Mr. Speaker, schools will be letting out soon, and American families will be hitting the road for their summer vacations. But how far will they get this year with sky-high prices at the pump? The average price of regular gasoline is…
Mr. Speaker, schools will be letting out
soon, and American families will be hitting the road for their summer vacations. But how far will they get this year with sky-high prices at the pump?
The average price of regular gasoline is hovering near record highs, and this week stands at about $3.16 a gallon. This means American families are spending nearly $54 on average every time they fill up their tank, an astonishing $30 more per tank since President Bush took office.
According to the AAA, the typical American family is on course to spend over $3,600 this year just to fill up their cars if these prices persist. Gasoline prices set a new record of $3.22 a gallon on May 21, according to the AAA's fuel gauge report. Gasoline prices in 34 States broke record highs in the past month. Prices are expected to climb again as the summer driving season progresses.
Record high gas prices may not cause hardworking Americans to cancel vacation plans, but they are forcing families to cut back on other spending, putting our economic growth at risk.
Wherever I go Americans are asking, why are gas prices so high? Surprisingly, the answer is not because crude oil prices are higher than they were last year. According to the Department of Energy, the largest component of U.S. retail gasoline prices is the price of crude oil. What is unique about the current situation is that crude oil prices, the red line, are lower right now at the onset of the summer driving season than they were at this time last year. But, as we all know, gasoline prices, the blue line, are higher than they were this time last year.
The Department of Energy projects that crude oil prices will average $2 less per barrel this summer than last. But they also predict that gasoline will average about $2.95 a gallon this summer, up more than a dime from last summer's $2.84 a gallon on average. Analysts attribute this in large part to the fact that our refinery capacity has failed to keep pace with demand.
We haven't had a new refinery built in the United States in 30 years, pushing refineries to operate at capacity levels that are overtaxing the system. Refining costs account for about 22 percent of the retail price of gasoline, up from 15 percent in 2003.
With the increase in oil and gas prices over the last several years, refining margins are at historical highs. Refining profits in the first quarter of 2007 increased 36 percent over last year, and the U.S. refining margin increased to over $17 per barrel of refined oil.
High gas prices should be an incentive for expanding refining capacity, but instead of building new refineries the industry argues that it has focused on expanding and upgrading existing refineries to keep up with increased demand.
U.S. refining capacity has stayed relatively stable over the past few years, and that is the red bar here. But demand has steadily increased, and that is the blue bar. So capacity utilization has risen, regularly reaching levels above 90 to 95 percent of capacity throughout much of the 1990s and continuing into this decade.
The problems and risks associated with running near full capacity have become very apparent in recent months. As this chart shows, overtaxed refineries have required unplanned maintenance which has taken supply off line and caused short-term price spikes. Refiners typically perform planned maintenance during off-peak driving season, which impacts available stocks of gasoline when the demand is lower. But the increasing frequency of unplanned maintenance is cause for great concern. Unexpected refinery outages choke off supply and cause price spikes at the pump.
A recent spate of such unplanned outages in refineries across the country have made the price spikes a common occurrence and have kept gas prices in the headlines. BP, ConocoPhillips, and Valero Energy have all reported unexpected shutdowns at a number of U.S. refineries.
Oil companies certainly have the profits to invest in increased capacity, but they are not investing. With capacity as tight as it is, refiners can boost profits by taking capacity off line, particularly when there is a lack of competition at the refinery level. It is hard to prove that they are purposely limiting supply, but the risk of manipulating capacity to maximize profits is certainly greater with fewer players in the market.
Consumer advocates, such as the Consumer's Union Mark Cooper, argued that a lack of competition in the market has enabled oil companies to exploit the tight market they have created by purposefully uninvesting and mismanaging refinery maintenance.
With refining margins as high as they are, construction of a new refinery is not a losing proposition, particularly for profit-laden Big Oil companies. But ExxonMobil's CEO, Rex Tillerson, has indicated that he will not build a new refinery in the U.S., pointing to research that U.S. gasoline consumption will plateau in coming years as ethanol and energy efficiency measures become more prevalent.
The current runup in gas prices underscores the urgent need for a better national energy policy. But instead, we see stubborn inaction and complicity on the part of the administration. The Bush administration has turned a blind eye to oversight of the oil and gas industry in general, and especially with respect to mergers. Mergers in the gas and oil industry over the past decade have resulted in dangerously concentrated levels of ownership in the U.S. refining market, leaving us with only five major domestic oil companies controlling the majority of our domestic refining capacity.
