NCPA - National Center for Policy Analysis


April 10, 2007

With Congress potentially moving forward on a law to penalize oil and gas companies for price gouging, a new study from the American Council for Capital Formation says doing so would cost the economy about $1.9 billion during a national emergency on the scale of hurricanes Katrina and Rita.

According to the study's authors:

  • Price gouging legislation would cause long lines at service stations and fuel shortages reminiscent of the 1970s energy crisis.
  • Oil companies, worried about being penalized for gouging, would shy away from paying higher prices to bring in more supplies.
  • Legislation would distort prices, causing energy giants some reluctance about exploring for new supplies.

Nevertheless, Rep. Bart Stupak (D-Mich.), along with 85 other House members, has introduced a bill that would establish the first federal law against price gouging by oil and gas companies, imposing criminal penalties and fines of up to $150 million for companies and $2 million on individuals, who could also face jail sentences.

Stupak's bill would give the Federal Trade Commission (FTC) the power to investigate and fine companies and people who hike the price of energy. The rules would cover gasoline, heating oil, natural gas, crude oil and propane.  But FTC Chairwoman Deborah Platt Majoras has said a federal law against oil company price gouging would be difficult to enforce and could hurt consumers by causing fuel shortages.

Source: Alan Zibel, "Price gouging gas bill costly," Kansas City Star, April 10, 2007.


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