FTC to investigate crude, product price allegations

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, June 21 -- The US Federal Trade Commission will investigate whether crude oil and product price increases this spring resulted from possibly anticompetitive behavior, according to letters sent by FTC Chairman Jon Leibowitz to five US senators. Leibowitz cited US Energy Information Administration statistics in early May showing a 90% increase in US refiners’ margins since the beginning of the year, and refineries running at 81.7% of capacity at the time, 7% less than a year earlier.

Sens. Maria A. Cantwell (D-Wash.), Mark L. Pryor (D-Ark.), John D. Rockefeller IV (D-W.Va.), Olympia J. Snowe (R-Me.), and Ronald L. Wyden (D-Ore.) wrote Leibowitz on Mar. 15 asking FTC to use investigative authority it received under the Petroleum Market Manipulation Rule that became final in 2009.

“Bad actors who are artificially driving up [gasoline] prices ought to be brought to justice and face stiff punishment,” Cantwell said on June 20 as she and Rockefeller released Leibowitz’s letter. “I am pleased the FTC is using this new authority to protect consumers.” An FTC spokesman confirmed June 21 that Leibowitz sent the letter.

The chairman told the senators that FTC would try to determine “whether certain oil producers, refiners, marketers, physical or financial traders, or others” acted in an anticompetitive manner or provided false or misleading information about wholesale crude or product prices to a federal department or agency.

Areas of investigation may include utilization and maintenance decisions, inventory holding decisions, product supply decisions, product import and export strategies and volumes, product output decisions, capital planning decisions, product margins and profitability, and any other information which may be relevant in determining if federal laws were violated, the letter continued.

FTC also will continue to work with the Oil and Gas Price Fraud Working Group that US Atty. Gen. Eric Holder established with state and local law enforcement agencies on Apr. 21, Leibowitz added.

Responding to the letter, an American Petroleum Institute spokesman told OGJ on June 21 that FTC has been tracking gasoline prices for years, and that API doubts an official investigation will find anything new. “Most likely, it will show that US refiners have been producing record amounts of gasoline this year, and that gasoline prices are largely driven by crude oil prices set on international markets,” he said.

In its latest Monthly Statistical Report on June 17, API said US refining capacity utilization from January through May averaged 79.9% compared with 84.2% for the comparable 2010 period. Total US operable refining capacity in 2011’s first 5 months also rose 2.1% year-to-year to an average of nearly 18 million b/d, it added.

“Our members obey the law,” National Petrochemical & Refiners Association Pres. Charles T. Drevna said on June 21. “Dozens of investigations of gasoline price-fixing over the years have generated plenty of headlines and political hyperbole, but have failed again and again to find any evidence of wrongdoing. This will happen again, and the only thing that will be accomplished by this new investigation is to waste taxpayer dollars.”

Contact Nick Snow at nicks@pennwell.com.

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