WASHINGTON — Citing growing worries about high gasoline prices, Democratic leaders announced an effort Thursday to give the Federal Trade Commission increased authority to crack down on companies that engage in price gouging.
Meanwhile, diesel prices Friday reached a new average all-time high of $5.16 per gallon, surpassing the previous record of $5.15 per gallon set on March 10, according to GasBuddy. In addition, a second record has been set: diesel prices are now $1 per gallon higher than gasoline prices, surpassing the previous record 98 cent difference set in November 2008.
“While gasoline prices get much of the attention, diesel, which broadly is the fuel that moves the economy, has quietly surpassed its recent record high as distillate inventories, which include diesel and jet fuel, have plummeted to their lowest level in years,” said Patrick De Haan, head of petroleum analysis at GasBuddy.
“Should distillate inventories fall another five million barrels, which is less than five percent, they will be at their lowest level in nearly 20 years, compounding the problem. There’s no quick solution as the economy has seen a robust turn around, made worse by Russia’s war on Ukraine as the West fences off Russia’s oil.”
Both diesel and gasoline prices spiked to record levels in early to mid-March, largely due to Russia’s war on Ukraine and the response via sanctions on Russian energy. The recent resurgence in diesel prices can be attributed to continued escalations in the situation and plunging inventories of oil and refined products, like diesel, along with recovering demand as goods move across the country, much of which is powered by diesel fuel in semi-trucks, trains and ships.
Diesel prices in the Northeast are likely to rise above any other region due to the loss of refining capacity from both Covid-induced shutdowns and a 2019 fire at the Philadelphia Energy Solutions refinery in 2019. Combined, these issues have caused the loss of nearly half a million barrels in refining capacity. Diesel prices are likely to remain at a substantial premium to gasoline as imbalances persist, however, refiners are likely adjusting yields to produce as much diesel and jet fuel. Economics favor production of these refined products and refiners chase the higher market value of these fuels.
Democrats downplayed the possibility of other options such as a federal gas tax holiday or offering oil companies more government incentives to increase production. Instead, they said the FTC needs more tools, including stiffer fines and penalties and a team of dedicated experts to monitor markets and go after price gouging.
With voters concerned about the growing toll of inflation, Democrats again signaled their intention going into November’s midterm elections to place much of the blame for high gas prices on oil companies. Democrats accused oil executives of “ripping off the American people” at a contentious hearing this month.
“There’s no excuse for big oil companies to profiteer, to price gouge or exploit families,” House Speaker Nancy Pelosi, D-Calif., said Thursday
“Congress must do more to beef up the FTC’s ability to crack down on potential gas price manipulation and price gouging,” added Senate Majority Leader Chuck Schumer, D-N.Y. When the Democratic bills reach the House and Senate floor, “Republicans will face a dilemma: Which side are they on?” Schumer said. “On the consumer and lowering gas prices? Or on the side of the big oil?”
The average price of a gallon of gas was $4.14 Thursday, according to the AAA auto club, and is markedly higher than that in California and other western states.
President Joe Biden, aware of the political stakes, has vowed to do all he can to ease ” pain at the pump for American families, ” including ordering release of record amounts of oil from the nation’s strategic reserve.
Sen. Maria Cantwell, a Washington Democrat who chairs the Senate Commerce, Science and Transportation Committee, said Congress strengthened the Federal Energy Regulatory Commission’s authority to investigate and punish energy market manipulation some two decades ago. That was following the Western energy crisis of 2000 to 2001 when Enron and affiliates were found liable for engaging in various market manipulation schemes.
She said the FTC needs a dedicated team of experts monitoring transportation fuels and looking out for any suspicious pricing behavior, and it needs authority to enact fines and penalties that would lead to corrective action.
“We need to make sure that there is a policeman on the beat,” Cantwell said. “It doesn’t seem right that we should have more transparency on a product like wheat or corn than we would on oil.”
A draft description of the legislation says it would double the maximum penalty for manipulating wholesale oil markets to up to $2 million a day for each violation.
The unit described by Cantwell would be charged with identifying any manipulation or use of market power or other unfair method of competition to distort markets. Once it identifies such behavior, it could then advise the full commission to go after the perpetrators and impose penalties.
Oil executives, testifying before Congress earlier this month, said oil is a global market and that oil companies don’t dictate prices.
“We do not control the market price of crude oil or natural gas, nor of refined products like gasoline and diesel fuel, and we have no tolerance for price gouging,” said Chevron CEO Michael Wirth.
Industry groups dismissed use of the FTC to investigate price manipulation as a political stunt. “Using the power of the FTC to undertake political investigations of American energy companies will not lower gas prices by a penny,” said Anne Bradbury, CEO of the American Exploration and Production Council, a trade association representing independent oil and natural gas companies.
“At a time of historic inflation and economic contraction, Americans deserve real policies that boost domestic oil and gas production,” she said.
Republicans were equally dismissive of the Democratic proposal Thursday.
“My Democratic colleagues are doubling down on their blatant blame-shifting for political cover,” said Rep. Cathy McMorris Rodgers of Washington state. “The American people know this isn’t price gouging or Putin’s price hike. It’s a Biden price hike since the day he took office.”
Gas prices rose late last year amid supply chain problems and increased demand as the economy recovered following the COVID-19 pandemic, but prices have spiked since Putin’s Feb. 24 invasion of Ukraine.
The answer to higher gas prices is to increase production here in the U.S., Republicans said.
“America is the world’s leading producer of oil and gas, and we should act like it. We can produce significantly more energy than we do today and unleash the vast resources under our feet,” Rep. Fred Upton, R-Mich., told Energy Secretary Jennifer Granholm at a hearing of the House Energy and Commerce Committee.
But Democrats said oil companies have made a choice to pad profits rather than increase production. Six companies at the April 6 House hearing, including Chevron and ExxonMobil, recorded $77 billion in profits last year.
“Here’s the bottom line: They’re not using the money for domestic energy production,” Schumer said. “They’re using it for stock buybacks. They’re using it to make their shares go up. We wouldn’t be here if the oil companies were using it to make the American consumer’s price cheaper.”
Some states have suspended their gas tax to give consumers relief at the pump. Many Democrats in Congress have also called for Congress to suspend the 18.4 cent per gallon federal gas tax. But Pelosi said there was no guarantee the savings would be passed on to drivers.
“It’s good PR,” she said of the tax suspension, but it “may or may not even have a benefit.”
Some Democrats have introduced bills in the House and Senate to impose a windfall tax on oil profits, but the idea has generated little momentum on Capitol Hill.
The Trucker Staff contributed to this report.
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