House Targets Gas-Price Gouging

On Capitol Hill, the House approved a bill that would ban price gouging on gasoline. A joint House-Senate committee discuss a radical idea: force the five major oil companies to break up.

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STEVE INSKEEP, host:

Maybe this could save you a little bit on gasoline. Maybe. The House approved a bill that would ban price gouging on gas. A joint House Senate committee yesterday discussed a radical idea that Congress should force the five major oil companies to break up. Some in Congress say only a breakup could lower the price of oil.

They've found that few economists or industry experts agree with them though. NPR's Adam Davidson reports.

ADAM DAVIDSON: Senator Chuck Schumer started the hearings making it clear: He is on the side of regular working folks.

Senator CHUCK SCHUMER (Democrat, New York): Today, American families are getting a raw deal while oil companies make out like the robber barons of Roosevelt's time.

DAVIDSON: That would be Teddy Roosevelt, who was known as the trust-buster. Schumer echoed the trust-busting language of that earlier age.

Sen. SCHUMER: On the surface, it seems that big oil is pumping cash rather than petrol, strengthening profits rather than rusty pipes.

DAVIDSON: Schumer's basic argument is that the five major American oil companies are working together to keep prices high. They are letting their pipelines and refineries break down in order to limit supply and drive up prices. Schumer thinks that breaking up those big five into 10 or more smaller companies will mean more competition, which will somehow lead to more refineries.

Democratic representative Carolyn Maloney, also from New York, agrees that the price of oil is far too high, but she sees a different culprit.

Representative CAROLYN MALONEY (Democrat, New York): We see stubborn inaction and complicity on the part of this administration.

DAVIDSON: The Bush administration is to blame, Maloney says, because it has allowed so many mergers. She doesn't mention that the biggest merger of all, Exxon Mobil, occurred during President Clinton's administration. A Republican on the committee, Congressman Jim Saxton of New Jersey, didn't want to blame the president or the oil industry.

Representative JIM SAXTON (Republican, New Jersey): Any analysis of gasoline price ought to start with OPEC and the gross distortions it has wrought in the petroleum industry.

DAVIDSON: So you can take your pick. Blame high gas prices on OPEC or the president or on the oil industry. Representative Elijah Cummings, a Democrat from Baltimore, said the only thing he cares about is what Congress can do to help American consumers. He put that question to Michael Salinger, the Federal Trade Commission's chief economist.

Representative ELIJAH CUMMINGS (Democrat, Maryland): Are there things that we can do to make a difference?

Mr. MICHAEL SALINGER (Federal Trade Commission): Congressman, the only way we're going to bring down prices is to increase supply or curb demand. So I would ask the question, is this policy going to increase supply or is it going to reduce demand? Because a lot of the things that are being proposed are going to have exactly the wrong effect.

DAVIDSON: Like breaking up big oil companies, says Phil Verleger, an independent oil industry analyst.

Mr. PHIL VERLEGER (Oil Industry Analyst): It's a terrible idea to break up the oil majors if we want increased supplies of energy. If one wants to put Americans back on bicycles and go back to the horse and buggy, it would be a good idea.

DAVIDSON: Big oil companies, Verleger says, are more efficient. They can invest for the long term. They can do all sorts of things to increase supply and reduce costs. But, he says, only American consumers can reduce demand. And no matter how much they like to complain about high prices, Americans keep buying more and more oil.

Adam Davidson, NPR News.

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