WASHINGTON -- Many Americans believe oil companies are gouging consumers in the aftermath of Hurricane Katrina, according to a Washington Post-ABC News poll. The survey conducted last Friday found that 72% of the respondents believe oil companies and gasoline suppliers have taken advantage of the storm emergency by raising prices, which spiked quickly last week to $3 dollars a gallon or more in many areas.
And a separate poll, conducted by SurveyUSA, found that 61% of the respondents believe stations where they live are guilty of price gouging, and 30% [image-nocss] think stations are charging a fair price.(Click here for complete survey results.)
Hotlines in most states, set up to report price gouging at the pump, have been receiving hundreds of consumer complaints especially after Katrina, according to news reports and official press statements from all over the country. And attorneys general in 43 states and District of Columbia have launched joint investigations into gasoline price gouging.
Updating a CSP Daily News report from earlier this week, here is what is going on in just a few of those states:
Florida
Agriculture & Consumer Services Commissioner Charles H. Bronson said he has issued subpoenas for 19 oil companies that have terminals in Florida in an expanding price gouging investigation in the wake of Katrina. He said the subpoenas for records on what the companies paid for the fuel they purchased and what they sold it for are being issued to determine whether any of the businesses engaged in price gouging or whether they were merely passing on increased costs incurred by them.
We have received a flood of calls in the last 10 days, and while we've been looking at service stations, we need to look at the terminals that supply the fuel to determine whether price gouging activity is occurring at that level, Bronson said.
Since Governor Jeb Bush declared a state of emergency on August 24, Bronson's hotline has received more than 2,600 calls, including 1,300 complaints, he said. Under Florida law, it is unlawful to charge excessive or exorbitant prices for essential items, including gasoline, during an emergency unless the increase in price is attributable to additional costs incurred by the seller. Individuals or businesses found to have engaged in gouging face fines of up to $1,000 per violation, or up to $25,000 a day.
Attorney General Charlie Crist sent teams of investigators and law enforcement personnel statewide looking into complaints of gasoline gouging. As of Friday afternoon, the AG's hotline had received 1,050 complaints since Katrina. The investigation seeks to determine whether the increases are caused by legitimate market forces or are instead the result of illegal price gouging.
"When we hear of 75- to 90-cent price spikes within two days, or reports that surcharges are being tacked onto consumers' fuel costs, then it is our duty to investigate," said Crist. "Floridians understood that damage fromKatrina would lead to some disruptions in fuel supply and some cost increases, but these spikes lead to legitimate questions that must be answered."
If price gouging is found to have occurred, a civil lawsuit can be brought under Florida's Price Gouging Law. As part of the investigation, the Attorney General subpoenaed two gasoline distributorsColonial Oil Industries and Murphy Oil USAseeking records of their deliveries into Florida.
Kansas
AG Phill Kline met with representatives of gasoline wholesalers and retailers from across the state this week to advise them that his office will aggressively investigate any allegations of price gouging following the devastation caused by Katrina.
While most gas sellers allow market forces to establish the price of their product, those who do not and choose instead to artificially inflate the price contrary to state law will be dealt with aggressively and swiftly, Kline said.
Kline has directed the Consumer Protection & Antitrust Division to continue to monitor gas prices across the state and take immediate legal action if and when incidents of gouging have occurred.
Industry leaders who met with Kline agreed that the action was both necessary and appropriate. We wholeheartedly support [AG] Kline's commitment to protect Kansas consumers and are honored to assist him by spreading the word within our industry that price gouging of any kind will not be tolerated during this difficult time, said Tom Palace, president of the Petroleum Marketers & Convenience Store Association.
Kline also asked Kansans to remember that attendants at gas stations and convenience stores are, themselves, consumers and not responsible for the recent increase of fuel prices. Even though it may not be easy to do right now, it's important that we show compassion and understanding toward station attendants and store clerks, Kline said. They're merely the messengers who have to live with higher gas prices, too.
New Jersey
Acting Governor Richard J. Codey said the New Jersey Division of Consumer Affairs' Office of Weights & Measures and Office of Consumer Protection personnel visited approximately 400 stations during the past week, finding more than 100 violations of state regulations. The most common violation was prices being raised more than once every 24 hours, a practice which violates state law. Other violations included the price setting on a pump differing from the posted price and unregistered pumps, he said.
Tennessee
AG Paul G. Summers late last week filed two lawsuits against retailers. In the first case, a Chattanooga store allegedly was charging almost $5 per gallon for gasoline, in violation of the Tennessee Consumer Protection Act and the Tennessee Price-Gouging Act of 2002.
In the second case, a McMinnville store allegedly was charging $7 per gallon for gasoline. The retailer allegedly doubled the posted price of $3.50 a gallon through the use of a note on the pumps that said, Doubled. Consumers complained they did not notice the signs until after they had pumped gasoline and started to pay the posted price. Penalties for violations are up to $1,000 per violation and are Class B misdemeanors.
Texas
AG Greg Abbott's investigators went to several Texas cities to follow up on complaints and consult with businesses and consumers about the situation. Abbott and his top deputies met with representatives of gasoline marketer and convenience store associations to discuss distribution and supply and demand issues that affect prices at the pump.
The AG's Antitrust Division has also contacted major oil companies to schedule meetings and to get updated information about refineries, pipeline distribution and transportation systems that have been impacted by Katrina.
Virginia
Four gas stations are under investigation by theVirginia AG's office for alleged price gouging, reported the WVEC-TV. Officials said they havereceived nearly 200 phone calls from people complaining about the price of gasoline since last Thursday. One Chesapeakebusiness allegedly was charging $3.98 a gallon while others in the area were charging $3.30.
Meanwhile, an editorial in the September 7 Wall Street Journal, entitled In Praise of Gouging', said, Some 20 statesalready have anti-price-gouging laws on their booksand many governors have declared emergencies to invoke them. These de facto price controls typically place ceilings of between 10% and 25% on how much companies can raise prices in the wake of a natural disaster. In almost all cases such laws are wrong-headed, because they exacerbate supply problems by short-circuiting the price system that matches supply with demand.
It added, As infuriating as higher gas prices will be over the next weeks and perhaps months, there is one economic certainty here: If governments will not allow the price system to ration the demand for gas, a new price system will emerge called gas lines, which have already appeared in many locales. But artificially holding down the price of gas makes a bad situation worse. This is also why many of the nation's governors are misguided, even if well-intentioned, in their attempts to suspend state gas taxes. Given the high demand for gas and constricted supply, this gas tax cut will have one of two undesirable consequences. If the savings are somehow passed on to consumers at the pump, demand will be elevated, thus heightening the risk of gas lines and/or sold out' signs at service stations. The alternative is that energy companies will keep the market-clearing pump price the same, and pocket the 10 to 20 cents a gallon reduction in the taxwhich would only increase their windfall. Either way, consumers won't benefit.
And it said, Anti-gouging laws also punish companies for building excess capacity and reserves in advance of a crisis like the one we're now having. One lesson of Katrina is that we should reward companies for stockpiling oil and gas for the times when it is most urgently needed. Price gouging laws give them no incentive to endure the costs of carrying this excess inventory. We could fill these pages with all the ways government has undermined U.S. energy security and raised production costs. These include reformulated gas mandates, prohibitions on offshore and Alaska oil drilling and environmental regulations and price controls that go a long way to explaining why not a single new oil refinery has been built in the U.S. since 1976.
(To read the full editorial, click on the Download Now button, below.)
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