Opposing high cost of gasoline
House passes first U.S. measure to make energy price-gouging illegal.
From Staff and Wire Reports
WASHINGTON - The House, eager to do something about record-high gasoline prices in advance of the Memorial Day weekend, voted narrowly yesterday to make energy price-gouging illegal.

The bill, the first federal measure ever aimed at energy price-gouging, would cover not only gasoline, but also other fuels, such as natural gas and heating oil.

In urging his colleagues to support the bill, its chief sponsor, Rep. Bart Stupak (D., Mich.), said the issue was whether "to side with Big Oil [or] . . . side with consumers who are being ripped off at the gas pump."

The legislation directs the Federal Trade Commission and Justice Department to go after oil companies, traders or retail operators if they take "unfair advantage" or charge "unconscionably excessive" prices for gasoline and other fuels.

The White House called the measure a form of price controls that could result in fuel shortages, and said President Bush would be urged to veto the legislation if it passed both houses of Congress.

It "would harm consumers, the very people the bill is touted to protect," a White House statement to lawmakers said.

The bill needed the approval of two-thirds of the members of the House, because the leadership considered it under an expedited legislative process. Thus, the 284-141 vote was only one over the threshold for passage. The Senate is considering a similar measure.

Stupak was forced to soften the bill so he could get it passed, by requiring a president to first declare an energy emergency before the anti-gouging law could be enforced.

Oil-state Democrats had wanted such limits.

The bill calls for criminal penalties of up to $150 million for corporations and up to $2 million and a jail sentence of up to 10 years for individuals found to be engaged in price gouging.

Opponents said the legislation was too vague and amounted to price controls.

"I don't know what 'unconscionably excessive' means," Rep. Joe Barton (R., Texas) complained, referring to a phrase that would trigger a price-gouging prosecution.

Barton said today's high gasoline prices were the result of supply and demand and not price-gouging.

"Demand has gone up, and supply has not gone up . . . and the price has gone up," he said.

Much of the price rise is being attributed to refinery outages this year. Shawkat Hammoudeh, a professor of economics and international business at Drexel University in Philadelphia, said there were two kinds of outages.

One is scheduled maintenance, usually in January, February and March, when most producers switch from heating oil to gasoline production. The second involves incidents, such as power outages or equipment breakdowns associated with age.

"They keep pushing the refinery to produce more, and, when they are already old, there are more breakdowns," Hammoudeh said. No refinery has been built in the United States in more than 30 years, he said.

Hammoudeh said refineries at this time of year have run at an average over the last five years of 93 percent to 95 percent of capacity. This week, it was just 91.1 percent.

"This means you have less supply of gasoline, and that causes a gap between supply and demand for gasoline," he said.

Over 12 consecutive weeks from mid-February to mid-April, gasoline inventories dropped 15 percent, equivalent to 34 million barrels of gasoline, according to the federal Energy Information Administration. This is the sharpest decline ever recorded in gasoline inventories over such a period, the agency said.

In opposing pricing legislation, oil-company lobbyists have argued that, when there are tight markets and rising prices, a vague gouging definition would inhibit refiners and retailers from adding supplies, for fear of being taken to court.

The House bill's supporters argued that states couldn't combat energy price-gouging, leaving motorists at the whim of arbitrary oil-company pricing.

Twenty-nine states have energy price-gouging laws, but they vary in detail.