Copyright 2000 eMediaMillWorks, Inc.
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Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
June 28, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 4334 words
HEADLINE:
TESTIMONY June 28, 2000 WENONAL HAUTER DIRECTOR PUBLIC CITIZENS CRITICAL MASS
ENERGY AND ENVIRONMENT PROGRAM HOUSE JUDICIARY OIL COMPETITION
PROBLEMS
BODY:
Testimony of Wenonah Hauter,
Director, Public Citizen's Critical Mass Energy & Environment Program on
Solutions to Competitive Problems in the Oil Industry June 28, 2000 Mr. Chairman
and members of the Committee, thank you for this opportunity to testify
regarding competitive problems in the Oil Industry. My name is Wenonah Flauter,
and I am director of Public Citizen's Critical Mass Energy & Environment
Program. Public Citizen, founded by Ralph Nader in 1971, is a non-profit
research, lobbying, and litigation organization based in Washington, DC. Public
Citizen advocates for consumer protection and for government and corporate
accountability, and is supported by over 150,000 members throughout the United
States. The Critical Mass Energy & Environment Program is Public Citizen's
energy policy arm, working to decrease reliance on nuclear and fossil fuels and
to promote safe, affordable and environmentally- sound energy alternatives. Oil
Consumption in the U.S. In 1999, oil provided 41 percent of our nation's energy
needs. Americans consumer more oil than ever before; we consumed 38 quads
(quadrillion Btu) in 1999 and 34 quads in 1990, an increase of 12 percent. Oil
use grew in 1999 by 3.2 percent when compared to 1998, the largest year-to-year
growth since 1998. Oil consumption in the U.S. is projected to increase steadily
during the next 20 years. Since 1985, domestic production of oil has been
declining, which means that the U.S. is more dependent on imported oil. In 1974,
imports of oil provided about 35 percent of our oil needs; today the United
States imports 55 percent of its oil. The U.S. Energy Information Administration
projects that our dependence on imported oil will keep growing during the next
20 years, reaching about 60 percent by 2010. Increasing Oil Prices The
year-and-a-half long increase in price for crude oil has been caused by many
factors. So much oil was available during 1997 and 1998 that prices for a barrel
of crude oil reached historic lows of $9.06 in December 1998. In order to
increase oil prices, oil companies, OPEC members, and non-OPEC members reduced
their production of oil (oil companies have tried to place all the blame for
higher prices on foreign producers, especially OPEC, even though the companies
have very close ties with most producing countries). Meanwhile, with prices for
oil products at near all-time lows in the United States, Americans sharply
increased their use of oil, the use of which grew in 1999 by 3.2 percent when
compared to 1998, the largest year-to-year growth since 1998. With a cutback in
oil production and increasing demand, the excess oil of 1997 & 1998 was
quickly consumed, and oil prices started rising through 1999 and into 2000,
hitting a peak of $31.13 in March 2000. Although OPEC and non-OPEC producers
announced increases in oil production in late March, which helped reduce oil
prices for several weeks, prices began rising again, as the announced increases
do not appear to be large enough to meet growing demand. As of June 16, the
price for an imported barrel of oil stood at $30.35. U.S. Gasoline Supplies Are
right ... As mentioned, Americans increased their demand for oil products during
1999, especially for transportation fuels. Americans are consuming more gasoline
than ever before. With crude oil prices rising since early 1999, refiners
started producing less gasoline. As shown in Table 1, we have less gasoline on
hand than in previous years- total motor gasoline stocks for May are I I percent
less than May 1999. In fact, the amount of gasoline on hand has been lower for
each of the past 12 months (June 1999 through May 2000) when compared to stocks
from the previous year. ... but Midwest Supplies of Reformulated Gasoline Are
Fine Ironically, stocks of reformulated gasoline sold in the Midwest appear to
be increasing when compared to previous years. As shown in Table 2, Midwest
monthly stocks for reformulated gasoline in May are 9 percent higher than in May
1999; 1 percent higher for April, 1 14 percent higher for March, 23 5 percent
higher for February, and 15 5 percent higher for January. In other words, when
compared to previous years, more reformulated gasoline has been available in the
Midwest for the past five months (Jan- May) than was available for similar
periods during 1999 and 1998. This refutes oil company arguments that there are
shortages of reformulated gasoline in the Midwest. U.S. Gasoline Prices Have
Increased for Seven Straight Weeks As of June 19, 2000, the average retail
gasoline price rose to a new all-time high of $1.68, which was almost 56 cents
per gallon higher than a year ago. The Energy Information Administration reports
that this is the seventh straight week of increases in the average price of
retail gasoline.9 Midwest consumers appear to have been hit the hardest. As
