Statements on Introduced Bills and Joint Resolutions

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

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By Ms. CANTWELL (for herself, Mr. Reid, Mr. Durbin, Mr. Inouye, Mrs. Feinstein, Mr. Kerry, Mr. Feingold, Mrs. Clinton, Mr. Wyden, Mr. Kohl, Mr. Schumer, Ms. Stabenow, Mr. Dorgan, Mr. Jeffords, Mrs. Boxer, Ms. Mikulski, Mr. Biden, Mr. Lieberman, Mr. Harkin, Mr. Reed, and Mr. Salazar):

S. 1735. A bill to improve the Federal Trade Commission's ability to protect consumers from price-gouging during energy emergencies, and for other purposes; to the Committee on Commerce, Science, and Transportation.

Ms. CANTWELL. Mr. President, I rise today to introduce the Energy Emergency Consumer Protection Act of 2005. I want to thank the original cosponsors of this legislation, which include Senate Minority Leader Reid, and Senators Durbin, Feinstein, Kerry, Feingold, Clinton, Kohl, Schumer, Stabenow, Dorgan, and Corzine.

This legislation would put in place a Federal law to prohibit gasoline price-gouging during national emergencies, and would institute new protections for American consumers from manipulation of oil and gasoline markets.

Even before the devastation caused by Hurricane Katrina and its tragic aftermath, skyrocketing oil and gasoline prices were burdening American families and our Nation's economy--with the notable exception of the oil industry, which continued to rack up record profits. Already in my home State of Washington, prices had reached 74 cents a gallon more than last year before the storm hit. After the storm--though our supplies were not directly affected--prices topped $3 per gallon in some areas of my State, including some of the most rural and economically challenged. And following that tragic storm, gas prices in some areas of this Nation reached almost $6 per gallon.

The volatility in oil and gasoline prices shows few signs of abating. Just yesterday, we saw oil set the new record for a one-day spike in prices. At the New York Mercantile Exchange, those prices rose more than $4 per barrel just yesterday, to close at $67.39. That's the largest single-day price spike since oil started trading on the exchange, in 1983.

It's clear to me that we have a lot of work to do, if we're going to get serious about addressing one of the most important challenges facing our generation of Americans: improving our Nation's energy security. We need a long-term plan and national commitment to free us from our over-dependence on oil in general. We need to make the American economy more fuel efficient, and position this Nation to compete in the 21st Century economy. It is in our Nation's long-term economic and national security interests to improve the fuel efficiency of American vehicles, provide consumers with the tools to make smart choices, provide those same consumers with a broader array of fuel-flexible vehicles and transportation options, and expand our production of home-grown biofuels, in more diverse regions of this country. Especially when it comes to fuel efficiency, this body has to date lacked the political will necessary to take the steps we must to bolster this Nation's energy and economic security. Along with my colleagues who have been tireless champions on this issue for so long, Senators Feinstein and Durbin, I will continue to fight to put our Nation on the right path when it comes to fuel efficiency.

But in the short-term, we also need to take a close look at the lack of transparency and increased concentration in the oil and gasoline markets, which has left us in a situation where the very few can set the prices that impact the lives of so many. And we need to make sure we have a national plan--triggered in cases of national emergencies--that makes it clear profiteering at the gas pump will not be tolerated.

Right now, the oil companies know we don't have a plan to protect American consumers. That's why we need a Federal law that's going to prohibit price gouging, and assess Federal penalties from those who exploit national tragedies to maximize their profits. That is why my colleagues and I have come together today to introduce this legislation.

In the wake of Hurricane Katrina, we have already heard gas station owners complaining that the big oil companies ordered them to raise prices. Investigating those claims should be the top job of federal regulators--and there should be harsh penalties for that kind of behavior, profiteering in the midst of a national disaster.

Today, 28 States have anti-gouging laws on the books. Unfortunately, my own State is not among them. But in crafting this legislation, I have looked to those other state laws--focusing specifically on the law of the State of New York, where price gouging cases have been successfully prosecuted in the past, related to natural disasters.

But I also want to remind my colleagues again that, while Hurricane Katrina exposed the underlying vulnerability of the American economy to supply disruptions, average U.S. gasoline prices were already 75 cents more than they were a year earlier--and many consumers had begun to ask why. While the oil companies have filled their coffers with record profits over the past few years, our Nation's airlines, truckers, farmers and small businesses across the board are struggling to make ends meet because of skyrocketing fuel costs. Worker pensions are in jeopardy, and families are already feeling the squeeze.

