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Federal Law To Prosecute Price Gouging


Guest Rep. Nancy Pelosi
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Guest Rep. Nancy Pelosi

“Right now, at the end of the summer, we are talking about the price at the pump, but pretty soon it’s going to be the cost of home heating oil that is going to have an impact on the budgets of America’s families.”

 

“At this sad time for our country, our focus must be on providing the Katrina emergency assistance that is still required, and to begin the recovery that is necessary for the people in the Gulf Coast states.

 

“Every day, we have reason to further extend our sympathies to the people of the region and to assure them that we will work together as much as possible and in a bipartisan way to help them. This is about them: their families, their emergency relief, their recovery.

 

“I was in Houston last week and I want to commend the people of Houston for the magnificent hospitality and display of humanitarian assistance that they have extended to the people of the Gulf States, largely Louisiana. I met with many of the evacuees who want to go home. Whether it’s a little boy, a woman about to have a baby, or a 90-year-old great granny, people want to go home and hopefully they can do that soon, but there is a lot of distance between then and now.

 

“As we focus on the needs of the people in the region, we have to also recognize the impact that this tragedy has had on the consumers in the rest of the country. Even before Katrina, there was concern about price gouging at the pump. Many of America’s families are experiencing a middle-class squeeze, and the price at the pump is becoming oppressive.

 

“Families are forced to make decisions about their spending, for example whether they would use the car or not. It goes beyond families deciding whether they would take a trip, but they were very limited with what they could do once they got there. Some people who make minimum wage can barely afford to drive to work if they lived any distance from their job.

 

“Something must be done about this. There must be a federal law to investigate and prosecute price gouging, and to receive damages from those in violation of the law and have that funding go to LIHEAP and other relief for consumers.

 

“Right now, at the end of the summer, we are talking about the price at the pump, but pretty soon it’s going to be the cost of home heating oil that is going to have an impact on the budgets of America’s families. And we should have transparency with the oil companies as to how they determine the price. We should have to have anti-trust laws apply to OPEC countries and how they do their pricing as well.

 

“There is one area of the energy bill that I would think is almost ludicrous if this didn’t have such a serious impact on America’s families. Drilling that oil companies do to get the oil and gas out of the deep water, for free. The policy, up until now, has said that if the price per barrel went above $35, then they would begin paying royalties to the American government, to the American people. At $35 a barrel, oil companies are making a ton of money. They don’t need further subsidies from the U.S. government. But in the energy bill that just passed, they said that no longer would $35 be the mark at which you pay royalties to the government. No matter what the price per barrel, this oil and gas are free for oil companies, and the American tax payer is once again ripped off.

 

“Even before Katrina Americans had concerns about prices at the pump, which have now been exacerbated. When I spoke to the Secretary of Energy right after Katrina hit, I asked him to do something about price gouging. He said: ‘Well, you know the companies are concerned about this as anybody, and some of this happens down the line.’ So I said, ‘If the heads of these oil companies are as concerned as you say, perhaps they can make a public statement that price gouging is wrong and that they would support penalties against those who engage in it.’ To which the Secretary replied, ‘Well I thought of that, but I didn’t want to give people any ideas about price gouging.’

 

“Give people any ideas? It is happening, Mr. Secretary. Get out into the world and understand that it is happening. We have to do something about it because once again the American people are paying the price and the oil and energy companies are getting the benefit.”

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The Foundation for Taxpayer and Consumer Rights (FTCR) today exposed internal oil company memos that show how the industry intentionally reduced domestic refining capacity to drive up profits. The exposure comes in the wake of Hurricane Katrina as the oil industry blames environmental regulation for limiting number of U.S. refineries.

 

The three internal memos from Mobil, Chevron, and Texaco show different ways the oil giants closed down refining capacity and drove independent refiners out of business. The confidential memos demonstrate a nationwide effort by American Petroleum Institute, the lobbying and research arm of the oil industry, to encourage the major refiners to close their refineries in the mid-1990s in order to raise the price at the pump.

 

"Large oil companies have for a decade artificially shorted the gasoline market to drive up prices," said FTCR president Jamie Court, who successfully fought" to keep Shell Oil from needlessly closing its Bakersfield, California refinery this year. Oil companies know they can make more money by making less gasoline. Katrina should be a wakeup call to America that the refiners profit widely when they keep the system running on empty."

 

"It's now obvious to most Americans that we have a refinery shortage," said petroleum consultant Tim Hamilton, who authored a recent report about oil company price gouging for FTCR. (Click here to read the report.) "To point to the environmental laws as the cause simply misses the fact that it was the major oil companies, not the environmental groups, that used the regulatory process to create artificial shortages and limit competition."

 

The memos from Mobil, Chevron and Texaco show the following:

 

* An internal 1996 memorandum from Mobil demonstrates the oil company's successful strategies to keep smaller refiner Powerine from reopening its California refinery. The document makes it clear that much of the hardships created by California's regulations governing refineries came at the urging of the major oil companies and not the environmental organizations blamed by the industry. The other alternative plan discussed in the event Powerine did open the refinery was "... buying all their avails and marketing it ourselves" to insure the lower price fuel didn't get into the market. Click here to read the Mobil memo.

 

* An internal Chevron memo states; "A senior energy analyst at the recent API convention warned that if the US petroleum industry doesn't reduce its refining capacity it will never see any substantial increase in refinery margins." It then discussed how major refiners were closing down their refineries.

 

* The Texaco memo disclosed how the industry believed in the mid-1990s that "the most critical factor facing the refining industry on the West Coast is the surplus of refining capacity, and the surplus gasoline production capacity. (The same situation exists for the entire U.S. refining industry.) Supply significantly exceeds demand year-round. This results in very poor refinery margins and very poor refinery financial results. Significant events need to occur to assist in reducing supplies and/or increasing the demand for gasoline. One example of a significant event would be the elimination of mandates for oxygenate addition to gasoline. Given a choice, oxygenate usage would go down, and gasoline supplies would go down accordingly. (Much effort is being exerted to see this happen in the Pacific Northwest.)" As a result of such pressure, Washington State eliminated the ethanol mandate -- requiring greater quantities of refined supply to fill the gasoline volume occupied by ethanol.

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