PUMPED UP

	June 21 , 2000
	As every driver knows, gasoline prices are up. Elizabeth Brackett of WTTW begins our report from Chicago.

ELIZABETH BRACKETT: Sticker shock is rampant at Midwestern gas pumps, especially for those who have belatedly discovered big vehicles mean big gas tanks. JULIE ZACHARY: It eats a whole lost of gas. I'm going through a tank every few days. My daughter put $20 in three days. It cost me $40 to fill up the car. It's incredible. It's incredible. ELIZABETH BRACKETT: Customers as gas pumps in Chicago and Milwaukee are facing the highest prices in the country. The average gas price in Chicago Is $2.25 a gallon for regular gasoline. Nationwide it's $1.65 for regular. In the last 45 days gas prices have gone up 57 cents a gallon in Chicago. Last Monday angry members of the Illinois congressional delegation called a public hearing in Chicago on gas prices. Afterwards Congressman Bobby Rush laid the blame squarely on the oil industry. REP. BOBBY RUSH, (D) Illinois: I believe that it's, in my estimation, profit taking by the petroleum industry. And it's price gouging and they are just reaping enormous profits. ELIZABETH BRACKETT: Responding to the charges of price gouging, the Federal Trade Commission has now opened a formal probe into soaring Midwest gas prices. Even the spokesperson for the oil industry in Illinois is shocked when he fills up his tank. But he denies charges of gouging. DAVID SYKUTA: We have a one-word response for that: It's nonsense. It's the cheapest kind of political cheap shot. Congress knows that most of this is caused by other factors. I guess they're going to study it. We welcome that study. We're going to be vindicated. ELIZABETH BRACKETT: Gouging may be taking place, but it's not the oil industry, says Economics Professor Richard Kosobud. RICHARD KOSOBUD, University of Illinois at Chicago: I wouldn't point a finger at them. There is gouging going on. I think OPEC, the Organization Petroleum of Exporting Countries, is gouging. They're taking money out of your pocket, and it may be 40 to 50 cents a gallon. And ultimately that's the basic problem. We're vulnerable to OPEC because we're hooked on cheap gas. ELIZABETH BRACKETT: OPEC members agreed to a 3% production increase today. But that won't drop pump prices immediately, especially in the Midwest. Sykuta blames the higher Midwest prices in part on the new EPA regulations that mandate cleaner gasoline for areas with pollution problems. DAVID SYKUTA: We have to sell what's called a new brand of reformulated gasoline, that, while it's a great fuel... I mean, we support the fuel. We think it's a cleaner fuel. It's great for air emissions, but the reality is, it's also a much more expensive fuel. Our estimation is that when you combine new fuel requirements with the ones of several years ago, the total price impact is somewhere in the order of 13 to 16 cents a gallon. ELIZABETH BRACKETT: EPA Assistant Administrator Bob Perciasepe told the Illinois delegation the cost of producing the new reformulated gas, or RFG, it's no more than four to eight cents a gallon. SPOKESMAN: Guilty of four to eight cents. BOB PERCIASEPE: Clearly there is a cost to having clean-burn gasoline but not what we're seeing here, and certainly there's nothing else that we've done in the last year that would warrant these price changes that have occurred in the last year. ELIZABETH BRACKETT: The finger pointing also went on between the makers of ethanol, the fuel additive used in to help meet the EPA standards in Illinois and the oil industry -- the oil industry saying it was ethanol that has spiked the prices. That brought a blast from the ethanol industry. ERIC VAUGHN: If ethanol is the problem as the A.P.I. Claims, why are conventional gas supplies-- conventional, Congressman Ross, nothing to do with the federal reformulated gasoline requirements, nothing to do with ethanol-- why are they up 30% in the last 90 days, twice, twice what they are in the rest of the country? Something strange, fishy, stinky is going on here. ELIZABETH BRACKETT: What's going on, a Department of Energy representative told the panel, is a disastrous series of refinery and pipeline breakdowns that have crippled Midwest oil supplies. MELANIE KENDERDINE: When the pipeline went down, I believe about six million barrels of oil were lost at the time, and that was a critical time when the terminal operators on may 1 were required to have RFG 2 product in their terminals. ELIZABETH BRACKETT: Supplies are so tight in the Midwest, the Energy Department began sending oil up from the strategic petroleum reserves. So it's not gouging, says gas station retailer Paul Torstrick, it's simple economics. PAUL TORSTRICK: We are in the middle of a classic commodity price reaction where we have very tight supply, very high summer driving demand, and what that's going to lead to is higher prices. ELIZABETH BRACKETT: The oil industry adds one more reason for the higher Chicago prices. DAVID SYKUTA: All you have to do is look over my shoulder here at this price sign. As we stand here right now, the gasoline taxes in Chicago are the highest in the nation. ELIZABETH BRACKETT: Governors in both Illinois and Indiana took steps today to suspend the state's sales tax on gasoline. But Illinois Congresswoman Jan Schakowsky says it's more than taxes. REP. JAN SCHAKOWSKY: We pay higher taxes. We've known that for years in Chicago, but it still doesn't explain that huge difference. You finally get down to why is it that we're paying so much more than these other cities. And there doesn't seem to be an explanation. And I think that's why the Energy Department and EPA finally hit a brick wall, and said Federal Trade Commission, you'd better look at it. Is there price fixing, is there collusion, is there price gouging, because there's no other explanation. ELIZABETH BRACKETT: The FTC says its investigation will now include subpoenas of the records of the nation's major oil companies.