One reason is that smaller gasoline inventories give little margin to deal with unexpected refinery problems or pipeline disruptions. The FTC investigation, which focused on the Midwest market, found no evidence of industry collusion, although it said some companies took advantage of last summer's tight supplies to maximize profits. The industry may be better prepared for problems in the Midwest this summer, and a major pipeline that shut down last year has resumed full operation, the Energy Department report said. Additionally, the Environmental Protection Agency has eased its ethanol standard making it easier to blend cleaner reformulated gas in the region. At the same time, though, the report noted that Midwest gasoline supplies are lower now than they were a year ago and a major Illinois refinery that operated last summer has since shut down.
Ethanol is produced from corn and is widely used as a gasoline additive in the Midwest.
Elsewhere the additive is usually MTBE, derived from natural gas. MTBE production in January fell to the lowest level since 1995 and has not rebounded adequately because of the high demand for natural gas as a fuel. The energy outlook report said the economic slowdown had been expected to ease the squeeze on crude oil supplies. However, it said crude oil inventories remain tight because of the recent decision by the Organization of the Petroleum Exporting Countries to cut production by 1 million barrels a day, beginning in April. A particular worry is the low level of natural gas stocks in underground storage.