No antitrust activities seen in ’06 gas price hikes, FTC says

Gasoline price increases in the spring and summer of 2006 were not the result of antitrust violations by oil companies or refiners, the Federal Trade Commission said Thursday.

“The 2006 price increases were caused by a confluence of factors reflecting the normal operation of the market,” the commission said in a report to President Bush.

Those factors included higher prices for crude oil and ethanol, greater demand for fuel during the summer driving season as well as lingering refinery outages from Hurricanes Katrina and Rita. Reduced capacity while refinery owners switched to using ethanol as a fuel additive also contributed.

Retail gasoline prices last spring rose to more than $3 a gallon, prompting then-Senate Majority Leader Bill Frist, a Tennessee Republican, to propose plans for a $100 rebate to motorists and expanded drilling for oil on federally owned land in Alaska. Both ideas were ultimately abandoned.

The new report builds on an investigation last year, when the commission reported to Congress that it found no evidence of manipulation of gasoline prices and limited instances of price gouging in the aftermath of the 2005 hurricanes that struck production platforms and refineries along the Gulf Coast.

As in the prior report, commission staff members said there was “no evidence that refiners conspired to restrict supply or otherwise violated the antitrust laws.”

The FTC’s staff said it could not “definitely rule out all other contributing factors” to the price increases in the spring and summer of 2006. The factors it listed for the rise “adequately explain” the higher prices, according to the report.

“The FTC has looked at the same phenomenon, which occurs almost every year, year after year, and they get the same result,” said Joseph Simons, former director of the FTC’s Bureau of Competition.

“Why people think it’s going to come out any different the next time is unclear,” said Simons, now a partner with the law firm of Paul, Weiss, Rifkind, Wharton & Garrison. “It’s a waste of taxpayers’ money.”

The commission’s report “confirms what we have been saying about markets,” said Rayola Dougher, senior economic analyst with the American Petroleum Institute, which represents major U.S. oil companies. “It really helps explain overall market prices.”

The Democratic majorities in Congress this year have taken up energy legislation that would repeal billions of dollars in tax breaks for oil companies and require higher fuel efficiency in cars.

The House and Senate also have approved separate versions of legislation that would make energy price gouging a federal crime.

President Bush has threatened to veto any legislation with price-gouging language in it, saying it would be a de facto price control.

The “report today is further proof that the Bush administration will ignore the evidence and distort the facts to protect Big Oil companies,” Rep. Bart Stupak (D-Mich.) said in a statement.

“The oil industry, which posted record profits in 2006, should not view this report as in any way a vindication of its behavior,” Commissioner Jon Leibowitz said in a dissenting statement.

Although commission staff members “identified some plausible justifications” for why the average price of gasoline rose to more than $3 a gallon last year, “most of what we did here was develop a theoretical model for why gasoline prices likely increased,” he said.

“There is no doubt market forces play a role in raising prices and lowering prices,” said Tyson Slocum, director of Public Citizen’s energy program. “The question is, are oil companies exploiting some of these fundamentals through their market share to make a bad situation worse for consumers? I think the answer to that is yes.”