House Approves Gas Price Gouging Legislation

The House of Representatives has passed what could become the first federal law against energy price gouging. Currently, several states have laws against said gouging, but the rigor of the enforcement is inconsistent at best.

Anyhow, they’ve passed it. Those who are for the bill say its good for consumers. Those who are against say it would harm consumers. And then there’s this one guy who is worried about “the mom and pop gas station owner.”

Missouri Rep. Roy Blunt, the No. 2 House Republican, said the bill would mean “undue hardship for … people trying to make a living” including mom and pop grocery or gasoline station owners.

Good job, brainiac. That argument is excellent. So is it good for consumers or not?

Who cares, say we. It’s a PR stunt. Price gouging is different than high gas prices. —MEGHANN MARCO

House OKs Gas Price Gouging Penalties [Forbes]

Comments

Edit Your Comment

  1. doctor_cos wants you to remain calm says:

    You’re not upset about higher gas prices.

    Higher gas prices are not connected to record oil company profits.

    You can go about your business.

    Move along.

  2. wessev says:

    Too bad the Emperor has already promised if this comes to his desk he will veto it. That is just as well because you will never get the gov’t to be able to prove that they are intentionally gouging on the price of gasoline. This also would do nothing at all to bring down the ever-increasing price at the pump.

    What’s more appalling than Roy Blunt’s propaganda about what effect this would have on “mom & pop” gas station owners [as if he cared], is the fact that the Republican party is “asking this congress to wait until a more perfect time … to help the American consumer out”.

    A more perfect time? When exactly would that be?

    I have to agree this is nothing more than PR for Congress, especially the Democrats, who need to deflect attention from their cave-in this week.

  3. @wessev
    “A more perfect time? When exactly would that be?”

    Easy one, next election. Last election gas prices started inching down as election day approached. I filled up right after voting at about 4:30PM the next day on my way to work (about 7:30am) the same station was $0.10/gal higher. Coincidence? No such animal.

  4. WV.Hillbilly says:

    In the glorious Peoples Republic Of West Virginia, gas taxes are tied to the price of gas, so when the gas price goes up, so does the tax.
    Who’s gouging who?

  5. JustAGuy2 says:

    Frankly, we need more price gouging. If gas prices doubled, and all that value was captured by the oil companies, we’d STILL be better off, as it would reduce (a) greenhouse gas emissions, and (b) the $ sent overseas to hostile countries. Clearly, I’d prefer that the higher gas prices come from higher taxes (so the money goes in all of our pockets, rather than just those of oil company shareholders), but any way to skin a cat…

  6. mac-phisto says:

    methinks people are a little confused about what price gouging actually is.

    The gouging bill would prohibit the sale of gasoline or other refined petroleum products at “unconscionably excessive” prices or prices that take “unfair advantage” of consumers during a presidentially declared “energy emergency.

    bullshit. just break apart the goddamn conglomerates already. they’re too big, too powerful & they’re limiting consumer choice & competition.

    oh, btw, that quote came from:
    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAr

  7. lincolnparadox says:

    @mac-phisto: mac-phisto, you’re an American that would make Teddie Roosevelt proud.

    Unfortunately, TR is deader than canned Tuna. You only have to look to Ma Bell and the oil corps to know that “anti-trust” is a bad punchline in Washington.

  8. holocron says:

    I smell VETO.

  9. DAK says:

    If most cases, you’ll notice that gas prices tend to be highest just after (not before) news orgs. start predicting gas price armageddon. Inevitably, there’s a run at the pumps, and since people are already prepared for the worse…eureka!

    Every time I see some report on cnn.com that says to expect $4/gallon gas, I know damn well that I’ll be paying $0.20/gallon more than I was last week, but not $4.

    And really, we can live with $3 gas anyway. The constant fluctuation is what causes problems.

