Inconvenient News,
       by smintheus

Thursday, May 17, 2007

  Gonzales refused to permit an investigation into gas-price gouging

Image Hosted by ImageShack.usAttorney General Gonzales appears to think that his main duty is to block investigations of wrongdoing. In recent appearances before Senate and House investigations of the firing of US Attorneys, his memory of events has been so faulty as to be nearly pathological.

Something there is that doesn't love a wall...

That's far from the only major investigation that Gonzales has blocked. He also urged George Bush to shut down an independent investigation of the illegal NSA domestic spy program being conducted by the Justice Department's Office of Professional Responsibility. Bush did so in one of the most outlandish ways possible—by denying the investigators the security clearances they needed to review relevant documents.

Shortly before Attorney General Alberto Gonzales advised President Bush last year on whether to shut down a Justice Department inquiry regarding the administration's warrantless domestic eavesdropping program, Gonzales learned that his own conduct would likely be a focus of the investigation, according to government records and interviews.

Bush personally intervened to sideline the Justice Department probe in April 2006 by taking the unusual step of denying investigators the security clearances necessary for their work.

Years ago I argued that one simple theme ties together, and would continue to link, all of the scandals of the Bush administration: stonewalling.

Every time Bush Co. have been faced with revelations of wrongdoing, their automatic response has been to stonewall. You remember's the thing about them that infuriates you perhaps the most of all...Stonewalling is a gift that keeps on giving. There is no good end that may come of stonewalling, once it's begun...And even the most casual observer of the news knows that it is a bad sign that the administration is stonewalling.


I thought of that long history of obstructionism while I perused the testimony yesterday before the House Judiciary Committee's Anti-Trust Task Force. The hearings concerned "Prices at the Pump: Market Failure and the Oil Industry".

The Connecticut Attorney General, Richard Blumenthal, testified that he and other states' Attorneys General asked Gonzales in 2006 to initiate a federal investigation of price gouging by oil industries.

...a meeting that I had with the United States Attorney General less than a year ago, involving a number of my colleagues from all around the country, both Republican and Democrat Attorneys General, who met with him and the chairman of the FTC with the single purpose of persuading them to begin a federal investigation. And unfortunately, our plea went unheeded then — there has been no effective federal investigation.

“We pleaded with Attorney General Gonzales and FTC Chairman Majoras, Platt, [sic] to begin an investigation of the oil industry, and we offered our partnership in that work. All 50 Attorneys General have hands full investigating monopolistic abuses on the part of the oil industry, but we lack the authority, and expertise, and resources of the federal government. And so we invited, we beseeched the federal government to join us in that investigation and so far they have declined to do so.

“There is a need to provide greater authority but also to use that authority effectively to enforce the law. The law without enforcement is dead letter. And so, as we review what can be done to change the law, I think at the top of the priorities ought to be the kinds of demands that you have made, Mr. Chairman, and other Members of the Committee and Congress, that the Justice Department be more vigorous in enforcing these laws that protect against anti-trust and consumer abuses.

There are few enough laws that Gonzales seems to be interested in enforcing, and anti-trust statutes just don't figure among them.

Blumenthal appears to be aware of how complex the background to the oil and gas price gouging is, which is precisely why the states are looking for the unifying and broader assistance that only the federal government can give to their individual efforts to hold these corporations accountable to the law. Here are some points made in Blumenthal's prepared testimony:

Despite industry claims that high gas prices simply reflect the rise in the price of crude oil, and that the lack of new refineries in the U.S. has ensured that prices will be steep, Blumenthal argues that these can explain only a part of the hugely inflated gas and oil prices. The Senate and public watchdog groups, such as Public Citizen, have found in recent years that mergers and consolidation in the industry "concentrated too much power in too few companies". The lack of competition has resulted in "artificially high prices and unconscionable profits". Blumenthal also cited a new article in the Journal of Economic Analysis and Policy, which reaches similar conclusions about the effect of mergers and oil market consolidation.

The top five companies now control 61% of the gas stations in the U.S. (that's more than twice as many as they controlled in 1991). The same companies also control 50% of the nation's oil refinery capacity (again, that figure has nearly doubled in recent years).

A GAO study in 2004 of 8 major oil industry mergers found that 6 of them "caused higher prices for consumers". It also found that lax enforcement of anti-trust law by the Federal Trade Commission allowed oil industry mergers that, among other things, led to excessive concentration of refinery capacity in the hands of a few large corporations. A second GAO study in 2006 found that the industry deliberately keeps fuel inventories low in order to keep consumer prices high.

In 2005, the Congressional Research Service found that the highest profits in the industry are in the refining and marketing of oil; thus the spike in prices was only marginally due to the rise in crude oil costs.

When states have attempted to block or impose needed conditions on mergers in recent years, they've gotten precious little help from the FTC.

Meanwhile, Blumenthal says, even if these few large companies are not illegally colluding to keep prices high, they exhibit a "herd mentality" in which one corporation's decision to restrict refining and production in one area of the country is matched by the other corporations.

He makes several recommendations to Congress, including the increase of refinery capacity and a joint federal/states investigation of sharp industry practices. He also urges a moratorium on further oil industry mergers, and the breakup of companies that engage in predatory acts (such as withholding gas to boost its price).


I also recommend that you read the testimony of Mark Cooper of the Consumer Federation of America. He makes many excellent points about monopolistic trends in the oil industry, and his charts document these well.

Cooper also reported that the average family's expenditures on gasoline have doubled in the last five years. Families in rural areas are paying the most now, well over $2500 per annum for gas.

crossposted from Unbossed

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