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States probe high gas prices, eye tax cuts

Posted on: Friday, 2 September 2005, 15:01 CDT

By Karen Pierog

CHICAGO (Reuters) - U.S. states, reeling from skyrocketing gasoline prices in the wake of Hurricane Katrina, have launched probes into alleged profiteering and are mulling temporary relief for drivers by suspending taxes.

Boosting the use of alternative fuels like ethanol to relieve gasoline supply worries is also being pushed by officials in some states.

Responding to numerous consumer complaints about pump prices jumping -- sometimes within hours -- investigators are fanning out across several states.

California launched a probe of gas price hikes and state Attorney General Bill Lockyer said he will subpoena refiners' records and threatened to prosecute profiteers.

The AAA Motor Club reported the national average price for regular unleaded gas was $2.86 a gallon on Friday, up from $2.70 on Thursday, although prices in many urban areas soared well above $3.

The hurricane knocked out oil refiners in Louisiana and Mississippi, cutting 42 million gallons a day or 10 percent of the nation's normal consumption.

The federal government responded by releasing 900,000 barrels a day of stockpiled crude, temporarily relaxed fuel standards and asked for emergency international supplies -- moves aimed at mitigating price run-ups and potential fuel shortages.

"We will not stand by and let our consumers be exploited by profiteers looking to cash in on Hurricane Katrina," said acting New Jersey Gov. Richard Codey in a statement.

He warned that his state will take action if cases of price fixing or other illegal activity push prices "off the chart."

Ohio Attorney General Jim Petro put the state's petroleum council, gasoline marketers and convenience stores on notice, asking them to justify price hikes.

"I encourage anyone who believes a station is charging excessive prices to file a complaint with our office," Petro said, adding that his office got hundreds of complaints this week.

STATE GAS TAX CUT URGED

Hawaii on Thursday became the first state to impose limits on gas prices since the energy crisis of the 1970s. The state will set weekly caps on wholesale gasoline prices for different regions of the islands.

Georgia Gov. Sonny Perdue on Friday signed an executive order suspending the state's 7.5 cent-per-gallon motor fuel tax through the end of September. The move must be ratified by the legislature.

In New York City, City Council Speaker Gifford Miller and others asked Friday for state authority to set a flat, per gallon tax rate to ease gas prices that have jumped over $3.50 per gallon.

New York and eight other states, including California, Florida and Illinois, collect sales taxes on gasoline purchases, giving them a potential revenue windfall as gas prices escalate.

All 50 states collect excise taxes that can add anywhere from 4 cents to 30 cents to the per-gallon cost.

Democrats in the Oklahoma legislature proposed suspending the state's gas tax for the rest of the year, saving drivers 17 cents per gallon, or $1 million a day.

Connecticut Gov. M. Jodi Rell has raised the possibility of a temporary suspension of the gross receipts tax on gasoline.

Meanwhile, officials in agricultural states who advocate greater use of corn-based ethanol and other non-fossil fuels intensified their efforts to promote alternative fuels.

In Ohio, House Speaker Jon Husted said he will push legislation for more widespread use of alternative fuels such as biodiesel and ethanol.

Wisconsin Gov. Jim Doyle called on the legislature to pass a bill ensuring gas sold in his state will contain 10 percent ethanol.

Source: REUTERS

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