  10. DAK says:

    @JustAGuy2: That’s not true. The demand for gas is generally inelastic, meaning we’ll pay damn near anything to not have to walk. Where it will truly hurt is in transportation costs for retail goods. Expect fuel surcharges to drive up the price of produce and other retail items.

  11. quantum-shaman says:

    i agree that this bill is just a pr stunt to make you think those a-holes in washington are doing something. and it gives you a faint idea of just how stupid they think most people are. could it be they’re right?

    @JustAGuy2: why don’t you put your money where your mouth is and just take whatever you’re spending right now on gas, double the price, and send the difference directly to the IRS? no? i didn’t think so.

    re “high gas prices” versus “price gouging”, on the industry side they say that the record profits are only for one quarter or one half in an industry that has traditionally been very volatile. of course hardly anybody is satisfied with THAT explanation. it’s also commonly spouted that, in inflation-adjusted terms, gas prices are about right where they should be, if not a little on the low side. this article says that, with the recent price spikes, even in adjusted terms we will soon be at record highs:
    http://www.fintrend.com/inflation/Inflation_Rate/Gasoline_

    then i read another article where this allegedly educated person said “it’s the consumer’s fault” because we’re all perfectly willing to keep paying for higher and higher fuel prices. i wanted to strangle his ass. we’re over a barrel! unless you live in NYC or are otherwise so fortunate as to live a few miles away from where you work, who can do anything BUT drive? the people who live in the suburbs and “bedroom communities” FAR outnumber those who can walk, ride a bike, or take the metro to work.

  12. duxmike says:

    The price of gas IS inelastic. What are you going to do? Carry your 3 kids and their 2 friends on top of you head when you go over to Y, or pop them into the Yukon XL?

    If you really want to address the issue, then build more refineries. There’s plenty of oil, there just isn’t enough capacity to refine it to meet demand.

    Here’s a delightful thought:
    Each state should have to build its own refinery. If the residents of a state don’t want to suffer from the horrifying ecological disaster that is energy creation from fossil fuels, then they can pay another state to sell them fuel. Then the fine folks of Massachusetts, say, can sleep fine at night knowing their Pipping Plovers are safe and can focus their conspiracy theories on something more substantial like the Queen of England’s roll in the international drug cartel.

    Meanwhile the residents of New Hampshire will be able to continue on their tax free ways and fund their schools on the price gouging of gas they pass onto the Mass neighbors.

    Capice?

  13. Meghan’s got it — PR stunt, so that people will think the gov’t is doing something about an issue they won’t actually touch with a forty-foot pole.

    What we need are profit caps on the industry, which we’ll never get because it’s an openly-admitted cartel (like the mafia, to clarify) and the only way to get out from under it is to stop needing what it’s pushing. Which kind of requires not having an oil baron in the White House, among other things.

    I do want to punch someone every time the news says, “This is all due to not having enough refining capacity”. What, with the highest profits IN THE WORLD they can’t afford to expand capacity? Of course they don’t want to build infrastructure — they know that gas is on the way out, one way or another, making refineries a poor long-term investment. But we’re okay with them just keeping the money instead?

  14. John Stracke says:

    The real problem here is that the bill will have a hard time targeting anybody but the gas stations, even though they generally make only 5, maybe 10 cents profit per gallon.

  15. quantum-shaman says:

    The NPRA thinks it sucks too:
    http://www.npra.org/news/facts/prices.cfm

    Federal price gouging legislation would be difficult to enforce and cause more problems than it solves. According to the FTC, if “prices are constrained at an artificial level for any reason, then the economy will work inefficiently and consumers will suffer.” Rep. Stupak’s bill is eerily similar to the laws enacted in 1973 to deal with oil and gas shortages, which led to higher prices, “no gas today” signs and long lines at the pump. Price controls are a proven failed energy policy.

