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Public Statements

Kohl Calls on the Government to Create a "Strategic Refinery Reserve"

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Location: Washington, DC


KOHL CALLS ON THE GOVERNMENT TO CREATE A "STRATEGIC REFINERY RESERVE"

Kohl Proposal will Increase Supply and Lower Cost of Fuel

In response to rising energy prices, U.S. Senator Herb Kohl today called on the federal government to build an oil refinery to produce petroleum products for the government's use and for the private market in times of tight supply and high prices. Kohl's proposal would authorize the Department of Energy to build enough refining capacity to meet the energy needs of the federal government -- primarily the Department of Defense -- and to supply the private market in times of shortages and price spikes. Sen. Kohl offered his Strategic Refining Reserve Amendment to the Defense Authorization bill.

In a letter to colleagues seeking their support, Kohl, who was joined by Senator Jim Jeffords (I-VT), stated the reasons for his proposal, "Americans deserve better than another week of finger pointing and grandstanding over the price of gas -- they deserve better than more excuses and rationalizations for an oil industry raking in record profits. They deserve a concrete response to the soaring energy prices that threaten our national and economic security."

Kohl's proposal would authorize the Secretary of Energy to build refining capacity to supply the government's own needs, as well as add to strategic stockpiles to increase the supply of refined petroleum products available, lower and stabilize prices and ensure an adequate supply of fuel in the event of future natural disasters or increased demand.

Current fuel shortages have led to price spikes felt across the nation. During the 1980's and 1990's there were significant refined oil reserve capacity.

However since 1981, when 324 refineries existed with a capacity of 18 million barrels per day, refinery and reserve capacities have shrunk dramatically. Today there are a mere 149 refineries in the U.S. with a capacity of 16.9 million barrels per day, desperately low to meet growing demand.

On November 9th the Energy and Natural Resources Committee will hold a hearing with top executives from the oil industry to defend their record profits this year.

Below is the text of the Kohl letter.

Dear Colleague:

As families and businesses face another week of sky-high energy prices, we ask your support for an amendment to the Defense Authorization bill that would increase the supply and decrease the cost of energy. Americans deserve better than another week of finger pointing and grandstanding over the price of gas -- they deserve better than more excuses and rationalizations for an oil industry raking in record profits. They deserve a concrete response to the soaring energy prices that threaten our national and economic security.

Our amendment would direct the Department of Energy, in concert with the Department of Defense, to build a refinery to produce petroleum products for the federal government, particularly the military. In case of a supply disruption caused by a disaster like Hurricane Katrina or Rita, our "Strategic Refinery Reserve" could refine oil for the private market, keeping the supply of gas steady and its price down.

There is little argument that diminished refining capacity in the United States is the primary cause of the energy price explosions we have experienced in the last months. No new oil refinery has been built in the United States since the 1970's. In fact, in 1981, there were 324 refineries in the United States; today, there are 149. Though demand is growing at a rate of about 2% a year -- and though Congress just passed an energy bill that provided numerous new incentives to those willing to invest in new refineries -- the oil companies have shown little interest in dipping into their profits to build up refining capacity for the future. That is their choice in a free market.

But it is also our choice here in Congress -- and our responsibility -- to look after more than just the bottom line of oil company stockholders. By building our own refinery to meet the needs of the federal government, we are acting on behalf of:

• Our National Security: The Strategic Refinery Reserve will ensure our military has a steady supply of fuel available at a predictable cost from an American source.

• Taxpayers: The federal government -- the Armed Services as well as civilian operations like the postal service and NASA -- pays the same price at the pump as the average consumer. And when the refining capacity shortage pushes prices up, as it is doing right now, those extra dollars flowing into oil company profits are taxpayer dollars. Our amendment would ensure that the government -- and the taxpayer -- only has to cover the actual cost of delivering refined petroleum products.

• Families and Businesses: The Strategic Refinery Reserve would have a refining capacity of 5% of total U.S. consumption. 2% of that would go to the Federal Government -- taking those buyers out of the market and freeing up supply for consumers. The remaining 3% capacity would be held in reserve, ready to increase supply in the private market should prices start to rise as they have these last few months.

Our economy, our military, our communities and our families are struggling under the burden of volatile energy prices. They don't need any more hearings or excuses. They expect us to act concretely to bring energy prices down. Our amendment would do that, and we ask for your support.

http://kohl.senate.gov/~kohl/press/05/11/2005B07B02.html

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