Gas rip-off: Tens of thousands tell Congress to get tough with price-gouging!

Posted by Joshua Holland at 9:21 AM on May 23, 2007.

Congress begins hearings today on H.R. 1252, a bill that would make gas price-gouging a federal crime, punishable by 10 years in the slammer. Nancy Pelosi said she'll move the bill to a vote this week if she gets the two-thirds majority she needs to fast track it through.

Price-gouging -- and its flip-side, manipulating prices downwards for electoral gains -- is the epitome of low-hanging fruit. High gas prices hurt, and they hurt ultra-nationalists and white evangelicals and security moms as much as anyone else.

Public Citizen estimates that Big Oil has taken in a quarter of a trillion in profits under the Bushies. Two-thirds of adults in a recent poll said gas prices had caused them "financial hardship."

Earlier this month, gas prices reached an all-time record high, beating out inflation-adjusted prices from 1981. When it comes to the energy sector, you have to be deeply brainwashed to believe the "hidden hand" of the market is at play.

The lowest prices at the gasoline pump for the entirety of 2006 hit during the week of the mid-term elections. They had dropped steadily for three months before Election Day -- average gas prices dropped by fifty cents, or 17 percent, between the end of August and the end of September -- they started rising again the week after votes were cast and they've been rising ever since.

Graph by Gandhi at Howard Death Watch, adapted from OPEC data.

What happened? A lot.

There was this bit of gamesmanship during the summer:

… the Saudis and other pro-US players in the Middle East play[ed] a delicate balancing game by promising their OPEC friends that they would cut production, but then failing to commit to the cuts and even raising production slightly instead.

Then, in early August, just weeks after former Goldman Sachs CEO Henry Paulson joined the Bush administration as Secretary of Treasury, the brokerage giant dumped $6 billion in gas futures on the market, a move that "caught traders by surprise."

The economist Lew Rockwell explained that what Goldman Sachs did is known as "painting the tape:"

Goldman doesn’t lose money. This is a managed commodity index. Goldman manages the index, but the actual money put up comes from institutions, hedge funds and other unlucky saps that trusted Goldman to manage the commodity index as a hedge against inflation – not to bail out of $6 billion in contracts over a few weeks. The result: Unlucky saps – Major losses. Goldman – Zero losses and their man running the Treasury. Which side of this trade would you want to be on?

Big Oil has been busted for price-fixing in the past. The Foundation for Taxpayer and Consumer Rights exposed internal oil company memos that show how the industry intentionally reduced domestic refining capacity to drive up profits. The three internal memos from Mobil, Chevron, and Texaco show different ways the oil giants closed down refining capacity and drove independent refiners out of business.

Senator Ron Wyden investigated the issue, and issued a damning report (PDF) …

The oil industry and its allies would have the public believe that insufficient refining capacity, restrictive environmental standards, growing gasoline demand and OPEC production cutbacks are the primary reasons for the current oil and gas supply problem.

However, the record shows – supported by documents I have obtained – that … major oil companies pursued efforts to curtail refinery capacity as a strategy for improving profit margins; that competing oil companies worked together to subvert supply; that refinery closures inhibited supply; and that oil companies are reaping record profits….

Congress has an opportunity to treat oil execs who get caught doing this stuff like the criminals they are (that is, if we can prosecute them, but that's a whole other story). It'll be a tough fight; the oil and gas energy gave $19 million dollars to Congress last year, 82% to Republicans, who can be expected to block the bill.

It's time to bring some pressure to bear. MoveOn is asking people to sign a petition -- they say the response has been overwhelming with over 150,000 signatures so far -- and today would be a very good day to contact your representative.

Tagged as: gas, price-gouging, collusion

Joshua Holland is an editor and senior writer at AlterNet.