03.14.06

Cantwell Presses Case for Anti-Price Gouging Law, Comprehensive Investigation of Petroleum Markets

Senator: We need to know if industry practices are behind high prices

WASHINGTON, DC – In a letter to Senate Judiciary Committee Chairman Arlen Specter (R-PA) and Ranking Member Patrick Leahy (D-VT) Tuesday, U.S. Senator Maria Cantwell (D-WA) underscored the need to uncover the cause of rising energy costs and determine if industry practices are contributing to record-high prices hurting hard-working Americans nationwide. Cantwell’s letter comes as the Judiciary Committee holds hearings Tuesday to determine the impacts of oil industry mergers and consolidation on fuel prices. Last week, Chairman Specter circulated draft legislation—the Petroleum Industry Antitrust Act of 2006—which would revise U.S. antitrust laws to prohibit oil companies from manipulating energy markets by withholding fuel supplies. In her letter, Cantwell said Specter’s proposal takes “critical steps forward,” and pressed her case for a comprehensive investigation of current dynamics influencing petroleum markets.

“For years now, we’ve seen a steady rise in energy prices for American families and businesses while oil and gas conglomerates haul in unheard-of profits,” said Cantwell, a member of the Senate Energy and Commerce Committees. “We can’t blame these prices on last year’s hurricane alone. Right now, we don’t understand how the fuel market works because there is no transparency. Meanwhile, we’re hearing that gas prices could jump again this summer. We need transparency, answers, and, most of all, stable affordable fuel to keep our economy strong and American families within their budgets.”

In her letter, Cantwell reiterated the need to get answer to the questions oil companies have thus far refused to address. Specifically, she outlined four policy areas that require further investigation:

  • industry practices regarding fuel inventories, which may be exacerbating recent volatility in petroleum prices;
  • controversial pricing policies used by the petroleum industry, such as “redlining” and zonal pricing;
  • the role that speculative trading in spot and financial futures markets may play in contributing to energy price volatility; and
  • the best model for enhancing market transparency, or providing a better mechanism for authorities to monitor compliance with our nation’s consumer protection laws.

Last November, executives from major oil companies appeared at a joint hearing of the Senate Energy and Commerce Committees to answer questions about possible price gouging at the gas pump. Before the hearing, Cantwell led a group of Democratic senators in requesting that oil company executives testify under oath, but her request was denied. Following the hearing, a number of the oil companies failed to provide necessary information about their fuel inventories, trading activities, and exports, despite commitments to do so at the hearing. Last week, Cantwell joined Commerce Committee Co-chairman Inouye (D-HI), requesting that the Government Accountability Office investigate a number of these issues. Cantwell’s letter to the Judiciary Committee Tuesday is yet another step in the effort to get answers.

Cantwell is also the lead sponsor of legislation to prohibit price gouging at the gas pump during times of national energy emergencies (S. 1735). Currently pending in the Senate Commerce Committee, of which Cantwell is a member, with nearly 30 cosponsors, this measure would provide new tools for state authorities to prosecute suspected instances of price gouging—but also recognizes the fundamentally interstate nature of fuel markets, by providing backstop federal authority to pursue profiteering across state lines, with a focus on the largest interests in the petroleum industry. Cantwell’s measure is modeled on successful state laws. In fact, an interim report issued earlier this month by the Federal Trade Commission has identified 99 cases in which states with price gouging laws on the books have brought charges related to the run-up in prices after last fall’s tragic hurricanes.

Between early 2002 and January 2006, unleaded gasoline rose from $1.36 to $2.32 per gallon, diesel increased from $0.86 to $1.99 per gallon, and home heating oil jumped from $1.13 to $2.30 per gallon, all while oil giants reported record-breaking profits. In January, Exxon Mobil reported $36 billion in 2005 profits, more than any American company has ever earned during a single year. Cantwell’s letter to Senators Specter and Leahy can be seen here 

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