Topic:
EMERGENCY PREPAREDNESS (GENERAL); ENERGY (GENERAL); DISASTERS; RETAIL TRADE; GASOLINE; PRICE CONTROL; FUEL PRICES;
Location:
DISASTERS; GASOLINE;

OLR Research Report


September 20, 2005

 

2005-R-0720

GASOLINE PRICING

 

By: Daniel Duffy, Principal Analyst

You asked if state law prohibits gasoline dealers from (1) price gouging or (2) raising the price of gasoline once it is in their tanks.

SUMMARY

The law does not prohibit “price gouging,” but it does prohibit all retailers from profiteering during declared emergencies, whether the disaster was declared by the governor under the civil preparedness law or the transportation law or declared by the president. Further, the law authorizes the governor to declare supply emergencies if there is a shortage, or a threatened shortage, of a product due to an abnormal market disruption.

The law also authorizes the governor to declare an energy emergency if there is an actual or impending acute shortage of usable energy resources. If she declares one, she can implement all or part of the Connecticut Energy Emergency Preparedness Plan, last updated in 1994. The plan includes encouraging the use of energy-efficient driving techniques and the possibility of imposing minimum and maximum gasoline purchase restrictions.

The law does not regulate gasoline prices or the manner in which retailers may set their prices.

PRICE GOUGING

The law prohibits profiteering during declared emergencies. Specifically, retailers may not raise the price of any item offered for sale in an area that is the subject of (1) a disaster emergency declaration issued by governor under the civil preparedness law, (2) a transportation emergency declared by the governor, or (3) any major disaster or emergency declared by the President of the United States (CGS 42-230). Further, the law authorizes the governor to declare a supply emergency if there is a statewide or regional shortage or threatened shortage of a product due to an abnormal market disruption resulting from a natural disaster, weather conditions, acts of nature, strike, civil disorder, war, national or local emergency, or other extraordinary adverse circumstance (CGS 42-231).

The Department of Consumer Protection operates a hot line for consumers to report instances of unfair gasoline prices. The number is 1-800-842-2649.

A related law, the Connecticut Antitrust Act, prohibits contracts, combinations, or conspiracies in restraint of trade (CGS 35-26). Among other things, it specifies that every contract, combination, or conspiracy is illegal if it fixes, controls, or maintains prices, rates, quotations, or fees (CGS 35-28).

Supply Emergencies

During a supply emergency, the law prohibits any retailer from selling a product that the governor has designated as being in short supply, or in danger of becoming in short supply, at a price that is more than the price it was sold for immediately before the declaration (CGS 42-232). Further, the law specifically prohibits selling an energy resource (defined to include gasoline) during a declared energy emergency at a price that is more than the price it was sold for immediately before the declaration. A violator commits an unfair trade practice and is subject to a fine of up to $1,000, one year imprisonment, or both, for each offense. An intentional violator or someone who has engaged in a pattern of behavior constituting repeated violations is subject to a fine of up to $5,000, five years imprisonment, or both. Each violation and each day on which the violation occurs constitutes a separate offense.

Energy Emergencies

The law authorizes the governor to declare an energy emergency if there is a situation in which the health, safety, or welfare of state citizens is threatened by an actual or impending acute shortage of usable energy resources. The law defines “energy resources” to include natural gas, petroleum products, coal and coal products, wood fuels, geothermal sources, radioactive materials, and any other resource that can yield energy (CGS 16a-2 and 16a-11).

In the event of an energy emergency, the governor can designate which parts of the state's energy emergency plan she intends to implement (CGS 16a-11). The law requires the secretary of the Office of Policy and Management to prepare an energy emergency plan that includes (1) programs concerning the allocation, rationing, conservation, distribution, and consumption of energy resources; (2) suspension and modification of existing statutes, standards, and requirements concerning the affected energy resources; (3) adoption of measures concerning the type, composition, production, and distribution of energy resources; (4) imposition or price restrictions; (5) adoption of measures concerning the hours and days that businesses must remain open or closed; and (6) establishment and implementation of regional programs to coordinate with the federal government, other states, and localities (CGS 16a-9).

Connecticut Energy Emergency Preparedness Plan

The plan, last updated in 1994, includes provisions on gasoline. “In the event of a petroleum supply disruption, the state's first response is to encourage voluntary reduction in petroleum demand” (p. 39). It also makes the Office of Policy and Management the “central clearinghouse” for all information concerning gasoline demand reduction. The voluntary measures include: promotion of energy-efficient driving techniques, ridesharing, and promotion of bicycle riding. Further, the plan authorizes the governor to implement mandatory programs, including establishing a minimum five gallon purchase to prevent “tank-topping,” establishing a maximum fuel purchase, lowering the highway speed limit to 55 miles per hour, and closing drive-up windows in retail establishments.

PRICE SETTING

The law does not regulate gasoline prices or the way in which gasoline sellers set their prices. Retailers undoubtedly consider many factors when setting these prices. These may include the cost of acquisition, the cost of doing business, the anticipated cost of acquiring the next delivery, prices charged by competitors, and a return on their investment.

DD:ts