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FTC Clears Oil Industry of 2006 Price Gouging

In strong dissent, one commissioner finds "disturbing conduct"

By Joe Benton
ConsumerAffairs.com

August 30, 2007

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The Federal Trade Commission has cleared the U.S. oil industry of charges of price gouging during the spring and summer of 2006 by a vote of 4-1.

The FTC blamed market forces for gasoline price increases in 2006, according to a report sent to President Bush by the federal antitrust regulators.

The report said U.S. pump prices leaped as high as $3.02 a gallon in August of 2006 because of consumer demand, the rising cost of crude oil and ethanol, refinery outages and capacity reductions stemming from the transition from the fuel additive methyl tertiary-butyl ether to ethanol.

"Our targeted examination of major refinery outages revealed no evidence that refiners conspired to restrict supply or otherwise violated the antitrust laws," the FTC report stated.

But FTC Commissioner Jon Leibowitz issued a dissenting statement charging that the oil industry, which “posted record profits in 2006” should not view the findings "in any way a vindication of its behavior."

The "investigation found price gouging by refiners under the Congressionally mandated definition and beyond that, disturbing conduct by even more petroleum companies. But the question you ask determines the answer you get,” Leibowitz said in his dissent.

Leibowitz said the FTC simply developed a "theoretical model for why gasoline prices likely increased" and noted that a separate investigation into gasoline pricing after hurricanes Katrina and Rita did find examples of price gouging by refiners.

The majority of the FTC commissioners described the investigation as “intensive” and supporting “the conclusion that the increases did not stem from violations of the antitrust laws.”

The news release announcing the findings stated that the “agency’s economists regularly scrutinize price movements in 20 wholesale regions and approximately 360 retail areas across the country and FTC attorneys and economists initiate law enforcement investigations in response to suspect pricing episodes as they are identified.”

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