Big, Collective Yawn From National, State Media As New York AG Announces “Price Gouging” Investigation
The House Energy & Commerce Committee recently held a hearing with major energy companies to push the debunked idea that oil companies are engaging in price gouging schemes amid record high gasoline prices.
But it’s a widely accepted economic principle that the price of gasoline tracks with the price of oil, which is set by the global market. It’s why the West Texas Intermediate crude oil price rose to $108 a barrel in recent weeks because of strong consumer demand while falling into negative territory in summer 2020 as COVID-19 undermined demand.
It’s why the media wasn’t buying the price gouging claims from Democrats on the committee. The Financial Times called the hearing “political theater,” and the Washington Examiner proclaimed that “Democrats cry crocodile tears over high gas prices,” while Politico observed, “the questioning is becoming like a broken record at this point.”
However, New York Attorney General Letitia James apparently hasn’t been reading the news. The AG announced “a wide-ranging investigation Thursday into whether the oil industry has engaged in gas price gouging,” according to CNN.
Yet, this so-called investigation is already coming up empty, as CNN went on to note:
“It’s not clear what evidence, if any, state authorities have of potential price gouging.”
It’s not a surprise. There has been numerous gasoline price gouging investigations over the past few decades and not a single one has found a case of wrongdoing.
Last month, a top economist spoke with USA Today about the issue:
“More broadly, the retail gasoline market is fragmented despite consolidation that has left some companies owning multiple stations. If a gas station jacked up its pump price too sharply, it would lose business to rivals, says Phil Verleger, an industry analyst and economist and a senior fellow at the Niskanen Institute. Because of that kind of competition, it isn’t illegal for a company to raise its prices well above the rest of the market to fatten its profit margin.
“‘There’s no such thing as price gouging,’ Verleger says. Over the past 30 years, there have been more than 100 investigations and lawsuits brought by consumers, the FTC and states attorneys general alleging such conspiracies in the gasoline market. ‘They all flopped,’ Verleger says.” (emphasis added)
During Congressional testimony on July 16, 2008, then-Federal Reserve Chairman Ben Bernanke said:
“The most important cause [of high gas prices] is the global supply-and-demand balance.”
In 2006, a Federal Trade Commission report, through multiple statements, made clear that price gouging has not happened:
“No 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 to less lucrative foreign markets. The evidence indicated that these firms produced as much gasoline as they economically could, using computer models to determine their most profitable slate of products.”
“No evidence to suggest that refinery expansion decisions over the past 20 years resulted from either unilateral or coordinated attempts to manipulate prices. Rather, the pace of capacity growth resulted from competitive market forces.
“No evidence to suggest that petroleum pipeline companies made rate or expansion decisions in order to manipulate gasoline prices.
“No evidence to suggest that oil companies reduced inventory to increase or manipulate prices or exacerbate the effects of price spikes generally.” (emphasis added)
At the state level, the Washington State Attorney General released a report in 2008 on an extensive investigation on gasoline prices that concluded:
“This investigation did not uncover any illegal conduct in Washington regarding the pricing of gasoline during the period examined, 2000-2008.”
More recently, during these recent high gasoline prices, Garrett Golding of the Dallas Federal Reserve Bank, also made clear there is no price gouging happening right now:
“Refiners acquire crude oil and turn it into the fuels we use. It’s then sent by pipeline, truck, railcar, and vessel to distribution facilities and service stations. This process can take several days. Inherent to that is a time lag between what you see with daily oil prices and what service stations pay to fill up their underground tanks. While oil prices shot up immediately, it took almost two weeks for the full effect to be seen on the street. … It’s not price gouging or a grand plot by the industry. This is how the business functions.” (emphasis added)
Famed energy analyst Bob McNally of Rapidan Energy also rejected gouging claims:
“There’s always a multi-week lag between global crude oil and domestic pump price changes, Mr. President. If these recently lowered crude prices stick, pump prices should follow. Recommend asking [Energy Information Administration] to explain these realities to you & your staff. Gouging is not an issue, sir.” (emphasis added)
It’s already been reported that New York Attorney General James doesn’t have any evidence of gasoline price gouging as she kicks off her investigation. And history shows that previous investigations have turned up nothing.
As with the congressional hearing last week, this investigation will fall flat.