09.21.05

Wednesday Cantwell Called For Senate Investigation of Post-Katrina Gas Price Gouging

22 Senators Sign on to Cantwell’s Anti-Gas Price Gouging Legislation

WASHINGTON, D.C. – At a hearing of the Senate Commerce Committee today, U.S. Sen. Maria Cantwell (D-WA) called for a Senate investigation of allegations that oil companies purposefully increased prices at the gas pump in the wake of Hurricane Katrina. She also urged swift passage of legislation she introduced yesterday (S. 1735) that would put in place a federal ban on price gouging during national emergencies. Twenty two of Cantwell’s colleagues have co-sponsored her legislation since she introduced it yesterday. The actions taken today are part of Cantwell’s efforts to make America energy independent by 2020.

"The federal government clearly lacks a plan to protect American consumers and businesses from gas price gouging, particularly when natural disasters and national emergencies strike," said Cantwell, a member of the Senate’s Energy and Commerce committees. "We must focus a bright light on these oil companies and their market practices because the dramatic increase in gas prices is hurting every sector of the American economy."

"There is a growing concern that oil companies are taking advantage of the horrible circumstances left in the wake of Hurricane Katrina and are raising their prices, far beyond additional costs, to increase profits.

Earlier this month, the Mid-Atlantic Chapter of AAA issued a statement, suggesting that "a growing chorus of Exxon dealers in the Washington metro area are raising their voices and accusing the world’s largest oil company, Exxon Mobil, of profiting from the exorbitant prices at the pump in the wake of Hurricane Katrina."

A number of Governors as well as groups such as the National Farmers Union have called for Congressional investigations into allegations of price gouging.

Cantwell said the Senate Commerce Committee, which has a long history of conducting investigations related to consumer protection, would be a logical place to run such an inquiry.

"Congress has a responsibility to get to the bottom of these claims, and we need to see whether these practices are widespread," said Cantwell.

Also today, Cantwell urged swift passage of her Energy Emergency Consumer Protection Act of 2005. Introduced yesterday, the measure now has 22 Senate cosponsors, including Senate Democratic Leader Harry Reid (D-NV), Assistant Leader Dick Durbin (D-IL) and Commerce Committee Co-Chairman, Daniel Inouye (D-HI).

Today, 28 states have anti-gouging laws on the books, although Washington state is not among them. Cantwell based her federal measure on New York’s law, where price gouging cases have been successfully prosecuted after natural disasters.

Cantwell’s legislation creates new federal fines and criminal penalties for price gougers. It also directs the Federal Trade Commission to focus its enforcement activities on big oil companies, with revenues of more than $500 million a year, and creates new authority for states to go after price gougers at the retail level.

In addition, Cantwell’s bill contains provisions to ban manipulation in the oil and gasoline markets, and new transparency, investigation and enforcement mechanisms. These provisions are based on measures in the recently passed energy bill, which contained Cantwell’s legislation to ban Enron-style manipulation schemes for electricity.

These efforts are just one part of Senate Democrats’ efforts to put America firmly on the path towards Energy Independence. Cantwell has sponsored legislation to set a national goal of reducing domestic oil consumption equivalent to 40 percent of America’s projected imports over the next 20 years, and has authored a measure that would require more accurate consumer information about the fuel efficiency of new vehicles. Cantwell has been a consistent advocate of measures to promote greater use of domestically produced biofuels and dramatically improving national fuel economy standards.

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"The Cantwell "Energy Emergency Consumer Protection Act"

Even before the devastation caused by Hurricane Katrina, skyrocketing oil and gasoline prices were taxing American families and burdening our nation’s economy—with the notable exception of the oil industry which continued to rack up record profits. Following Katrina, gas prices in some areas reached almost $6 per gallon, deepening suspicions of gas pump profiteering. Cantwell’s legislation would put in place a number of measures to ensure that the President has the tools needed to adequately respond to energy emergencies and prohibit price gouging. Based on measures included in the energy bill, it would also put in place new consumer protections to prevent market manipulation and ensure greater transparency when it comes to oil and gas prices.

Federal Energy Emergency Response: Skyrocketing energy prices following Hurricane Katrina validated the warnings of many national security experts and renowned economists that America’s absolute reliance on petroleum products left our nation susceptible to crippling economic shocks after even relatively small supply disruptions. Regardless of whether they are natural disasters or human-caused events--such as terrorist acts or political upheaval in oil-rich nations--the United States has neither a short- nor long-term plan to deal with the ramifications of our oil dependence. In order to begin tackling both these problems, the bill would:

Give the President the authority to declare a temporary National Energy Emergency. Upon declaration of an emergency, trigger a federal prohibition on price gouging for the affected area. This provision is modeled after anti-price gouging legislation on the books in about 28 states. It specifically relies on a standard established in New York state law, related to "unconscionably excessive" prices. Price gouging cases have previously been successful under the New York law. Institute a new civil penalty of up to $3 million a day for violations of the price gouging prohibition, as well as a new criminal penalty of up to 5 years imprisonment. Require the federal government to develop a national response plan to prepare our nation against future domestic or global petroleum supply disruptions. Fair Prices at the Gas Pump: While Hurricane Katrina exposed the underlying vulnerability of the American economy, even before the storm hit average U.S. gasoline prices were already 75 cents more than they were a year earlier—and many consumers had begun to ask why. In the wake of Enron, the energy bill contained a number of additional measures to ensure American consumers pay a fair price when they flip on their lights. Cantwell’s legislation would apply to the oil industry many of these same protections, including:

A new statutory ban on manipulative practices in the wholesale petroleum markets; New measures to ensure transparent pricing for petroleum products; Civil penalties of up to $1 million for violations of anti-manipulation and market transparency rules.