Washington (Platts)--30Aug2007

The sharp increase in US gasoline prices in the spring and summer of 2006
was due to market factors, such as increased demand and higher crude and
ethanol prices, not violations of antitrust laws, the US' top competition
regulators said Thursday in a report commissioned by President George W. Bush.

     Bush requested the review by the US Federal Trade Commission and
Department of Justice's antitrust division in April 2006 after prices spiked
significantly in February and March.

     At the time, the FTC was completing its investigation of petroleum
industry conduct and gasoline pricing following August 2005's Hurricane
Katrina, a review that also found no collusion or market manipulation by the
oil industry.

     The Report on Spring/Summer 2006 Nationwide Gasoline Price Increases
describes staff's factual findings and economic analysis of the price spikes. 

     It found the run-up was due to six main factors: seasonal effects of the
summer driving season; increases in the price of crude oil; increases in the
price of ethanol; capacity reductions stemming from refiners' transition from
the fuel additive MTBE to ethanol; refinery outages resulting from hurricane
damage, other unexpected problems or external events, and required
maintenance; and increased consumer demand for gasoline beyond the seasonal
effects of the summer driving season.

     "The determination that the price increases were attributable to these
six factors also supports the conclusion that the increases did not stem from
violations of the antitrust laws," the report said. 

     But FTC Commissioner Jon Leibowitz, who dissented in the FTC's 4-1
decision, said the "oil industry, which posted record profits in 2006, should
not view this report as in any way a vindication of its behavior."

     Leibowitz noted that while commission staff identified plausible
justifications for the dramatic price spikes, the analysis was based on a
theoretical model for why gasoline prices likely increased. "This is not an
unreasonable approach, given that just last year we completed an exhaustive
investigation into gasoline pricing in the aftermath of hurricanes Katrina and
Rita," he said. "But the question you ask determines the answer you get:
whatever theoretical justifications exist don't exclude the real world threat
that there was profiteering at the expense of consumers."

     In addition to FTC and DOJ, the US Department of Energy also helped in
preparing the report.

		--Cathy Landry, cathy_landry@platts.com