WEBVTT

NOTE What Constitutes Price-Gouging in the Oil Industry?

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News that oil companies are once again posting huge profits has been greeted with loud protests,

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especially from members of Congress.

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Both Republicans and Democrats have suggested penalizing anyone who takes advantage of the

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imbalance between supply and demand.

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But as NPR's Alex Markells reports, going after those who raise prices may have more

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to do with political posturing than with keeping a lid on gas prices.

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Ask the folks pulling up to the Chevron station near Washington's Watergate Hotel how they

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feel about paying $3.30 for gas, and the same word keeps popping up.

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Gouge. Really gouge. It just seems like a price gouge.

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I definitely feel like I'm being gouged at the gas pump.

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Like a lot of his fellow customers, Ben Fuller thinks he knows who's to blame.

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Oil companies have windfall profits while they're saying they can't do anything to

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give us an easier time at the pump.

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That kind of frustration led a group of congressmen to gather at a BP station on Capitol Hill

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last week to talk up their ideas for fighting soaring gas prices.

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Along with proposals to open new areas to drilling and reduce restrictions on fuel mixtures,

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the congressmen, who pulled up in two hydrogen-fueled minivans, called for federal legislation to

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help keep consumers from getting taken at the gas pump.

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House Speaker Dennis Hastert thinks it could make a difference.

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We will ask the Federal Trade Commission and the Attorney General to make sure that there

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is no price gouging, that there isn't any manipulation of the prices.

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There's no magic wand, but we do those things, I think you can see almost an immediate drop

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in the fuel prices.

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Florida Republican Adam Putnam says his state first enacted anti-gouging legislation after

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people took advantage of the situation when Hurricane Andrew hit.

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People were charging gouging rates for ice and plywood and things like that in the middle

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of hurricanes.

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There's a legal model out there. We want to standardize that model so that states that don't have gouging laws will now.

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But like most state anti-gouging laws, Florida's statute only applies during a state of emergency, and it defines price gouging as

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charging an amount that grossly exceeds the average price in the 30 days before the emergency was declared.

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Because of that, economists say such laws won't have any effect on gas prices now, when there's no emergency, and when demand is simply outstripping supply.

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Even in emergencies, they warn that anti-gouging laws often don't do what they're intended to.

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Anti-price gouging laws really harm the people that they're meant to help.

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Mark Thornton is an economist with the Libertarian Mises Institute in Georgia.

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He points to recent hurricanes in the Gulf Coast, where anti-gouging laws kept many stations from raising their prices.

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If the law wasn't in effect and gas stations were allowed to raise their prices, they would have raised their prices significantly,

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and people would have only purchased the gasoline necessary to get to safety, leaving more gas for the people to come behind them.

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But Thornton says that's not what happened.

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What Happened? The people who came later ended up finding gas stations with no gas and ended

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up being stranded along the interstate. With the latest price spike, many people figure

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gas sellers are simply taking advantage of the situation. Economists like Sam Peltzman

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at the University of Chicago say there's little evidence of collusion or price fixing in the

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market. If you just drive down a main street, you'd see how hard it would be to do that.

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So then why are congressmen so eager to pass anti-gouging legislation?

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Of course if they really wanted to make some political hay, they might try going after

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6.50? Really? That's almost as much as a movie for popcorn?

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If they're going to do it for gasoline, they should definitely do it for popcorn.

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for NPR News.