Gas Prices Level Off

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Gas Prices Level Off

NEW YORK -- Gasoline prices are beginning their descent following Labor Day weekend's heavy travel period.

Nationally, the average price of a gallon of regular unleaded was $1.72 on Friday, according to AAA's daily gas-price survey. A year ago it was $1.405. The national record high was $1.737, set the Saturday before Labor Day.

Petroleum officials deny price gouging was behind the fuel increases. In a letter to Congress last week, Red Cavaney, president and CEO of the American Petroleum Institute (API), laid most of the blame for the higher fuel prices on tight inventories by oil companies, a pipeline break in Phoenix and the recent power blackout in the Northeast, which caused seven refineries to shut down.

"Additionally, the price of crude oil, the single largest component in the cost of gasoline, increased from $25 a barrel in April to $32," Cavaney said in his letter. "This increase reflects the uncertainties in the marketplace over the continuing unrest in several oil-producing areas and OPEC's lowered production levels."

Both state and federal lawmakers, acknowledging that the cost of gasoline always tends to increase a little around Labor Day, announced this week they would investigate if any unfair pricing occurred to make pump-price increases so prolific.

Florida Attorney General Charlie Crist, along with other state officials, asked the U.S. Department of Energy to help get a full accounting of the gas spike.

Crist said investigators from his office currently are surveying prices at about 100 gas retailers in Florida -- mostly along the state's East Coast -- but they haven't issued any citations. He thinks pressure by his office and the lawmakers in other states are having an impact.

"The best news of all is that prices are starting to go back down again," Crist said. "Sometimes, there is strength in numbers, and maybe when oil companies start seeing that happen, it can have an impact."

Analysts supported the API's claim. "It is not price-gouging. It is really supply and demand at work," said Tom Drennen, assistant professor of economics at Hobart and William Smith Colleges in Geneva, N.Y. "Gasoline demand falls as soon as the busy driving season ends. Retail gas stations know that demand will be high during the last week of August, and therefore know that they can charge a bit more. But they also know that, after Labor Day, demand will slacken, consumers will shop around a bit more, and drive prices down."