The People of America's Oil and Natural Gas Indusry

New Rule Penalizes Petroleum

Jane Van Ryan

Jane Van Ryan
Posted August 6, 2009

Today, the Federal Trade Commission (FTC) announced a new petroleum market "price manipulation" rule that could lead to a less competitive market--hurting American consumers of gasoline, diesel and other petroleum products. Furthermore, it could discourage companies from providing information to the marketplace.

Unlike other unfair practices, for which the penalty is $11,000 per violation, the maximum penalty here is nearly 100 times greater--$1 million--and it compounds daily until a violation is rectified. This clearly is an overreaction by the FTC when strong deterrents already are in place. However, we are pleased that the commission recognized the need to provide 90 days for industry to design and implement compliance programs.

API member companies believe in an open and transparent marketplace. There have been numerous and extensive FTC investigations of the industry that haven't uncovered any evidence that market manipulation has distorted petroleum markets or harmed consumers. In fact, these investigations found that prices are primarily determined by supply and demand fundamentals.

Last summer's higher gasoline prices were essentially the result of higher costs to produce gasoline--higher crude prices as a result of a tight global supply and demand situation led to higher prices at the pump. It's also important to note that lower demand for oil products have led to much lower prices for crude oil, gasoline and other fuels over the past year.

Read more about market fundamentals and supply and demand issues.