Senators call for investigation of U.S. oil companies.

Sens. Chuck Grassley (R-Iowa) and Amy Klobuchar (D-Minn.) have asked both the Justice Department and Federal Trade Commission to investigate allegations that oil companies are blocking the introduction of higher ethanol blends of gasoline by requiring their retail franchisees to continue to carry premium grade gasoline. The two senators say that the requirement blocks retailers from using the existing infrastructure at gas stations to carry the higher blends.

In letters to Attorney General Eric Holder and Federal Trade Commission Chair Edith Ramirez, the two senators note that "Station owners who wish to sell renewable fuel would bear the cost and logistical burden of having to install additional infrastructure to do so." In such a case, they say, "the oil company may be using its economic power over its franchisee[s] to effect a tying arrangement in violation of the Sherman [Antitrust] Act." And, they add, "This conduct may also violate the Gasohol Competition Act of 1980, which prohibits discrimination or unreasonable limits against the sale of gasohol or other synthetic motor fuels."

"Faced with growing competition from new sources of fuel promoted by the [renewable fuel standard], the oil industry has publicly stated their goal of repealing the RFS. At the same time, we have heard reports that oil companies are taking steps to undermine efforts to distribute renewable fuels that could help meet the RFS requirement," Grassley, ranking member of the Senate Judiciary Committee, and Klobuchar said in the letter. The letter did not provide details regarding the alleged steps the oil companies are taking to undermine ethanol.

The letter does not mention the source of the allegations of antitrust behavior, so it is difficult to judge the veracity of or possible motives behind the allegations. It should be noted that last March, the Renewable Fuels Association asked the departments of Justice, Energy and Agriculture, as well as the Federal Trade Commission, to launch a similar investigation.

It may be that there are gas station franchisees who want to sell gasoline containing either 15 percent or 85 percent ethanol but who are being thwarted by gasoline companies that require that the stations sell blends no more potent than E10. In that case, it is likely that both the Department of Justice and Federal Trade Commission will look closely at how prevalent the alleged behavior is before launching an all-out investigation.

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Publication:	The Food & Fiber Letter
Date:	Aug 26, 2013
Words:	391
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Topics:	Petroleum industry