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American Government Topic:  Gasoline, William E. Kovacic

FTC Testifies on "Market Forces, Anticompetitive Activity, and Gasoline Prices"

Agency: Federal Trade Commission
Date: 7 April 2004
Agency Details Initiatives to Protect Competitive Markets Before Senate Subcommittee

Testifying today on behalf of the Federal Trade Commission before the Subcommittee on Antitrust, Competition Policy, and Consumer Rights of the Senate Judiciary Committee, General Counsel William Kovacic detailed the agency’s initiatives to maintain competitive energy markets, and said that the Commission will take enforcement action, if warranted, to protect U.S. consumers from price increases resulting from illegal anticompetitive conduct. Based on FTC studies and other sources, however, Kovacic said, “The single most important factor affecting both the level and movement of gasoline prices in the United States is the price of crude oil.”

The Commission’s testimony began with an overview of the FTC’s mission and its recent enforcement initiatives and investigations in the energy arena. The testimony discussed some factors identified in its recently held public conferences on the price and volatility of refined petroleum products in the United States as deserving further study. In addition, Kovacic described the FTC’s gasoline price monitoring and investigation initiative, which “actively monitors wholesale and retail prices of gasoline,” and examines why “unusual” price movements have occurred.

The testimony presented a detailed overview of the FTC’s merger enforcement in the oil and gasoline industries, focusing specifically on two recent investigations in this area, the first concerning the merger of Chevron and Texaco, and the second the Commission’s challenge to the proposed $6 billion merger of Valero Energy Corporation and Diamond Shamrock Corporation. The testimony presented a summary of recent nonmerger investigations into gasoline pricing by the FTC, specifically the Commission’s complaint against Union Oil Company of California (Unocal) for allegedly deceiving the California Air Resources Board (CARB) in connection with regulatory proceedings to develop the reformulated gasoline standards that CARB had previously adopted. The testimony also described the FTC’s recent investigation into West Coast gas prices spikes, which did not find any illegal anticompetitive activities.

The testimony provided a look at the FTC’s gasoline price monitoring and investigation initiative, providing analyses of gas price anomalies in Arizona, Atlanta, and the Mid-Atlantic area during specific periods of time. Finally, the testimony provided an overview of recent FTC conferences and staff reports that have identified factors affecting the price of gasoline nationwide, detailing how changes in crude oil prices impact prices at the pump. “Changes in crude oil prices account for approximately 85 percent of the variability of gasoline prices,” according to the testimony. “When crude oil prices rise, as they have recently, gas prices rise.”

In concluding the FTC’s testimony, Kovacic said, “The Commission has a long and continuing history with law enforcement investigations in the petroleum industry. The agency has expended substantial effort and resources to maintain and study competition in this industry. We will continue to do so in the future.”

“The American public needs to know what forces shape the performance of this vital sector of the economy. Higher prices for products that are critical to our citizens’ quality of life and for the efficient functioning of the national economy are matters of serious concern. When price increases result from conduct that violates the antitrust laws, the FTC will take enforcement action.”

The FTC vote to approve the testimony and place a copy on the public record was 5-0. The written statement presented by the General Counsel at the hearing represents the views of the Commission.

The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm

(FTC File No. P859900)



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