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Attorney General Rowe Announces Release Of Northeast Petroleum Market Report
September 18, 2007
Commissioned by the attorneys general of Maine, Massachusetts, New Hampshire, Vermont, and New York to examine gasoline and heating oil markets within those states, the report provides an overview of market conditions that may affect the prices of petroleum products sold in New England and New York.
"Whether it is heating our homes or driving to work, the high price of gas and heating oil impacts Maine people every day." Rowe said. "Historically it has been thought that fluctuations in the price of petroleum products were caused by natural disasters, prolonged cold spells or other factors beyond our control." The Attorney General added: "The factual information in this report will help us to better understand the causes of severe price fluctuations."
Noting that the report concluded that over 80% of observed variation in average retail gasoline prices is explained by variation in the average price of crude oil, Rowe remarked: "To a large extent, this report corroborates conclusions drawn by my office two years ago. The price of gas and heating oil is driven by factors outside of Maine and fundamental reforms to stabilize and rationalize petroleum markets must be enacted."
The new report examines multiple facets of the gasoline and heating oil industry in Maine and the region including; wholesale and retail markets, transportation, product storage, and the structure of the supply and distribution chain.
Included is a discussion of federal, state and local regulations that may affect wholesale and retail gasoline markets, such as environmental regulations and state and local excise taxes. In addition, the report addresses the impact of the futures market for petroleum products on the price consumers pay. It also touches on how the role of non regulated, "over-the-counter" trades by private parties affect the prices for crude oil, gasoline, and heating oil in Maine and the region.
In 2005 the Maine Office of the Attorney General investigated the factors that precipitated sharp increase in gas prices following hurricane Katrina. As a result of that investigation, Attorney General Rowe wrote to Maine's Congressional delegation, urging an independent, professional and in-depth study of these markets as a basis for fundamental reforms designed to stabilize and rationalize petroleum markets. Rowe suggested a focus on three areas: 1) over-concentration in the refinery industry, 2) a need to review the regulatory regime governing the New York Mercantile Exchange (NYMEX), the commodities markets where petroleum futures are traded among petroleum companies, speculators and hedge funds, and 3) the unregulated operations of the off-exchange market in over-the-counter derivatives.
The Center for State Enforcement of Antitrust and Consumer Protection Laws Inc. (The Center) provided partial funding for the report through a grant to the Maine, Massachusetts, New Hampshire, and Vermont attorneys general. The full report is available for review at: http://www.statecenterinc.org/
Special Assistant to the Attorney General, 626-8577