The investigation is believed to be the first in the country to target the industry’s ongoing onslaught of high pump prices, and comes when some Democrats doubt whether oil companies are benefiting consumers.
The investigation in New York is extensive and looks at the entire supply chain of the state, from production to the pump, CNN has learned.
The study will focus not only on large oil companies that supply oil to the state, but also refineries that convert crude to gasoline, as well as independent operators of pipelines and terminals, the source said.
The New York Price Increase Act gives the authorities broad powers to investigate entire supply chains involving all actors, including manufacturers, retailers, distributors and shipping companies.
According to the Attorney General’s website, state law prohibits “unknowingly excessive” prices, including both “unknowingly extreme” prices and prices set by “unfair leverage or unfair means”.
It is not clear what evidence, if any, public authorities have of potential price increases.
“Rising gas prices are forcing working New Yorkers and low-income families to make difficult decisions about whether to pay their bills or put food on the table,” James told CNN. “Rising prices are unfair and illegal and my office is determined to make sure this does not happen in our state.
Rockets and pens
The prices of the pump are oriented from the oil market.
Oil prices have risen over the past two years for a variety of reasons, including strong demand as Covid slows the slow return of US and OPEC supplies off offline at the start of the pandemic. The war in Ukraine led to a sharp rise in oil prices last month to its highest level since 2008, pushing gas prices to record highs.
The New York investigation comes just weeks after President Joe Biden called for a faster drop in gas prices as oil fell from its highest level since the invasion.
Biden called for the tendency for gas prices to rise like a rocket when oil jumps, but only to fall like a feather when oil collapses. The White House has drawn attention to a decades-long trend known as rockets and feathers that critics say hurts consumers by not passing on savings to drivers.
The focus of the investigation at this stage is on understanding downstream pricing and not necessarily at the retail level, a person familiar with the matter told CNN.
Tom Klose, global head of energy analysis at the Oil Price Information Service, looked at price data from more than 5,000 gas stations in New York and said the summary so far this year “shows nothing out of the ordinary.”
“There are always a few bad seeds that have high prices in small small communities where convenience is everything,” Klose said in an email. “So AG can find several stations, but the huge number of operators is unlikely to fall into any free definition of ‘digging’ that politicians choose.”
Klose added: “For me, carving is spreading at Yankee Stadium. How much do they make from a hot dog and a bottle of water?”
NY AG asked the public for receipts and photos
After Biden banned Russian oil imports from the United States last month, New York’s attorney general warned oil companies and gas stations that raising prices was illegal.
In a statement at the time, James urged people experiencing a sharp rise in fuel prices to contact her office to announce dates and times of price increases and provide copies of sales receipts and photos of advertised prices. James promised to do “everything we can to protect consumers.”
The American Petroleum Institute, the trading group representing the oil and gas industry, told CNN that pump prices were a function of increased demand, supply lag, “geopolitical turmoil and political uncertainty from Washington.”
“This is an industry of pricing, not pricing, and countless investigations into history have shown that changes in gasoline prices are based on market factors,” said API spokeswoman Bethany Williams.
However, the industry had previously defended itself against accusations that it would seek to profit from Russia’s invasion of Ukraine. After Biden warned the oil industry in late February not to “exploit this moment”, API CEO Mike Somers told CNN: “Our companies will never take advantage of this situation.”
“Kidnapping the American People”
Critics of the oil industry often point out that companies attract huge profits and huge sums of money are given to shareholders in the form of dividends and repurchases.
“During this Russian war, you are uprooting the American people and it must end,” California Democrat MP Raul Ruiz told Big Oil executives during a hearing last week.
However, it is worth noting that oil companies lost huge sums of money in 2020, when crude oil fell below zero for the first time. Dozens of oil companies went bankrupt during the downturn.
However, officials in some states recently called for an investigation into potential price increases.
In early March, Massachusetts Secretary of the British Community Bill Galvin called for an investigation into whether oil and gas companies were raising prices.
“They have the right to profit. They have no right to excessive profits, “Galvin told WBZ-TV at the time.
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