shown in Table 3, Midwest average prices for conventional gasoline were $1.85,
or 17 cents higher than the national average. Prices are even higher for Midwest
reformulated gasoline, which recently was priced at over $2.00, or 30 cents
higher than the national average for reformulated gasoline, even though most
analysts agree that reformulated gasoline should only cost up to 5 cents more
per gallon compared to conventional gasoline.' 0 Even though supplies of
reformulated gasoline are at levels higher than in previous years, Midwest
gasoline consumers are paying some of the highest prices ever seen in the United
States. Oil Companies Are Making Record Profits Table 4 shows that the profits
of most of the world's major private oil companies rose dramatically during the
1st quarter of 2000 (Jan.-Mar.) when compared to the 1st quarter of 1999. BP
Amoco, Coastal, Conoco, Exxon Mobil, and Shell set all-time record quarter
profits. Texaco led the pack with a 473 percent increase in 1st quarter profits,
followed by Conoco with 371 percent, BP Amoco with 296 percent, Chevron with 291
percent, Phillips with 257 percent, ARCO with 136 percent, Shell with 117
percent, ExxonMobil with 108 percent, and Coastal with 30 percent (Marathon went
from a net loss in the lst quarter of 1999 to a profit in 2000). Many analysts
expect even larger profits for the oil companies from the 2nd quarter, which
ends June 30. Although Big Oil has been trying to blame OPEC for the price
increases, there is no question that many consumer dollars are flowing straight
into the greedy hands of the oil companies. Because oil company profits are so
outrageous, the U.S. Federal Trade Commission has launched an investigation to
see whether oil companies have engaged in price fixing. On an annual basis,
Table 5 shows that many oil companies did very well during 1999 when compared to
1998, with ARCO showing a 165 percent increase in annual profits between 1999
and 1998, followed by Phillips with 46 percent, and BP Amoco, Marathon, Shell,
and Texaco all around 35 percent. Presidential Politics May Be Influencing Oil
Prices and Policy As oil and gasoline prices have quickly risen, so have calls
from Republican members of Congress, such as Senate Majority Leader Trent Lott
(Miss.) and Energy & Natural Resources Chairman Frank Murkowski (Alaska), to
increase oil production from Alaska by drilling in the Arctic National Wildlife
Refuge, and by drilling in the off-shore oil fields in the Gulf of Mexico and
the West Coast. Accompanying these environmentally irresponsible suggestions are
attacks on state and federal gasoline taxes, which provide funding for road
repair and mass transit; attacks on clean air regulations, which help reduce
harmful pollution that kills and injures thousands of Americans each year; and
attempts to provide additional taxpayer subsidies for domestic oil producers,
who already receive massive subsidies (while harvesting record profits!), as
shown in Table 6. Big Oil has made similar demands." Is it just a coincidence
that Republicans and Big Oil share the same agenda? Public Citizen is concerned
that massive campaign and soft money contributions by the oil & gas industry
have been influencing national energy policy in ways that benefit Big Oil at the
expense of consumers, workers, and the environment. For example, as shown in
Table 7, Republicans running for federal office (excluding the race for
president) have taken in $680,000 in Oil & Gas PAC contributions versus
$180,000 for Democrats, while the Republican Party has collected $1.4 million in
soft money contributions compared with $510,000 for Democrats), as compiled by
the Center for Responsive Politics. Interestingly, Republican presidential
candidate Governor George W. Bush (Texas) has received PAC contributions from
Big Oil totaling $1.5 million so far, an amount much greater than that received
by Democratic candidate Vice President Al Gore ($100,000), Green Party candidate
Ralph Nader (), or Reform Party candidate Pat Buchanan ($7,600). No doubt Big
Oil considers Gov. Bush a friend, as Mr. Bush previously owned Arbusto Energy,
Inc., an oil exploration firm, and who also supports policies called for by the
oil companies. The Gore family, too, has had close connections to the oil
industry-the vice president's father, Sen. Albert Gore, worked for Occidental
Petroleum founder Armand Hammer after leaving public office, and the family
still owns hundreds of thousands of dollars worth of stock in the company. What
Can Congress Do To Protect Consumers? Except for the recent price spikes and the
ones that accompanied the Gulf War in early 1991, gasoline prices have been near
historic lows for the last half of the 1980s and most of the 1990s. In other
words, for around 15 years, U.S. energy policy has encouraged the provision of
heavily subsidized gasoline and other oil products. Policy makers have ignored
efforts to conserve energy, making U.S. consumers vulnerable to the apparent
price fixing and gouging of large oil companies and oil producing countries.
Increased pollution, sprawl, and traffic congestion have all been made worse as
policy makers from both Republican and Democratic parties ignored responsible
energy policy while providing huge subsidies to oil & gas companies.
