Probe pump prices, Biden urges FTC
WASHINGTON — President Joe Biden urged the Federal Trade Commission to probe possible illegal conduct in U.S. gasoline markets, though any inquiry by the agency is unlikely to have an immediate impact on pump prices paid by consumers.
In a letter Wednesday to FTC Chair Lina Khan, the president expressed concern about the difference between pump prices and the cost of wholesale fuel, while citing what he said was “mounting evidence of anti-consumer behavior by oil and gas companies.”
“I do not accept hardworking Americans paying more for gas because of anti-competitive or otherwise potentially illegal conduct,” Biden said in his letter to Khan, calling for an investigation.
The FTC is an independent agency that is not directed by the White House, though Biden selected Khan as its chairwoman and the agency can choose to follow the president’s suggestions.
Fuel prices collapsed when the pandemic hit in 2020 but have risen sharply amid a global resurgence in demand and ongoing supply disruptions in many parts of the world. Europe has faced an energy crisis with surprisingly weak wind power generation and a decline in Russian gas exports, while China has faced a coal shortage that led to a drop in economic production.
The U.S. has not been spared from energy price pressures, forcing the Biden administration into a difficult position. AAA said the average price for a gallon of gasoline in the United States was $3.41 as of Wednesday, up from $3.32 one month ago. Both prices are much higher than the $2.12 price for a gallon of gasoline one year ago, though demand was down sharply as a third wave of the coronavirus was ravaging the United States amid a huge spike in cases and deaths.
Gasoline prices are up 49.6% from October 2020.
The price increase has also pinned Biden between his goals of reducing the greenhouse gas emissions
that drive climate change and keeping costs low for middle-class consumers. Although economists agree that higher gas prices discourage gasoline use, Biden refused to include an increase in the federal gasoline tax as an offset for the spending in his infrastructure negotiations with Republicans.
Biden wrote to Khan as Americans are feeling the effects of higher prices across much of the economy, an issue that’s also hurting him politically as his poll numbers continue to sag. The October consumer price index was up 6.2% from a year earlier, with energy costs a major driver.
But his letter is mostly symbolic. It’s not uncommon for state and federal regulators to open investigations of gasoline prices when they soar. Few of those investigations translate into real action.
A White House official said the agency could decide to begin an investigation to collect data on how gas companies set prices, as well as data on actual pricing. Biden asked the commission to “further examine what is happening with oil and gas markets, and that you bring all of the commission’s tools to bear if you uncover any wrongdoing.”
The president said in his letter that “prices at the pump have continued to rise, even as refined fuel costs go down and industry profits go up.” He alleged an “unexplained large gap between the price of unfinished gasoline and the average price at the pump” relative to prepandemic differences.
Oil prices account for well over half of the cost of gasoline. And while pump prices have surged 51% this year, oil futures have climbed even more — by 65%.
It’s unclear what unfinished gasoline price Biden was referring to in his letter to the commission, but wholesale gasoline prices in the U.S. Gulf Coast, where much of the nation’s refining occurs, are up nearly 62% this year.
Gas and oil firm collusion may be worth investigating but Biden’s argument is “a little thin,” as it highlights the disparity between prices and costs for only a short period of time, said Lucio Miranda, president of ExportUSA, an export consulting company that follows gas and oil prices.
“As I see it in the letter, basing this whole investigation on one or two months of data I’m not sure it’s going to hold water,” Miranda said, adding that factors such as higher transportation costs could help account for the disparity between the price of unfinished gasoline and what consumers pay at the pump.
Biden’s message to Khan follows an August letter from White House National Economic Council Director Brian Deese urging that the FTC monitor gasoline markets and address any illegal conduct that might be increasing prices.
After that, Khan directed her agency to ramp up its oversight of mergers in the oil and gas sector, a move the White House official said had already slowed the pace of mergers.