Did “Teflon Rob” Botch the Gas-Price Study?

Attorney General candidate John Ladenburg has been criticizing his Republican opponent, Rob McKenna, for the incumbent's recent gas-price study, which was performed to explain regional variations in gas prices and determine whether such variations were the result of anti-competitive practices. Ladenburg and Tim Hamilton, executive director of the Automotive United Trades Organization, an organization representing independent gas sellers, argue that the investigation was less than thorough in its search for price-fixing, and thus misleadingly exonerated the industry. But Keith Leffler, a University of Washington economist who has worked extensively on petroleum issues and who was commissioned to perform the study, took issue with the pair's assessment in a recent e-mail:

"I am surprised that Mr. Ladenburg makes light of the AG Report," Leffler writes. "I can attest that the investigation was thorough. Many parties interviewed, much data analyzed, substantial opportunities for critics to influence the direction of the Report. I don't recall Mr. Ladenburg being present at any of the various public forums or offering any comments, questions, or suggestions during the extensive period for public comment. I suppose finding that the market works is not a good message when gasoline prices get to $4.

"This was not a price-fixing investigation, although we were certainly alert to that question," he continues. "The data concerning wholesale prices, however, demonstrated that nothing was out of line with supply and demand explaining the prices. In addition, since wholesale gasoline markets are certainly geographically at least as broad as the West Coast (as explained in detail in the Report), a single state investigation is of little value. Indeed, the FTC simultaneously conducted an investigation focused [on] the collusion issue and found no evidence. Mr. Hamilton is correct that the explicit purpose of the study was to attempt a better understanding of regional variations in prices. I believe it was successful."

Hamilton responds that "the FTC didn't do an investigation either," and recalls having to pay $1,500 of his own money to provide data for a recent FTC investigation in California, because the FTC lacked the budget to do so itself.

"As politely as he said it, no price investigation was done in the state of Washington," says Hamilton. "The bottom line is that you cannot do a price investigation by not going to the powers of subpoena, by not putting people under oath. The data they gave [Leffler], you could get tomorrow morning on the Internet. He had zero to work with. I feel sorry for him, because this guy is good. I've told him before that I would hire him if I could afford to. But this is not rocket-scientist shit. A high school kid with Excel could do this."