Huffpost Politics
Sam Stein Headshot

Democratic Leadership Requests Investigation Into Gas Price Fixing (UPDATED)

Posted: Updated:
SCHUMERMC

WASHINGTON -- Keeping the spotlight on the high prices at the pump, Senate Democratic leadership has sent a letter to the Federal Trade Commission requesting an investigation into whether oil companies have been deliberately holding down the supply of refined gasoline.

The letter, spearheaded by Sen. Claire McCaskill (D-MO), is the latest in a line of politically sharp attempts to turn the screws on Big Oil. Last week, the CEOs of the five biggest oil companies came to the Hill to testify before Sen. Max Baucus' (D-Mont.) Finance Committee. The topics discussed varied, but focused primarily on why or whether oil companies needed generous tax breaks when oil was selling so high.

"Don't punish our industry for doing its job well," was the reply from John Watson, CEO of Chevron.

A Senate vote on eliminating those tax subsidies is expected shortly, perhaps even as soon as Tuesday. The votes will likely fall short of the 60 needed to reach cloture, with several oil-friendly Democrats raising opposition.

In the meantime, the Department of Justice is looking into the possibility of fraud and manipulation in the oil market. Now, the Senate is pressing the FTC to investigate the possibility that U.S. inventories were being kept artificially low in order to maintain high gas prices.

"At a time when major refiners and oil companies are making record profits and American families continue to struggle with gasoline at record prices the idea that refiners may be manipulating the market to keep prices artificially high goes beyond reproach," the Democratic leadership writes. "It is incumbent upon the Commission to ensure that the American people are protected from this type of manipulation. Accordingly, we request that the Commission open a full investigation into these allegations of wrongdoing and to determine the impact this behavior, if confirmed, has on regional and national gasoline prices."

In the letter, McCaskill cites Energy Information Administration data showing that "refineries are using only 81.7 percent of their capacity, a decline of 7 percent from the same time last year."

The petroleum industry has contended that the disparity between the two years is simply a result of changing supply, with refineries struggling last year. Recent flooding from the Mississippi River has caused additional concerns about refinery disruptions. But those eased on Monday with gasoline futures going below $3 a gallon and oil prices subsequently falling.

UPDATE: 12:05 PM

McCaskill, who is up for reelection this year, and Sen. Charles Schumer (D-NY) held a Tuesday briefing on Capitol Hill to discuss the letter to the FTC.

When it was noted that a bill eliminating tax subsidies for oil companies is unlikely to advance in the Senate, Schumer said any proposal for deficit reduction put forward by Democratic leadership would "certainly" call for the elimination of oil subsidies.

"I believe that all of us in the leadership -- and I think there's pretty broad consensus in our caucus -- believe that this is the place to start," Schumer told reporters at the briefing. "We do have to reduce our dependence on foreign oil, and that is a longer process and we'll be doing things on that down the road. But immediately ... we have to cut spending, and you have so many things that are being proposed being cut. Some propose cutting cancer research. Some propose cutting help that middle class families get to go to college," Shumer said. "Our question is simple: Are these subsidies a better place to cut than those and shouldn't we start with these?"

The full letter from Democratic leadership is below.

May 17, 2011

Jon Leibowitz, Chairman
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, D.C. 20580

Dear Chairman Leibowitz:

We write today to request the Commission begin an investigation into potential price fixing of gasoline by U.S. refiners. Recent reports have indicated that U.S. refiners are cutting back on U.S. gasoline stockpiles in order to artificially keep prices high and inflate their bottom line. If true, this behavior is a direct affront to the American people who are still struggling with the economic downturn. It is currently within the Federal Trade Commission's (Commission) authority to review these allegations for any potential wrongdoing and to determine the impact these actions may have on gasoline prices both regionally and throughout the country.

The rise in the price of oil is certainly a driving factor behind the recent rise in gasoline prices, but concerns have been raised that while gasoline use is declining, U.S. gasoline inventories remain below average and refining margins continue to rise. According to information posted by the Energy Information Administration U.S. refiners are using only 81.7 percent of their capacity, a decline of 7 percent from the same time last year. Moreover, since the beginning of 2011 U.S. refiners have seen over a ninety percent increase in their refining margins. While some have argued that this increase is due to potential impacts from recent flooding along the Mississippi River, this cannot justify the steady increases in their margins since January of this year.

At a time when major refiners and oil companies are making record profits and American families continue to struggle with gasoline at record prices the idea that refiners may be manipulating the market to keep prices artificially high goes beyond reproach. It is incumbent upon the Commission to ensure that the American people are protected from this type of manipulation. Accordingly, we request that the Commission open a full investigation into these allegations of wrongdoing and to determine the impact this behavior, if confirmed, has on regional and national gasoline prices.

Thank you for your consideration of our request. Should you have any questions about please feel free to contact Senator McCaskill's office at 202-224-6154. We look forward to hearing from you.

Sincerely,

Senator Claire McCaskill
Senate Majority Leader Harry Reid
Senator Charles E. Schumer
Senator Patty Murray

UPDATE: Sen. Dick Durbin (D-Ill.) has signed on to the letter as well, according to a leadership aide.

Lucia Graves contributed to this report.

Around the Web

Answer Desk: Are gasoline dealers 'price gouging'? - Business ...

Obama: Gas Price Solution Lies in Renewable Energy Sources ...

Senators want regulators to look into allegations of gasoline price fixing

Putin accuses oil firms of gasoline price fixing

Register To Vote