AG candidate John Ladenburg has been criticizing current AG Rob McKenna for the latter's recent gas price study , which was performed to explain regional


Economist, Gas Station Lobbyist Clash over McKenna Gas Price Study


AG candidate John Ladenburg has been criticizing current AG Rob McKenna for the latter's recent gas price study, which was performed to explain regional variations in gas prices and to determine whether such variations were the result of anti-competitive practices. Ladenburg and Tim Hamilton, Executive Director of 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 industry players. Keith Leffler, the University of Washington economist who has worked extensively on petroleum issues and who was commissioned to perform the study, responds via e-mail:

"I am surprised that Mr. Ladenburg makes light of the AG Report. 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. 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. ("Welcome to the world of George W. Bush," he says.)

"As politely as he said it, no price investigation was done in the state of Washington. 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 him, 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."

The data was from the Oil Price Information Service, an online subscription service that Hamilton sees as the oil industry's tool for avoiding anti-trust laws. Rather than talk to each other, he argues, industry players give their information to the third-party OPIS, and then buy it back. "It's tacit collusion," he says. "But it doesn't violate our anti-trust laws because they're outdated. Teddy Roosevelt didn't foresee the Internet."

He says he has found suspicious the day-to-day shifts in pump prices vs. refinery prices (the former moving before the product from the latter can get to it), as well as synchronized, hourly, industry-wide shifts in prices. But he claims he was told that the issues of collusion were outside the study's purview. (Leffler says he was unaware of any evidence that Hamilton offered, and reiterates that such collusion would have to take place at least over the entire West Coast, if not the whole country, and that he encountered nothing that would indicate collusion.)

Hamilton says he has also crossed swords with Christine Gregoire over her price gouging bill, which he felt unfairly targeted gas stations while giving free rein to big oil producers. And he concedes that "Rob McKenna may be an honorable guy and a great attorney general. My problem is with the press releases, both before and after. He knew the limitations of his office--this was just a way to get his name out there."

Below are links to the press releases and the study, so you can judge for yourself whether McKenna was grandstanding or whether this is much ado about nothing:

AG press release announcing gas study

AG press release announcing conclusion of study

The study

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