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My dad's email from Congress re: gas prices

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L Independant
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My dad's email from Congress re: gas prices

Postby L Independant » Wed May 14, 2008 8:41 am

My dad wrote a few letters to Senator Carl Levin (D-Michigan) about gas prices. Here's the email he got back, where Levin explains the research he's assigned and its results.

I want to share with you a speech I gave in the Senate today regarding soaring energy prices. Record high gas and diesel prices have reverberated throughout our economy, hitting the pocketbooks of ordinary Americans and inflating the price of everything from food to manufactured goods. Action is clearly needed to combat these skyrocketing energy prices which are a threat to our economic and national security.

During the past few years, both as Chairman and as Ranking Member and of the Senate Permanent Subcommittee on Investigations (PSI), I have led a number of investigations examining U.S. energy markets and rapidly rising oil and gasoline prices. As a result of these investigations, I have been advocating a number of measures to address the rampant speculation and lack of regulation of energy markets, which have greatly contributed to the recent run-up in fuel prices. Four specific policies should be immediately adopted to combat the absurd prices Americans are paying at the pump. These policies are contained in the Consumer-First Energy Act of 2008 (S.2991), which was introduced by Senator Harry Reid (D-NV) on May 7, 2008. I am an original cosponsor of this important legislation.

First, we need to put a cop back on the beat in all energy markets that affect the U.S. in order to prevent the excessive speculation and price manipulation that drives up the price of a barrel of oil. The trading of contracts for the future delivery of oil and gas has increased six-fold since 2001. Much of this increase can be attributed to speculators, who buy and sell futures contracts for crude oil and leverage them just to make a profit, creating an artificial “paper demand” that does not accurately reflect actual market conditions. While the Commodity Futures Trading Commission (CFTC), the main federal regulator charged with policing U.S. energy commodity markets, has the authority to regulate certain commodity markets, it cannot police one of the biggest energy markets due to the “Enron loophole,” a provision in law that exempts electronic energy exchanges from government oversight. In September 2007, I introduced legislation (S.2058) that would close the Enron loophole and regulate electronic energy markets. In December 2007, I was able to successfully work with my colleagues to insert language from S.2058 into the Farm Bill that was passed by the Senate on December 14, 2007 (H.R.2419). Last week, the House and Senate conferees on the Farm Bill reached agreement to include our legislation in the final Farm Bill. I am hopeful that Congress will finally pass this important legislation – and the President will sign it – shortly.

The Consumer-First Energy Act contains a provision to close another loophole in the regulation of our energy markets. One of the key energy commodity markets for U.S. crude oil, gasoline, and heating oil is now located in London, outside the reach of U.S. regulators. This means that traders can avoid our government’s limits on speculation and reporting requirements by using the London exchange. The Consumer-First Energy Act includes a provision to stop rampant speculation and increase our access to timely and important trading information and ensure that there is adequate market oversight of the trading of U.S. energy commodities no matter where the trading occurs. This provision is so important that I have introduced this provision as a separate bill, S. 2995.

Another policy that should be implemented to help alleviate some of the upward pressure on oil prices is the suspension of the filling of the Strategic Petroleum Reserve (SPR). In 2003, the Permanent Subcommittee on Investigations released a report showing that the Bush Administration’s policy of placing large deposits of oil into the SPR was increasing prices but not overall U.S. energy security. For the past few years, over repeated objections from its own experts at the Department of Energy (DOE), the Administration has continued to fill the SPR regardless of the price of oil or market conditions. Given the fact that the SPR is more than 95 percent full, it makes little sense to be filling the SPR when the price of a barrel of oil is hitting record highs on a daily basis. That is why I have co-sponsored a bill (S.2598) to suspend the SPR fill for one year, or until prices fall to more acceptable levels, whichever comes first. Passing this legislation will save the taxpayers money and relieve some of the pressure on the oil markets that is driving prices relentlessly higher.

While closing the Enron loophole and temporarily stopping the filling of the SPR will help lower energy prices in the near-term, we need to develop a long-term, comprehensive energy plan to decrease our reliance on oil. By investing in new technologies and alternative energy sources, we will significantly reduce our dependence on foreign oil. I have long been a supporter of advanced automotive technologies such as hybrid electric, advanced batteries, hydrogen and fuel cells and promoted development of these technologies through federal research and development and through joint government-industry partnerships. The federal government must do its part first to develop these technologies so that they will then in turn be within reach of the American public.

Finally, while the American consumer is increasingly burdened by record prices at the pump, major oil companies have been reporting record-breaking profits. Instead of utilizing these windfall profits to develop new technologies or boost production, these companies have been buying back shares to inflate their earnings and reap further profits. I have supported windfall profits taxes in the past, and I will continue to support them in order to encourage the sensible use of oil company resources.

These four common sense policies could do a great deal to lower energy prices and alleviate some of the pressure the average American is feeling in this difficult economy. If you would like to learn more about the Consumer-First Energy Act, or view my statement on actions we should take to lower oil and gas prices, I encourage you to click on the following link http://levin.senate.gov/newsroom/release.cfm?id=297663.


Cool to see a few of the policies not being reported on that are leading to higher gas prices (like the SPR...didn't know it was still being filled to the extent it is).

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Postby The Juan Percenter » Wed May 14, 2008 9:02 am

Windfall profit tax is a joke. What ever the government does to tax companies gets passed onto the consumer. The best way to stop speculation is to make the dollar more attractive. Investors will then pull out of commodities and put money back into stocks and currencies. Government intervention is a big part of what made the price of oil so high. Having politicians interfere with the market place will only make things worse.

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Postby kingbobb » Thu May 15, 2008 12:57 pm

While not saying any of these things have some merit...well, maybe the windfall tax idea doesn't. That's generally never a good idea. Punishing success generally doens't work...the biggest thing the government can do is to remove the barriers to new development of refining construction. This country has only a few domestic refineries left operating, and none so far as I know are planned for development at all. The cost of doing so is considered to be too high. The cost of getting new permits that would need to adhere to current environmental regulations is just too high compared to the cost of operating a refinery that may very well be over 100 years old. While the older facility lacks modernization and might not be as efficient as a new facility would be, often they are grandfathered out of meeting the modern environmental requirements.

Supply and demand are still and always will be the biggest drivers of the market price of any good. Everything else is just tinkering. Even if the government stops filling the SPR, that's a miniscule impact on demand, and even those that advocte it, if you press them, will admit that it's mostly a symbolic gesture that they don't expect will have any real impact on the market.

What is comes down to is that Americans consume a lot of petroleum products, but our ability to provide the supply for that demand domestically is very constrained. You can't ship gasoline over long distances because of it's evaporative nature, so it has to be refined locally. The global cost of oil does play into it, but the biggest issue is that our supply isn't rising to meet our demand. Constructing additional, new refineries would allow domestic supplies to be increased, allowing for a more stable product base that's somewhat insulated from the global price of oil.
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