Congress and the High Price of Gas. Part 1

On May 21, 2008 the U.S. Senate Judiciary Committee called the top executives from the petroleum industry for an inquisition to get the oil companies to confess price gouging. The executives called were Robert Malone, Chairman and President of BP America Inc.; John Hofmeister, President, Shell Oil Company; Peter Robinson, Vice Chairman of the Board, Chevron Corporation; John Lowe, Executive Vice President, Conoco Philips Company; and Stephen Simon, Senior Vice President, Exxon Mobil Corporation. The entire proceeding was done in the hopes of publicly shaming the oil companies, and improving the image of a rather unpopular Democratic congress, whose approval rating is more dismal than The U.S. Presidents'. The Judiciary Committee however was not prepared for the facts and figures given to them by the summoned executives. At one point during the proceedings, John Lowe described the small part that American oil companies play in the global petroleum market. John Lowe; "I cannot overemphasize the access issue. Access to resources is severely restricted in the United States and abroad, and the American oil industry must compete with national oil companies who are often much larger and have the support of their governments. We can only compete directly for 7 percent of the world's available reserves while about 75 percent is completely controlled by national oil companies and is not accessible." Stephen Simon also expounded on the minute role American oil companies play on the world market. Stephen Simon; "Exxon Mobil is the largest U.S. oil and gas company, but we account for only 2 percent of global energy production, only 3 percent of global oil production, only 6 percent of global refining capacity, and only one percent of global petroleum reserves. With respect to petroleum reserves, we rank 14^th. Government-owned national oil companies dominate the top spots. For an American company to succeed in this competitive landscape and go head to head with huge government-backed national oil companies, it needs financial strength and scale to execute massive complex energy projects requiring enormous long-term investments. To simply maintain our current operations and make needed capital investments, Exxon Mobil spends nearly $1 billion each day. When the inevitable questioning began about price gouging at the pump, the senate committee members were a little less than enthused when the oil executives cited that on average 15% of the cost consumers pay at the pump goes to taxes, while only 4% goes to the oil companies as profit. These figures were repeated many times during the course of the hearing. Oddly not one Democratic senator offered to lower the taxes on gas to help consumers. Another point that was repeatedly brought up was Congress's responsibility for restricting oil exploration within the United States. John Hofmeister;
"While all oil-importing nations buy oil at global prices, some, notably India and China, subsidize the cost of oil products to their nation's consumers, feeding the demand for more oil despite record prices. They do this to speed economic growth and to ensure a competitive advantage relative to other nations. Meanwhile, in the United States, access to our own oil and gas resources has been limited for the last 30 years, prohibiting companies such as Shell from exploring and developing resources for the benefit of the American people."
Senator Sessions; "I agree, it is not a free market." Currently in the United States 62% of all on-shore federal lands are restricted from oil and gas development, with another 92% of those restrictions applying to all federal lands. There also exist an outer shelf moratorium on the Atlantic Ocean, an outer continental shelf moratorium for the Eastern Gulf of Mexico, a congressional ban for specific areas of the Rock Mountains, and Alaska for on-shore oil and gas development, there even exists a congressional ban on an analysis of the resource potential for the Pacific, Atlantic, and Eastern Gulf of Mexico, according to the Department of the Interior. In 2004 a report done by the Argonne National Laboratory identified some 40 specific federal policies meant to limit, delay, halt or restrict natural gas projects. At the time these policies were set in motion oil was selling in the single digits, and not the triple digits that oil is currently selling at. These policies were intended to force U.S. companies to look over seas for new deposits; as a result U.S. oil production has fallen to the point that nearly 60% of daily consumption comes from foreign countries. In essence Congress holds the power to reverse some, if not all these policies, and allow oil companies to explore for new oil deposits and lower prices at the pump.