That's why this legislation also contains provisions to ban manipulation in oil and gasoline markets, and institutes new market transparency, investigation and enforcement mechanisms. These measures are based on provisions in the recently enacted bipartisan energy bill that prohibited these practices in other sectors of the energy industry. It provides for the same kind of anti-manipulation and transparency rules as those with which electricity and natural gas industries must comply. This legislation would apply the same sort of anti-manipulation and transparency standards to the oil industry that we already apply to companies that sell other essential energy commodities.

Already, these prices are impacting a diverse swath of the U.S. economy and hurting hard-working Americans. According to the Department of Energy, Americans will spend over $200 billion more on energy this year than they did last year, totaling over one trillion dollars.

These energy prices are also costing us jobs. On average, every time oil prices go up 10 percent, 150,000 Americans lose their jobs--based on the calculations of the Bureau of Labor Statistics and Federal Reserve Board.

What's more, according to the non-partisan Congressional Budget Office, a 40 percent increase in gas prices this month will decrease total domestic consumption by 0.4 percent. And unless prices come down in the fourth quarter, our Gross Domestic Product (GDP) will fall by 0.9 percent. These energy price spikes are strangling economic growth. According to the Congressional Research Service, every time oil prices go up by 10 percent for a sustained period of time, we lose somewhere between $80 billion and $160 billion in economic growth.

But while these prices are hurting the economy as a whole, they are having a particularly profound impact on our Nation's energy-intensive industries. For example, they are hampering the American airline industry. The airline industry estimates it will pay $9.2 billion more for fuel in 2005 than in 2004, a 103 percent increase from 2001. As Southwest CEO Steve Kelly told the Seattle Times just last week, ``We are now facing energy prices that no airline can make money at, at least with today's [ticket prices].''

These prices are also making it impossible for our farmers to break even. Even during a good year, farmers operate on profit margins of only about 5 percent, so fertilizer, fuel, and pesticide price increases of 20 percent or more have made it very difficult to get by.

Other sectors of the transportation industry are also being dramatically impacted. Take, for example, the trucking industry. Diesel fuel accounts for a quarter of the trucking industry's operating expense, or $85 billion in 2005. Each penny increase in diesel costs the trucking industry $350 million over a full year.

And these prices are impacting essential services in this country. School districts and local governments are feeling the pain, as are federal agencies themselves. Higher fuel prices are expected to add $300 million to the Postal Service's transportation costs nationwide this year.

What about the pain these prices are causing, in other ways? Energy costs are putting pensions at risk and requiring taxpayer bailouts. That's particularly true when it comes to the hundreds of thousands of airline workers in this country. United Airlines has already transferred $6.6 billion of its pension obligations to the government pension agency. If Delta and Northwest terminate their pension plans following their bankruptcy declarations, taxpayers would have to cover another $12 billion.

And these prices are especially harmful to low-income Americans. Households with incomes under $15,000--about one-fifth of all households in this country--this year will spend around 10 percent of their total income on gasoline alone.

And what's going to happen this winter? Heating costs for the average family using heating oil are projected to hit $1,666 during the upcoming winter months. This represents an increase of over $400 over last winter's prices and $700 more than the winter heating season of 2003 and 2004. For families using natural gas, prices are projected to hit $1,568, representing an increase of over $600 over last year's prices and $640 more than 2003 and 2004.

These alarming statistics lead me to question where is all this money going? The Congressional Budget Office wrote recently that increased gasoline prices are ``basically a temporary redistribution of income from consumers of gasoline to the stockholders of refiners.''

This is a situation that is causing gross inequities between different industries themselves. Oil industry profits have nearly tripled over the last three years to roughly $87 billion last year--likely to be even more this year--while the airline industry has lost over $32 billion over the last four years.

How is this happening? While we watch all of these economic impacts transpire, our federal regulators have allowed the oil industry to strengthen its choke-hold on American consumers and businesses. According to the independent Government Accountability Office, mergers and increased market concentration with the U.S. petroleum industry has led to higher wholesale gasoline prices in this country.

That's why it's time for this body to do something about it. The Energy Emergency Consumer Protection Act is a common-sense approach to protect American consumers from gasoline price gouging during national emergencies. And it begins to shine the spotlight on the marketing practices of the oil industry in general.

I thank my cosponsors for their support, and I ask my colleagues to support this legislation.

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