Nary a politician in the summer of ’06 was even slightly unsure why gas prices were punching through the $3-a-gallon threshold: The culprit was predatory, price-gouging oil-company executives – who obviously golf regularly with Dick Cheney.
Sen. Barbara Mikulski (D-Md.) was typical: “It is often the large, vertically integrated oil companies that dictate the prices that gasoline retailers can charge.”
Senate Democratic Leader Harry Reid agreed, and then some: “The nation’s eyes are focused on the big-oil companies’ greed and enormous profits – the oil companies blame international tension and demand, and then increase their prices. I blame the Bush administration.”
The scene eerily resembled the Hill only a year earlier, when gas prices were skyrocketing in the wake of Hurricane Katrina. New York’s own Sen. Charles Schumer was one of many imploring the Federal Trade Commission to investigate, writing: “We fear that some of the fluctuation and inconsistencies in gas prices are a result of price-gouging at the pump.”
“Price-gouging must not be tolerated, and we must do more to make sure that oil companies and gas-station owners are operating . . . within the law,” he added.
Last summer, Congress again called on the FTC to investigate.
Last month, the agency issued its report. The findings? Last year’s spike was caused by . . . market forces.
That mirrors its 2006 report, which similarly found “no evidence of manipulation” in the post-Katrina price jumps.
The problem, instead, was a series of simultaneous events: climbing crude prices, refining capacity that had been reduced by storm damage and increased U.S. demand for gasoline.
That’s not to say that only supply and demand are to blame. The reports also finger congressional policies – specifically regarding ethanol.
Last summer, refiners were essentially forced to start using more of the corn-derived additive, nearly doubling its cost per gallon. Demand for ethanol became so intense that refiners began importing almost 20 percent of their supply, despite a 54-cent-a-gallon tariff.
Obviously, the added cost got passed along to the pump.
Not that these lessons are ever internalized: When prices were rising this spring, Sens. Schumer and Hillary Clinton issued – what else? – demands for investigations into Big Oil.