    A No-Win Situation for Wholesalers, Distributors, and Retailers

    Every person in the distribution chain, down to the local gas station owner, would be faced with the Catch-22 of having to set a price at which to sell their gasoline, and then having to wait to see if someone complains that it was “excessively unconscionable.” This is unavoidable for market participants because under Rep. Stupak’s bill, if they refuse to sell their supply during an emergency, they may face criminal penalties for withholding supply from the market. Exceptions in Rep. Stupak’s bill do not consider market conditions or the free flow of supply and demand.

  16. mac-phisto says:

    @quantum-shaman: you know, that “inflation-adjusted” crap is bird shit in my book. you know why? b/c the energy prices are at the core of the inflation. everything requires energy & retail prices are rising due to it. so, obviously we’re not getting hosed when the prices are taken into account relative to inflation.

    & i agree with you on the “consumer’s fault” b.s. primarily, b/c the supply can be artificially controlled by the oil companies. reduced demand can be offset by reducing supply with “unscheduled maintenance” on refineries, pipelines, offshore platforms…hell, they could tell the supertankers to chug around in circles in the middle of the ocean if they want. THEY COLLECTIVELY CONTROL EVERY ASPECT OF THE SUPPLY CHAIN!

    & it’s not just oil companies…this is the current trend in the entire energy sector.

    @Mary Marsala with Fries: the industry has actually tried to get a few new refinery farms built in the past decade or so, without luck. most applications for a refinery are blocked by environmentalists or NIMBY from local citizens. instead, they’ve shifted their efforst to upgrading current facilities (which is acutally part of the reason supply has been reduced lately).

  17. JustAGuy2 says:

    @quantum-shaman:

    Sure, happy to, it was about $150 last year. At the same time, I’d appreciate it if you could send me a check to compensate me for the high rents in New York City. Don’t want to? Well, if you want me to subsidize your chosen lifestyle, isn’t it fair that you subsidize mine?

    @DAK:

    Clearly, it would be better to ease into higher gas prices (i.e. taxes going up a few cents/month for five years), to give people a chance to adjust their behavior gradually, but maybe a price shock is what we need to get people’s attention.

    Fundamentally, I just want to see gas prices reflect the actual costs of gasoline usage – the Iraq war is costing about $125BN/year, or about $0.90/gallon, so an immediate $0.70/gallon increase in gas taxes would be pretty reasonable.

  18. yahonza says:

    Its as inevitable as the tides: if you set a price ceiling below the market price (i.e. the “Gouging” price) you will get a shortage.

    This anti-gouging measure will either do nothing, or will cause shortages of gasoline (i.e. longer lines because some gas stations will choose not to sell any gas or will choose not to buy as much to resell).

    It does not matter whether the oil companies are a cartel, a monopoly or are in a state of perfect competition (or even if the entire system was state run) – the price ceiling will have the same two possible effects – no effect or a shortage.

  19. quantum-shaman says:

    @JustAGuy2: tell me again how you’re “subsidizing” my SUV. of course, you’re not.

    sorry, i don’t believe in socialist utopias. if you don’t like your high NYC rents, vote with your feet, move out and start driving. that’s the way it works.

  20. quantum-shaman says:

    @JustAGuy2: but i don’t believe in socialist utopias, and you’re not subsidizing my lifestyle. if you don’t like those high NYC rents, vote with your feet and start driving. that’s the way it works in the real world.

  21. quantum-shaman says:

    @mac-phisto: very good points! i don’t buy the inflation-adjusted B.S. either, but that’s what they always say to make you feel better about paying $3.95/gallon. it’ll be there soon.

  22. Tonguetied says:

    Yes it’s a PR stunt. The other sad aspect of it is that people lap it up. I’m always simultaneoulsy amused and appalled at the economic ignorance displayed whenever I hear a politician rambling on about price gouging. Mostly it’s after some kind of disaster but inevitiably the goods and services that get their prices capped are the ones that won’t flow into the affected area at an increased rate. If the politicians would back off and let the market work recovery would be drastically sped up.

