With Hurricane Ian bearing down the Gulf Coast of Florida, President Joe Biden took the opportunity to once again push debunked claims of gasoline price gouging by the U.S. energy industry during a White House event on Wednesday.
Biden said:
“Do not — let me, repeat, do not — do not use this as an excuse to raise gasoline prices or gouge the American people. … This small, temporary storm impact on oil production provides no excuse — no excuse — for price increases at the pump. None. If companies try to use this storm to raise prices at the pump, I will ask officials to look into whether price gouging is going on.”
But as Energy In Depth has noted repeatedly during 2022, the U.S. oil and natural gas industry does not control the price of crude oil nor the price of gasoline – the prices of both are set by the market forces of supply and demand.
In response to the President’s comments, the American Fuel and Petrochemical Manufacturers said that the storm’s impact on supply and demand would be the reason for any price changes, not actions by the industry to boost profits:
“Our country has seen time and again that major storms and often-correlated runs on gas stations can have a swift impact on prices. Already in Florida, some key areas are functioning with roughly 20 percent of retail stations either out of gas or out of power. That means there is less supply overall and some temporary inability to access supplies in certain Florida communities where there is, at present, heightened local demand.”
And as Patrick De Haan of GasBuddy recently explained, if energy companies did engage in gasoline price gouging, then it could have prevented prices from tumbling in 2020 amid corrupted demand during the COVID-19 pandemic.
please do explain your theory then behind why oil companies “allowed” prices to fall for 14 straight weeks? And also explain why mysteriously in 2020, oil companies also stopped “gouging” https://t.co/mNTAFawRBz
— Patrick De Haan
(@GasBuddyGuy) September 25, 2022
But because the industry does not control prices, 2020 resulted in record losses for companies, demonstrating the high and lows of the business and firmly debunking any theories of gasoline price gouging.
No Evidence of Price Gouging After Hurricane Katrina
President Biden’s warning to the industry comes amid Hurricane Ian making landfall, despite no evidence of price gouging during other past major hurricane events.
In fact, a Federal Trade Commission investigation in the aftermath of Hurricane Katrina in 2005 found there to be no such illicit practices and that “market trends” explained the rare occurrences of price spikes:
“In its investigation, the FTC found no instances of illegal market manipulation that led to higher prices during the relevant time periods but found 15 examples of pricing at the refining, wholesale, or retail level that fit the relevant legislation’s definition of evidence of ‘price gouging.’ Other factors such as regional or local market trends, however, appeared to explain these firms’ prices in nearly all cases.” (emphasis added)
The FTC also noted that gasoline price gouging legislation would only make the problem worse during hurricanes:
“Further, the report reiterated the FTC’s position that federal gasoline price gouging legislation, in addition to being difficult to enforce, could cause more problems for consumers than it solves, and that competitive market forces should be allowed to determine the price of gasoline drivers pay at the pump.” (emphasis added)
Bottom Line: As experts have reiterated throughout the last year and hundreds of investigations have shown, energy producers are price takers not price makers.
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