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Congress Must Reform Oil Industry, Financial Markets, Public Citizen Tells House Subcommittee

May 6, 2008  

Congress Must Reform Oil Industry, Financial Markets, Public Citizen Tells House Subcommittee

As Oil Company Profits Hit Record Highs, Americans Pay the Price at Pump

WASHINGTON, D.C. – Uncompetitive practices by oil companies and manipulation of the market by financial speculators are two culprits behind soaring gas prices, Tyson Slocum, director of Public Citizen’s Energy Program, told a U.S. House of Representatives subcommittee today.

As American consumers pay ever-rising prices at the pump, the five largest oil companies in the U.S. – ExxonMobil, ChevronTexaco, ConocoPhillips, BP and Shell – have raked in $586 billion in profits since 2001, Slocum said in testimony to the House Transportation and Infrastructure Committee’s Subcommittee on Highways and Transit. Meanwhile, during that time, gasoline prices have risen 160 percent and diesel has gone up more than 210 percent.

“Public Citizen’s analysis of oil company profits and their investments shows that they are spending unprecedented sums on benefits for their shareholders in the form of stock buybacks and dividend payments and not adequately investing in sustainable energy that is necessary to end America’s addiction to oil,” Slocum testified. For example, ExxonMobil has spent $40 billion buying back stock since January 2007 while spending   only $4.3 billion on U.S. capital and exploration.

Additionally, Public Citizen’s research shows that a portion of these record earnings are fueled by market manipulation and other anti-competitive practices, made possible by the wave of recent mergers and weak regulatory oversight. At least $30 of the current $115 of a barrel of oil – or about 70 cents of a gallon of a gasoline – is attributable to pure speculation, unrelated to supply and demand, Slocum said. Re-regulating these energy markets will introduce the transparency and disclosure necessary to combat harmful speculation that is making hedge funds, investment banks and oil companies rich at the expense of everyone else.

Slocum also urged lawmakers to resist the temptation of temporarily repealing the 18.4-cent federal gas tax as a way to lower energy prices for their constituents. There’s no guarantee that a “gas tax holiday” will cause retail prices to drop 18.4 cents, with the more likely scenario being prices declining a few pennies and oil companies, distributors and retailers pocketing the difference. And the loss in federal revenues to the Highway Trust Fund is too costly, Slocum said.  

Slocum outlined a five-point plan for reform that calls for repealing all existing oil company tax breaks, including the roughly $9 billion a year in subsidies to oil companies, and implementing a windfall profits tax, which would finance clean energy, energy efficiency and mass transit; empowering the federal government to crack down on anti-competitive practices by oil companies and investment firms; establishing a Strategic Refining Reserve that would complement America’s Strategic Petroleum Reserve and would be funded by a windfall profits tax on oil companies; re-regulating energy trading exchanges; and improving vehicle fuel economy standards to reduce gasoline demand.

READ Slocum’s full testimony.