The Petition to Stop the Games with Gas/Oil Prices

Fact: Gasoline is now $4 a gallon here in the Hudson Valley, crude oil (which costs $20 a barrel to extract) is selling for $132 a barrel, the five largest oil companies made almost $600 billion in profits since 2001, and American taxpayers now spend $25 billion annually on unnecessary subsidies for the fossil fuel/nuclear industry.

Fact: Last October BP agreed to pay $300 million to settle allegations that it manipulated the American propane futures market (and yet the practice of energy traders speculating on information gleaned from its own affiliate
companies in the energy infrastructure continues; see ClosetheEnronLoophole.com).

Fact: In spite of the fact that the Dutchess County Legislature unanimously passed a resolution drafted by yours truly this March to address this and "close the Enron loophole", Congress has failed to move to do so.

If you agree with Public Citizen's common-sense five-point plan to address oil/gas price insanity below, sign on to this petition, pass it along to
all you know, call Congress toll-free at (800) 828-0498, and send a letter to our County Legislature at [email protected] (on May 23rd a resolution was submitted by yours truly for Dutchess to send a strong message to Washington on all five points-- see more on these at
Citizen.org and ConsumerWatchdog.org):

1. Repeal all existing oil company tax breaks, close loopholes allowing oil companies to escape paying adequate royalties and/or implement a windfall profits tax, dedicating the new revenues to financing clean energy, energy efficiency and mass transit.

2. Re-regulate energy trading exchanges to restore transparency and impose firewalls to stop energy traders from speculating on information gleaned from the companies' affiliates.

3. Ensure that new powers provided to the Federal Trade Commission to crack down on unilateral withholding and other anti-competitive actions by oil companies and financial firms are effectively carried out.

4. Establish a Strategic Refining Reserve to be financed by a windfall profits tax on oil companies that would complement America's Strategic Petroleum Reserve (SPR), and cease filling the SPR.

5. Improve fuel economy standards from the modest increase approved by Congress in 2007 to reduce gasoline demand.

Joel Tyner
Dutchess County Legislature Environmental Committee Chair
County Legislator, Clinton/Rhinebeck
324 Browns Pond Road
Staatsburg, NY 12580
[email protected]
(845) 876-2488

[notable must-read below: May 6th testimony of Tyson Slocum, Director Public Citizen's Energy Program, before the House of Representatives'
Committee on Transportation and Infrastructure, Subcommittee on Highways and Transit: "Hot Profits And Global Warming: Financial Firm and
Oil Company Profits and Rising Diesel Fuel Costs in the Trucking Industry":
Citizen.org/documents/House08.pdf]

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[resolution here below submitted by yours truly May 23rd; send letters to [email protected] to get it on agenda and passed]

WHEREAS, we are in a national energy crisis that requires immediate action as well as long-term decisions; the fact is that crude oil, which costs $20 a barrel to extract, is selling for $132 a barrel, and the five largest oil companies made almost $600 billion in profits since 2001, and

WHEREAS, the impact of skyrocketing oil prices on Dutchess County taxpayers, our county budget, school budgets, town budgets, and city budgets, along with consumers, truckers and the airlines has been enormous and will only worsen, while energy companies are so flush with money that they are spending more on buying back their own stock at record rates than they are on finding the new clean energy sources we need, and

WHEREAS, the well-respected long-time nonprofit advocacy organization Public Citizen has issued the following common-sense recommendations immediately: increasing funding for mass transit and rail transportation, levying a windfall tax on the excess profits oil companies are making, closing the Enron loophole by re-regulating energy producers to combat price fixing, stopping oil companies, investment banks and hedge funds
from continuing their exploitation of recently deregulated energy trading markets to manipulate energy prices, as this speculation is costing Americans an extra 70 cents on every gallon of gas, and

WHEREAS, last October BP agreed to pay $300 million to settle allegations that it manipulated the American propane futures market, and yet the practice of energy traders speculating on information gleaned from
its own affiliate companies in the energy infrastructure continues; Congress and our President needs to put an end to this form of insider trading, and

WHEREAS, Public Citizen also recommends that the following long-term solutions be implemented as soon as possible: substantially increasing motor vehicle fuel economy standards (currently minimal)to help conserve
fuel, moving our nation to alternative energy sources such as wind and solar power by truly supporting their funding and development, ending subsidies for fossil fuel and nuclear companies once and for all,
redirecting that $25 billion to households like those here in Dutchess County so they can afford clean alternatives like hybrid cars and can install solar panels, and

