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Cantwell should check her oil shtick
Sen. Maria Cantwell has made it a centerpiece of her re-election effort to make accusations against the oil companies. As long as it is a call for information, there is a solid argument for it.
Certainly, government should have the power to investigate the pricing of a commodity as crucial as oil. But in comparing the oil companies to Enron, she has gone further than this. Notably, the latest government report by the Federal Trade Commission does not back her up. The FTC, in a report signed by all five commissioners, including an independent and a Democrat, found "no instances of illegal market manipulation that led to higher prices."
In a press release May 22, Cantwell claimed the report "shows evidence of price gouging." But gouging had been defined in the authorizing law as any price higher after Hurricane Katrina than before it. The FTC did find price increases, but it said they were about what would be expected in a competitive market.
Cantwell suggests the oil companies may be "Enron-style profiteers." She refers to the Western electricity crisis of 2001, which occurred in a regional market, effectively unconnected to the rest of the world, subject to untested rules imposed by the state of California. Energy traders figured out how to manipulate that market by shutting down power plants for phony maintenance. Through duplicity, they pushed up electricity prices more than tenfold.
The law defines and forbids fraud, collusion and deceptive practices. Cantwell offers a bill that additionally makes a federal crime of "gouging," which is a vaguer thing.
In an economic system in which the seller may charge what the market will bear, it is unclear how to define gouging — and Cantwell's bill does not try. It defines the penalties — up to $3 million a day — but instructs the FTC to define the crime.
Of two charges against the companies, the first does not stick and the second is undefined. Cantwell's case may improve; she has asked the Government Accountability Office to do a new study, which may be a smart thing. But so far, the latest and best information does not support our junior senator's election-year alarms.
Copyright © 2006 The Seattle Times Company