Contact: Matt Dempsey Matt_Dempsey@epw.senate.gov (202)224-9797
Opening Statement of Senator James M. Inhofe
Environment and Public Works Committee
Hearing on “Transportation’s Role in Climate Change and Reducing Greenhouse Gases.”
Tuesday, July 14, 2009
Madame Chairman, you and I both know the importance of robust funding for our nation’s highways and bridges and ensuring the Highway Trust Fund is able to meet its commitments. I look forward, as always, to working with you on passing a highway bill extension and Trust Fund fix in the next two weeks.
As we have discussed many times in this Committee, the Highway Trust Fund is going to run out of money sometime in the next few weeks and will require an infusion of $5 to $7 billion to get through the rest of fiscal year 2009. Additional funds will be needed to fund the highway and transit programs in future years.
This Committee is going to consider an 18 month extension later this week. The Trust Fund will require a total of $20 billion to get through this 18 month period according to this Administration. It is critical to fix this shortfall. Failing to do so will delay planned and ongoing road projects and result in people being laid off. This would be unacceptable any time, but more so during today’s economic downturn.
But today, we are examining a different aspect of the transportation sector—that is, the role it would play under a cap-and-trade system. There is some interesting debate about what its role will be. But there’s no debate about this: cap-and-trade will make gasoline more expensive for American consumers. What’s more, it will actually increase our dependence on foreign oil.
The consumers represented here today are America’s truckers. Trucking is a highly competitive industry with very low profit margins. This explains why, as fuel prices increase, many trucking companies are reporting lower profits, if they are reporting any profits, at all.
In 2007 and 2008, for example, over 5,000 trucking companies with at least 5 trucks went out of business and thousands of independent operators, drivers, and employees have lost their jobs. If we enact cap-and-trade legislation, fuel prices will rise, and more jobs in the trucking sector will be destroyed.
For the sake of argument, let’s use EPA’s projected cost of carbon under cap-and-trade, which is about $20 dollar per ton for CO2. According to EIA estimates, Americans consumed about 268 billion gallons of finished petroleum products such as gasoline, diesel fuel and jet fuel in 2008. What does this mean? Well, according to the Union of Concerned Scientists, in testimony before the House Energy and Commerce Committee, this would translate into an increase of 20 cents per gallon of gasoline for American consumers.
If we take a step back and look at the big picture, this means consumers would pay almost $54 billion more annually for gasoline, diesel fuel, jet fuel and other petroleum products. And that is a low-ball estimate. As the cost of carbon increases over time—in addition to fluctuations in the global price of oil and the costs of more refined product being imported because of higher operating costs to refiners in the United States—these costs estimates are likely to be much higher.
Supporters of cap-and-trade claim it will help break our dependence on foreign oil. In fact, the opposite is true: passing this legislation may make us even more dependent on imports of refined petroleum products like gasoline, diesel, jet fuel, and home heating oil.
Refining trends are not encouraging. Many of the new refinery capacity expansions abroad are being built to produce fuels solely for the U.S. market. According to a recent article in the publication OPIS about Indian refining company Reliance Industries, “Reliance's plan to sell oil products from its new 580,000-barrel per day Jamnagar refinery to the U.S. is beginning to take shape as the Indian refiner secured an additional 1million barrel storage space at BORCO in the Bahamas….” The 580,000 barrel per day figure alone represents more than 6 percent of U.S. daily gasoline consumption. This number is from one foreign refinery.
An ICF International study on the impacts of last year’s Lieberman-Warner climate legislation indicated refining investment would drop over 11 billion dollars in 2020 due to the high costs cap-and-trade would impose on the U.S. refining sector. Moreover, that same analysis estimated that petroleum product imports would double from 15 percent to nearly 30 percent by 2020.
Despite routine denial from environmentalists, it’s clear that we will be using petroleum for decades to come. This is no secret; it’s a fundamental fact of everyday life. So let’s get on with it: let’s expand domestic production of all forms of energy—nuclear, clean coal, oil, natural gas, wind, geothermal, you name it. Just last week, I introduced legislation to spur development of natural gas vehicles—which is one of many innovative ways to lessen our dependence on foreign oil.
Whatever the solution, we can’t lessen our dependence on foreign oil through taxes, mandates, and bureaucracy. We can only do it by opening access to all forms of domestic energy and encouraging innovation and the creation of new technologies right here at home.