WHEREAS, Public Citizen has also sensibly recommended that Congress and our President delay no longer in mandating the installment of temperature equipment at gas pumps like Canada does, so consumers at least get the
amount of gas for which they are paying regardless of how hot it is, and stop subsidizing the production of ethanol, as the fact is that this raises food prices and does not help global warming, and be it further

RESOLVED, that the Dutchess County Legislature requests that Congress pass and our President sign into law legislation based on Public Citizen's common-sense recommendations above, in order to protect the taxpayers and
consumers of Dutchess County, New York and the United States from being further hurt than we have been already by unfairly skyrocketing oil prices, and be it further

RESOLVED, that a copy of this resolution be sent to President George W. Bush, Senators Hillary Rodham Clinton and Charles Schumer, and Representatives Kirsten Gillibrand, John Hall, and Maurice Hinchey.

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[this resolution below drafted by yours truly passed unanimously this March in Dutchess County Legislature; unfortunately Congress has yet to act on this; call (800) 828-0498!]

WHEREAS, the Close the Enron Loophole Act, S.2058, has been introduced in the Senate co-sponsored by Senators Chuck Schumer, Maria Cantwell, Byron Dorgan, Frank Lautenberg, Claire McCaskill, Rob Menendez, Jack Reed, Bernard Sanders, and Ron Wyden; companion legislation, H.R.4066, has been introduced in the House of Representatives, co-sponsored by Representatives
John Hall, Maurice Hinchey, Carolyn McCarthy, James McGovern, Peter Welch, John Larson, Thomas Allen, Michael Michaud, Robert Andrews, Bill Pascrell, and Steven Rothman; both bills increase transparency and oversight for the electronic over-the-counter trading of energy commodities, such as heating oil, crude oil, coal, natural gas, propane, diesel fuel, and electricity, and

WHEREAS, speculation and trading on unregulated exchanges are fueling wild swings in energy prices that are harming U.S. families, businesses, and the economy as a whole; an impressive array of industrial, consumer, and
natural gas utilities is supporting this legislation to close the Enron loophole, increase market transparency, and strengthen federal oversight of energy pricing, including Citizen Action, Consumer Federation of America, Consumers Union, Agricultural Retailers Association, American Public Gas Association, American Public Power Association, Industrial Energy Consumers of America, New England Fuel Initiative, and many others, and

WHEREAS, the price of energy affects every sector of the U.S. economy and the lives of every Dutchess County resident; in recent years, the price for crude oil, gasoline, heating oil, natural gas, propane, and other commodities have been at the mercy of energy traders on unregulated "dark markets"; these traders have used these markets, made "dark" by loopholes in federal oversight, to cash in at the expense of families and small businesses, and

WHEREAS, these "dark markets" are now the dominant energy trading environments; market fundamentals of supply and demand have been ignored, as fear, paranoia and greed drive prices; because these markets are not policed by U.S. regulators, speculation runs rampant and manipulation allegations abound, and

WHEREAS, in 2000, Enron lobbyists seeking to exempt energy commodity trading from federal oversight were successful in passing the "Enron
Loophole"; Enron basically had the word "energy" removed from federal commodities laws pertaining to certain types of trading environments;
electronic trades on energy were exempted from oversight by a provision inserted at the behest of Enron and other large energy traders into the
conference report on the Commodity Futures Modernization Act of 2000; virtually overnight, the loophole freed over-the-counter energy
trading from federal oversight requirements, opening the door to excessive speculation and energy price manipulation; while Enron is long gone, its legacy remains; it is time to put "energy" back into federal law where Enron had it removed, and close the loophole once and for all, and

WHEREAS, the integrity of the markets where futures of oil and natural gas are traded has never been more important; cases like Enron and Amaranth prove that the federal agency tasked with oversight in these markets, the Commodity Futures Trading Commission (CFTC), lacks the tools to detect and prevent manipulation and fraud; meanwhile, consumers have been forced to
foot the bill while oil companies and traders only get richer; the time has come to require record-keeping and an audit trail that will shine light on energy market trading, and

WHEREAS, closing loopholes exploited by companies like Enron to keep their actions hidden and beyond the reach of federal regulators is key to
preventing market manipulation in the future and ensuring fair energy prices for American families and businesses; requiring open books and
transparent markets, we can catch patterns of irregular trading and stop dishonest energy traders, and

RESOLVED, that the Dutchess County Legislature request that Congress pass and the President sign into law the Close the Enron Loophole Act,
H.R.4066/S.2058, and that a copy of this resolution be sent to President George W. Bush, Senators Hillary Rodham Clinton and Chuck Schumer, and Representatives Kirsten Gillibrand, John Hall, and Maurice Hinchey.

