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Biden Asks FTC to Examine Whether Oil, Gas Companies Are Inflating Gas Prices
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© John Tully/Getty ImagesWASHINGTON—President Biden called on the Federal Trade Commission to investigate whether oil-and-gas companies are participating in illegal conduct aimed at keeping gasoline prices high.
In a Wednesday letter to FTC Chair Lina Khan, Mr. Biden alleged that there is “mounting evidence of anti-consumer behavior by oil-and-gas companies.” He said gasoline prices are rising even as the price of unfinished gasoline goes down.
“This unexplained large gap between the price of unfinished gasoline and the average price at the pump is well above the pre-pandemic average,” Mr. Biden wrote. “Meanwhile, the largest oil-and-gas companies in America are generating significant profits off higher energy prices.”
The president called on Ms. Khan to “consider whether illegal conduct is costing families at the pump,” asking her to “bring all of the Commission’s tools to bear if you uncover any wrongdoing.”
The American Petroleum Institute, the industry’s top lobbying group, called the letter a “distraction from the fundamental market shift that is taking place,” adding that demand has increased as the economy picks back up.
“Rather than launching investigations on markets that are regulated and closely monitored on a daily basis or pleading with OPEC to increase supply, we should be encouraging the safe and responsible development of American-made oil and natural gas,” Frank Macchiarola, the group’s senior vice president of policy, economics and regulatory affairs, said in a statement.
A Chevron Corp. spokesman declined to comment and referred reporters to API. Representatives for Exxon Mobil Corp. and BP PLC didn’t immediately respond to a request for comment on the letter. Royal Dutch Shell PLC declined to provide an immediate comment.
“The FTC is concerned about this issue, and we are looking into it,” said FTC spokeswoman Lindsay Kryzak.
Facing political fallout from high gas prices, past presidents of both parties have called for similar investigations into alleged price gouging and manipulation in the market. The efforts rarely result in federal action against companies, though some state attorneys general have taken action against gas station owners for alleged price gouging.
“Demanding that the FTC investigate gouging is the oldest tool in the tool kit,” said Bob McNally, who served as an energy adviser to President George W. Bush and is now an analyst at Rapidan Energy Group. He added that the trend began during the first gasoline crisis after World War I.
Video: Biden administration can't do much to stop rising gas prices (CNBC)
Mr. McNally and some other analysts questioned the merit of the letter’s allegations.
“I think it’s a stretch to pick one month’s data and conclude it’s evidence of anticompetitive behavior” because of the historic price volatility of unfinished gasoline and pump prices, Mr. McNally said.
Many analysts say that gasoline prices have risen along with climbing oil prices, spurred by an uptick in global economic activity and moderate oil production growth that has not met climbing energy demand. Current gasoline price increases relative to oil prices are in line with historic trends, these analysts say.
U.S. gasoline prices in October averaged $3.38 a gallon while U.S. oil prices averaged $81.48 a barrel, according to the U.S. Energy Information Administration. The last time U.S. gas prices reached similar levels in October 2014—$3.25 a gallon—U.S. oil prices were $81.40 a barrel. U.S. oil production sharply increased since last year to about 11.5 million barrels a day, according to the EIA, but is still well below pre-pandemic levels of around 13 million barrels a day.
Unfinished gasoline, which Mr. Biden referred to in his FTC letter, is what most petroleum refineries produce and requires blending with other liquids to be suitable for use in spark ignition engines, according to the EIA. Mr. McNally’s firm analyzed the disparity between unfinished gasoline and retail pump prices cited in Mr. Biden’s letter and said the difference wasn’t out of the normal range.
Mr. Biden and his senior advisers have for weeks been weighing policy options in response to high gas prices, amid mounting concerns about inflation.
U.S. inflation hit a three-decade high in October. Gasoline prices were up more than 60% in mid-November from a year earlier, putting the price for a gallon of regular gas at the highest level since 2014, according to the EIA.
Mr. Biden has limited options for quickly lowering prices.
He has called on the Organization of the Petroleum Exporting Countries to increase production to ease shortages and lower prices. OPEC has so far rebuffed those requests.
Mr. Biden has faced criticism from environmental activists for pushing OPEC to pump more oil. The activists say that the efforts conflict with his longer-term commitment to reduce U.S. greenhouse-gas emissions and wean the country off fossil fuels. Mr. Biden has said he is still committed to his climate agenda. But he has said that because the U.S. will continue to rely on fossil fuels in the short term, his administration must take steps to lower prices to help consumers.
In January on his first day in office, President Biden revoked a permit for the Keystone XL oil pipeline. His administration has sought to incentivize wider use of electric vehicles and curb new drilling on federal land, though the administration moved forward this week with a massive lease sale for oil and gas drilling in the Gulf of Mexico.
As gas prices soared in recent months, some of Mr. Biden’s senior advisers have urged him to release oil from the national Strategic Petroleum Reserve, but the administration hasn’t done so. Asked about the impact on prices of an SPR release, Stephen Nalley, the acting EIA administrator, told a Senate committee this week, “Ultimately the amount of impact would be relatively short-lived. It would depend on how much was released.”
Mr. Biden’s letter comes after National Economic Council Director Brian Deese urged Ms. Khan in August to look into “divergences between oil prices and the cost of gasoline at the pump.”
In response, Ms. Khan said the commission would examine potential unlawful business practices in the oil and gas markets. She said she would take steps to deter unlawful mergers in the industry, “identify additional legal theories” to challenge retail fuel station mergers that allow large companies to buy family-run businesses, and investigate alleged abuses in the franchise market.
Write to Andrew Restuccia at andrew.restuccia@wsj.com and Katy Stech Ferek at katherine.stech@wsj.com
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