FTC: No answer to high Buffalo gas prices

The question of why Western New York motorists pay unusually high prices for gasoline remains a mystery based on an investigation by the Federal Trade Commission.

The probe was called for by Rep. Brian Higgins, D-Buffalo, and Sen. Charles Schumer after retail gas prices at area stations last fall ranked among the highest in the nation. At the same time, prices in most other U.S. metropolitan areas were declining faster along with the price of oil.

In a letter sent May 13 by FTC Chairman Jon Leibowitz to Higgins, the agency said after a careful and extensive investigation, regulators could not find any evidence of illegal activity in gasoline markets in any of the affected cities. The agency monitored prices in Buffalo, Jamestown, Rochester and Burlington, Vt.

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???To the contrary, staff found evidence suggesting that it is unlikely that illegal conduct caused those price levels, although staff was unable to identify precise reasons why retail gas prices in Western New York did not fall as quickly as prices in other Northeast cities,??? Leibowitz wrote.

What the agency did note was that after Higgins released an Oil Price Information Service (OPIS) report on Dec. 4, 2008 citing Jamestown and the Buffalo-Niagara regions among the top 5 most ???profitable??? for gasoline retailers, the prices for unleaded gas decreased from an average of $2.25 to $1.85 by the end of 2009.

In mid-November of last year, the average price of a gallon of unleaded gas in the Buffalo area was $2.66 compared to the statewide average of $2.53 and the national average of $2.15. New York state has the third-highest taxes on fuel in the U.S., according to the various sources, trailing only California and Connecticut.

The investigation said it analyzed prices over a 10-year period for Buffalo, Rochester, Jamestown and Burlington, using Albany as a baseline. The FTC did note that prices in the four cities were significantly higher than those in Albany.

From there, FTC staffers looked at potential supply disruptions but again could not find any market conditions to explain the price differences. Additionally, the attorney generals from both New York state and Vermont checked on potential illegal behavior by gasoline operators but did not find any wrongdoing.

Investigators also looked to see if there was the possibility of collusion but said that ???it would have been very difficult to establish and maintain effective collusive agreement to raise retail prices in Buffalo throughout the fall of last year.???

Higgins intends to raise public awareness to the issue and has co-sponsored a bill pushing for passage of price-gouging legislation as well as federal law to stop speculation in the oil market that may trigger higher gasoline costs.

???While we might not have proof of illegal activity or a clear definition of why our prices were so high, what is clear is retailers were acting in bad faith through some type of implicit collusion and retailers and consumers should know that we were watching then and are watching now and will continue to work to make sure this doesn???t happen again,??? said Higgins in response to the investigation.

As of Friday, the AAA daily fuel gauge report said the average cost per gallon of unleaded fuel in the Buffalo area was $2.40, up from $2.17 a month ago. Those current prices, however, were the same as Albany and 3 cents below statewide average.