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From Citizen.org/documents/House08.pdf...

May 6, 2008 Testimony of Tyson Slocum,
Director Public Citizen's Energy Program http://www.citizen.org

U.S. House of Representatives Committee on Transportation and
Infrastructure, Subcommittee on Highways and Transit

"Hot Profits And Global Warming: Financial Firm and Oil Company
Profits and Rising Diesel Fuel Costs in the Trucking Industry"

[excerpt here below]

Thank you, Mr. Chairman and members of the Subcommittee on Highways and Transit for the opportunity to testify on the issue of gasoline prices. My name is Tyson Slocum and I am Director of Public Citizen's Energy Program. Public Citizen is a 37-year old public interest organization with over 100,000 members nationwide. We represent the needs of households through research, public education and grassroots organizing.

Gasoline prices are up 160\% since the summer of 2001, and diesel up more than 210\%, creating financial hardship for millions of families, as the average annual expenditure on gasoline increased $1,000 for the typical family over that time...

Since 2001, the largest five vertically-integrated oil companies operating in the United States-- ExxonMobil, ChevronTexaco, ConocoPhillips, BP and Shell-- recorded $586 billion in profits. Recent entries to oil markets like investment banks, hedge funds and private equity firms have also
been posting record earnings. While some of their profit clearly stems from certain aspects of global supply and demand and the weak U.S. dollar, investigations show 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, thereby denying Americans access to competitive markets.

At least $30 of the current $115 of a barrel of oil (or about 70 cents
of a gallon of gasoline) is pure speculation, unrelated to supply and demand
fundamentals. To add insult to injury, oil companies enjoy billions of dollars worth of subsidies courtesy of the U.S. taxpayer at a time
when the industry records record profits. Investing in America's communities-- not Big Oil-- is needed to provide families with access to alternatives.

Public Citizen research shows that oil companies aren't adequately investing these record earnings into projects that will help consumers,
as the five largest oil companies have spent $170 billion buying back their stock since 2005.

America's addiction to oil is a major source of greenhouse gas emissions that cause global warming. Forty-three percent of America's world-leading carbon dioxide emissions in 2006 were from the burning of petroleum. Until the oil industry takes the lead on prioritizing investments to curb
America's addiction, Congress should take steps to revoke oil company subsidies or impose a windfall profits tax to finance sustainable energy solutions such as increased funding for mass transit.

In addition, energy trading markets, where futures prices of oil and gasoline are set, were recently deregulated, providing new opportunities
for oil companies and financial firms to manipulate prices. Investigations show that energy trading firms have not only exploited recently weakened regulatory oversight, but a new trend of energy traders controlling energy infrastructure assets like pipelines and storage facilities provide
additional abilities to use "insider" information to help manipulate markets.

Public Citzen has a five point plan for reform:

Repeal all existing oil company tax breaks, close loopholes allowing oil
companies to escape paying adequate royalties and/or implement a windfall
profits tax, dedicating the new revenues to financing clean energy, energy
efficiency and mass transit.

Re-regulate energy trading exchanges to restore transparency and impose
firewalls to stop energy traders from speculating on information gleaned from the companies' affiliates.

Ensure that new powers provided to the Federal Trade Commission to crack down on unilateral withholding and other anti-competitive actions by oil companies and financial firms are effectively carried out.

Establish a Strategic Refining Reserve to be financed by a windfall profits tax on oil companies that would complement America's Strategic Petroleum Reserve (SPR), and cease filling the SPR.

Improve fuel economy standards from the modest increase approved by Congress in 2007 to reduce gasoline demand.

