The probe is believed to be the first in the nation directed at the industry for the ongoing bout of high pump prices and comes as some Democrats question whether oil companies are taking advantage of consumers.
The New York investigation is broad, examining the state’s entire supply chain, from production to pump, CNN has learned.
The probe will focus not only on major oil companies that supply oil to the state but refineries that turn crude into gasoline as well as independent operators of pipelines and terminals, the source said.
New York’s price gouging statute gives authorities wide power to investigate entire supply chains, covering all actors including manufacturers, retailers, distributors and shipping firms.
It’s not clear what evidence, if any, state authorities have of potential price gouging.
“Soaring gas prices are forcing working New Yorkers and low-income families to make difficult decisions on whether to pay bills or put food on the table. Price gouging is unfair and illegal and my office is determined to make sure it doesn’t happen in our state,” James said.
Rockets and feathers
Prices at the pump take their cues from the oil market.
Oil prices have surged over the past two years for a variety of reasons, including strong demand as Covid subsides and the slow return of US and OPEC supply taken offline at the onset of the pandemic. The war in Ukraine sent oil prices skyrocketing last month to the highest level since 2008, driving gas prices to record highs.
Biden called out the tendency for gas prices to go up like a rocket when oil spikes, but only drop like a feather when crude crashes. The White House drew attention to a decades-long trend, known as rockets and feathers, that critics argue hurts consumers by failing to pass savings along to drivers.
The focus of the investigation, at this stage, is on understanding price-setting further up the supply chain and not necessarily at the retail-level, the person familiar with the matter told CNN.
NY AG asked public for receipts and photos
After Biden banned US imports of Russian oil last month, the NY attorney general warned oil companies and gas stations that price gouging is illegal.
The American Petroleum Institute, the trade group that represents the oil-and-gas industry, said in a statement to CNN that prices at the pump are a function of increased demand, lagging supply, “geopolitical turmoil and policy uncertainty from Washington.”
“This is an industry of price takers, not price makers, and countless investigations throughout history have shown that changes in gasoline prices are based on market factors,” said API spokesperson Bethany Williams.
“Ripping the American people off”
Critics of the oil industry often note the massive profits companies are hauling in and the vast sums of money being lavished on shareholders in the form of dividends and buybacks.
However, it’s worth noting that oil companies lost enormous sums of money in 2020 when crude crashed below zero for the first time ever. Dozens of oil companies went bankrupt during the downturn.
Still, officials in some states have recently urged probes into potential price gouging.
In early March, Massachusetts Secretary of the Commonwealth Bill Galvin called for an investigation into whether oil and gas companies are price gouging.
