A new Washington Post-ABC News Poll shows that 94 percent of Americans are concerned about inflation as it soars to a 40-year high. High inflation is wiping out wage increases and leading to higher prices for consumers. One of the most prominent increases is in energy costs, with the average price of gas eclipsing $4 per gallon at the pump. Facing immense political pressure, some Democrats want the Federal Trade Commission (FTC) to crack down on supposed “price gouging” and shift the blame from the government to the private sector. Consumers shouldn’t be fooled by this ploy.
According to reports, Democrats are proposing legislation that would empower the FTC and state Attorneys General (AGs) to penalize oil and gas companies and retailers with penalties as high as $2 million per day. Senate Majority Leader Chuck Schumer (D-NY) says this “is at the very top of our list.” However, an investigation and higher penalties for oil and gas companies is not a new playbook, nor is it one that will likely play out any differently this time around.
In November of last year, President Biden wrote a letter to the FTC urging the agency to investigate oil and gas companies for “anti-consumer” behavior as gas prices and inflation rose. Biden is not the first president to pursue such action. President George W. Bush urged the FTC to investigate gas prices following Hurricane Katrina, and President Barack Obama formed the “Oil and Gas Price Fraud Working Group.” Unsurprisingly, these past efforts have largely reaffirmed that supply and demand is the main culprit for price changes, not “greed” or nefarious activity.
Politicians want to telegraph that they are “doing something” about the issues voters care about. This can be seen with Biden’s move to release oil and gas from the Strategic Petroleum Reserves, which will eventually need to be restocked. Democrats have also floated a gas tax holiday, as well as direct rebates to Americans. Other Democrats have gone in a different direction by threatening a windfall tax on oil and gas companies, a tried and failed idea.
There are few tools at the disposal of lawmakers to quickly reduce the price Americans are paying at the pump, which leads to some of the political signaling and blame shifting we are currently seeing. However, this would be the time to look inward and evaluate what long-term reforms and changes need to be made. Rather than attempt to expand government, lawmakers should look at where government gets in the way of domestic production and unnecessarily drives up costs for companies and consumers.
The current environment is undoubtedly challenging due to the global pandemic, a war in Ukraine, economic sanctions on Russia, and major supply chain issues. Lawmakers are not powerless to act, and they should seize this opportunity to evaluate what the government has done wrong (terminating the Keystone XL pipeline, suspending oil and natural gas leases, etc.) and what can be done to mitigate harms to consumers during future market fluctuations. The reforms may not be a headline grabber like greenlighting the FTC to go after Big Oil, but consumers and taxpayers would be better served with a thoughtful and realistic approach to the issue.
Will Yepez is a Policy and Government Affairs Manager for National Taxpayers Union.