FOR IMMEDIATE RELEASE
Monday, May 22, 2006
Mark Cooper, CFA, 301-807-1623
Jennifer Fuson, CU, 202-462-6262, email@example.com
Urge Congress to Take Action
Testimony before Senate Commerce Committee Addresses Market Failures
(Washington, DC) –Consumer groups voiced criticism of a Federal Trade Commission report released today on oil industry price gouging as too limited and called on Congress to take action against an industry that is reporting historic profit margins.
“The FTC’s ‘price gouging’ investigation failed to expose one of the single largest factors influencing oil and gas prices today – the lack of competition,” said Ann Wright, a policy analyst for Consumers Union. “Consolidation within the industry over the past decade has eroded downward pressure on gas prices. The result is that consumers are trapped between a handful of powerful oil companies controlling prices and a government that won’t take meaningful action.”
“The FTC will say that oil companies have not manipulated prices, but clearly they do not have to,” said Mark Cooper, research director for the Consumer Federation of America. “The industry has become so concentrated, that they do not have to collude to raise the price of gasoline. Each company acts individually and knows full well that its brethren will act in a parallel fashion.”
Consolidation within the industry can be seen through mergers over the past ten years that have resulted in the consolidation of 11 of the major oil giants into four. Four out of the five regional refining markets and 47 out of 50 state wholesale gasoline markets are concentrated. This consolidation has allowed oil companies to work in tandem with each other to tighten supplies and raise prices. In 2005 the oil companies earned more income than the five years between 1995 and 1999. In a statement regarding the Commission’s report, FTC Commissioner Jon Leibowitz noted that twelve of the U.S. oil companies that list on the Standard and Poor’s 500 reported an average 48 percent increase in earnings for the fourth quarter of 2005.
Cooper will be testifying Tuesday, May 23 before the Senate Commerce Committee on soaring gas prices and oil industry.
CU and CFA have called on Congress to take action against further price spikes through the following legislative actions:
- Create a joint task force of federal and state Attorneys General to monitor the structure, conduct and performance of gasoline markets.
- Reduce fuel consumption through aggressive, targeted improvements in vehicle fuel efficiency standards.
- Establish a federal reserve of gasoline stock to use during seasonal peaks or in the event of a supply disruption.
- Reinvest windfall profits in expanded refinery capacity.