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Bloomberg: Pelosi, Democrats Call on FTC to Probe Gas Prices

By Laura Litvan

April 25 (Bloomberg) -- House Democratic leaders called on the U.S. Federal Trade Commission to investigate whether oil industry manipulation has contributed to a 24 percent rise in gasoline prices in the past year.

'The FTC has failed to exercise its power to protect consumers from skyrocketing energy costs,'' House Speaker Nancy Pelosi and other Democratic leaders wrote in a letter to FTC Chairman William E. Kovacic.

The FTC has acknowledged that oil and gas markets are susceptible to manipulation. In 2006, the FTC's congressionally mandated investigation of gasoline prices after Hurricane Katrina acknowledged the possibility that the petroleum industry can manipulate prices by reducing production, distribution, or inventories or increasing margins.

Democrats are highlighting rising gasoline prices as the summer vacation driving season begins. Regular, self-serve gasoline averaged $3.57 a gallon at the pump in the U.S., AAA said on its Web site today.

Illinois Senator Barack Obama, campaigning for the Democratic presidential nomination in Indiana, said gas prices for most Americans have become a 'huge problem, bordering on a crisis.'' Obama called for a windfall profit tax on oil companies and more transparency in how prices are set.

`Not for Consumers'

'The laws that have come out of Washington have been good for the oil companies and not so good for the consumers,'' Obama said at a news conference. 'It isn't right that oil companies are making record profits at a time when ordinary Americans are going into debt trying to pay rising energy costs.''

FTC spokesman Mitchell Katz said the agency received the letter from the Democratic leaders, is 'working diligently on the issue and expect to respond very soon.''

Kovacic, at the Senate hearing earlier this month, told lawmakers that the issue is a 'high priority.''

Legislation signed by President George W. Bush in December directs the FTC to ensure there is no price or supply manipulation in the U.S. petroleum market. The Democratic leaders said the agency should begin drafting rules to implement the new law.

'The FTC must no longer delay action on implementing the mandate from Congress to stop market manipulation as American families and businesses struggle to deal with record gas prices,'' the letter said. House Majority Leader Steny Hoyer and House Energy and Commerce Committee Chairman John Dingell were among those joining Pelosi.

Oil Prices

The letter noted that the price of a barrel of oil reached $119 this week. Democrats say the new law expands the FTC's traditional antitrust authority, giving it new power to look for price manipulation.

A similar demand to the FTC was made earlier this month by Senators Olympia Snowe, a Maine Republican, Maria Cantwell, a Washington Democrat, and Byron Dorgan, a North Dakota Democrat.

Cantwell asked Kovacic about the FTC's new authority at a Senate Commerce Committee hearing on April 8. She said a series of FTC investigations into gasoline price increases, including a review of market conditions in Spokane, Washington, had failed to provide answers.

Kovacic said FTC lawyers were reviewing possible antitrust violations by the gasoline industry and promised to consult with lawmakers without making any specific commitments.