A Wasteful Investigation

The FTC has completed its investigation of high gasoline prices in the summer of 2006 and concluded that oil companies did not conspire to raise prices:

… price increases during the spring and summer of 2006 were attributable to six factors: (1) seasonal effects of the summer driving season; (2) increases in the price of crude oil; (3) increases in the price of ethanol; (4) capacity reductions stemming from refiners transition from the fuel additive methyl tertiary-butyl ether to ethanol; (5) refinery outages resulting from hurricane damage, other unexpected problems or external events, and required maintenance; and (6) increased consumer demand for gasoline beyond the seasonal effects of the summer driving season.

Quelle surprise. What a waste of taxpayer money. Any economist worth their salt could've predicted this outcome. This investigation was politically motivated grandstanding, as have been similar investigations in the past. It's outrageous that taxpayers have to fund this stuff.

The full report is available online, and is very interesting reading. For example, would you believe that ethanol was responsible for a significant part of the higher gasoline prices? Read the report!

There was one dissenter on the commission: Commissioner Leibowitz's dissent is also available online. It is one paragraph long and reads like a petulant sneer:

The oil industry, which posted record profits in 2006, should not view this Report as in any way a vindication of its behavior. Commission staff identified some plausible justifications for the unexpected and dramatic price spikes that bedeviled consumers in the Spring and Summer of 2006, and that raised the average price of gasoline to more than $3.00 per gallon in August of that year. The fact remains, though, that most of what we did here was develop a theoretical model for why gasoline prices likely increased. This is not an unreasonable approach, given that just last year we completed an exhaustive investigation into gasoline pricing in the aftermath of hurricanes Katrina and Rita. That investigation found price gouging by refiners under the Congressionally mandated definition and, beyond that, disturbing conduct by even more petroleum companies. But the question you ask determines the answer you get: whatever theoretical justifications exist don't exclude the real world threat that there was profiteering at the expense of consumers.

Commissioner Leibowitz presents no empirical support for his narrative, and not even a "theoretical model" to explain what happened. He simply asserts that "there was profiteering at the expense of consumers" despite evidence to the contrary, catapulting him into the pantheon of political gasbags drifting without tether to reality.

Well, it's as I said three years ago… anger over "price gouging" isn't about economics.