Recent Mergers, Weak Anti-Trust Law Threaten Consumers

According to the U.S. Government Accountability Office, over 2,600 mergers have been approved in the U.S. petroleum industry since the 1990s. In just the last few years, mergers between giant oil companies-such as Exxon and Mobil, Chevron and Texaco, Conoco and Phillips-have resulted in just a few
companies controlling a significant amount of America's gasoline, squelching competition. And the mergers continue unabated as the big just keep getting bigger. In August 2005, ChevronTexaco acquired Unocal; ConocoPhillips acquired Burlington Resources in December 2005; and in June
2006, Anadarko Petroleum announced it was simultaneously acquiring Kerr-McGee and Western Gas Resources. ExxonMobil, ChevronTexaco, ConocoPhillips, BP and Shell produce 10 million barrels of oil a day-- more than the combined exports of Saudi Arabia and Qatar.

Consumers are paying more at the pump than they would if they had access to
competitive markets, and five oil companies are reaping the largest profits in history. Since 2001, the six largest oil companies operating in America have recorded $586 billion in profits. While of course America's tremendous appetite for gasoline plays a role, uncompetitive practices by oil corporations are a cause-- more so than OPEC or environmental laws-- of high gasoline prices around the country.

High prices are having a detrimental impact on the economy and national security. Imported oil represents one-third of America's trade deficit, slows economic growth, adds to inflationary pressures and creates financial hardship for families and businesses.

Motorists are not getting any bang for their buck. While drivers are stuck paying record high prices, oil companies are spending more money buying back their own stock then they are on investing in their ageing
infrastructure. The industry leader, ExxonMobil, spent $40 billion buying back its stock since 2007, while spending only $4.3 billion on U.S. oil exploration and refining capital investment.

In just the last few years, mergers between giant oil companies-- such as Exxon and Mobil, Chevron and Texaco, Conoco and Phillips-have resulted in just a few companies controlling a significant amount of America's gasoline, squelching competition. Public Citizen research shows that in 1993, the largest five oil refiners controlled one-third of the American market, while the largest 10 had 55.6 percent. By 2005, as a result of all the mergers, the largest five now control 55 percent of the market, and the largest 10 dominate 81.4 percent. This concentration has led to skyrocketing profit margins. As a result of all of these recent mergers, the largest five oil refiners today control as much capacity as the largest 10 did a decade ago.

The consolidation of downstream assets-- particularly refineries-- plays a big role in determining the price of a gallon of gas. A recent government study revealed that the "source of potential market power in the wholesale gasoline market is at the refining level because the refinery market is imperfectly competitive and refiners essentially control gasoline sales at the wholesale level" and concluded that "mergers and increased market
concentration generally led to higher wholesale gasoline prices in the United States."

The industry has plenty of incentive to intentionally keep refining markets tight. ExxonMobil's new CEO told The Wall Street Journal that even though American fuel consumption will continue growing for the next decade, his company has no plans to build new refineries:

"Exxon Mobil Corp. says it believes that, by 2030, hybrid gasoline-and-electric cars and light trucks will account for nearly 30\% of new-vehicle sales in the U.S. and Canada. That surge is part of a broader shift toward fuel efficiency that Exxon thinks will cause fuel consumption by North American cars and light trucks to peak around 2020-- and then start to fall. 'For that reason, we wouldn't build a grassroots refinery' in the U.S., Rex Tillerson, Exxon's chairman and chief executive, said in a recent
interview. Exxon has continued to expand the capacity of its existing refineries. But building a new refinery from scratch, Exxon believes, would be bad for long-term business."

ExxonMobil and other major oil companies are not building new refineries because it is in their financial self interest to keep refining margins as tight as possible, as that translates into bigger profits.

Margins for U.S. oil refiners have been at record highs. In 1999, U.S. oil refiners enjoyed a 22.8 cent margin for every gallon of gasoline refined from crude oil. By 2006, they posted a 53.5 cent margin for every gallon of
gasoline refined, a 135 percent jump. Refiner margins on diesel have increased from 11.9 cents per gallon in 1999 to 55.7 cents in 2006, a 368 percent jump. That forced The Wall Street Journal to conclude that "the
U.S. market is especially lucrative, sometimes earning its refiners $20 or more on every barrel of crude oil they refine." Another Wall Street Journal article notes:

"On a per-barrel basis, the difference between crude prices and gasoline prices, known as the 'crack spread' and considered to be a proxy for refining profit margins, widened to more than $23 a barrel [in March 2007], the highest level this year and up from this year's low of less than $5 on Jan. 31. Last year, the spread briefly topped $26 a barrel in April [2006], and following the devastation in Hurricane Katrina of 2005, it ballooned to $40.87. In recent years, the spread has averaged about $10 a barrel...rising gasoline prices tend to lift crude prices because they boost refinery margins, leading to a rise in crude-oil demand."

