Bush to Trade Commisssion: "Find out what's going on!"

The U.S. Federal Trade Commission is investigating whether gasoline prices were illegally increased after Hurricane Katrina and if oil companies have constrained refinery capacity to keep fuel prices high, an agency official told Congress on Wednesday.

"We are continuing our intense scrutiny of conduct in the petroleum industry in the aftermath of Katrina," John Seesel, FTC associate general counsel for energy, told the Senate Commerce Committee at a hearing on gasoline prices.

"The FTC will proceed aggressively against any violations of the antitrust and consumer protection laws that it enforces," he said.

U.S. oil companies have adamantly denied that they have acted to push up gasoline prices or reduce supply.

Energy legislation signed into law this summer before Katrina struck the Gulf Coast required the FTC to probe whether gasoline prices have increased due to reduced refining capacity.

But Seesel said the agency's investigation will also look into the jump in pump costs after Katrina.

The national retail price for gasoline jumped 46 cents to a record $3.07 a gallon during the week after Katrina hit. The pump price has fallen 28 cents since then to $2.79 this week.

"The FTC is acutely aware of the pain that high gasoline prices that we have experienced recently has caused American families and businesses," Seesel said.

Governors from eight states on Tuesday asked the Bush administration and Congress to investigate profiteering or price gouging by the major oil companies after Katrina.

"The Commission is committed to maintaining competitive markets in refined petroleum products," Seesel told the committee.

Separately, an official with the Government Accountability Office said recent retail gasoline prices have risen faster than crude oil prices.

This goes against the historical trend of when "major upward and downward movements of crude oil prices are generally mirrored by movements in the same direction by gasoline prices," said Jim Wells, GAO director of natural resources and environment issues.

That supports a claim made by the eight governors, who also said the jump in motor fuel costs was much more than the increase in crude oil prices.

The price of crude accounts for about half the cost of making gasoline.

Seesel said there will be some "adverse effect" on gasoline prices until offshore oil production rigs and onshore refineries damaged by Katrina are repaired, which he said is "a process that could take months."

Four major oil refineries remain shut and a large chunk of oil production in the Gulf of Mexico is still offline due to damage from Katrina which slammed into Louisiana and Mississippi three weeks ago.

Now with the approach of Hurricane Rita, which has strengthened into a Category 4 storm, oil and gas companies have evacuated thousands of their workers from oil rigs and production platforms in the Gulf. Some refineries are also shutting down.