  23. yahonza says:

    Article From George Mason University on Price-Gouging from a free market point of view:

    http://www.econlib.org/library/Columns/y2007/Mungergouging

  24. Sudonum says:

    @yahonza:
    Thats a pretty good article. The only prosecution I’ve ever seen on gouging laws in FL or LA were before or during disasters related to hotel rooms. In Orlando there was a Days Inn or something like it charging $150 – $200 a night for evacuees. Not quite the same circumstances as described in that article.

    I also saw people selling generators out of a rental truck after Ivan hit the FL panahndle making a tidy profit on each unit and there were State Police there for crowd control while supplies lasted. So in that case I guess common sense prevailed.

  25. JustAGuy2 says:

    @quantum-shaman: How am I subsidizing your SUV? Well, how about the taxes I pay that fund the war in Iraq (no, we’re not fighting to “get the oil”, but there’s no way we’d be there if the Middle East didn’t have oil), that’s about $125BN/year, for one thing. Or how about the $40BN/year in federal highway funds, which is offset by about $20BN in gas taxes. That’s $140BN/year right there, or about 9% of individual income tax receipts. I’d be happy to see an across-the board 9% cut in individual income taxes, funded by a comparable $140BN increase in gas taxes (about $1.40/gallon).

    Frankly, I’d fund all highway construction and Middle East military costs out of gas taxes. I’d pay for that, but only for the portion that is paid by vendors who deliver to me.

    Bottom line, if you don’t want to subsidize the cost of my expensive, close-to-work housing, don’t ask me to subsidize the costs created by your commute.

  26. stunna18 says:

    Oil Companies using Enron style price fixing.
    Closing refineries to jack up gas prices.

    NOTE: Register to post comments and receive e-mail notification every time this Blog is updated!

    Gasoline prices hit a new record high Tuesday with the National Average now standing at $3.08 a gallon. The primary reason cited for the rise in gas prices is the high number of oil refineries “Closed for maintenance” (which turn oil into gasoline) just prior to the “Summer driving season”.

    If this sounds familiar to you, it’s because this is EXACTLY what Enron did, taking advantage of the new California electricity-deregulation laws (pushed through by Republicans in the late 90’s, arguing that it would SAVE consumers money as competition would drive costs down), to manipulate the cost of electricity. Enron closed power-plants and switching stations to create “artificial shortages” then charged exorbitant rates for what power was left. To relieve the strain on the remaining power grid, “rolling blackouts” had to be instituted, leaving many Californians in the dark with no electricity on some of the hottest days of the year. I remember even The Tonight Show with Jay Leno doing an entire show in near total darkness “as a show of support during the energy crisis”.

    One of the most famous/evil quotes to come out of the Enron debacle was when CEO Jeff Skilling made the following joke:

    “What’s the difference between California and the Titanic?
    When the Titanic went down, the lights were still on.”

    The sheer contempt Enron’s energy traders had for the people they were swindling made headlines when audio tapes from the trading floor made their way onto the Network News.

    And now we are seeing it again, only a much larger scale, and with the blessings of the White House.

    Where Enron created artificial shortages to jack up the price of electricity in a single state by closing power stations, oil companies have been closing refineries for “maintenance” during peak oil demand to manipulate oil prices across the entire country. And the heavily “oil-friendly” Bush Administration has allowed them to get away with it. What do you expect when a former oil-company exec with close ties to the Saudi Royal Family is made President, and the former CEO of one of the largest oil industry support firms in the country (“Halliburton”) is made Vice President?

    You almost certainly noticed, along with the rest of the country, that oil prices plummeted just in time for the November election, dipping to a national low of just $2.39 on election day (falling as low as $1.99/gal for regular here in Houston) before creeping back up to Tuesday’s record high of $3.08 a mere 6 months later? The Bush Administration… namely Vice President Cheney… laughed at the notion that the government had some “magic wand” that they could just wave to bring down gasoline prices in time for the election. But that’s not exactly true. Truth is, the government has quite a few tools in their arsenal to help manage oil prices:

    First… keep the “saber-ratting” to a minimum. Nothing can cause the price of oil to spike like uncertainty over the supply due to unrest in the Middle East. For as many as six months prior to the election, the Bush Administration stopped threatening the use of military action against Iran over their nuclear aspirations and began to cite progress via “talks” and “negotiation”.

