Record-High Gas Prices: Had Enough?

Democrats believe America should work for everyone—not just Big Oil. As energy prices have risen, the Bush Republicans’ do-nothing approach to the squeeze American consumers feel has taken its toll on American families, farmers, businesses, and our economy. Instead of taking steps to reduce demand, which would quickly affect prices, Republicans have used current high energy prices as a reason to support new oil and gas drilling, which would not reduce prices for many years, if at all. America needs a new direction that will free America from dependence on oil, end giveaways to Big Oil companies making record profits, and enact tough laws to stop price gouging.

Gas Prices are High and Rising

Gasoline now costs more than $3 a gallon. Prices at the gas pump have jumped 104 percent from $1.47 per gallon in January 2001 to $3.00 today, with prices rising by 40 cents in four weeks this spring. The price for a barrel of oil has more than doubled during the Bush Administration from $30.63 in January 2001 to $73.87 today. (Energy Information Administration, Gasoline and Diesel Fuel Update 7/24/06)

Transportation costs for families have doubled. The average household with children will spend about $3,815 on transportation fuel costs this year, an increase of 100 percent or $1,912 over 2001 costs. (Energy Information Administration, Household Vehicle Energy Use: Latest Data and Trends 11/05; Short Term Energy Outlook, 7/06)

Summer vacationers squeezed from all sides. The average price of gasoline this summer is estimated to be $2.88 a gallon, 51 cents higher than last year’s average and almost double the price of $1.53 in the summer of 2001. At the same time, airlines have raised ticket prices to compensate for skyrocketing fuel costs; customers are paying 11 percent more for airline tickets than they paid a year ago. (EIA Short Term Energy Outlook 7/06 and 9/01; Air Transport Association)




Oil Company Profits are High and Rising

Oil companies still making record profits. While Americans pay more at the pump, the five largest oil companies reported a record $110 billion in profits in 2005. Exxon Mobil alone raked in $36 billion in profits, the largest annual profit of any American company. The five largest oil companies have increased their annual profit by 158 percent since 2001. Energy analysts estimate that profits for these companies in the second quarter of 2006 will be $33.6 billion, 32 percent higher than the second quarter of 2005. (Based on annual profits from ExxonMobil, Shell, BP, ChevronTexaco, and ConocoPhillips company financial reports for 2001 and 2005; Associated Press 7/21/06)

Refiners demanding more tax breaks. “Despite public frustration over high pump prices and flush industry profits, major refining companies are seeking and winning large local tax breaks for their refinery-expansion plans with little political opposition. The various incentives, combined with a federal tax-break package last year, can offer refiners savings that reach hundreds of millions of dollars...” (Wall Street Journal, 7/18/06)

Companies not putting their record profits toward new investment. The Congressional Research Service (CRS) found that the eight top oil and refining companies have $57 billion in cash on hand, a sixfold increase over the $9.5 billion they held in 2001. The rate of return on equity has also increased sixfold. At the same time, these companies’ exploration costs and capital investment have only doubled from their 2001 level. Despite what oil companies are saying, the CRS report demonstrates that they are not reinvesting their record profits in activities that could bring down the prices of oil and gasoline. Moreover, oil companies’ investments of these profits in non-petroleum alternatives has been “negligible.” (CRS Memorandum to Senator Wyden 7/5/06, ExxonMobil response to Questions from the Record of Joint Committee Hearing regarding Energy Pricing and Profits with Senate Energy and Natural Resources and Commerce, Science, and Transportation Committees 11/9/05)

Economic Volatility, Driven by Energy Costs, is High and Rising

Threatening economic growth and consumer spending. “…The anticipated moderation in economic growth now seems to be under way… That moderation appears most evident in the household sector…one likely source of this deceleration was higher energy prices, which have adversely affected the purchasing power of households and weighted on consumer attitudes.” (Testimony of Federal Reserve Chairman Ben Bernanke before the Senate Committee on Banking, Housing, and Urban Affairs, 7/19/06)

Increasing the risk of a recession. “With oil prices surging, financial markets gyrating and consumers turning cautious, the risks of recession are rising… A big worry is surging oil prices, which have contributed to several past recessions.” (Wall Street Journal 7/16/06)

Putting pressure on inflation. “Much of the upward pressure on overall inflation this year has been due to increases in the prices of energy and other commodities and, in particular, to the higher prices of products derived from crude oil.” (Testimony of Federal Reserve Chairman Ben Bernanke before the Senate Committee on Banking, Housing, and Urban Affairs, 7/19/06)

Bringing down the stock market. “Surging oil prices pulled stocks sharply lower for a third straight session Friday…” (Associated Press 7/15/06)

Increasing the trade deficit. “The U.S. trade deficit widened to $63.84 billion in May, thanks to a big increase in the nation's monthly bill for imported petroleum. For the month, oil imports reached a record $27.88 billion, up $4.03 billion, or 17 percent, from April, the Commerce Department said. Overall, the trade imbalance for May expanded 0.8 percent from April's revised gap of $63.34 billion, as the U.S. stayed on pace to far exceed last year's trade deficit, which came in at a record $716.73 billion.” (Wall Street Journal 7/13/06)

Sending more American dollars overseas. “Petroleum imports hit a record $27.9 billion as the average price of imported crude oil hit a record $61.74 a barrel in May, rising $4.92 from April for the biggest month-to-month gain since Iraq invaded Kuwait in August 1990. May imports from members of the Organization of the Petroleum Exporting Countries hit a record $13.6 billion, pushing the United States' petroleum trade deficit that month to a record $25.4 billion.” (Los Angeles Times, 7/13/06)

America Needs a New Direction

Because they can’t “snap their fingers” to bring down gas prices, Bush Republicans have no plan to confront the problem. Instead of convening a bipartisan energy summit as requested by Senate Democrats or taking actions to reduce the price at the pump today, President Bush has lamented, “I told the people, if I could lower gasoline prices with a snap of the fingers, I’d do it.” Bush Republicans have only proposed smokescreen solutions that would not lower the price at the pump but would subsidize new refineries, waive environmental laws, usurp state and local authority, and open up sensitive areas to oil and gas drilling. (Senate Democrats letter to President Bush, 5/18/06; Bush Press Conference, 7/9/06)

Senate Democrats’ Clean EDGE Initiative would protect American consumers.
S. 2829, the Clean Energy Development for a Growing Economy Act, would move America quickly in the direction of energy independence. The bill includes an oil savings target of six million barrels per day by 2020, requires immediate increases in the availability of alternative fuels and flex-fuel vehicles, increases energy market transparency, repeals tax breaks for the oil and gas industry, makes price gouging a federal crime, and invests heavily in making America’s energy future more sustainable and secure.