Letter to the FTC: Consumer Gas Prices

The Honorable William E. Kovacic

Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, DC 20580

Dear Chair Kovacic:

We write to request that the Federal Trade Commission (FTC) immediately initiate a rulemaking to implement the market manipulation authority mandated by Congress in the Energy Independence and Security Act of 2007 (P.L. 110-140).  We are concerned that consumers are paying record prices at the pump, while legislative tools exist but go unused.  Recent price volatility and investor actions in the market to hedge against the falling dollar by investing in crude oil needs strong oversight, especially when oil prices smash records daily, hitting $119 per barrel yesterday.  


Title VIII, Subtitle B of the Energy Independence and Security Act became law last December.  This legislation makes clear the federal government’s responsibility to ensure that the U.S. petroleum market is free from manipulation, and to levy penalties against those who might seek to profit from such illegal activities. Utilized effectively, we believe this new authority will substantially augment existing consumer protections against high energy prices.  More importantly, strong enforcement will help lower and stabilize prices, increase market transparency, and provide Americans with confidence that retail gasoline and diesel prices are free from the influence of anticompetitive practices and the exercise of market power.

 
As you know, the new authority granted to the FTC is modeled on the anti-manipulation authorities utilized by other agencies such as the Securities and Exchange Commission (SEC) and the Federal Energy Regulatory Commission (FERC).  Specifically, Title VIII, Subtitle B of the Energy Independence and Security Act  is modeled on section 10(b) of the Securities Exchange Act of 1934 for which a substantial body of case law has been developed over the last half century. In fact, the Supreme Court has compared this body of law to “a judicial oak which has grown from little more than a legislative acorn.” Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 737 (1975).
 

FTC has acknowledged that oil and gas markets are susceptible to manipulation. In 2006, the FTC’s Congressionally-mandated investigation of gasoline prices after Hurricane Katrina acknowledged the possibility that the petroleum industry can manipulate prices by reducing production, distribution, or inventories or increasing margins.


We need aggressive oversight to ensure such actions are not presently occurring, or punish them if they are.  The FTC must no longer delay action on a tool to stop market manipulation as American families and businesses struggle to deal with record gas prices and act swiftly and ensure market participants are not taking advantage of consumers.
 
Sincerely,

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