Mr. Speaker, first of all, at the appropriate time, I will enter some extraneous information into the Record. Mr. Speaker, it is very clear when we look at what has happened in the last few years where we have had a number of mergers of…
Mr. Speaker, first of all, at the appropriate time, I will enter some extraneous information into the Record.
Mr. Speaker, it is very clear when we look at what has happened in the last few years where we have had a number of mergers of oil companies, the top five oil companies, I believe, now dominate more than a third of the market. As a result, we see that prices keep increasing as market concentration increases. This is a clear example of what happens when monopolies dominate an economy. We have high prices, and we also have manipulation of supplies, increased profits; and now we have price gouging.
With this manipulation of supply, we are also seeing an attempt today to attack our environmental laws. That puts us in a position where we sacrifice not only the standard of living of many Americans to the oil companies but now we are sacrificing the environment itself.
I think that many Americans are already aware that one of the reasons that we are in Iraq is because of oil. I mean, very few people would dispute that now. There were no weapons of mass destruction, they are not going to have a democracy there, but the administration is preparing to stay there for the long haul, and it is because of oil. Oil is corrupting this government. Oil is costing us peace in the world. Oil is putting us on a path to economic ruin. Oil is dominating this political process right now.
We need to take a new course. We can start with the windfall profits tax, but we have to go beyond that. We need to look at alternative energy, the power of the sun. Sunlight is a disinfectant in many ways, but it is also a powerful energy source. We need wind power, we need geothermal, we need to tap all available technologies to take us in a new direction where the globe itself is not at stake.
What a disgrace it is that we put the lives and the existence of the Gwitchin Indians in Alaska at risk for more oil. What a disgrace it is that we violate people's human rights for more oil. What a disgrace it is that we are not taking a new direction, not just to save the planet, but to save democracy. Vote down the bill.
Public Citizen,
Washington, DC, October 5, 2005.
Dear Representative: On Friday, October 7 the House will
consider H.R. 3893, the ``Gasoline for America's Security
(GAS) Act of 2005.'' This bill takes the approach that
environmental laws must be weakened in order to encourage the
U.S. refining industry to expand or construct new refining
capacity. This is false. The facts clearly show that not only
are current environmental laws in place at a time when the
refining industry is experiencing record profits, but that
recent, fundamental changes to the refining industry--namely
recent mergers--have created financial incentives for
refineries to encourage tight supplies. Until these market
fundamentals--and not environmental rules--are corrected,
Americans will continue to be price-gouged by oil companies.
This week, the national average gasoline price hit $2.93/
gallon, up 50 percent from a year ago. These prices were well
on their way to hitting record highs long before Hurricane
Katrina. Oil and gasoline prices were rising long before
Hurricane Katrina wreaked havoc. U.S. gasoline prices jumped
14 percent from July 25 to August 22.
The problem is that too few oil companies control too much
of the refineries, squelching competition but guaranteeing
record profits for the industry.
In 1993, the 5 largest U.S. oil refining companies
controlled 34.5 percent of domestic oil refinery capacity;
the top 10 companies controlled 55.6 percent. By 2004, the
top 5--ConocoPhillips, Valero, ExxonMobil, Shell and BP--
controlled 56.3 percent and the top 10 refiners controlled 83
percent. As a result of all of these recent mergers, the
largest 5 oil refiners today control more capacity than the
largest 10 did a decade ago. This dramatic increase in the
control of just the top 5 companies makes it easier for oil
companies to manipulate gasoline prices.
The proof is in the numbers. According to the Energy
Information Administration, profit margins for U.S. oil
refiners have been at record highs. In 1999, U.S. oil
refiners made 22.8 cents for every gallon of gasoline refined
from crude oil. By 2004, they were making 40.8 cents for
every gallon of gasoline refined, a 79 percent jump. And the
Washington Post noted that those profit margins have soared
even higher in 2005, to 99 cents on each gallon sold, for a
more than 300 percent increase since 1999.
It is no coincidence that oil corporation profits--
including refining--are enjoying record highs. Since 2001,
the largest 5 oil refiners in America have recorded $228
billion in profits.
And will the environmental regulations make it easier to
build new refineries? No, because the financial structure of
the refining industry is what is prohibiting additional
investment. That's because the industry is making record
profits off of the current tight supplies. They have no
interest in creating surplus capacity because that will erode
their profit margins.
Want proof? Start with the U.S. Federal Trade Commission.
In March 2001, FTC concluded in its Midwest Gasoline Price
Investigation:
``. . . A significant part of the supply reduction was
caused by the investment decisions of three firms . . . One
firm increased its summer-grade RFG [reformulated gasoline]
production substantially and, as a result, had excess
supplies of RFG available and had additional capacity to
produce more RFG at the time of the price spike. This firm
did sell off some inventoried RFG, but it limited its
response because selling extra supply would have pushed down
prices and thereby reduced the profitability of its existing
RFG sales. An executive of this company made clear that he
would rather sell less gasoline and earn a higher margin on
each gallon sold than sell more gasoline and earn a lower
margin. Another employee of this firm raised concerns about
oversupplying the market and thereby reducing the high market
prices. A decision to limit supply does not violate the
antitrust laws, absent some agreement among firms. Firms that
withheld or delayed shipping additional supply in the face of
a price spike did not violate the antitrust laws. In each
instance, the firms chose strategies they thought would
maximize their profits.''
So, that settles it: U.S. oil refineries would rather sell
less gasoline and earn bigger profits than flood the market
and earn lower profit margins. So gutting environmental laws,
as H.R. 3893 proposes, will do nothing to expand refining
capacity, but it will reduce public health protections for
Americans.
And a May 2004 U.S. Government Accountability Office report
agreed with Public Citizen that recent mergers in the oil
industry have directly led to higher prices. It is important
to note, however, that this GAO report severely
underestimates the impact mergers have on prices because
their price analysis stops in 2000--long before the mergers
that created ChevronTexaco, ConocoPhillips, and Valero-
Ultramar/Diamond Shamrock-Premcor.
Rolling back environmental laws will do nothing to lower
prices, but it will weaken public health protections for
Americans.
Sincerely,
Tyson Slocum,
Public Citizen's Energy Program.