The President has approved mergers at such a break-neck speed that by 2005, the top 10 refiners controlled 81 percent of the market, up from 56 percent since 1993. So it has jumped an astonishing amount. This concentration of refiners has restricted production capacity, causing American consumers to pay more at the pump than they would be with more market competition. The lack of competition is hurting consumers now and will hurt our economy in the future.
As a first step toward protecting consumers, the House passed the Energy Price Gouging Prevention Act just before the Memorial Day weekend. This legislation will provide relief to consumers by giving the Federal Trade Commission the authority to investigate and punish those who artificially inflate the price of energy. It would ensure the Federal Government has the tools it needs to adequately respond to energy emergencies and prohibit price gouging. With a priority on refineries and Big Oil companies, especially during a time of national crisis such as Hurricane Katrina, the Energy Price Gouging Prevention Act will provide the FTC with new authority to investigate and prosecute those that engage in predatory or unconscionable pricing from oil companies on down to local gas stations, with an emphasis on those who profit most. This includes the gouging of gasoline, home heating oil, propane or natural gas. It will enpower the Federal Government to impose tough civil penalties of up to triple damages of all excess profits from companies that have cheated consumers.
Until we have abundant renewable energy alternatives to benefit consumers, in the short term Congress must carefully look at the current market framework to see what can be done to improve competition in the marketplace. At the refinery level, Congress should look at strengthening antitrust laws, changing the way oil mergers are reviewed by U.S. antitrust agencies, cracking down on anticompetitive actions by oil companies, and/or improving price transparency at the wholesale level.
Mr. Speaker, high gas prices is an issue that has a supply side and a demand side, and we need to address both. Government leaders and businesses are recognizing the need to reduce our dependency on oil by making our vehicles more fuel efficient and investing in clean, renewable energy sources and technologies.
Mr. Speaker, I request additional time.
Mr. Speaker, I ask permission to revise and extend my remarks.
Mr. Speaker, last month, it was announced in my home district that New York City cabs are going green,
as the Mayor plans to replace the city's fleet with hybrid cars by 2012.
The Joint Economic Committee recently released a report entitled, ``Money in the Bank, Not in the Tank'', which argues that we have to take the issue of improving fuel efficiency seriously.
America's cars were more efficient two decades ago when our fleet- wide average was 26.2 miles per gallon. Now, our fleet-wide average for cars and trucks has slipped to 25.4 miles per gallon. Clearly, we're going in the wrong direction.
And it's hurting our competitiveness--our nation ranks at the bottom of the list of industrialized nations when it comes to fuel efficiency.
In Europe, fuel efficiency averages around 40 miles per gallon and they're looking to raise it to 51 miles per gallon by 2012. Japan is trying to get to 50 miles per gallon by 2010 across their fleet.
If we raised CAFE standards to 35 miles a gallon from 27.5 miles per gallon, the average American family would reduce their spending on gas by nearly one-quarter.
With families on course to spend more than $3,600 on average filling up their cars this year, this would be a savings of $900 a year.
Despite major technology gains, especially hybrid technologies, and record-breaking gas prices, we are decades behind when it comes to making our cars more efficient.
More efficient cars mean American families spend less at the pump, we're less dependent on foreign oil, and our environment benefits from lower emissions.
The President's priority has been to give tax breaks to oil and gas companies even as their profits have soared to new heights. The big five oil companies enjoyed eye-popping profits of $120 billion last year.
Instead of using those profits to expand refining capacity or make serious investments in renewable energy, the big oil companies are buying back their own stock to enhance prices for their shareholders.
Moreover, oil companies seem to be working hard to prevent gasoline alternatives, such as ethanol-based products, from being pumped at their branded gas stations.
In our first 100 hours of work in the majority, the House voted to roll back $14 billion in taxpayer subsidies for Big Oil companies and reinvest that money here at home in clean alternative fuels, renewable energy and energy efficiency.
We have also passed a bill that encourages research and development of markets for biofuels.
Speaker Pelosi has created a Select Committee on Energy Independence and Global Warming to develop policy initiatives and assure that progress is made toward reducing our dependence on foreign oil.
Democrats in Congress are working on legislation to protect consumers and increase our energy independence by investing in renewable energy sources and reducing global warming emissions.
We need this new direction for energy policy that brings relief to American families and strengthens our economy.