Key US lawmaker skeptical of energy price-gouging claims

ogj.pennnet.com Maureen Lorenzetti Washington Editor

WASHINGTON, DC, Feb. 27 -- Allegations of price-gouging in energy markets may be based on frustration, not facts, Senate Energy Chairman Pete Domenici (R-NM) said Wednesday.

Natural gas and crude oil prices have soared in the past few weeks, the lawmaker acknowledged, but the sudden increases likely are market-related, Domenici said.

"This week, wholesale natural gas prices jumped 38% in 1 day. The spot markets jumped even higher. Wholesale natural gas prices are at $7.15/MMbtu. Crude oil is trading at $37/bbl," he said. But, he added, "We've been down this road before. We were here 2 years ago. Prices were just as high, driven by rising demand and tight supply."

And this time around, it's a good bet that the same market forces are at work, Domenici said.

Congressional concerns Some legislators, particularly those from large energy-consuming states such as New York and California, voiced concerns that fuel suppliers may be taking advantage of a jittery market spooked by a series of seemingly daily geopolitical crises among the world's larger oil exporters: lingering strikes in Venezuela, growing unrest in Nigeria, and possible military action in Iraq.

Sen. Charles Schumer (D-NY), a vocal critic of the Bush administration's energy policies, wants the Federal Trade Commission to investigate whether consumers are being gouged for their purchases of heating fuel and gasoline. He also called on the White House to release oil from the Strategic Petroleum Reserve to help bring prices down.

"Having but not using the SPR is like having an ace in the hole and saying you're not going to play the card," Schumer said. "This is no longer a partisan issue. Republicans in Congress just joined me in the call to open the reserves. The Bush administration must take action now to reduce gas prices for consumers before the economy goes over the edge.''

Responding to Schumer and a growing chorus of East and West Coast lawmakers, Domenici urged "caution and careful consideration" before making such allegations. He added that federal regulators are monitoring the situation and so far have not found evidence to suggest manipulation. The New Mexico lawmakers also concurred with the White House that the SPR should be used only for sudden supply shocks (OGJ Online, Feb. 26, 2003).

"I understand the frustration and anxiety that prompts allegations of gouging and price-fixing. The natural gas market has been deregulated and is a free market," he said. "The Commodity Futures Trading Commission continues to monitor the market for manipulation. Meanwhile, the Federal Energy Regulatory Commission is taking action to ensure the integrity of gas price reporting to ensure consumers have accurate market information. These actions are responsible and prudent."

Domestic production needed One way to avoid future price spikes would be to produce more domestic energy, he suggested, echoing comments made by Sec. of Energy Spencer Abraham before the committee earlier in the week.

"Insufficient production is our core problem; allegations and rumors are just a temporary distraction. If we want to stabilize energy prices, we must produce more energy," he said.

The White House and Republican leaders say that to encourage domestic production, Congress should this year pass a comprehensive energy bill.

"If we don't, we will visit this scenario again and again. The use of natural gas in the production of electricity in this country is expected to double in the next several years. Virtually every power plant we're building relies on natural gas. That means these crises in supply and price will only get worse if we don't act swiftly and decisively.

"I am committed to passing a comprehensive energy bill that will provide affordable, reliable, and clean energy for all Americans. At the very least, we must give the president an energy bill that will increase our own domestic production," Domenici said.