May 22, 2006
FTC Finding on Oil Company Price-Gouging Defies Belief
Statement of Tyson Slocum, Director of Public Citizen’s Energy Program
The Federal Trade Commission’s (FTC) announcement today that it found no evidence of price-gouging by oil companies after last year’s hurricanes in the Gulf of Mexico defies belief.
The FTC has become increasingly political, losing its traditional independence and favoring big oil, and the agency is too quick to point blame at small retailers rather than large refiners, despite the fact that a May 2004 U.S. Government Accountability Office report found that mergers in the oil industry have led to higher prices.
The FTC downplays the role of legal manipulation, by which refiners use their market power to unilaterally engage in anti-competitive practices, leading to higher prices for consumers.
Since the 1990s, there have been more than 2,600 mergers and acquisitions in the U.S. oil industry, creating giant conglomerates such as ExxonMobil, ChevronTexaco and ConocoPhillips. The result: A few companies control a significant amount of America’s gasoline, squelching competition. A number of independent refineries have been closed, some due to uncompetitive actions by larger oil companies, further restricting capacity. As a result, consumers are paying more at the pump than they would if they had access to competitive markets, and five oil companies are reaping some of the largest profits in history. The largest 10 owners of oil refineries controlled 83.3 percent of the market in 2004, up from 55.6 percent in 1993.
Congress must step in and represent the needs of consumers by significantly boosting fuel economy standards, cracking down on legal market manipulation, re-evaluating mergers and enacting a new income tax on oil companies with the proceeds dedicated to alternative energy, energy efficiency measures, mass transit and rebates for moderate- and low-income consumers.