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FTC Finds No Widespread Gas Price Gouging

Prices Slip 1.5 Cents

May 22, 2006
The Federal Trade Commission has reported only 15 examples of gasoline price gouging after Hurricane Katrina and the agency says there is no widespread effort by the oil industry to illegally manipulate prices, a finding Public Citizen said "defied belief."

The commission downplayed allegations of price gouging by seven refiners, two wholesalers and six retailers. Investigators attributed soaring prices following the September 2005 hurricanes to "regional or local market trends."

"The FTC has become increasingly political, losing its traditional independence and favoring big oil, and the agency is too quick to point blame at small retailers rather than large refiners, despite the fact that a May 2004 U.S. Government Accountability Office report found that mergers in the oil industry have led to higher prices," said Tyson Slocum, Director of Public Citizen’s Energy Program.

"The FTC downplays the role of legal manipulation, by which refiners use their market power to unilaterally engage in anti-competitive practices, leading to higher prices for consumers," said Slocum.

The FTC reports that only one unnamed gas-station owner intentionally tried to profit from gas shortages. The other 14 retailers mentioned in the report, according to the FTC, raised prices out of confusion and were not being malicious.

For the purpose of the report, the FTC defined price gouging as any finding that the average price of gasoline in designated disaster areas in September 2005 was higher than in August 2005.

The FTC investigation found no evidence that refiners or pipeline companies manipulated prices or restricted capacity to boost prices. The commission found no evidence that oil companies cut inventory to boost prices.

The investigation concluded that the post-Katrina spike in gasoline prices in September 2005 was in line with the market forces of supply and demand affecting gasoline prices.

"The conduct of firms in response to the supply shocks from the hurricanes was consistent with competition," according to the FTC report.

Not everyone is fully satisfied with the FTC findings. Representative Rick Boucher, (D-Va.), claims that the real reason there is a refinery shortage in the U.S. is because the oil companies that own refineries are profiting enormously from refinery bottlenecks and gasoline shortages.

Since the 1990s, there have been more than 2,600 mergers and acquisitions in the U.S. oil industry, creating giant conglomerates such as ExxonMobil, ChevronTexaco and ConocoPhillips.

The result is that a few companies control a significant amount of America’s gasoline, squelching competition, Public Citizen charged.

In the week after the hurricane, retail gasoline prices jumped 46 cents to a record nationwide average of $3.07 per gallon.

After price rises in recent months, gas buyers are receiving a small break ahead of Memorial Day weekend as prices that recently approached the 2005 record have begun to recede according to oil industry analyst Trilby Lundberg.

"Gasoline prices fell a penny-and-a-half in the past two weeks. Self-serve regular is now $2.93 a gallon," according to Lundberg. "It's the first drop since February," she said.

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