The Saginaw News (Michigan)
Motorists angry over the record high cost of fueling up have filed about 100 complaints a day with the state attorney general’s office.
Attorney General Mike Cox says the state can do little to fend off high prices at the pump, although his Consumer Protection Division “investigates every single complaint.”
Motorists will find plenty to grouse about today when they prepare to leave town for the Memorial Day weekend: Gasoline prices rocketed to an all-time record $3.65 a gallon this week, then dropped a few pennies Thursday.
“If we get (a service station) well above everyone else, we’ll look closely,” said Cox, a Republican.
“This isn’t just a Michigan issue,” said Katharyn Barron, chief of Cox’s consumer protection office. “Prices are high across the nation.”
Price gouging profits?
As Big Oil continues setting profit records, a veteran mid-Michigan congressman who co-sponsored legislation that passed the U.S. House this week to prevent price gouging declared oil companies have taken advantage of consumers’ wallets.
“I just know when they are declaring the biggest dividends in the history of the world, they are not just making a reasonable profit,” said U.S. Rep. Dale E. Kildee, a Flint Democrat who represents Saginaw. “I believe there is price gouging.”
Exxon-Mobil, the world’s largest oil company, had a $39.5 billion profit last year, the highest ever for any corporation. In the first quarter this year, it had a net gain exceeding $8 billion, The Associated Press reported. The industry as a whole reported $125 billion in profits last year, and $30 billion in the first quarter of 2007.
Last year, a typical family paid about $1,000 more for fuel than it did five years before, Kildee’s office said.
While drivers and consumer advocates might agree with the veteran congressman, industry and federal officials blame higher costs on refinery outages, record demand and fewer oil imports.
Washington, D.C.-based American Petroleum Institute spokeswoman Rayola Dougher said costs rose this driving season because of a series of refinery outages and production problems, including those that hit two large refineries in Ohio and Indiana that supply the Midwest.
Add in fewer imports from oil exporters such as Venezuela and Nigeria, and demand outstrips supply, she said.
“We haven’t seen any illegal anti-competitive conduct that’s led to the high price we’re seeing,” said Mitch Katz, a Federal Trade Commission spokesman in Washington, D.C.
Timothy A. Hamilton, an Olympia, Wash., petroleum industry consultant who works with oilwatchdog.org, dismissed the stance of the federal agency, which he said hasn’t watched out for consumers.
“They know fully well the increase in the price at the pump is pure 100 percent profit for the oil companies,” he said. “As long as they don’t collude, the FTC is going to tell them, ‘Go-ahead, boys.’ They’re getting it in a legal fashion, but the consumer is paying for it.”
Cox said he and other attorneys general asked the Federal Trade Commission and the U.S. Department of Justice nearly a year ago to investigate whether price fixing has occurred.
“There’s limits to what a state can do,” he said, adding consumers should lobby Congress.
The Federal Price Gouging Prevention Act, which Kildee co-sponsored and which passed the House on Wednesday, would allow the Federal Trade Commission to punish price gouging, let states file lawsuits against wholesalers or retailers engaged in the practice and hold company officials accountable through fines and possibly prison time.
The act would take effect only after the president has declared an energy emergency and would remain in force for 30 days.
Motorists’ ‘Bill of Rights’
U.S. Rep. Dave Camp, a Midland Republican, voted against the bill because he found the legislation too vague on defining price gouging, said spokesman Sage Eastman.
“He supports outlawing price gouging; he just feels we ought to define what that is,” Eastman said.
The spokesman said Camp has co-sponsored with fellow Rep. Fred Upton, a St. Joseph Republican, a Motorists’ Bill of Rights that more clearly defines price gouging, would expand refinery capacity and reduce the need for “boutique” or specialized summer blend fuels that are more costly but reduce ozone emissions.
State Sen. Roger N. Kahn, a Saginaw Township Republican, intends to draft a bill that would amend the Michigan Consumer Protection Act to let the attorney general issue an injunction to prevent a retailer who engaged in price gouging from selling fuel. Violators would face a $1,500 first time civil fine, $3,000 for a second offense and $25,000 for subsequent offenses.
Barron said a retailer in violation of the act would have to charge customers a price “grossly in excess” of nearby gasoline stations.
The Attorney General Consumer Protection hotline is (877) 765-8388.
Past investigations of price gouging complaints have found that most retailers make a small profit on gasoline after subtracting the wholesale price plus state and federal taxes, Cox said. A gallon of gasoline, for example, has a 4.5 cent distribution fee, and 18.5 cents in both federal and state road taxes plus the 6 cents per dollar state sales tax, he said. Consumers using credit cards to buy fuel can add a 3 percent transaction fee to the price.
Price gouging is “a very hard case to bring because we’re in a free market society,” he said.
The courts also haven’t ruled on cases that would determine what constitutes excessive prices, he said.
The attorney general’s office hasn’t brought a price gouging case since just after the Sept. 11, 2001, terrorist attacks on the World Trade Center and the Pentagon, Cox and Barron said.
“What we had there, which we really haven’t had since, was we had the wholesale price remaining steady but retail prices shooting up,” Barron said.
This time, wholesale prices have ridden a roller coaster.
A wholesaler gouging a retailer would fall under anti-trust law, she said.
Lower crude, pay more?
Hamilton said the common perception that the price of crude oil causes pump prices to rise isn’t necessarily true anymore.
“Prices are higher than they were last year, yet the price of crude is lower,” said Hamilton, who’s affiliated with the Foundation for Taxpayer and Consumer Rights in Santa Monica, Calif.
“The tail is wagging the dog. It’s the price at the pump that is changing the price of crude, not the other way around.”
The price of west Texas light crude reached $69.86 a barrel Wednesday compared to $65.77 the same day last year, an American Petroleum Institute spokeswoman said Thursday.
AAA of Michigan reported a statewide price average of $3.42 a gallon Monday, or 57 cents higher than the same time a year ago, said Debra Pearson, an agency spokeswoman in Detroit.
Hamilton said oil companies stocked the lowest inventory levels in a half-century this winter, which started the upward price spiral.
Dougher said supplies actually were above average then.
Even with refinery outages, Dougher said, “We have produced record amounts of gasoline in the midst of all this.”
The oil industry has produced an industry high of 8.75 million barrels of gasoline a day as it found ways to recover more fuel from oil. It hasn’t made a dent in prices because consumer demand of 9 million barrels a day still outstrips production, she said.