Democratic Talk Radio Blog

Gas Price Gouging - Call It Like It Is
By Robert Weiner and John Larmett
The Seattle Post-Intelligencer
Tuesday 30 October 2007

Gasoline prices are poised to explode again. Oil companies are setting
up the framework for higher prices because of fears of a Turkish invasion
of Kurdish-controlled Northern Iraq and administration saber rattling about
Iran. Crude oil, at $29.59 a barrel when President Bush took office in
January 2001, is now pushing toward $100. Washington State’s current
gasoline cost of $3.09 per gallon, double Seattle’s 2001 price of $1.52, is
now second only to California in the 48 contiguous states.

Jay Leno joked on the “Tonight Show” October 17, “The Nobel Prize for
Economics was awarded to three people - the CEOs of Exxon, Texaco, and
Shell for figuring out how to quadruple the price of oil over a seven year
period without an actual shortage.”

He’s right, there is no actual shortage. Even if something happened,
Kurdish oil production is less than 1/4 of 1% of the world’s oil, and all
of Iraq generates under 3%. Iran’s share of world production is falling, 5%
last year compared to 8% in 1974. The oil industry uses the unrealized
potential of small disruptions to implement huge price fluctuations. They
are using the fear factor and war profiteering to repeat and increase what
they had last year, the highest profits for any industry in American history.

Furthermore, home heating oil bills are up a third from a year ago,
and double six years ago-a $1700 annual household increase, seven times
inflation. Home heating bills are the silent economic killer to families -
the spotlight has been on car gas prices.

As former House Energy Committee Chair Joe Barton (R-TX) said, “No
federal statute prohibits price gouging.” Leading Democratic Presidential
candidate Hillary Clinton is demanding a new Federal Trade Commission oil
price investigation. Oil companies raised gas prices 24 cents a gallon in
the 24 hours after Katrina. The FTC reported increases “not substantially
attributable to increased costs.” It was pure fear-mongering.

Congress is enacting new laws specifically aimed at price gouging,
sort of. In May, the House passed groundbreaking legislation making gouging
by oil and gas companies a federal crime. The bill calls for jail time and
fines of up to $150 million a day for charging “unconscionably excessive
prices” and taking “unfair advantage” of consumers during a presidentially
declared emergency. The President has indefinitely continued drug
trafficking and national security emergencies and could do the same on oil
prices strangling consumers.

However, there is no “violation” if the price charged is
“substantially attributable to local, regional, national, or international
market conditions.” The House is saying it is not gouging if the public
will bear it. The oil companies could still charge whatever they want-a
loophole big enough for a gas-guzzling Mack truck.

In the Senate, Sen. Maria Cantwell (D-WA) has introduced legislation
which defines gouging as “charging an unconscionably excessive price” and
adds a critical “prohibition on market manipulation”, regardless of
“emergency” timing. Cantwell has been pushing for its enactment for over
two years and missed the 60 vote debate “cloture” by just three votes in
2005. With the new Democratic majority, Cantwell succeeded in including
this provision in the Senate energy bill now before a House-Senate
conference. Cantwell’s ban on market manipulation regardless of
“emergencies” could have enormous impact on stopping price spikes.

(An unintended consequence of the Bush saber rattling is even higher
prices and more money to Iran, which defeats the purpose of sanctions to
stop nuclear weapons.)

Congress needs to rise above special interest relationships, protect
Americans from oil company gouging, and define the term so it means what it
really is.
———
Robert Weiner worked six years as a communications director in the
Clinton White House and sixteen years in the House of Representatives. John
Larmett, senior policy analyst at Robert Weiner Associates, worked on
energy-related issues as press secretary to Rep. Jim McDermott, D-Seattle.

This entry was posted on Tuesday, November 6th, 2007 at 12:27 pm and is filed under Political Corruption, Energy Issues, Trade Policy, Economics. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.