President Asks FTC To Investigate Fuel Prices At The Pump
Last Wednesday, President Biden asked the Federal Trade Commission (FTC) to investigate prices at the pump, suggesting illegal conduct by the oil industry is the cause of the recent price spike.
To support his claim of “anti-consumer behavior by oil-and-gas companies,” the president said in his letter to FTC Chair Lina Khan that, “Usually, prices at the pump correspond to movements in the price of unfinished gasoline, but in the last month the price of unfinished gasoline is down more than 5 percent while gas prices at the pump are up 3 percent.”
Ms. Kahn previously has suggested “concentration and collusion in retail markets” would be examined by the FTC.
Unfortunately, what the market is currently experiencing is the whiplash effect of prices due to COVID-19’s depression of gasoline demand, which caused oil companies to shut down unneeded production.
Crude oil is traded in a global market, and prices are ultimately set by worldwide supply and demand and are also influenced by perceptions about future supply and demand.
Look no further than the U.S. Energy Information Administration (EIA) Administrator’s own testimony this week before the Senate Energy and Natural Resources Committee in which he said, “Energy price increases are a direct result of the very good news that, globally, economies have begun to recover after the severe economic contraction most of the world experienced in the first months of the COVID-19 pandemic. World consumption of petroleum is recovering faster than production, which has resulted in steady draws on global oil inventories and upward pressure on prices.”
A myriad of factors beyond the cost of crude oil and refining it into gasoline affect prices at the pump, including federal/state motor fuels excise taxes, boutique or unique fuel requirements, and credit card swipe fees which remain the highest expense after labor for small business energy marketers.
Gas prices are set by the owner or operator of each retail outlet who must factor the need to pay for the next delivery of gasoline (i.e., replacement costs) into the street price.
If supply is seen as dropping relative to demand, this can place upward pressure on price and can be factored into the retailer’s pricing decision.
The costs to transport and deliver motor fuels to retail outlets are often overlooked, but they too have increased.
The national truck driver shortage has increased labor costs and impacts the ability of thousands of independent energy marketers to distribute supply to their customers.
Last week, EMA sent a letter to the Biden Administration outlining ways to minimize the driver shortage and improve disaster response.
Unfortunately, the latest effort by the Biden Administration, a perennial in every administration since Nixon, arises whenever gasoline prices increase from demand outstripping supply.
EMA stands ready to work with the Administration to reign in excessive swipe fees and alleviate the truck driver shortage.