Welcome to Consumer Reports Advocacy

For 85 years CR has worked for laws and policies that put consumers first. Learn more about CR’s work with policymakers, companies, and consumers to help build a fair and just marketplace at TrustCR.org

Consumers hit with $1,000 annual hike in energy bills since 2000


Tuesday, Sept. 14, 2004
Adam Goldberg, CU, (202) 462-6262
Mark Cooper, CFA, (301) 384-2204
Consumers Socked by Over $500 Billion Increase
In Household Energy Bills During Last Four Years

New Report Finds Household Bills Up About $1,000 Annually Since 2000;
Lax Federal Oversight, Uncompetitive Practices, Profit-Taking Main Causes for Increase

(Washington, D.C.) – American consumers have been hit by an average $1,000 increase in their annual household energy bills during the past four years, draining more than $500 billion from the economy, a new report from Consumers Union and Consumer Federation of America shows. Much of these higher prices are due to unchecked consolidation in the oil and gas industry, which has resulted in a lack of competition and increased profits – close to $100 billion – for oil and gas companies since 2000.
“The energy problem American consumers have been facing is now a problem for the whole economy,” said Mark Cooper, CFA’s director of research. “Even though gasoline prices have dropped by a few cents during the past few weeks, they’re still higher than we’ve ever seen and consumers continue to face escalating energy costs.”
According to the report, three-quarters of recent price increases have been caused by domestic factors, and increases in concentration in the industry have played a key role. Citing a recent GAO report that found mergers had contributed to the price increases, the report demonstrates how the Federal Trade Commission (FTC) – which is responsible for overseeing consolidation in the oil and gas sector – has been asleep at the switch in allowing excessive consolidation during the last two decades.
The GAO concluded “that oil industry mergers and increased market concentration generally led to higher wholesale gasoline prices.” The FTC, without providing any empirical evidence to counter those findings, has nonetheless disagreed with the conclusion of the government’s nonpartisan accountant.
“Four years ago, we said excessive consolidation in the industry was hurting consumers, and today the evidence clearly supports that,” Cooper said “Unfortunately, the FTC continues to hide its head in the sand over the effect its inaction on mergers is having on consumers’ pocketbooks.”
Adam Goldberg, policy analyst with Consumers Union, publisher of Consumer Reports, said it’s not just the FTC that needs to change its approach to the energy-price crisis.
“The Federal Energy Regulatory Commission needs to quit dragging its feet in its investigation of price manipulation, and it needs to make sure the gas markets are functioning properly,” Goldberg said. “And Congress has to drop its misguided energy proposals that reward oil companies with subsidies for exploration that they should be conducting with the massive profits they’re now making.”
The report recommends several public policy changes to respond to the growing problems in the energy sector, including a change in FTC’s merger review process to stop further consolidation that would result in decreased competition and higher prices for consumers. The groups also recommend stock and storage policy be changed so that minor disruptions and reduced storage do not lead to price spikes; an increase in the nation’s refinery capacity to better meet demand; and most important, an increase in automobile fuel efficiency standards.
Click here to read the complete report.