No '06 Gas-Price Gouging Found

As gasoline prices broke through the $3-a-gallon level 16 months ago, a bipartisan chorus of congressional leaders and President Bush demanded that the Federal Trade Commission investigate whether the big oil companies were engaged in price gouging.

The FTC gave its reply yesterday: Market factors explained the soaring gasoline prices in the spring and summer of 2006.

By a 4 to 1 vote, the commission blamed unusually high demand in the summer driving season, crude-oil price increases, refinery adjustments for ethanol use, high ethanol prices and lingering refinery outages after Hurricanes Rita and Katrina.

The one dissenting commissioner, Jon Leibowitz, suggested that the commission had started with an answer and then found a way to justify it. He said the FTC had found "some plausible justifications for the unexpected and dramatic price spikes that bedeviled consumers in the Spring and Summer of 2006."

"The question you ask, determines the answer you get: whatever theoretical justifications exist don't exclude the real world threat that there was profiteering at the expense of consumers," Leibowitz wrote.

Consumer groups also criticized the report.

The FTC has been issuing reports that "gloss over some of the structural problems in the oil industry, such as the lack of adequate competition, and blame it all on supply and demand," said Tyson Slocum of Public Citizen. "Yes, supply and demand play a role in prices, but companies are exploiting that situation to drive prices up even higher."

The FTC said it is continuing to monitor retail and wholesale prices "to identify unusual price movements and determine whether they might result from anticompetitive conduct."

Bush ordered the commission to scrutinize gasoline prices in the spring of 2006. In the previous four months, gasoline prices had jumped about 70 cents a gallon, or about a third. Oil companies cited the same factors as the FTC did in its report yesterday.

A similar increase in prices occurred again last spring, even though ethanol prices were lower and refineries had adjusted to using the new additive. But oil companies said unexpected refinery fires and breakdowns as well as strong consumer demand were to blame this year. The FTC did not comment on this year's prices.