What Constitutes Price-Gouging in the Oil Industry?

0:00News that oil companies are once again posting huge profits has been greeted with loud protests, especially from members of Congress. Both Republicans and Democrats have suggested penalizing anyone who takes advantage of the imbalance between supply and demand. But as NPR's Alex Markells reports, going after those who raise prices may have more to do with political posturing than with keeping a lid on gas prices. Ask the folks pulling up to the Chevron station near Washington's Watergate Hotel how they feel about paying $3.30 for gas, and the same word keeps popping up. Gouge. Really gouge. It just seems like a price gouge. I definitely feel like I'm being gouged at the gas pump. Like a lot of his fellow customers, Ben Fuller thinks he knows who's to blame.

0:48Oil companies have windfall profits while they're saying they can't do anything to give us an easier time at the pump. That kind of frustration led a group of congressmen to gather at a BP station on Capitol Hill last week to talk up their ideas for fighting soaring gas prices. Along with proposals to open new areas to drilling and reduce restrictions on fuel mixtures, the congressmen, who pulled up in two hydrogen-fueled minivans, called for federal legislation to help keep consumers from getting taken at the gas pump. House Speaker Dennis Hastert thinks it could make a difference. We will ask the Federal Trade Commission and the Attorney General to make sure that there is no price gouging, that there isn't any manipulation of the prices. There's no magic wand, but we do those things, I think you can see almost an immediate drop in the fuel prices.

1:37Florida Republican Adam Putnam says his state first enacted anti-gouging legislation after people took advantage of the situation when Hurricane Andrew hit. People were charging gouging rates for ice and plywood and things like that in the middle of hurricanes. There's a legal model out there. We want to standardize that model so that states that don't have gouging laws will now. But like most state anti-gouging laws, Florida's statute only applies during a state of emergency, and it defines price gouging as charging an amount that grossly exceeds the average price in the 30 days before the emergency was declared. Because of that, economists say such laws won't have any effect on gas prices now, when there's no emergency, and when demand is simply outstripping supply.

2:22Even in emergencies, they warn that anti-gouging laws often don't do what they're intended to. Anti-price gouging laws really harm the people that they're meant to help. Mark Thornton is an economist with the Libertarian Mises Institute in Georgia. He points to recent hurricanes in the Gulf Coast, where anti-gouging laws kept many stations from raising their prices. If the law wasn't in effect and gas stations were allowed to raise their prices, they would have raised their prices significantly, and people would have only purchased the gasoline necessary to get to safety, leaving more gas for the people to come behind them. But Thornton says that's not what happened. What Happened? The people who came later ended up finding gas stations with no gas and ended up being stranded along the interstate. With the latest price spike, many people figure gas sellers are simply taking advantage of the situation. Economists like Sam Peltzman at the University of Chicago say there's little evidence of collusion or price fixing in the

3:21market. If you just drive down a main street, you'd see how hard it would be to do that. So then why are congressmen so eager to pass anti-gouging legislation? Of course if they really wanted to make some political hay, they might try going after 6.50? Really? That's almost as much as a movie for popcorn?

4:16If they're going to do it for gasoline, they should definitely do it for popcorn. for NPR News.