On Thursday, U.S. Senator Charles E. Schumer called on the Federal Trade Commission (FTC) to immediately finish and release the results of its investigation to determine whether oil producers and refiners are engaged in price manipulation, which could be contributing to continued high gas prices.
Schumer successfully pushed for the FTC to initiate this investigation in June 2011, based on reports that refiners were cutting back on gasoline stockpiles in an effort to decrease supply and inflate the price of gas at the pump. Since the start of this investigation, gas prices have only increased and are at record high levels for this time of year. In his letter to FTC Chairman Leibowitz, Schumer highlighted that it is critical for the FTC to release its findings and take action against any company that is violating FTC law, keeping prices high at the gas pump and forcing the American consumer to face serious financial burdens as a result.
“As the economy is just starting to turn the corner, it is incumbent upon the Federal Trade Commission to protect the American consumer and conclude and release the results of their investigation in potential price-fixing by oil refiners,” said Schumer. “Gas prices are at a record high for this time of year, and after over nine months, the results of this investigation are long overdue. If the FTC report reveals that price fixing has been occurring, the federal government can take action that could translate into relief at the pump from sky-high gas prices across the state. I was pleased last June when the Commission heeded my call and saw the real concern that oil producers and refiners were keeping gas prices artificially high to pad their bottom line, but at this point, the American people suffering from burdensome gas prices just need answers.”
American consumers are again facing rising gasoline prices. According to American Automobile Association (AAA), gas prices are an average of $3.96 in New York State, $3.93 in Capital Region, $3.93 in Western New York, $3.90 in Syracuse, $3.94 in Binghamton, $3.88 in Rochester, and $3.73 nationally – which is almost exactly double 2009’s average of $1.86 a gallon and the highest prices the US has ever seen at this time of year. The price of diesel fuel has also increased, reaching $4.02 a gallon, nationally. The price of diesel fuel not only affects truck drivers, but it pushes food and transportation costs higher, hitting consumers not only at the pump, but at the grocery store as well. The combined effect of these energy prices has the potential to significantly undercut the U.S. economic recovery.
Schumer is urging the FTC to conclude and release the results of their investigation into potential price fixing by oil producers and refiners. If such practices are occurring, and oil refiners are intentionally keeping supply low to pad their bottom line, Schumer stated that swift action could then be taken to provide relief at the pump.
In May 2011, Senator Schumer and Senator Claire McCaskill called on the Federal Trade Commission to immediately undertake an investigation to determine if oil producers and refiners were practicing price fixing, keeping gas prices artificially high at the pump across New York and the United States. Schumer raised these concerns with some of his Senate colleagues, based on reports that suggested that U.S. refiners were cutting back on U.S. gasoline stockpiles in order to artificially keep prices high and inflate their bottom line.
The FTC initiated this investigation in June 2011. According to data released by the Energy Information Administration at that time, U.S. oil refiners were producing at just 81 percent of their capacity—a drop of 900,000 barrels per day compared to the previous year’s output. At the same time, the refiners’ profit margins had more than doubled over that same span, and refining margins experienced an increase of over 90 percent since January 2011.
Schumer successfully prompted the June 2011 FTC investigation, based on concerns that while gasoline use was in decline, U.S. gasoline inventories remained below average and refining margins continued to rise. All of those trends are still evident, over 9 months after the investigation began. At that time, U.S. refiners were using only 81.7 percent of their capacity, a decline of 7 percent from the same time last year.
Moreover, since the beginning of 2011, U.S. refiners saw over a ninety percent increase in their refining margins. For refineries, their margin is the difference between what they pay for crude oil and what they get for wholesale gasoline and other products. Those gradually rose in 2011 and at the time of the FTC’s investigation were more than double what they were a year ago.