FTC Agrees to Investigate High Fuel Prices at Senator Dick Durbin's Request

May 14, 2008 -- WASHINGTON, DC – At the urging of United States Senator Dick Durbin (D-IL), the Federal Trade Commission (FTC) today agreed to launch an inquiry into the record high fuel prices facing American consumers. The commission, which is responsible for investigating consumer protection and competition issues in broad sectors of the economy, announced the investigation at their annual budget hearing before the Senate Appropriations Financial Services and General Government Subcommittee, which Durbin chairs.

“As summer approaches drivers and air travelers across America are feeling the heat from record high fuel prices and projections suggest it’s only going to get worse,” Durbin said. “Yet these record-breaking prices are coming at time when the oil industry is reporting record-breaking profits. I’m pleased that the FTC is taking the issue seriously and has opened an investigation; we must ensure that American consumers are not falling victim to price-gougers and profiteers.”

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Last month, Durbin sent a letter to the FTC asking for an investigation into the recent spikes in fuel prices. The FTC is tasked with investigating anticompetitive business practices. In addition, the commission monitors gasoline and diesel prices and can take enforcement actions for violations of antitrust laws. The FTC last investigated high gas prices in the aftermath of Hurricane Katrina in 2005. Testifying at today’s hearing were FTC Chairman, William Kovacic and FTC Commissioner Jon Leibowitz.

Durbin noted that today, the average gas price reached an all time nationwide high of $3.73 a gallon, according to AAA. Many analysts predict that gas will reach $4.00 in the near future. And recent polling shows that a majority of Americans believe that gas prices could exceed $6 a gallon in the next few years.

Transportation agencies and airlines are also feeling the pinch. Nationally, diesel prices are also at record high levels. The Chicago Transit Authority is projecting that they will be more than $25 million over budget by year’s end because of the high cost of diesel fuel. Shipping prices have also gone up because of increased fuel costs paid by commercial truckers causing a price increase on many consumer goods, including food.

Airlines are faced with a growing gap between the cost oil and the price they pay for jet fuel. The increase in the spread between the cost of crude oil and the price airlines pay for refined jet fuel is at its widest gap ever. Last month, United Airlines announced it lost nearly $540 million in the first quarter of this year due to soaring fuel costs - the cost of which more than offset its record profits.

In addition to FTC’s investigation into gas prices, today’s hearing focused on FTC’s FY09 budget request. The agency is requesting a 5% budget increase for the new fiscal year raising their budget to $256.2 million. The increase would to towards increasing staffing levels in the area of consumer protection and enforcement of antitrust laws.

Today’s hearing also discussed FTC’s work in the following areas: subprime lending investigations and other unfair and deceptive practices in the financial services arena; “Green” Marketing (guidelines for representing environmental attributes of products); identity theft and other privacy issues.

Source: Senator Dick Durbin