U.S. Senate Committee on Environment & Public Works
U.S. Senate Committee on Environment & Public Works
Hearing Statements
Date:   05/12/2004
 
Statment of Senator George V. Voinovich
Environmental Regulations in Oil Refining

Thank you, Mr. Chairman.

Last month, I asked the Committee Chairman, Senator Inhofe, to conduct a hearing on the impact of environmental laws on gasoline prices. I am pleased that he responded positively.

Today's hearing is the fourth hearing I’ve attended on the high cost of gasoline in our nation. Since 2000, the Committee on Government Affairs, of which I am also a member, has held a series of hearing on this issue. At these hearings, we were assured that we would have more stability of prices. Unfortunately, prices are still not stable. Today, consumers are paying the highest price ever per gallon of self-serve regular gasoline, and that price continues to increase. I am very concerned that this is just the beginning of a summer of record-breaking gas prices since there are still four months of high gasoline demand to come.

You cannot pick up a newspaper or turn on a television without reading or hearing about the high price of gasoline in our nation today. I have to tell you – it's not possible for me to visit a gas station these days without coming across people who are downright angry. When people pumping their gas start talking to each other across the islands about the "blankety-blank" price of gasoline, you know they are mad. I don't blame them. They are angry because the increase is affecting them where it hurts, right in the pocketbook. It's affecting people who have to drive long distances to make a living. It's affecting vacation plans for those families who have planned to take long trips this summer. It's particularly affecting people who live on the financial edge –those of whom we sometimes forget how much high gas prices can impact on their ability to pay for food and other essentials. This problem is compounded because these same people see an increased burden on their income because of high natural gas and electricity costs.

According to the Energy Information Administration, on Monday the national average price of regular grade gasoline was $1.94 per gallon. I’ve seen estimates that gasoline prices could reach as high as $3.00 per gallon in some parts of the country in the coming months.

The kind of gas price increases we are seeing do more than raise eyebrows, they raise questions.

The American people are getting fed up with paying these high gas prices. Politicians, analysts and business owners are busy pointing to a whole host of reasons for price hikes over the past several years:

- Lack of domestic production;
- Lack of new refinery construction since 1976;
- Reformulated gasoline;
- Alleged price gouging and collusion by oil companies;
- Economics and the law of supply and demand;
- Pipeline and other transportation problems; and
- You name it.

Frankly, most people don't care what the reason is and they are getting tired of the finger pointing.

Four years ago, at a hearing in the Government Affairs Committee, I asked what we were going to do now to bring down gasoline prices, and what were we going to do at that time to make sure that we don't end up in this predicament five years down the road. It’s important to remember that gasoline prices at that time were an average of $1.65 per gallon.

All too often in government, when a problem comes up, we have a tendency to treat it as if we would a barking dog: give it a bone and a little attention to make it stop barking, and when it stops barking, ignore it until it starts barking again.

Such neglectful treatment of such a vital component of our nation's economy is unconscionable and reflects the inability of this Congress and the Administration to adopt a comprehensive energy policy. In spite of the efforts of some of us since 2002 to adopt such a policy and it was disheartening that our attempt last fall was frustrated because we were unable to get cloture on the bill. The American people need to understand that the passage of a comprehensive energy bill is key to our economic prosperity and dealing responsibly with our reliance on foreign oil.

The American people want results. They want to know what we will do in the short term to bring down prices, and they want to know what our long term plan is as well. No one wants to see a lengthy continuation of what we're going through at this time and, no one wants to see this situation repeat itself years from now.

One of the problems we are facing is that, for far too long, our country has not had a comprehensive energy policy and has moved ahead with environmental laws and regulations with little consideration of how it would affect our economic well-being.

The United States Senate has a responsibility to develop a policy that harmonizes the needs of our economy and our environment. These are not competing needs. A sustainable environment is critical to a strong economy, and a sustainable economy is critical to providing the funding necessary to improve our environment.

We need to enact a policy that broadens our base of energy resources to create stability, guarantee reasonable prices, and protect America's security. It has to be a policy that will keep energy affordable. Finally, it has to be a policy that won't cripple the engines of commerce that fund the research that will yield environmental protection technologies for the future.

The energy bill is also important to my home state. Ohio has many just-in-time manufacturers who transport components and finished products far and wide. They rely on low gas prices—or at least stable gas prices—for their economic survival. Passing the Energy Bill will help provide that stability by allowing us to increase domestic production and reduce our reliance on volatile foreign sources of oil.

Yesterday’s overwhelming vote in favor of the energy tax provisions in the FSC bill is a step in the right direction. I’m pleased that my colleagues avoided the demagoguery and voted in favor of this provision. For example, the provision will provide certainty for our marginal oil producers by creating counter-cyclical incentives that only take effect when the price is low. Five years ago, we lost the production of many marginal wells when crude prices dipped below $13 per barrel and many of the small producers couldn’t break even. These incentives will guarantee a minimum price for these producers, protecting our domestic supply of oil from future low prices.

In order to continue to meet our domestic petroleum needs, we must pass an energy policy that will increase production and provide certainty to our producers. We also must consider conservation and energy efficiency measures that will help us use less oil. We must consider common-sense CAFÉ standards that will help decrease our reliance on fossil fuels. Unfortunately, we were unable to consider exploring for oil in the Arctic National Wildlife Refuge (ANWR). ANWR would be a step in the right direction toward increasing our domestic energy supply.

Nationwide, our pipelines are operating at capacity, and, if a break or other problem is experienced, then the gasoline being distributed to the gas stations will be interrupted, which will be reflected in the price at the pump as we saw in the Midwest in 2000. The best way to alleviate this problem with our distribution system is to improve our infrastructure.

We also must deal with our refining capacity. New Source Review has placed America’s refiners in limbo. Permitting requirements have made it difficult for refineries to expand capacity or to construct new refineries. There have been no new refineries built in this country since 1976.

Today, there are 149 refineries in the United State. They are stretched to the limit because they are operating at 94 percent capacity. In 1981, when there were over 300 refineries in this country, just over 68 percent of the capacity was being utilized.

Our problem with our reliance on foreign oil is frightening. 30 years ago, we relied on 35 percent foreign oil to meet our energy needs. Today our reliance averages 60 percent and it is expected to increase to 73 percent by the year 2025 according to the Energy Information Administration. This problem will be exacerbated because of China’s growing demand for oil.

Many people forget what led to the oil embargo of 1973. The Arab states believed that their complaints against Israel were going unheeded. In order to punish the United States, they cut off our access to the oil supply we were relying on in the Middle East. I believe we are more vulnerable than we have ever been. Political unrest continues in the Middle East, and I am concerned that many of the foreign oil supplies we rely on are vulnerable to potential terrorist attacks. Can you imagine what al Qaeda would do if they were able to get control of Saudi Arabia and the oil fields there?

If the Congress is serious about dealing with our current oil supply crisis, we must pass the energy bill now. Band-aids will no longer work – the patient is hemorrhaging. We can’t continue with our head in the sand any longer.

Thank you and I look forward to hearing the testimony of today’s witnesses.