FTC gasoline price probe finds nothing illegal

WASHINGTON (Reuters) - The U.S. Federal Trade Commission said on Monday it had found no evidence that oil companies illegally manipulated gasoline prices or constrained oil refining capacity to restrict supply.

The investigation found some instances of questionable gasoline price increases in the wake of Hurricane Katrina last year, but no evidence that companies helped foster a run-up in prices since 2002 by restricting refining capacity or cutting inventory, the FTC said.

The probe concluded that the spike in gasoline prices after Katrina hit in late August and Hurricane Rita in September, was in line with "standard supply-and-demand model of a market performing competitively," the FTC said.

"The conduct of firms in response to the supply shocks from the hurricanes was consistent with competition," the FTC said.

The FTC said it had found 15 examples after Hurricane Katrina that fit lawmakers' definition of price-gouging at the refining, wholesale, or retail level. In ordering the report, Congress told the FTC to define price-gouging as any rise in price that occurs without a corresponding increase in cost or other explanation.

However the FTC said factors like regional and local market trends appeared to explain the pricing in nearly all of the 15 questionable cases.

Many states have laws against price-gouging, but there is no federal law against excessive price increases. The FTC expressed skepticism about passing such a law, saying it would be difficult to define and enforce.

U.S. government officials have come under increasing pressure to do something about soaring fuel costs at a time when oil companies and refiners are collecting record profits from gasoline prices that hover around $3 a gallon in many parts of the country.

Energy experts say current high gasoline prices are mainly the result of rising crude oil costs. Crude costs have been rising because of strong global demand, especially from the growing economies of India and China. Also, concerns about future supply disruptions linked to militant attacks on Nigeria's oil facilities and the West's dispute with Iran over its nuclear program have driven prices higher.

Before Katrina struck, Congress asked the FTC to examine if refinery capacity or some form of market manipulation was behind rising gasoline prices. A post-Katrina pricing probe request was then rolled into one investigation.

The FTC previously conducted about a dozen similar gasoline price probes over the years and never found the oil industry at fault.

An official with the industry's trade group, the American Petroleum Institute, said on Monday that the report "confirms what several dozen previous federal and state investigations have found, that there have been no anti-competitive practices by the oil industry and its companies."

"I don't know what more we can say other than the companies are acting honorably and in the best interests of customers and shareholders," API CEO Red Cavaney told Reuters Global Energy Summit.

A prominent critic of the industry on Capitol Hill, New York Democratic Sen. Charles Schumer, criticized the FTC report as inadequate and accused the major oil companies of setting prices "higher than what real competition would merit."

(Additional reporting by Ben Berkowitz in New York)