Indeed, BP's most recent financial report shows that refining margins at their US operations are more than double the margins in other countries. In 2007, BP had a refining margin of $12.81 for every barrel they refined in the Midwest, $13.48/barrel in the Gulf Coast and $15.05/barrel on the West
Coast. Compare these returns with those at BP's European operations ($4.99/barrel) and Singapore ($5.29/barrel).

While major oil companies haven't applied for a permit to build a new refinery, a small start-up has: Arizona Clean Fuels. The company is
successfully obtaining the necessary air quality permits to build the facility, which begs the question: if a small company can do it, why can't ExxonMobil, the world's most profitable corporation, do it?

The U.S. Federal Trade Commission found evidence of anti-competitive practices in the physical refined product market in its March 2001 Midwest Gasoline Price Investigation:

"An executive of [one] 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."

In December 2007, HR 6 was signed into law. Sections 811 through 815 of that act empower the Federal Trade Commission to develop rules to crack down on petroleum market manipulation. If these rules are promulgated effectively, this could prove to be an important first step in addressing certain anti-competitive practices in the industry.

A congressional investigation uncovered internal memos written by major oil companies operating in the U.S. discussing their successful strategies to maximize profits by forcing independent refineries out of business, resulting in tighter refinery capacity. From 1995-2005, 97 percent of the nearly 929,000 barrels of oil per day of capacity that has been shut down were owned by smaller, independent refiners. Were this capacity to be in
operation today, refiners could use it to better meet today's reformulated gasoline blend needs.

Taxing Oil Company Profits

Apologists for record oil company profits argue that the companies need and deserve record windfalls to provide the necessary market incentive to invest more money into increased energy production.

Public Citizen's analysis of oil company profits and their investments show 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.

Since January 2005, the top five oil companies have spent $170 billion buying back stock and held $70 billion in cash. This not only represents a huge transfer of wealth from consumers to oil company investors, but shows that oil companies are squandering opportunities to use their record profits to make investments that will end America's addiction to oil.

With nearly $1 trillion of combined assets tied up in extracting, refining and marketing petroleum and natural gas, the big five oil companies' entire business model is designed to squeeze every last cent of profit out of their monopoly control over fossil fuels. They simply will not make significant investments in anything else until their monopoly control over oil is spent.

And this monopoly control translates into unprecedented profits. When communicating to the general public and lawmakers, oil companies downplay these record earnings by calculating profits differently than they do when they speak to Wall Street and shareholders. Conversing with lawmakers and the general public, the oil industry highlights the small profit margins (typically around 8 to 10 percent) that measuring net income as a share of total revenues produces.

But that's not the calculation ExxonMobil and other energy companies use when talking to investors and Wall Street. For example, here's an excerpt from the company's 2005 annual report: "ExxonMobil believes that return
on average capital employed (ROCE) is the most relevant metric for measuring financial performance in a capital-intensive business such as" petroleum.

ExxonMobil's 2007 earning report shows that that the company's global operations enjoyed a 32 percent rate of return on average capital employed. And the company's rate of profit in the U.S. was even higher: domestic
drilling provided a 35 percent rate of return on average capital employed, while domestic refining returned 65 percent. Shell's 2007 return on capital employed was 24.5 percent. ChevronTexaco has posted strong returns as well, reporting a 23 percent rate of return on average capital employed in
2007-- the median return on capital employed for Chevron over the last 19 years was only 8.7 percent.

It isn't just oil producing nations like Saudi Arabia that get rich when the price of a barrel of oil exceeds $60-major oil producing
corporations get rich, too. On average, it costs an oil company like ExxonMobil about $20 to extract a barrel of oil from the ground, while they sell that barrel to American consumers at the market price of $60/barrel.
Indeed, a Merrill Lynch analyst estimated that "ConocoPhillip's overall
'finding and developing' costs [in 2006] were $18 a barrel, including barrels obtained through acquisitions."

