FTC Says Gas Was Expensive Last Year Because Of Market Forces, Not Price Gouging

You can stop worrying about whether or not you got screwed by the gas industry. The Federal Trade Commission announced late last week that they’ve found no evidence of price gouging during 2006, when the average price of gas rose above $3 per gallon. Or as one oil industry spokesman puts it (tactlessly, for a spokesman), “It’s difficult for the average American to understand market forces, but that is what’s ultimately in play with this industry.”

The FTC said high gasoline prices in the spring and summer of 2006 were caused by

  1. regular seasonal effects from increased demand in the summer
  2. increases in the price of crude oil
  3. increases in the price of ethanol
  4. reduced production by refiners
  5. damage to refineries from Hurricanes Katrina and Rita in 2005
  6. increased demand for gas

The lone dissenting statement, from Democrat Jon Leibowitz, is brief enough to include in its entirety here (or you can download a pdf copy with footnotes from the FTC website):

The oil industry, which posted record profits in 2006, should not view this Report as in any way a vindication of its behavior. Commission staff identified some plausible justifications for the unexpected and dramatic price spikes that bedeviled consumers in the Spring and Summer of 2006, and that raised the average price of gasoline to more than $3.00 per gallon in August of that year. The fact remains, though, that most of what we did here was develop a theoretical model for why gasoline prices likely increased. This is not an unreasonable approach, given that just last year we completed an exhaustive investigation into gasoline pricing in the aftermath of hurricanes Katrina and Rita. That investigation found price gouging by refiners under the Congressionally mandated definition and, beyond that, disturbing conduct by even more petroleum companies. But the question you ask determines the answer you get: whatever theoretical justifications exist don’t exclude the real world threat that there was profiteering at the expense of consumers.

The story was widely reported via the Associated Press, but we want to link to the SmartMoney article because it includes this extra, paranoid-conspiracy-fodder gem: “The report published on the agency’s Web site had been expected to be released several months ago, but was delayed for unknown reasons.”

“FTC Finds No Evidence of Gas Gouging in ’06” [SmartMoney]

“FTC, Antitrust Division Send Report to President on Factors Explaining National Average Gasoline Price Increases During Spring and Summer of 2006” [www.ftc.gov]

(Photo: Getty)