    Second… you suspend toping off the National “Strategic Reserve”. In April of 2006, the Bush Administration suspended purchases of oil to supplement the National Strategic Petroleum Oil Reserve, thereby leaving more oil for the consumer market and helping to bring prices down.

    Third… the oil companies… on their own… at a time when they are seeing the largest corporate profits in history, it is most certainly in their best interests to maintain the status-quo in Washington. While it would be difficult (if not impossible) to prove that the oil companies kept all of their refineries online and output gasoline at a record rate in the months prior to the election in order to glut the market and drive down prices, the evidence seems clear that that is exactly what they did.

    And now that the election is over, refineries are being shut down, gasoline prices are spiking, and profits are going through the roof a mere six months later.

    Defenders of the Bush Administration might try to convince you that gasoline prices only climb as the price of oil climbs on the world market. If that were true, the current record price of gasoline should coincide with a record in the per-barrel price of oil. But in fact, oil at its current price of $63 per barrel is well below the record high of $78.40 on July 13, 2006 when gasoline peaked at $3.03 a gallon.

    Oil prices – 2006 to 2007

    As you can see from the above graph, the price of oil tumbled downwards in the months before the November 2006 election, and have climbed steadily upward ever since. But the price of oil, while far lower than last years record, does not comport with the record high national average price for gasoline. Obviously, something else is effecting the price of gasoline. And that is a lack of supply due to the number of refineries that have been taken off line.

    Since the November election, the National Average for the price of a gallon of gasoline has risen by as much as $0.85 a gallon. Fortunately, this has prompted some in Congress to call for a Congressional probe into price fixing, but, expect little to come of it. Despite massive evidence of criminal wrongdoing, it took Washington more than 5 years to prosecute Enron for its price fixing and stock manipulation, in which only four people were convicted, one of which (supposedly) died before he could be sentenced (“Kenny Boy” Lay) and another that has yet to be sentenced as he files his appeal.

    We are witnessing CLEAR EVIDENCE of price manipulation on a MASSIVE scale here, yet Washington is almost timid in its response, and the White House has said nothing at all. It’s time to start demanding answers. Hopefully,this question will be put to the candidates running in the 2008 Presidential election. I know I’ll be doing my best to get this question on the agenda. The price of gasoline effects EVERYTHING in our lives. “Oil burning” electricity generation plants must charge more for electricity. The cost to grow, cultivate, harvest and ship all food products goes up with the cost of fuel, and that cost is passed on to you. The extra money you spend on gas, food and electricity is money you don’t have to spend on other things, cutting into sales and slowing the economy overall. And despite the inflation produced by these rising costs, wages have remained stagnant, which directly translates into a lower standard of living… and naturally, disapproval of the way Washington manages the economy (which believes record highs in the stock market are an indication of a healthy local economy) translates directly into poll numbers:

    So if anyone has motivation to bring the price of gasoline down and investigate price gouging, it should be President Bush, whose poll numbers seem to be directly tied to gasoline prices:

    Gas prices vs Bush’s poll numbers

    But George W knows what master he serves. What Big Oil giveth, Big Oil can taketh away.

  27. DAK says:

    JustAGuy2: You’d be paying those taxes regardless of whether there was a war or where. That’s like saying you subsidize everything the govt. does. It’s sorta true, but it’s also sorta nonsense. More nonsense than truth, though.

    For the most part, the idea to heavily tax gasoline as a way of controlling demand is ridiculous. Everyone thought the same idea would discourage people from smoking, and did it work? No. Now, state and local govts. are dependent on that tax revenue, and nothing changes. For something like gasoline, which is in even higher demand than tobacco, the likelihood of success is even lower.