By Patrice Hill
The House yesterday passed a bill that would make price gouging by gas stations and oil companies a federal crime as prices at the pump surpassed a 1981 record reached at the height of the Iranian oil crisis. The White House, which has threatened to veto the bill, warned the legislation amounts to price controls and would lead to gas shortages and lines like in the 1970s.
The cross over the threshold of $3.23 a gallon reported by GasBuddy.com equals the inflation-adjusted record high for gas prices and heralds a new era of high energy prices and scarcity of fuel as growing demand in China, India and the U.S. collides with scarce new sources of oil and sluggish increases in gasoline production worldwide. Economists say the House bill will not help to ease those shortages or bring down high prices.
Business groups said the bill would be difficult to enforce and would set a dangerous precedent by opening the floodgates to frivolous lawsuits, further driving away any hopes of increased energy production that would take the pressure off prices.
"This is a first step in addressing the outrageous prices we are seeing at the gas pump," said bill sponsor Rep. Bart Stupak, Michigan Democrat. Prices in recent years have peaked at about the Memorial Day start of the summer driving season, but they could climb higher this year if hurricanes or conflicts in the Middle East or Nigeria disrupt supplies.
"This bill is all bark and no bite, and will do nothing to lower gas prices," said House Minority Leader John A. Boehner, Ohio Republican. "No American likes paying high prices at the pump. ... This bill could make the pain felt by consumers at the pump considerably worse."
The supply pressures that have driven up gas prices this year eased somewhat yesterday as the Energy Information Administration reported an increase in output at U.S. refineries and a 1.5 million-barrel increase in gasoline stocks, which are about 7 percent below average for this time of year. That helped to reduce wholesale gas prices, though demand for gas remained strong, growing at a 1.2 percent pace.
In coming years, Americans face sharply higher prices for energy as they compete with burgeoning demand for gasoline to power cars in emerging giants such as China, India and Russia. A separate report from the energy agency Monday said energy demand worldwide will soar 57 percent by 2030. To keep pace with that demand, production of oil would have to grow more than 40 percent to 118 million barrels a day.
But because of dwindling reserves and production of petroleum, the report projects that other liquid fuels such as biodiesel and liquefied coal will meet about one-quarter of the increased demand. Economists say oil and gasoline prices will have to rise significantly higher for that to happen, since expensive technologies are needed to tap into the alternative fuel sources and make mass production possible.
The sobering outlook for energy resources was not discussed much yesterday as the House entertained a perennial favorite among lawmakers and the public: legislation enabling the Federal Trade Commission and Justice Department to impose on oil companies, traders and retail operators jail sentences and fines of up to $150 million a day for charging "unconscionably excessive" prices or taking "unfair advantage" of consumers.
The bill's enforcement provisions would be triggered if the president declared an energy emergency such as might occur if hurricanes disabled Gulf Coast oil fields and refineries as they did in 2005 after Hurricanes Katrina and Rita. The bill could be enforced by state attorneys general and class-action lawsuits.
The White House warned lawmakers that the bill would create a "vague and arbitrary regulatory regime," which would spur lawsuits and maybe even "bring back long gas lines reminiscent of the 1970s." The Federal Trade Commission has testified against the legislation, having found little evidence of price gouging in its many studies of the gasoline market.
"Price-gouging legislation is a solution in search of a problem and totally contradicts the advice given by the Federal Trade Commission," said National Petrochemical & Refiners Association official Charles Drevna. "We'd strongly encourage the Senate to consider the unintended consequences should it debate this or a similar bill."
"The bill represents an open invitation to ambitious state attorneys general to try their hand at suits against Big Oil," says Iain Murray, senior fellow at the Competitive Enterprise Institute, saying the bill's legal mechanisms would distort the market mechanisms that set gas prices in response to supply and demand.
"This is sheer populism and displays an outrageous ignorance of basic economics."