However, by stopping oil company mergers, by making investments in energy
efficiency, mass transit, renewable energy, by eliminating oil company corporate
welfare, and by changing campaign finance laws, Congress can help protect
consumers from future oil shocks. Stop Oil Company Merger Mania. The past year
saw a merger of Exxon and Mobil (previously, the 1st and 3rd largest private oil
companies in the world) and a merger between BP Amoco and Atlantic Richfield
(previously, the 2nd and 7th largest private oil companies). While mergers give
greater power to individual companies, industry consolidation makes the industry
itself more influential as power becomes concentrated in the hands of the very
few. Efficient Automobiles. Contributing to the current oil spikes is the fact
that Congress has for years prohibited the U.S. Department of Transportation
from even studying whether the fuel economy of cars and light trucks should be
changed. Corporate Average Fuel Economy (CAFE) standards have
remained unchanged since 1985, and the highway fuel economy of cars peaked in
1991 at about 21 miles per gallon, which is about where it stands today. The
standards should be raised for all cars, especially light trucks (which includes
vans, pickups, and sport utility vehicles), since these vehicles now account for
more than half of all new car sales. The American Council for an Energy
Efficient Economy and the Sierra Club estimate that by increasing the efficiency
of cars and light trucks, we could save more oil than what would be produced by
drilling in the Arctic National Wildlife Refuge or off-shore in the Gulf of
Mexico or the West Coast. 15 Mass Transit. Congress should increase investments
in mass transit, such as light rail systems, subways, and buses. Not only do
mass transit investments help save oil, they make it easier for everyone to get
to and from work, and they reduce sprawl and environmental degradation.
Eliminate Oil Company Corporate Welfare. As shown in Table 6, the oil & gas
industry receives many tax-payer subsidies, as identified by the Green Scissors
Coalition, www.foe.org. Big Oil currently receives subsidies of $2.4 billion for
"intangible drilling costs" and $7.1 billion for "non-conventional fuel
production credits," among others. Congress should follow the advice of the
Green Scissors Coalition and eliminate the tax breaks for the oil & gas
industry. Windfall Profits T" Congress should impose a tax on excessive profits
harvested out of the pockets of hard-working Americans by Big Oil. Revenues from
such a tax could provide rebates to people who buy ultra-efficient cars, or
could help reduce mass transit fares, or could help increase the availability of
mass transit options. Residential Weatherization Programs. Federal and state
funding of residential weatherization programs have been drastically cut back
during the past five years, even though energy efficiency is one of the cheapest
ways to "create energy." Congress should increase support for programs that make
homes and businesses more energy efficient. The programs should address the
needs of any household or business regardless of the type of fuel used for
heating or cooling. Government Buildings, Vehicles, and Purchasing. The federal
government should step up- efforts to make government buildings and vehicles
more energy efficient. Federal agencies should make sure they are buying the
most efficient appliances and equipment for government facilities. Money saved
through energy efficiency can be used to support other vital government
services. Energy Efficiency Appliance Standards. Congress, federal, and state
agencies should establish, update, and enforce energy efficiency standards for
appliances and equipment used in American homes, businesses, and factories.
Billions of dollars could be saved while creating thousands of jobs, reducing
pollution, and saving valuable natural resources. Building Codes. Congress
should encourage the states to adopt the strongest residential and commercial
building codes, which not only ensure quality living/working environments, but
also save tremendous amounts of energy. Renewable Energy. Congress should
encourage the development of alternative fuels for vehicles (such as biofuels
derived from agricultural products) and for generating electricity, such as
wind, solar, and biomass technologies. Energy Innovations, a report issued by a
group of non-profit organizations,'6shows how a combination of renewable energy
and energy efficiency could save tremendous amounts of money and pollution.
Campaign Finance Reform. For over a century the oil and gas industry gas engaged
in a scheme of legalized bribery of local, state, and federal officials. As
shown in Table 7, the oil industry has poured almost $3 million into year 2000
federal campaigns (not counting the race for president); nearly $900,000 in
"hard money" contributions and $2 million in "soft money" contributions. So far,
the oil & gas industry has given George Bush $1.5 million and Al Gore $ 1
00,000. Oil & gas federal lobbying expenditures from 1998 totaled nearly $30
million. Campaign contributions and heavy lobbying encourage politicians to
support massive subsidies that enrich oil and gas companies on7fhe backs of
consumers, competitors, and the environment. Congress should enact laws that
take private money out of public elections. Table 1. Monthly Stocks of Motor
Gasoline, 1998-2000. Table 1 found on hardcopy Table 2. Monthly Stocks of
Reformulated Gasoline in the Midwest (PADD II), 1998-2000. Table 2 found on
hardcopy Table 3. Retail Prices for Gasoline, March through June 2000. Table 3
found on hardcopy
LOAD-DATE: July 11, 2000, Tuesday
