U.S. Senate Committee on Environment & Public Works
U.S. Senate Committee on Environment & Public Works
Hearing Statements
Date:   05/12/2004
Statement of Senator Wayne Allard
Environmental Regulations in Oil Refining

Mr. Chairman, I want to thank you for holding this very important hearing. Gas prices are up all over the country. Colorado has not been hit as hard as some states, but is certainly feeling the pinch. In Pueblo and Grand Junction people are paying about $1.96 per gallon, in Fort Collins they’re paying about $1.90 a gallon.

And there are areas like Vail, where they are out of the way, so it costs more to get products there. But, they also cause price increases by instituting a lot of regulations that business and products have to comply with. They are paying $2.30 per gallon. Another area that’s out of the way, but has brought some of this about through regulations, is Durango, where it’s $2.03.

Those of us who have run our own businesses know what it’s like to get hit by all of these regulations. It runs up the cost of doing business, which runs up the cost of your products.

We are all aware that there are many factors that affect the price of gasoline. But we must ask ourselves if we, in Congress, are doing anything to lift some of the burden of these elevated costs, or if we’re adding to the burden.

One factor that must be taken into account is that of the overall price of crude oil and the numerous costs required to convert crude to its useable form of gasoline. As Mr. Slaughter mentions in his testimony, approximately 46% of the cost of gas comes directly from the price of crude oil. We must remember that nearly 60% of our crude oil is imported from foreign countries.

Our reliance on imported sources means that our country has little to no control over crude oil prices. Unrest in many of the countries that provide oil to the world causes uncertainty in the supply. This uncertainty can drive up prices. Additionally, the Organization of the Petroleum Exporting Countries (OPEC) is able to raise and lower their supply of oil through a calculated system of quotas, which manipulates prices.

Another important factor is obviously the impact of supply and demand. In states like Colorado, summertime brings increased travel; this in turn brings about an increased demand for gasoline. When the demand for gas rises, but supply remains essentially the same, prices increase.

Some ask, “why don’t refiners simply increase their output?” The answer to that question is quite simply, because they can’t. There have been no new refineries built since 1976. Restrictions and requirements instituted by Congress make it so difficult and extremely expensive to build new capacity. In addition to the cost factor, it would likely take 5 to 7 years to get a project through design, permitting and construction. Few companies can afford to do this. We must not throw up so many regulatory roadblocks that we end up turning to other countries for all of our gasoline supply.

I am supportive of an energy policy that calls for greater dependence on domestic energy sources, including oil, natural gas, clean coal, nuclear, and renewable resources. But, we must also be aware of the effects of the myriad of laws we pass each year. We must not make the production or use of our domestic sources so expensive that costs force us to again increase our reliance on foreign sources.