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Big Oil Price Gouging 22 May 2007

Posted by Todd in Commentary, Environment, Law/Courts, Politics.
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Moveon.org is reporting on a bill up for voting in the Congress to make petroleum price gouging a federal offense. I don’t mind having higher gas prices (we have incredibly cheap fuel in the U.S.), but I’d rather have the prices be because of taxes that go for maintaining roads and for research into alternative energies, etc., like other more civilized democracies. However, in the U.S., oil companies continue to increase prices for no good market reason other than that they can. Price gouging has been a common practice, and for an industry that has been making record profits for two years running, a bit of a mystery. This is why I can never be an economic libertarian: Some markets simply dont’ function on idealized supply-demand models, because the supply is controled by monopolies or because there is a captive demand. The oligopoly that controls petrol in the U.S. needs outside restriction to ensure fair market prices.

My preference would be for alternative, cleaner energy sources; but in the meantime, we need a regulation to prevent consumer gouging, which is already against the law in other areas, so why not oil too?

Here’s the text from the Moveon.org campaign letter, with references at the end:

As of yesterday, gas prices are the highest in U.S. history—we just passed the 1981 record, even adjusted for inflation.1 Prices could reach $4.00 per gallon in parts of the country, just in time to crimp summer vacation plans. As consumers suffer, the oil industry continues to reap the windfall—breaking profit records on an almost quarterly basis. It’s outrageous!

Enough is enough. Hearings start today on H.R. 1252, a House bill that would make gas price gouging a federal crime, punishable by 10 years in prison. Speaker Pelosi has said she’ll move the bill to a vote this week—if there’s the two-thirds majority required to fast track the bill through the process.2

Oil company lobbyists are frantically trying to stop the bill. Your representative needs to hear from you today. Will you sign our petition asking Congress to pass the price-gouging bill—and then send it to your friends?

“Gasoline price gouging should be made a federal crime before the summer price increases hurt more American families.”

Sign the petition:
http://pol.moveon.org/stoppricegouging/?rc=oil_petition&id=10387-7015053-oeq6HW&t=4
Rep Bart Stupak (D-MI), sponsor of the House bill said this of his motivation to introduce the legislation:

“In April … crude oil was $7 a barrel cheaper than last year (but) gas prices were almost 50 cents a gallon higher. Clearly there’s more at play than simply the world crude oil market.”3

In April, more than two-thirds of Americans reported that their gas bills were causing financial crunches, with a full third saying it was having a “serious” impact on their families.4

That same month, the top two US companies, Exxon-Mobil and Chevron-Texaco, announced a combined $14 billion in first quarter profits.5

It seems like even the oil industry has gone too far this time, and it’s time to balance the scales. The Senate passed a price-gouging measure out of committee last week, and the House bill now has over 100 co-sponsors from both sides of the aisle.

The oil industry is nervous. They’ve sent their lobbyists to the Hill in full force to stop—or at least weaken—these bills, and they’re pulling out all the stops. The American Petroleum Institute, an industry front group of more than 400 oil and gas companies, even threatened that new laws could increase gas prices more.6

Enough is enough. This summer, we can stop Big Oil from profiting at the expense of American families. Can you sign the petition to ask your representative to make gasoline a price gouging a federal crime now?

Sign the petition:
http://pol.moveon.org/stoppricegouging/?rc=oil_petition&id=10387-7015053-oeq6HW&t=5
Don’t forget to pass it on to your friends—this week is an historic opportunity to send Big Oil a message that we’ve had enough.

Thanks for all you do.

–Ilyse, Natalie, Eli, Tom, and the MoveOn.org Political Action Team
Tuesday, May 22nd, 2007

Sources:

1. “U.S. gas prices jump more than 11 cents,” Atlanta Journal-Constitution, May 21, 2007
http://www.moveon.org/r?r=2595&id=10387-7015053-oeq6HW&t=6

2. “Debate on [H.R. 1252], offered by Energy and Commerce Oversight and Investigations Subcommittee Chairman Bart Stupak, D-Mich., will kick off Tuesday with a hearing in Stupak’s subcommittee. It is possible that an Energy and Commerce markup will follow. But Democratic leaders might opt to bring the bill up to the floor under suspension of House rules by Wednesday.”
Excerpted from National Journal’s Congress Daily, Monday, May 21, 2007

3. “Lawmaker Links Gas Prices to Investments,” Houston Chronicle, May 16, 2007 http://www.chron.com/disp/story.mpl/ap/fn/4810598.html

4. “As Gas Prices Rise Again, Democrats Blame Big Oil,” Washington Post, May 11, 2007 http://www.moveon.org/r?r=2591&id=10387-7015053-oeq6HW&t=7

5. “Lawmaker Links Gas Prices to Investments,” Houston Chronicle, May 16, 2007 http://www.chron.com/disp/story.mpl/ap/fn/4810598.html

6. “Lawmakers’ blood pressure rises with prices at the pump,” TheHill.com, May 17, 2007 http://www.moveon.org/r?r=2586&id=10387-7015053-oeq6HW&t=8

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Comments

1. Miranda - 22 May 2007

The supply of gasoline is not infinite. The high market cost of gasoline not only serves to curb demand, but also provides an incentive to seriously research alternative energy. I am all for higher gas taxes for many of the same reasons you are, but I think that the additional revenue generated by the higher prices has a better chance of going toward weaning us off oil than raising gas taxes in the current political climate.

This guy at Environment Economics makes more or less a similiar point.

2. Todd - 22 May 2007

So because it’s the oil companies basically fucking us over, it’s more of a motivation than if the government were doing it? LOL

3. Miranda - 23 May 2007

No, we sort of do it to ourselves. The surest way to see a reduction of gas prices would be to use less gas. This may be the only economic issue Greg Mankiw and I agree on without reservation. LOL.

I am not opposed to a gas tax on principle. I believe that a national gas tax is absolutely a good idea both because it will drive down demand and because the revenue can be used to fund alternative energy research. I just don’t trust this administration to fund truly promising research (see Rebuilding of Iraq, Haliburton).

If Al Gore were president, I’d have less reservations about a national gas tax.

4. Equality - 24 May 2007

Todd,

I would argue that the ability of Big Oil to gouge consumers is not a function of economic libertarianism but rather is a result of the power that Big Oil companies have over our government. In a truly free economy, there would be a level playing field. As it stands, the govenrment favors big business over small business through tax, regulatory, and antitrust enforcement policies. Monopolies and oligopolies can only survive when they have some measure of control over the levers of government power. You are correct that power in the oil industry is concntrated in the hands of a few, thereby throwing out of whack the normal competitive pressures that would prevent gouging. The Bush administration has done nothing to stand in the way of one merger after another so that where there once were 10 big oil companies, there are now about 3. Makes it easier for them all to charge excessive prices.

5. joe - 11 May 2008

omg…lol… do any of you have degrees in economics and business? if vehicles account for 40% of oil consumption and vehicles are becoming 2-3 times more efficient then your going to be selling less oil…. anyone no what a controlled market is (look at the diamond market.) they took the amount of marriages in the us and they only allowed that many diamonds in the market each year to ensure that demand was in their favor! this ensured their insane profits. so…. its a no brainer that the oil cartels are price gouging to make up for the fuel efficient automobiles meaning they are selling less oil but at a higher price. thats why their profits have went up by over 1000% in the last 10 years. this is how you keep your investors, by earing more each year. If they kept the same price per barrel over the last 20 years they would have profited less almost every year. cars are 30% more efficent and truck are 20% more efficient.


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