Muslims For Kucinich

Kucinich gave the following speech in Congress on October 7, 2005:

During debate on H. Res. 481, a rule expediting debate of H.R. 3893, Gasoline for America's Security (GAS) Act of 2005, Congressman Kucinich said:

"Mr. Speaker, first of all, at the appropriate time, I will enter some extraneous information into the Record.

"Mr. Speaker, it is very clear when we look at what has happened in the last few years where we have had a number of mergers of oil companies, the top five oil companies, I believe, now dominate more than a third of the market. As a result, we see that prices keep increasing as market concentration increases. This is a clear example of what happens when monopolies dominate an economy. We have high prices, and we also have manipulation of supplies, increased profits; and now we have price gouging.

"With this manipulation of supply, we are also seeing an attempt today to attack our environmental laws. That puts us in a position where we sacrifice not only the standard of living of many Americans to the oil companies but now we are sacrificing the environment itself.

"I think that many Americans are already aware that one of the reasons that we are in Iraq is because of oil. I mean, very few people would dispute that now. There were no weapons of mass destruction, they are not going to have a democracy there, but the administration is preparing to stay there for the long haul, and it is because of oil. Oil is corrupting this government. Oil is costing us peace in the world. Oil is putting us on a path to economic ruin. Oil is dominating this political process right now.

"We need to take a new course. We can start with the windfall profits tax, but we have to go beyond that. We need to look at alternative energy, the power of the sun. Sunlight is a disinfectant in many ways, but it is also a powerful energy source. We need wind power, we need geothermal, we need to tap all available technologies to take us in a new direction where the globe itself is not at stake.

"What a disgrace it is that we put the lives and the existence of the Gwitchin Indians in Alaska at risk for more oil. What a disgrace it is that we violate people's human rights for more oil. What a disgrace it is that we are not taking a new direction, not just to save the planet, but to save democracy. Vote down the bill."

Letter from the Public Citizen's Energy Program

Washington, DC
October 5, 2005

Dear Representative:

On Friday, October 7, the House will consider H.R. 3893, the "Gasoline for America's Security (GAS) Act of 2005." This bill takes the approach that environmental laws must be weakened in order to encourage the U.S. refining industry to expand or construct new refining capacity. This is false. The facts clearly show that not only are current environmental laws in place at a time when the refining industry is experiencing record profits, but that recent, fundamental changes to the refining industry -- namely recent mergers -- have created financial incentives for refineries to encourage tight supplies. Until these market fundamentals -- and not environmental rules -- are corrected, Americans will continue to be price-gouged by oil companies.

This week, the national average gasoline price hit $2.93/gallon, up 50 percent from a year ago. These prices were well on their way to hitting record highs long before Hurricane Katrina. Oil and gasoline prices were rising long before Hurricane Katrina wreaked havoc. U.S. gasoline prices jumped 14 percent from July 25 to August 22.

The problem is that too few oil companies control too much of the refineries, squelching competition but guaranteeing record profits for the industry.

In 1993, the 5 largest U.S. oil refining companies controlled 34.5 percent of domestic oil refinery capacity; the top 10 companies controlled 55.6 percent. By 2004, the top 5 -- ConocoPhillips, Valero, ExxonMobil, Shell and BP -- controlled 56.3 percent and the top 10 refiners controlled 83 percent. As a result of all of these recent mergers, the largest 5 oil refiners today control more capacity than the largest 10 did a decade ago. This dramatic increase in the control of just the top 5 companies makes it easier for oil companies to manipulate gasoline prices.

The proof is in the numbers. According to the Energy Information Administration, profit margins for U.S. oil refiners have been at record highs. In 1999, U.S. oil refiners made 22.8 cents for every gallon of gasoline refined from crude oil. By 2004, they were making 40.8 cents for every gallon of gasoline refined, a 79 percent jump. And the Washington Post noted that those profit margins have soared even higher in 2005, to 99 cents on each gallon sold, for a more than 300 percent increase since 1999.

It is no coincidence that oil corporation profits -- including refining -- are enjoying record highs. Since 2001, the largest 5 oil refiners in America have recorded $228 billion in profits.

And will the environmental regulations make it easier to build new refineries? No, because the financial structure of the refining industry is what is prohibiting additional investment. That's because the industry is making record profits off of the current tight supplies. They have no interest in creating surplus capacity because that will erode their profit margins.

Want proof? Start with the U.S. Federal Trade Commission. In March 2001, FTC concluded in its Midwest Gasoline Price Investigation:

" ... A significant part of the supply reduction was caused by the investment decisions of three firms ... One firm increased its summer-grade RFG [reformulated gasoline] production substantially and, as a result, had excess supplies of RFG available and had additional capacity to produce more RFG at the time of the price spike. This firm did sell off some inventoried RFG, but it limited its response because selling extra supply would have pushed down prices and thereby reduced the profitability of its existing RFG sales. An executive of this company made clear that he would rather sell less gasoline and earn a higher margin on each gallon sold than sell more gasoline and earn a lower margin. Another employee of this firm raised concerns about oversupplying the market and thereby reducing the high market prices. A decision to limit supply does not violate the antitrust laws, absent some agreement among firms. Firms that withheld or delayed shipping additional supply in the face of a price spike did not violate the antitrust laws. In each instance, the firms chose strategies they thought would maximize their profits."

So, that settles it: U.S. oil refineries would rather sell less gasoline and earn bigger profits than flood the market and earn lower profit margins. So gutting environmental laws, as H.R. 3893 proposes, will do nothing to expand refining capacity, but it will reduce public health protections for Americans.

And a May 2004 U.S. Government Accountability Office report agreed with Public Citizen that recent mergers in the oil industry have directly led to higher prices. It is important to note, however, that this GAO report severely underestimates the impact mergers have on prices because their price analysis stops in 2000 -- long before the mergers that created ChevronTexaco, ConocoPhillips, and Valero-Ultramar/Diamond Shamrock-Premcor.

Rolling back environmental laws will do nothing to lower prices, but it will weaken public health protections for Americans.

Sincerely,
Tyson Slocum,
Public Citizen's Energy Program

[Ed. note: H. Res. 481 was agreed to by recorded vote: 216 - 201 (Roll No. 515). Then a price gouging amendment by Congressman Bishop of New York was voted down. Finally, a 5-minute recorded vote was called on H.R. 3893. After the house leadership extended the vote by 40 minutes, H.R. 3893 was agreed to by recorded vote: 212 - 210 (Roll No. 519). During this extended vote, 12 parliamentary inquiries were recorded.]