53 Democratic House Members Call for Investigation into Price Gouging in the Oil Industry
Washington, D.C. --- Fift y-three Democratic members of the U.S. House of Representatives today called on the Bush administration to investigate whether increased market consolidation in the oil industry has resulted in price gouging or other anticompetitive activities. The formal request was made in a letter to Attorney General John Ashcroft and U.S. Federal Trade Commission (FTC) Chairman Timothy J. Muris.
The letter, initiated by U.S. Reps. Edward Markey (D-MA) and Frank Pallone, Jr. (D-NJ), both senior members of the House Energy and Commerce Committee, comes during a week in which the House is considering a series of energy proposals that House Republicans are marketing as a response to higher gas prices. However, Democratic lawmakers are concerned that none of the Republican proposals address the wave of mergers and consolidation in the oil industry, recently identified by the U.S. General Accounting Office (GAO) as one of the most significant factors affecting oil prices today.
"We are greatly concerned that in the current oil market, where supplies have been tight and prices at the pump have risen dramatically, that the current over-concentration of market power in the oil industry may provide oil companies with ample opportunities to exploit market power to gouge consumers," the Democratic lawmakers wrote. "We urge you to take action now to help bring relief to consumers who are paying the price at the gasoline pump."
"American consumers will continue to be gouged at the gas pump as big oil companies exploit their control over refinery capacity to drive out competitors and raise prices. Congress needs to immediately address this urgent issue, and our antitrust regulator have a duty to take action," Rep. Markey said.
"A May 2004 report by the General Accounting Office found that over 2,600 mergers have occurred in the U.S. petroleum industry since the mid-1990s, with most of these occurring later in the period. The GAO reported that these mergers have led to a substantial increase in market concentration in the oil industry, a reduction in the availability of lower priced "generic" gasoline compared to "branded gasoline, and in refiners preferring to deal with large distributors and retailers, leading to further market concentration in those businesses. The sky-high profits reaped by the big oil companies are coming at the expense of consumers across the country, who face record high gas prices just as the summer driving season is kicking into high gear.
Thats unacceptable, and today we are urging the Bush Administration to launch an investigation into this oil industry practices," Rep. Markey said.
"We can't let the Bush administration's cozy relationship with big oil companies hold American's hostage at the pump," Pallone said during a speech on the House floor. "America's consumers should not be fooled into believing that the energy bills the Republicans have on the floor will do anything to lower gas prices. If House Republicans were really interested in doing something, they would join us and call on the Bush Administration to launch an investigation to determine whether gas companies are purposefully inflating prices at the pump."
Text of the letter follows.
June 16, 2004
The Honorable John Ashcroft
950 Pennsylvania Avenue, N.W.
Washington, D.C. 20530
The Honorable Timothy J. Muris
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Attorney General Ashcroft and Chairman Muris:
We are writing to express our deep concern over potential price gouging and anticompetitive activity in the oil industry.
A recent report by the General Accounting Office ("Energy Markets: Effects of Mergers and Market Concentration in the U.S. Petroleum Industry," GAO-04-96) has found that over 2,600 mergers have occurred in the U.S. petroleum industry since the mid-1990s, with most of these occurring later in the period. The GAO reports that these mergers have led to a substantial increase in market concentration in the oil industry, a reduction in the availability of lower priced "generic" gasoline compared to "branded gasoline, and in refiners preferring to deal with large distributors and retailers, leading to further market concentration in those businesses.
The GAO has concluded that oil company "mergers and increased market concentration generally led to higher wholesale gasoline prices in the United States from the mid-1990s through 2000." It found that "six of the eight mergers that GAO modeled led to price increases averaging between 1 and 2 cents per gallon." GAO also found that increased market concentration in the oil industry following these mergers also lead to increased prices, which
GAO found had increased the wholesale price of gas in some regions of the country by 5 cents
per gallon, and increased the price of "boutique fuels" sold in the East Coast and Gulf Coast regions by 1 cent per gallon, while prices for boutique fuels sold in California increased by over 7 cents per gallon.
We are greatly concerned that in the current oil market, where supplies have been tight and prices at the pump have risen dramatically, that the current over-concentration of market power in the oil industry may provide oil companies with ample opportunities to exploit market power to gouge consumers. We believe that your agencies, which have responsibility under federal law to enforce the laws against monopolies and unfair competition, should immediately commence an investigation into current oil industry market structure, market concentration, and business practices, to determine whether any unfair or anti-competitive activity is taking place, or whether the recent trends towards increased market concentration should be reversed by government antitrust action.
We urge you to take action now to help bring relief to consumers who are paying the price at the gasoline pump.
Edward J. Markey
Frank Pallone, Jr.
Stephanie Tubbs Jones
Louise McIntosh Slaughter
John Conyers, Jr.
Fortney Pete Stark