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Monday, April 24, 2006
Posted 11:12 PM by

Gas pains: Rendell's call for oil profit tax a bit hard to stomach

While Pennsylvania Gov. Ed Rendell and U.S. Sen. Arlen Specter call for a windfall profits tax on oil companies amid soaring prices, both Congress and the state failed to properly probe gas gouging allegations last year. Pa. also still has the third highest state gas tax in the nation.

If Gov. Ed Rendell wants to lower gas prices, why doesn't temporarily lower the state's 31.1 cents per gallon gas tax - the third highest in the nation?Was Gov. Ed Rendell being earnest, making a political statement for the Democratic Party he once chaired or just doing some electioneering Monday when he called on President George Bush to pass a windfall profits tax on oil companies?

Perhaps a mix of all three.

"It is simply bad economic policy to let profiteering continue unabated," Rendell said at a news conference next to pumps at a Harrisburg gas station. "There is no excuse for this - absolutely no excuse. It's embarrassing."

In 1999, U.S. oil refiners made 22.8 cents for every gallon of gasoline refined from crude oil, according to Rendell. Last year, they made 99 cents on each gallon sold.

I won't argue that oil companies are reaping record spoils and I can't dispute the accuracy of Rendell's numbers. However, I think he fails to factor in the rise in both inflation and gasoline demand over those seven years.

His motives, however, are bolstered by Republican U.S. Sen. Arlen Specter, who similarly called Sunday for a tax on excessive oil profits.

What Rendell and Specter will only hint at publicly is that this latest round of gas gouging was probably preventable.

Why did oil companies wait until the normal spring driving upswing to switch from the chemical additive MTBE to Ethanol in the refining process, which they blame in part for the current shortage?

They had plenty of time to do it in winter, when gasoline demand is normally lower, and which turned out to be one of the warmest on record in the Eastern U.S. With the drop in demand for natural gas, they should have been able to make the switch long before now.

Of course, if Congress had only acted last year when they hauled oil company executives in to testify about the Bush Administration's secret energy policy meetings, the companies might have thought twice about playing games like this.

The state also shares some blame.

Pennsylvania Gov. Ed Rendell is pushing for passage of a new price gouging law, which would raise the fin to $10,000 a day for anyone convicted of profiteering.Pennsylvania has the third-highest gas taxes in the nation - 31.1 cents per gallon - which it uses to pay for road maintenance. That's up from 25.9 cents per gallon just two years ago. Only Wisconsin and New York now have higher state taxes, 32.1 cents and 31.9 cents respectively.

Why not cut the state tax rate in the short term to give drivers a break? Oh I'm sorry, why should the state give up any revenue when it's more economical for Rendell to score political points at a gas pump?

While he was there, Rendell also said he hopes the current prices prompt the state Senate to pass Bill 450, which calls for a fine of up $10,000 a day for anyone found guilty of profiteering.

One can only wonder if state Attorney General Tom Corbett's office had more aggressively pursued profiteering cases against gasoline retailers last year, would they now be more hesitant to raise prices on a daily basis?

Out of the 1,000 gas gouging complaints Corbett's office received last summer, only about half were investigated, spokeswoman Barbara Petito told the Associated Press two weeks ago.

Of those 500 investigations, only two cases of price gouging were actually prosecuted.

On Sept. 1, three days after Katrina hit, the Valley General Store in Petersburg got a fuel delivery on Sept. 1, three days after Katrina hit, and paid about $3.35 per gallon, court papers state. But the store unfairly markedup the price to $3.99, putting its pumps 80 cents higher than the average price in the surrounding area,

At the Turkey Hill in Mountaintop, regular gas went up 30 cents to $3.19 on Sept. 2. At the chain's store in Shillington, the price shot up 56 cents to $2.99 over just three days even though the wholesale cost did not change.

All three stations agreed to settle the charges without admitting any wrong doing and have been fined a total of $7,000.

What's the use of hiking a potential fine for price gouging when state Attorney General Tom Corbett only prosecuted two cases of it last year despite getting 1,000 complaints.More charges could come, Petito said.

My question is why even bother pursuing it if you're not going to make examples of the stations that do gouge? I'm sure it cost the state more than $7,000 in manpower and attorney fees to prosecute those two cases.

This in a state where the governor just accused President Bush of having a "bad economic policy to let profiteering continue unabated."

New Jersey also has a law on the books against gas price gouging. And while that state similarly let two profiteering oil companies settle cases without admitting any wrongdoing, their fines totaled $640,000.


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