With oil companies failing to take action to protect America's middle- and low-income families from the high energy prices that fuel their profits, oil industry subsidies should be repealed with the proceeds invested in
renewables, alternative fuels, energy efficiency and mass transit. Indeed, HR 5351, which passed the House on February 27, 2008 repeals $18 billion in oil company subsidies over the next decade and dedicates the money to
bigger investments in clean energy. A windfall profits tax could be modeled on S. 2761, S.2782 or S.1238, all introduced in the 110th Congress.

Naysayers argue that increasing taxes on oil companies or enacting a Windfall Profits Tax didn't work the last time it was tried. The Windfall Profits Tax of 1980-88 was ineffective not because of the tax itself, but
because oil prices fell shortly after enactment of the tax due to global events unrelated to U.S. tax policy. Congress enacted the Windfall Profits Tax in 1980 after U.S. oil company profits surged following the Iranian
Revolution and the resulting Iran-Iraq war, which caused oil prices to increase from $14/barrel in 1979 to $35/barrel by January 1981. But after 1981, crude oil prices steadily decreased until completely bottoming out in
1986-87 as demand slackened and as other oil producing countries increased their output. As the value of the commodity subject to tax fell, the effectiveness of the tax was diminished.

But that was then. The Wall Street Journal concluded that "a crash looks unlikely now, both because supplies remain tight and because of the large volumes of money that investors are pouring into oil markets."

In addition to a Windfall Profits Tax, Congress needs to reform the royalty system imposed on companies drilling for oil and natural gas on public land. One-third of the oil and natural gas produced in the United States
comes from land owned by the taxpayers, but royalty payments by oil companies have not been keeping up with the explosion in energy prices and profits enjoyed by the industry. A recent Inspector General audit of the
U.S. Department of the Interior's Minerals Management Service concludes that oil companies are pumping oil from federal land without paying adequate royalties to taxpayers for the privilege. The report cites
widespread cronyism, ethical breaches, decimated auditing staff and overreliance on information provided by Big Oil as culprits in the oil industry giveaway. Meanwhile the Justice Department unexpectedly announced the welcome news that it has initiated criminal investigations into the Interior Department's oversight of oil companies. Taxpayers must be fairly compensated for allowing oil companies the privilege of extracting resources from federally-owned land.

Public Citizen also recommends repealing all federal subsidies currently enjoyed by the oil industry and transferring those expenditures to renewable energy, energy efficiency and mass transit. Public Citizen estimates that the oil industry receives about $9 billion annually, or roughly 40 percent of all federal government energy tax breaks and
government spending programs, including:

Excess of percentage over cost depletion.

Credit for enhanced oil recovery costs.

Expensing of exploration and development costs.

Exception from passive loss limitation for working interests in oil and gas properties.

Last in, first out accounting for vertically integrated oil companies.

"Geological and geophysical" costs from Section 1329 of EPACT 2005.

Oil refinery expensing from Section 1323 of EPACT 2005.

Deductions for foreign taxes.

Manufacturing tax deduction from Section 102 of HR 4520 passed in 2004.

Various Department of Energy spending programs, including the Ultra-Deepwater drilling subsidy in Title IX, Subtitle J of EPACT 2005.

Other countries often feature higher gas prices than the U.S., but that is because they impose higher taxes on gasoline than we do. For example, the average federal, state and local gas taxes in the United States are 39
cents/gallon (45 cents/diesel), compared to $2.08/gallon in Japan ($1.33/diesel), $4.45/gallon in France ($3.35/diesel); $4.76/gallon
in Germany ($3.64/diesel); and $5.08/gallon in the United Kingdom ($5.11/diesel).26 These high taxes are not only a disincentive to drive, but generate the revenue the countries need to help subsidize mass transit and other sustainable energy investments to actively provide citizens with alternatives to driving.

FTC Not Adequately Protecting Consumers

The Federal Trade Commission has contributed to the problem by allowing too many mergers and taking a stance too permissive to anti-competitive practices, as evidenced by the conclusions in its most recent nvestigation,
for example, finding evidence of price-gouging by oil companies but explaining it away as profit maximization strategies and opposing federal price-gouging statutes. This stands in stark contrast to the May 2004
conclusions reached by a U.S. Government Accountability Office report which found that recent mergers in the oil industry have directly led to higher prices. It is important to note that this GAO report severely underestimates the impact mergers have on prices because their price analysis stops in 2000-- before the mergers that created
ChevronTexaco-Unocal, ConocoPhillips-Burlington Resources, and Valero-
Ultramar/Diamond Shamrock-Premcor.

