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July 03, 2006

What happened to gas prices last year?

When gas prices jumped to $3.50 a gallon last year after hurricanes Katrina and Rita, there were charges of price manipulation and price gouging by oil companies and gas sellers. Dr. Mike Walden, an N.C. State University economist, outlines what a government agency has to say in a recent report about those charges.

"And this was an exhaustive study. It was done by the Federal Trade Commission; these are not political appointees -- no politics here. These are staff, career economists and others," he says.

"You can go online to the FTC’s web site and pull down their report. What they found bottom line here is no evidence of either price manipulation or price gouging. They found no evidence of companies for example withholding supply to raise prices. They found no evidence of price levels being higher than market conditions at the time would warrant.

"And they concluded," Walden says, "that the very simple reason for the high prices after those hurricanes was that the hurricanes caused a major reduction in the supply of oil and gas products. And whenever you have that, you are going to have an increase in price.

"Case closed."

Posted by deeshore at July 3, 2006 08:00 AM