Record gasoline prices, heating oil so high that families cannot afford to heat their homes, and the highest natural gas prices in the world point to one inescapable conclusion: America is suffering an energy crisis. The unfortunate truth is that this crisis was not only predictable but also largely preventable.
Five years ago this week, I predicted that gasoline prices would rise to more than $3 per gallon within a decade unless Congress took serious action to address our energy needs. In a report we released on April 26, 2001, Senator Chuck Schumer and I described a coming energy storm that would cause prices to triple within a decade and cost the average American family $2,000 more per year to meet their energy needs.
The cause of this crisis? As noted in our report, two opposing trends were on a collision course: surging demand for all forms of energy combined with stagnating global energy supplies. The resulting market would have little flexibility to respond to disruptions in supply and leave us vulnerable to painful explosions in energy prices.
No Mainer who recently filled their gas tank, no Maine family that struggled to heat their home this winter, and no Maine business struggling to meet soaring energy expenses while still making payroll needs to be told that the collision has happened, and the crisis is now. Our diminished energy infrastructure in the Gulf Coast due to Hurricane Katrina, the tensions in the Middle East and other countries that supply oil to us, and the increasing demand as China has dramatically increased its use of oil and as the summer driving season approaches are all factors contributing to record prices.
The quickest, most effective step we can take to bring our energy situation back into balance is to reduce demand through conservation. Our first step should be to do what Senator Schumer and I called for five years ago: increase corporate average fuel economy (CAFE) standards for automobiles.
During the last 20 years, the American economy has become more and more efficient, producing more and more with every drop of oil and BTU of natural gas. In fact, our gross national product has grown at twice the rate of our fuel consumption. Unfortunately, not all segments of the economy are doing their fair share: Detroit has made few gains in fuel efficiency in the last 20 years.
Since we clearly cannot count on the automakers to increase fuel efficiency on their own, Congress must require them to do it. Increasing CAFE standards is an important step toward energy independence. Higher CAFE standards will reduce our imports of foreign oil, reduce energy prices, and protect the environment, using technology that is already available. Simply by closing the SUV loophole we can save more than a million barrels of oil per day.
The tight balance between supply and demand makes the United States vulnerable to market manipulations and price spikes. I am very concerned about allegations of price gouging by energy suppliers. As Chairman of the Senate Homeland Security and Governmental Affairs Committee, I have asked one of the subcommittees, the Permanent Subcommittee on Investigations, to conduct an investigation into the price of gasoline and crude oil, as well as examine allegations of price gouging in our natural gas markets.
I am also troubled by the continued subsidies that taxpayers are providing to the oil and gas companies. When the net profits of a single oil company reach almost $10 billion in a single quarter, it is absurd to expect taxpayers to subsidize this industry.
I am introducing legislation that will eliminate needless tax subsidies for energy companies, and instead use this money to boost conservation and alternative fuels. My legislation would eliminate subsidies such as that for “intangible drilling costs,” or IDCs. According to the Congressional Research Service, IDCs are a major subsidy that reduce oil and gas tax rates significantly below rates on other industries. I see no reason to provide reduced tax rates on one of the world’s most profitable industries at a time when so many families and small businesses across the country are struggling.
My amendment will raise nearly $10 billion to be used for tax credits for hybrid cars and alternative fueled vehicles and to reduce the deficit.
One short-term method of addressing high energy prices is to suspend oil deliveries to the Strategic Petroleum Reserve (SPR). Last year, Senator Levin and I offered an amendment requiring the Department of Energy to develop procedures for using the SPR in such a way as to reduce energy prices and the impact on taxpayers, while maximizing oil supplies and improving US energy security. This amendment became law as part of the Energy Policy Act of 2005.
I am pleased that the President recently announced that, consistent with our amendment, he has halted all deliveries to the SPR. I strongly urge him not to resume deliveries until a review of the SPR by the Government Accountability Office, which Senator Levin and I requested, is completed.
This review will examine to what extent and at what cost the oil in the reserve could protect the economy from an oil disruption, how and when to fill the SPR in a way that minimizes any detrimental impacts to the economy, and what alternatives exist to better protect the economy from the negative impacts of an oil disruption.
Increasing energy supplies is also an important component in addressing our energy problems. We can increase supply by streamlining exploration in areas already approved for development, including environmentally sound areas in the Gulf of Mexico, by building a natural gas pipeline from Alaska, and by further developing biofuels and other alternative energy sources.
High energy prices take a tremendous toll on Maine families and businesses. Since Maine is a rural state where families frequently have little choice but to travel long distances to their jobs, high gasoline prices are felt particularly hard and reduce the money families have available to spend on other necessities. High prices harm our tourism economy by making it more difficult for Americans to pack up the family car
and head to America’s vacationland for their annual summer getaway. Finally, high prices are very difficult for Maine’s farmers, truck drivers, and many other small businesses.
It is long past time for Congress to demonstrate leadership on the issue of high energy prices. Congress needs to pass a balanced energy policy that will increase supply, decrease demand, and finally begin to address our ever-growing reliance on foreign oil.
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