Gas Price Update
Read Bart's Views on Current Issues
Gas prices are causing working families significant financial hardship. Many Americans are being forced to make considerable sacrifices just to fill up their tanks. While high gas prices and home heating fuel prices can make heating homes expensive during winter months, high energy and gasoline costs also affect farmers, manufacturers, electrical utilities, and other industries.
While consumers are being forced to pay more than $3.00 a gallon for gasoline, oil companies continue to reap record profits. Last year, Exxon Mobil posted $36 billion in profits, the largest profit for any corporation in United States history. Moreover, in 2005, refineries increased their prices 255 percent. As these profits increase, so does the potential for price gouging.
When talking about refinery profits, economists refer to the “crack spread,” which is the profit resulting from a barrel of crude oil refined into an equal amount of gasoline. If a refinery has a crack spread of $8-9 per barrel, economists consider this spread a good, consistent profit. Refineries’ current crack spreads are as much as $36 per barrel, jumping from $30 to $36 on June 1st. Oil companies are raking in excessive profits at the expense of working Americans. This is price gouging, and Congress should give the Federal Trade Commission (FTC) the tools to investigate these profits and prosecute those energy companies that engage in unfair practices.
Approximately two years ago, I introduced legislation (H.R. 3936) to provide the FTC with new authority to investigate and prosecute those who engage in predatory pricing and other unfair practices, with an emphasis on those who profit most. My bill would have set specific guidelines for the FTC to define price gouging, including provisions that would have made unconscionable pricing and false pricing information illegal.
On February 28, 2007, I re-introduced my legislation to make price gouging illegal. My bill, The Federal Energy Price Gouging Prevention Act (H.R. 1252), has 125 bipartisan co-sponsors. On May 24, 2007, the U.S. House of Representatives sent a clear message that the new Democratic Congress will stand up for the American consumer who is forced to pay too much at the gas pump. The House approved my price gouging prevention legislation by a two-thirds vote, 248 to 141. I look forward to working with the Senate to send a price gouging bill to the President’s desk.
While my price gouging legislation is a good first step, I believe that the federal government must also investigate the effect that oil market speculators have on gas prices.
Traditionally, trading of energy commodities such as crude oil, gasoline, diesel fuel, and natural gas has taken place on the New York Mercantile Exchange (NYMEX), with oversight by the Commodity Futures Trading Commission (CFTC). However, an increasing amount of trading does not occur on NYMEX but in off-market deals, known as “over-the-counter” (OTC) trading. It is estimated that up to 50 percent of all energy trades are over-the-counter, where speculation occurs without any regulation or oversight by the federal government. Without effective oversight, there is no way to know whether energy speculators are basing their oil trades on market realities or speculation based on fear and greed at the expense of hard-working Americans.
Due to these concerns, I have also re-introduced the Prevent Unfair Manipulation of Prices (PUMP) Act, (H.R. 594), to bring OTC trading under the oversight of the government. This increased oversight and transparency would improve confidence in the market and help eliminate the unreasonable speculation in crude oil prices. My legislation would also increase penalties for speculators found to be unfairly manipulating the oil futures market. It is estimated that oversight over all futures trades would lower the price of a barrel of crude oil by as much as $20.
The Department of Energy says that gas costs are based directly on the price of a barrel of oil. Therefore, between my price gouging legislation and my legislation to bring oversight to over-the-counter trading, the price of a gallon of gas could be reduced by approximately one dollar. I will continue to work with my colleagues in Congress to pass my legislation.
Ultimately, the United States needs to lessen our dependence on foreign energy sources. Congress made a good start when the House passed the Energy Policy Act of 2005, which became law on August 8, 2005. The bill included incentives for the production of advanced diesel, hybrid vehicles, renewable fuels, and alternative energy fuels. It is now a matter of developing alternative energy sources, curbing our consumption and developing refinery capacity.
I will continue to do all I can to provide short and long term answers to the country’s energy needs and eliminate high gas prices.