The FTC consistently allowed refining capacity to be controlled by fewer hands, allowing companies to keep most of their refining assets when they merge, as a recent overview of FTC-approved mergers demonstrates.

The major condition demanded by the FTC for approval of the August 2002
ConocoPhillips merger was that the company had to sell two of its refineries-- representing less than four percent of its capacity. Phillips was required only to sell a Utah refinery, and Conoco had to sell a Colorado refinery. But even with this forced sale, ConocoPhillips remains the largest domestic refiner, controlling refineries with capacity of more than 2.2 million barrels of oil per day, or 13 percent of America's entire capacity. And the FTC allowed ConocoPhillips to purchase Premcor's 300,000 barrels/day Illinois refinery in 2004.

As a condition of the 1999 merger creating ExxonMobil, Exxon had to sell some of its gas retail stations in the Northeast U.S. and a single oil refinery in California. Valero Energy, the nation's fifth largest owner of oil refineries, purchased these assets. The inadequacy of the forced divestiture mandated by the FTC was compounded by the fact that the assets were simply transferred to another large oil company, ensuring that the
consolidation of the largest companies remained high.

The sale of the Golden Eagle refinery was ordered by the FTC as a condition of Valero's purchase of Ultramar Diamond Shamrock in 2001. Just as with ExxonMobil and ChevronTexaco, Valero sold the refinery, along with 70 retail gas stations, to another large company, Tesoro. But while the FTC forced Valero to sell one of its four California refineries, the agency allowed the company to purchase Orion Refining's only refinery in July 2003, and then approved Valero's purchase of the U.S. oil refinery company
Premcor. This acquisition of Orion's Louisiana refinery and Premcor defeats the original intent of the FTC's order for Valero to divest one of its California refineries...

Solutions

-- Re-regulate energy trading markets by subjecting OTC electronic exchanges to full compliance under the Commodity Exchange Act and mandate that all OTC energy trades adhere to the CFTC's Large Trader reporting requirements. In addition, regulations must be strengthened over existing lightly-regulated exchanges like NYMEX. Senators Feinstein, Snowe, Levin and Cantwell have introduced S.577 in the 110th Congress which would address many of these issues.

-- Impose legally-binding firewalls to limit energy traders from speculating on information gleaned from the company's energy infrastructure affiliates or other such insider information, while at the same time
allowing legitimate hedging operations. Congress must authorize the FTC and DOJ to place greater emphasis on evaluating anti-competitive practices that arise out of the nexus between control over hard assets like energy infrastructure and a firm's energy trading operations. Incorporating energy trading operations into anti-trust analysis must become standard practice for federal regulatory and enforcement agencies to force more divestiture of assets in order to protect consumers from abuses.

-- A revolving door moratorium must be established to limit federal government decision makers from leaving the agency to go to entities under its regulatory jurisdiction for at least two years.

Conclusion

Although the U.S. is the third largest oil producing nation in the world-- producing more oil than Iran, Kuwait and Qatar combined-- we consume one out of every four barrels used in the world every day, forcing us to import 66 percent of our oil and gasoline. In all, we use more than the next five
biggest oil consumers (China, Japan, Russia, Germany and India) put together. Sixty percent of the oil consumed in America is used as fuel for cars and trucks. Nine percent is for residential home heating oil, with the remainder largely used for various industrial and agricultural processes (only 1.4 percent is to fuel electric power). So improving efficiency in our transportation sector by fully-funding mass transit will go a long way
to reducing our dependence on oil.

This era of high energy prices and record oil company profits isn't a simple case of supply and demand, as the evidence indicates that
consolidation of energy infrastructure assets, combined with weak or non-existent regulatory oversight of energy trading markets, provides opportunity for energy companies and financial institutions to price-gouge
Americans. Forcing consumers suffering from inelastic demand to continue to pay high prices-in part fueled by uncompetitive actions-not only hurts consumers economically, but environmentally as well, as the oil companies and energy traders enjoying record profits are not investing those earnings into sustainable energy or alternatives to our addiction to oil. As a
result, our consumption of fossil fuels continues to grow, and the impacts of global warming take their toll on our environment.

Reforms to strengthen regulatory oversight over America's energy trading markets and bolster anti-trust enforcement are needed to restore true competition to America's oil and gas markets.