilled the state's role as a "watchdog" for consumers as evidenced by the companys' complaints during the probe.

"I think we applied quite a bit of pressure on these companies given the fact that they were howling at all the documents and information we requested," King said. "At some point you have to drop the case."

Gasoline prices in Alaska typically average 9 cents per gallon higher than those in the West Coast, where gasoline already averages 11 cents above the national average.

Botehlo agreed that Alaskans pay too much for gasoline. But he said his office's investigation couldn't come up with sufficient evidence that companies conspired to maintain high prices. In other words, companies didn't put their heads together to manipulate prices at the pump.

The Alaska investigation was prompted by consumer complaints of high prices from 1995 to 1998, which were as much as 17 cents per gallon above West Coast prices.

Botelho noted that immediately after the investigation began in 1999 prices began falling. A gasoline spokesman said the dip in prices was unrelated to the investigation.

"The investigation itself had nothing to do with it. It was just the market conditions," said Ron Noel, vice president and general counsel for Tesoro Alaska Co., one of the state's largest gasoline retailers.

Evidence gathered in the case remains confidential and the attorney general's office would not divulge details of the investigation.

The Federal Trade Commission in recent years has conducted several formal investigations into gasoline pricing practices in the California and Midwest markets and concluded each time that there was no collusion among suppliers or violation of antitrust laws.

A recent staff investigation by the Senate Governmental Affairs investigations subcommittee concluded that oil companies, while not colluding, tended to manipulate supplies to keep prices high in tight markets.

In part, they are able to do so because of the reduced number of competitors now in the industry, the report said.

The state report noted that Alaska's gasoline industry is dominated by four marketers and that the dearth of competition makes it easier for companies to set parallel prices. But it said there was no evidence of an express or implied agreement to set prices.

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