NPRA Says CT Congressional Delegation Missed the Target on GAO Request

NPRA, the National Petrochemical and Refiners Association, today took issue with a request by members of Connecticut’s Congressional delegation for the Government Accountability Office (GAO) to review refining practices under the premise that they increase gas prices.

“We’re disappointed to see that the Connecticut delegation completely missed the target in its request of GAO,” NPRA Executive Vice President Charles T. Drevna said. “Domestic refiners are some of the most highly regulated businesses in the country. Report after report has proven that price manipulation does not occur. Economists and national editorial pages have warned Congress against passing so-called ‘price gouging’ legislation. The American public could be far better served if its elected officials would work with businesses instead of against them to craft a sensible and realistic energy policy to protect consumers by keeping supplies stable.

“Punishing American companies will not solve the nation’s need for more fuels, but rejecting emotional pleas to institute 1970s-style price controls and expanding the safe, clean use of our domestic resources will. We hope GAO looks into the real contributors to higher gas prices such as regressive energy policies that discourage the construction of new refineries and expanded domestic exploration and production.”

What Others Have Said…

The Federal Trade Commission (FTC)

After an FTC investigation into the causes of price spikes in the Midwest markets during the spring and summer of 2000, former FTC Chairman Robert Pitofsky stated, “There were many causes for the extraordinary price spikes in Midwest markets. Importantly, there is no evidence that the price increases were a result of conspiracy or any other antitrust violation. Indeed, most of the causes were beyond the immediate control of the oil companies.” (Federal Trade Commission Press Release, “FTC Issues Report on Midwest Gasoline Price Investigation,” March 31, 2001 [emphasis added])

In 2006, the Federal Trade Commission (FTC) finalized its investigation on rising gasoline prices following Hurricane Katrina, and found “no instances of illegal market manipulation.” In fact, the FTC found that the price increases were actually due to market forces, stating:

[T]he evidence is remarkably consistent with the competitive explanation. Based on well-established economic principles, the price increases were roughly in line with increased predicted by the standard supply and demand paradigm of a competitive market. (Federal Trade Commission, “Investigation of Gasoline Price Manipulation and Post-Katrina Gasoline Price Increases,” Spring 2006, p. 62 [emphasis added])

The FTC found “[n]o evidence to suggest that refiners manipulated prices through any means, including running their refineries below full productive capacity to restrict supply, altering their refinery output to produce less gasoline, or diverting gasoline from markets in the United States… .” (FTC Press Release, May 23, 2006 [emphasis added])

May 29, 2007 New Hampshire Union Leader / Scripps Howard News Service Editorial

“The culprit always turns out to be supply and demand, aggravated by such factors as hurricanes, refinery fires, market misjudgments and Congress’ own often-counterproductive efforts to steer the industry in directions it deems desirable. The price-gouging bill is a backdoor attempt at price controls, which inevitably fail and inevitably hurt consumers in the process.” (Editorial, “Gas gouging? Price controls are worse,” Scripps Howard News Service, May 29, 2007 [emphasis added])

May 25, 2007 USA Today Editorial

“If this grandstanding were harmless, it might be best ignored. But this year’s version actually stands to make matters worse. On Wednesday, the House passed a bill that would use government edicts and criminal prosecutions to determine gas prices. A narrower but still troubling measure has been approved by a Senate committee. … A seller of gasoline could be thrown into prison for up to 10 years, in the House bill, for the crime of selling at the best price the market will bear. When price can’t be used to allocate a commodity in scare supply, shortages occur. In the 1970s, a host of restrictions on prices meant that the Arab oil embargo led not only to a surge in prices but lines at gas stations.” (Editorial, “Our view on gas prices: Grandstanding on gas,” USA Today, May 25, 2007 [emphasis added])

May 25, 2007 Wall Street Journal Editorial

“The inconvenient fact is that there’s no evidence of price rigging by Big Oil or the tens of thousands of independent service station owners across America. The causes of higher gas prices include $65 per barrel oil caused by rising global demand and geopolitical tensions; a record high U.S. gasoline consumption of 380 million gallons a day; and refined gasoline shortages caused by Congressional rules and mandates. Far from withholding production to raise prices, U.S. gasoline production of 8.8 million barrels per day is higher than any time in history and refineries are getting more gas per barrel of oil than ever before. … Domestic refining capacity is stretched in part because environmental laws discourage the building of new refineries. Meanwhile, new mandates for ethanol and other ’boutique’ gasoline blends make it harder for the industry to meet refining shortfalls.” (Editorial, “Pains at the Pump,” The Wall Street Journal, May 25, 2007 [emphasis added])

NPRA members include more than 450 companies, including virtually all US refiners and petrochemical manufacturers. Our members supply consumers with a wide variety of products and services used daily in their homes and businesses. These products include gasoline, diesel fuel, home heating oil, jet fuel, lubricants and the chemicals that serve as “building blocks” in making everything from plastics to clothing to medicine to computers.