Gas Price Gouging Feared Rampant

With retail gas prices still hovering at or near the $3 level in much of the country three weeks after Hurricane Katrina hit land, the Federal Trade Commission (FTC) yesterday told Congress it is monitoring the price of fuel over concerns that companies may be artificially inflating pump prices.

The reported closer scrutiny parallels growing complaints from consumer watchdogs and mounting calls for an investigation from political leaders in both ruling parties.

Testifying before Congress, FTC Associate General Counsel John H. Seesel said the Commission was aware of and concerned about the "swift and severe price spikes that occurred immediately before and after Katrina made landfall." Noting that the FTC has received numerous calls for an investigation into price manipulation, Seesel said staffers were already analyzing the actions of companies and energy traders to determine if any were involved in illegal activity.

In a letter a day earlier, governors of eight states asked President George W. Bush and the heads of both chambers of Congress to initiate an investigation into gas prices they termed "artificially and inexplicably high." Citing a study released Friday by a Wisconsin economist suggesting that companies jacked fuel prices up at much faster rates than their actual costs rose, the governors, all Democrats, asked for legislation to return "ill-gotten profits" to consumers and suggested that both parties could work together on the issue.

This week, Senators from both parties introduced separate legislation aimed at prohibiting and punishing fuel-price manipulation during emergencies.

Tuesday, Washington State Senator Maria Cantwell (D) introduced her bill, which quickly gained the support of 22 co-sponsors, she said in a statement. The bill is based on a New York State law.

Only 28 states have laws that specifically prohibit price gouging, Cantwell noted in her statement.

Decrying the lack of strong federal laws preventing price gouging a day later, Oregon Senator Gordon Smith (R) filed legislation empowering the FTC to determine when price disparities exceed acceptable levels, Smith said in a statement yesterday. The bill would prohibit price gouging for 30 days after a disaster declaration.

Since early September, several groups have reported consumer concerns over gas prices, which topped $6 in some parts of the country and were hiked several times in a single day directly following Katrina’s strike. The American Automobile Association (AAA) earlier this month told the Associated Press "there is profit-taking; no one can avoid that conclusion."

However, executives said gas would need to reach $6 a gallon to have the same psychological effect as the fuel shortages of the 1970s. They don't see the good times and high profits of big SUVs ending any time soon.

"Americans like big," said Jim Press, head of Toyota Motor Corp.'s (search) U.S. operations. "We have big distances to cross. We like large homes. We like big hamburgers. We like supersize. There will always be a proclivity in the marketplace for large vehicles."