TV is abuzz with the House of Representatives passage of new legislation to restrict gasoline price gouging. The laudable goal is to restrict unconscionable prices and it is also laudable that the debate is heating up in Washington about what we should pay at the pump.
The problem with price gouging laws, though, is they generally only apply in the wake of catastrophes and national disasters. We should not have to wait for a hurricane or an earthquake to prosecute oil companies and retailers for charging unconscionable prices. Proscecutors should be able to look at holiday weekend prices too and call them unconscionable.
The most important parts of the new gasoline price gouging legislation, being guided in the House by Michigan Rep. Bart Stupak and in the Senate by Washington State's Maria Cantwell, is that oil companies and suppliers will now be on the hook for their role in inflating prices after unusual market disruptions. Almost every state has a price gouging law but generally only retailers can be prosecuted, not the oil industry suppliers. In fact, proving suppliers or oil companies raised their prices is a defense in price gouging cases.
What's needed in America, though, is a standard for how much is too much to pay at the pump. When refiner margins top $1 per gallon is that gouging? Or $2? We need that standard all year long, not just when mother nature revolts and gives oil companies big opportunities. As Oilwatchdog.org is proving, gouging in that regard, profits that are close to half the price per gallon, goes on daily in America.
Oil industry defenders like Rep. Joe Barton are out in force claiming the Stupak legislation will constrict supply even more. Hard to imagine things could get much worse in that regard. So, perhaps the most important part of the price gouging legislation is the debate its sparked over what a gallon of gas should cost and who is on what side of controlling that price, not through price controls but through supply-side regulation and monitoring.
"Gouging" isn't a phantom menace as The New York Times' Edmund Andrews claims - it just needs a specific definition that applies to unconscionable profits all year long.