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Senate Fails to Address Oil Prices and Industry Profits

Consumers Union * Consumer Federation of America

Monday, July 31, 2006
Ann Wright or Jennifer Fuson, CU, 202.462-6262
Mark Cooper, CFA, 301-807-1623
Senate Fails to Address Oil Prices and Industry Profits

Washington, DC—The Senate votes today on a narrow piece of legislation aimed at expanding energy production, while doing little to address our nation’s growing demand for oil, record breaking petroleum industry profits, and high gasoline prices.
“The narrow bill being voted on today does not address the severe energy problem facing America,” said Mark Cooper, research director for the Consumer Federation of America. “The Congressional Research Service recently found that drilling in environmentally sensitive areas will not produce enough oil to affect the price of gasoline. The primary affect of this bill will be to increase oil industry profits. It gives the oil industry the go- ahead to drill for ‘cheap’ oil in U.S. waters and pocket higher prices,” added Cooper.
“Consumers are looking for leadership to address our rising energy costs and the Senate instead looks to add more cash to the oil companies’ profits, side stepping any significant energy proposal that would put our country on the path to a more secure energy future,” said Ann Wright, senior policy analyst with Consumers Union.
Consumers Union and Consumer Federation of America’s Recommendations for Real Energy Policy Include:
A commitment to substantial reduction of oil consumption and imports.
National oil consumption and foreign oil dependence is now widely recognized as a pervasive problem affecting consumers, the economy, national security and the environment. A long-term commitment to reducing consumption of transportation fuel is the only way to address this problem. The Vehicle and Fuel Choices for American Security Act (S. 2025), a bi-partisan bill sponsored by senators Brownback ( R-KS) and Bayh (D-IN) calls for reducing America’s oil consumption by ten million barrels per day over the next quarter century.
An increase in fuel efficiency requirements for vehicles.
Automobiles and light trucks are the single largest source of oil consumption in the U.S., but the an Environmental Protection Agency (EPA) report this month found the average fuel economy for vehicle fleets in the U.S. has not improved in two decades. According to EPA, transportation fuel accounts for approximately 40 percent of all U.S. oil consumption. Without legislation with significant targets, the growing demand our nation’s dependence on foreign oil will continue to grow.
Two bills have been introduced in the Senate that would improve the fuel efficiency of vehicles and should be considered in the current energy debate. They are the Ten in Ten Fuel Economy Act (S. 3543), introduced by Senators Feinstein and Snowe, and the Fuel Economy Reform Act of 2006, sponsored by Senators Lugar and Obama. Both bills would require a 10 MPG increase in the fuel efficiency of cars and trucks over the next ten years.
A requirement that EPA update miles per gallon estimates on new vehicle window stickers and require manufacturers to use the accurate estimates in compliance with federal mileage standards, called Corporate Average Fuel Economy (CAFÉ) standards.
Consumers Union, publisher of Consumer Reports magazine, has tested the accuracy of EPA’s mpg claims for model years 2000 to 2006 and found the mileage promised on new car stickers is very often inflated, sometimes by as much as 50 percent.
Congress has not allowed EPA to update its fuel economy data on window stickers since the 1980s. Even more faulty numbers, which date back to 1970s, are used by the National Highway Traffic Safety Administration to enforce compliance with the federal miles per gallon standards.
The Ten in Ten Fuel Economy Act would order EPA to update its decades-old fuel economy data to reflect real driving conditions and force the National Highway Traffic Safety Administration to use those numbers to enforce the miles per gallon compliance.
An examination of the price raising business practices of the oil industry.
The Senate needs to act on legislation that puts in place mechanisms for preventing pricing abuse by the oil industry. The oil industry is reporting record profits. Exxon Mobil reported this week that it earned $10.36 billion in the second quarter, the second largest quarterly profit ever recorded by a publicly traded U.S. company.
The Oil and Gas Industry Antitrust Act of 2006 (S. 2557), a bi-partisan bill voted out of the Senate Judiciary Committee, would allow the formation of a joint task force of federal and state attorneys general to monitor the structure, conduct and performance of gasoline markets.
Legislation is needed that would set meaningful goals for expanding domestic oil refining capacity in environmentally friendly ways to help combat price manipulation by the oil giants.
Create oversight on the trading of unregulated energy futures.
According to a bi-partisan report released by the U.S. Senate Permanent Subcommittee on Investigations, trading of energy commodities on unregulated electronic markets has been linked to rising gasoline prices by driving up crude oil prices as much as $20 a barrel. Regulatory oversight of energy commodities is needed to restore integrity to our price discovery markets.
The Oil and Gas Traders Oversight Act of 2006 (S. 2642), sponsored by Senators Feinstein, Snowe, Levin and Cantwell, would give the Commodity Futures Trading Commission (CFTC) oversight authority over unregulated energy futures. Consumers Union strongly urges the Senate to take up and pass this important piece of legislation.