Ensuring Honesty at the Pumps
October 28, 2005
Have you or your family visited the local gas station recently? Gasoline prices have continued to taper off from record highs after Hurricanes Katrina and Rita. Previously reaching levels of $3.00-plus a gallon, the national average for gasoline has recently stalled at $2.66 per gallon. However, oil company profits have not begun to level, but rather the opposite. As Americans are made to dig deeper into their wallets to put gas in their cars and to heat their homes, oil companies are posting record profits. The question arises; are these profits unfairly achieved?
It is for this reason I have introduced the "Energy Price Discipline Act of 2005," which will empower state and federal agencies to investigate and fully prosecute refiners, distributors, or retailers of crude oil, gasoline, diesel fuel, natural gas and heating oil that are suspected of manipulating the market price for unsubstantiated reasons at any time. My legislation would grant the Federal Trade Commission (FTC) the authority to pursue and prosecute price-gougers at every level of the supply chain - from the Exxon-Mobils to the local gas stations.
Specifically, the "Energy Price Discipline Act of 2005" permits the FTC to use specific factors to determine whether the price of crude oil, gasoline, diesel fuel, natural gas or heating oil is "unjust or unreasonable." The FTC will examine the following factors in determining if price-gouging has occurred: (1) The relation of the price to the prevailing price of that commodity in the market in the same geographic region during the previous 12-month period; (2) Shipping, manufacturing or other costs to the entity; (3) Whether there has been a national or re¬gional disruption in the supply of the commodity; and, (4) Whether there is any indication of the enti¬ty taking unfair advantage of consumers.
The "Energy Price Discipline Act of 2005" also empowers the FTC to investigate reports of price-gouging without a "triggering effect." This past Labor Day, the New Jersey Division of Consumer Affairs received hundreds of calls from consumers concerned of price-gouging at gas stations across the state. The agency, which found more than 100 instances of price-gouging, was unable to issue violations due to a lack of federal emergency declaration.
On September 20, the federal declaration was ordered and, more than two weeks after the initial complaints, the Attorney General's office was legally permitted to issue fines against those were guilty of price-gouging. My legislation removes the need for such a "triggering-effect" and allows the FTC to investigate and prosecute at the instant that a complaint is lodged.
This past week, oil companies released to stockholders their third quarter profits. While there was significant disruption to domestic production and shortfalls in refined fuels across the country due to the hurricanes, Exxon-Mobil still posted a $9.9 billion profit margin for the quarter - a 75 percent increase from profits seen a year ago. To put this into perspective, Exxon-Mobil's overall revenue - reported at $100.72 billion for the three-month period - was greater than the annual gross domestic product of some of the largest oil producing nations, including the United Arab Emirates and Kuwait.
Exxon-Mobil, however, was not alone. ConocoPhillips and Dutch-owned Shell also posted significant profit growth in the third quarter: $3.8 billion (52 percent increase) and $9 billion (68 percent increase), respectively. While I am certainly not against businesses making profits, I believe it must not be at the exploitation of the consumer. Consumers should have the right to know that the fuel prices they are struggling to pay are legitimate with no one profiting unjustly at their expense.