09.27.05

Commerce Dems Call for Senate Investigation of Post-Katrina Gas Price Gouging

WASHINGTON, D.C. – Seven members of the Senate Commerce Committee today called for a special investigation of allegations that oil companies purposefully increased prices at the gas pump in the wake of Hurricane Katrina. In a letter to the Commerce panel’s Co-Chairs, Sens. Ted Stevens (R-AK) and Daniel Inouye (D-HI), the Senators requested that the Committee open a formal inquiry into post-Katrina price gouging allegations. They specifically noted the complaints of some gas station owners and operators that were reportedly ordered to raise prices by Exxon-Mobil, the nation’s largest oil company.

"These dealers add a unique and compelling voice to the debate, given that their own businesses depend on access to supply from this company," the Senators wrote. "As such, we believe these allegations deserve the utmost scrutiny." The letter was signed by Sens. Maria Cantwell (D-WA), Byron Dorgan (D-ND), John Kerry (D-MA), Frank Lautenberg (D-NJ), Barbara Boxer (D-CA), Bill Nelson (D-FL) and Jay Rockefeller (D-WV).

The prospect of a Committee inquiry into post-Katrina price gouging was first raised by Sen. Cantwell at a Commerce hearing on gasoline prices last Wednesday. Since then, the Chair of the Federal Trade Commission (FTC)—the federal agency with responsibility for monitoring gasoline prices for anticompetitive activity—has come out against proposals to strengthen the FTC’s ability to protect American consumers from gouging at the pump. Cantwell said the FTC’s resistance to new consumer protection laws has raised serious questions about the agency’s ability to conduct a thorough price gouging investigation on its own.

"This is a situation that cries out for additional Senate scrutiny," said Cantwell, a member of the Senate Commerce and Energy Committees. "On the one hand, the FTC assures us it will get to the bottom of these price gouging allegations. On the other, the FTC Chair says new consumer protections aren’t needed—even before the agency’s investigation is anywhere near complete. The Senate needs to step in and do its rightful job of oversight, to make sure this doesn’t turn into a whitewash. American consumers deserve better."

Cantwell has been joined by 25 other Senators in sponsoring legislation (S. 1735) that would put in place a federal ban on gasoline price gouging during national emergencies. Today, 28 states have anti-gouging laws on the books, but no similar federal law exists. Nevertheless, FTC Chairwoman Deborah Majoras was reported last week as saying of federal price gouging protections, "While we understand their appeal for protecting consumers, we fear they're more likely to do more harm than good."

"We have seen this pattern of resistance before," said Cantwell. "It took three years and the considerable public embarrassment of energy traders caught on tape, gloating about ripping off Grandma Millie, before federal regulators got serious about examining all the evidence related to Enron’s schemes to rip off consumers. That’s why we need to ask tough questions about the FTC now. Whose interests is this agency trying to protect—the oil companies, or American consumers?"

A number of Senators and outside groups have become increasingly critical of the FTC and its oversight of oil and gasoline markets. Last year, the Government Accountability Office released a report that concluded that "mergers and increased market concentration generally led to higher wholesale gasoline prices in the United States"—contrary to the FTC’s own findings. Similar concerns have been raised about the agency’s leadership, given potential conflicts of interest associated with Chairwoman Majoras’ past employment as outside counsel for oil giant, ChevronTexaco. Unable to overcome opposition in the Senate, the Bush Administration circumvented the traditional confirmation process by granting Chairwoman Majoras a "recess appointment" last July.

[Text of the Commerce Committee letter follows below]

September 27, 2005

The Honorable Ted Stevens Chairman Committee on Commerce, Science & Transportation United States Senate 508 Dirksen Senate Office Bldg Washington, DC 20510

The Honorable Daniel Inouye Co-Chairman Committee on Commerce,Science & Transportation United States Senate 508 Dirksen Senate Office Bldg Washington, DC 20510

Dear Chairman Stevens and Co-chairman Inouye,

We write to respectfully request that the Senate Committee on Commerce, Science & Transportation initiate a special investigation into allegations of price gouging in the sale of oil, gasoline and other petroleum products in the aftermath of Hurricane Katrina. In the wake of this tragic storm, Governors from across the nation, farmers and a growing number of consumers have called on Congress to investigate skyrocketing fuel prices, which are placing an enormous burden on American families, businesses and our economy as a whole.

It is also notable that earlier this month the Mid-Atlantic Chapter of the American Automobile Association (AAA) gave voice to a growing number of gas station owners and operators who themselves have raised concerns about Exxon-Mobil, the largest oil company in the United States, demanding a steep increase in prices after Katrina. These dealers add a unique and compelling voice to the debate, given that their own businesses depend on access to supply from this company. As such, we believe these allegations deserve the utmost scrutiny.

We also believe that the Commerce Committee is well-positioned to undertake this investigation, given its long history of formal inquiries into practices impacting our nation’s consumers. Likewise, it is the Committee with primary jurisdiction over the Federal Trade Commission (FTC), which is the federal agency with responsibility for preventing anticompetitive practices in oil, gasoline and petroleum markets. Many of us believe that the FTC has itself fallen short. For example, at last week’s Commerce Committee hearing on energy prices, the FTC’s Associate General Counsel for Energy suggested that he was not even specifically aware of the allegations raised by AAA regarding Exxon-Mobil’s pricing policies after Katrina—far from the response we would expect from an aggressive consumer watchdog. Moreover, many of us have long believed the agency has failed to protect the American economy from the impacts of increased mergers and consolidation within the oil industry, leaving consumers even more susceptible to price gouging–particularly in instances where natural disasters or emergencies have occurred. Clearly, the FTC is an agency that would benefit from the increased scrutiny and oversight resulting from a Commerce Committee investigation.

There is no question that all sectors of the American economy are struggling under the weight of the spiking fuel prices we have recently witnessed in oil markets and at the gas pump. Profiteering in the midst of a national emergency cannot be tolerated. A Commerce Committee investigation would help bring the relevant facts to light after Hurricane Katrina. It may also serve as a strong deterrent for potential price gougers, as the events surrounding Hurricane Rita demonstrated that these markets remain subject to tremendous volatility. Lastly, it would provide the Senate additional, valuable insights into measures we may institute to better protect American consumers and businesses from skyrocketing fuel prices.

Thank you for your consideration of this request, which is of such importance to our constituents.

Sincerely,

Maria Cantwell Byron Dorgan John Kerry Frank Lautenberg Barbara Boxer Bill Nelson Jay Rockefeller