About 5-6 weeks ago, I wrote to Senator Carl Levin about the current energy supply issue. Here is his reply.
Dear Mr. Salvador:
Thank you for contacting me with your concerns about the price of gasoline. Record high gas and diesel prices have reverberated throughout our economy, hitting the pocketbooks of all 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 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. 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.3044), which was introduced by Senator Harry Reid (D-NV) on May 20, 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. to prevent the excessive speculation and price manipulation that drives up the. 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, until recently it could not police some of the biggest energy markets due to the “ ,” a provision in law that exempted electronic energy exchanges from government oversight. In September 2007, I introduced legislation ( S.2058 ) to close the Enron loophole and regulate electronic energy markets. I was able to successfully work with my colleagues to insert language from S.2058 into the Farm Bill, which was enacted into law when the Senate voted to override President Bush’s veto. Since the House of Representatives had previously voted to override the veto, it became law.
In addition, I have worked with my colleagues on additional legislation to close the “London loophole,” which has allowed traders of crude oil in the United States to route their crude oil trades overseas to avoid the limits on the trading of crude oil that apply to trades made on U.S. energy exchanges. I introduced the Close the London Loophole Act (S. 3129 ) and have co-sponsored Senator Durbin’s bill, S. 3130, which contains the same provision and other measures to bolster the CFTC’s ability to police the energy markets.
Another policy I have long advocated 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 continued to fill the SPR regardless of theor market conditions. Given the fact that the SPR is more than 95 percent full, it makes little sense to fill the SPR when the price of a barrel of oil is hitting record highs on a daily basis. That is why I 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. In addition, during debate on the Flood Insurance Reform and Modernization Act (H.R.3121), I supported an amendment similar to S.2598 that was passed by the Senate by a vote of 97 to 1. Similar legislation was passed by the House of Representatives and the provision became law, thus stopping the Bush Administration from continuing to put expensive oil into the SPR. I am glad that Congress finally passed this legislation, which will save taxpayer money and relieve some of the pressure on the oil markets that has been driving prices relentlessly higher.
While closing the Enron loophole and stopping the filling of the SPR may 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 have promoted development of these technologies through federal research and development and through joint government-industry partnerships. The federal government must first do its part to develop these technologies so that they will then be within reach of the American consumer.
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. If such a measure were tailored correctly, it would encourage oil and gas companies to dedicate more of their profits for exploration, expansion of production capacity, and investment in advanced technologies to secure our nation’s energy future.
These 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. On June 4, 2008, the Consumer-First Energy Act was brought before the full Senate for debate. Unfortunately, the minority party filibustered this bill, and on June 10, 2008, the Senate fell short of the sixty votes necessary to limit debate, which effectively blocked further action on this legislation.
Recently, there have been calls to develop more of our domestic oil and gas resources to counter the dramatic rise in gas prices. While drilling for more domestic resources would do little to impact oil and gas prices in the near term, I have supported environmentally responsible efforts to increase the domestic production of oil and gas and to allow for exploration in an environmentally sound fashion. For instance, in December 2006, I supported passage of the Tax Relief and Health Care Act (H.R.6111, P.L.109-432), which included, among other things, a provision to open certain areas of the Gulf of Mexico for oil and gas leasing and to prohibit oil and gas leasing in any area less than 125 miles from the Florida coastline.
However, I do not support efforts to drill in environmentally sensitive areas like the Arctic National Wildlife Refuge (ANWR). I believe opening these areas to drilling is the wrong way to address our energy problems. The oil reserves in ANWR are too small either to ensure the United States’ energy independence or to have a significant impact on energy prices. Furthermore, drilling in ANWR and other sensitive areas could have devastating and permanent effects on fragile ecosystems. I will continue to oppose drilling in environmentally sensitive areas.
Thank you again for contacting me.
First, I’m grateful for Carl Levin, or his office, for taking the time to reply. My thoughts on some of his topics.
- “Enron” oversight. Now, I’m not naive enough to think that corporations are angelic. But, since Enron, my company’s leadership has been anal about training and compliance with laws regarding accuracy in reporting inventory, insider trading, conflict of interest. These CEO’s do not want to go to jail and they will do what they can to comply with the law. NOTE: I USED THE WORD COMPLY. If the law doesn’t work, CONGRESS should change it for all corporations not just the oil companies.
- Consumer-First Energy Act of 2008 (S.3044): How do you lower consumer cost by increasing the corporate tax burden?????? I don’t think I will ever understand that. Read the FairTax book. Want the government to lower gas prices? Encourage investment in research to find alternate energy sources or more efficient engines by giving TAX BREAKS.
- Consumer-First Energy Act of 2008 (S.3044): Stop filling the Strategic Petroleum Reserves – are you kidding? Do you think the Chinese Army gives a rat’s patuti about what you are paying for gas? There’s a reason it’s called STRATEGIC. It is there to protect us.
- IT IS TIME TO DRILL FOR OIL in ANWR AND OFF THE AMERICAN COAST. The Chemical Industry has reduced emissions by 73% since the 1980’s. My personal experience is that chemical and petroleum companies invest billions of dollars each year to improve environmental performance of existing plants and to implement the best technology available on new plants.
I’m no great fan of John McCain, but, his $300 Million prize proposal is a way to stimulate ingenuity. Could he pull it off? I don’t know. But, I do know that prohibitive environmental laws and taxes will not stimulate investment and research.
Like my old boss used to say, “LET’S JUST DO SOMETHING!”