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Public Statements

Statements on Introduced Bills and Joint Resoutions

Location: Washington, DC


By Mr. KOHL:

S. 1979. A bill to provide for the establishment of a strategic refinery reserve, and for other purposes; to the Committee on Energy and Natural Resources.

Mr. KOHL. Madam President, I rise today to speak briefly about an amendment Senator Jeffords and I had hoped to offer to the Defense authorization bill. I understand it is not considered relevant, so we won't get a vote. That is unfortunate. I cannot imagine what is more relevant to the defense of our Nation than an amendment that would do something concrete about high energy prices, about national security, and about economic security--all with one vote.

Our amendment, which we are introducing today as a freestanding bill along with Senator Feinstein, 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 also to supply the private market in times of shortages and price spikes.

There is bipartisan agreement that increasing refining capacity in the United States would help avoid the kinds of energy price spikes we have seen in the last few months. There also seems to be clear evidence that, despite generous incentives from the Government and soaring profits, the oil companies are not interested in building the new refineries we need. And in a free market, of course, that is their choice.

But in a democracy, we in Congress are charged with making a different choice. We need to do what is best for our national and economic security. And, in this case, that would be to stop begging and bribing the oil companies. By building our own refining capacity, we would be able to supply the fuel needs of the Federal Government at what it actually costs to make that fuel. And we would also be able to hold in reserve refining capacity that we could access to bring down the cost of gas in times when shortages raise prices.

Today, the Senate is holding important hearings on energy. I am concerned, however, that instead of offering answers and solutions, the oil companies will blame OPEC for the high price of gasoline, diesel fuel, and home heating oil. We should not let them get away with that because OPEC is only part of the story.

While the price of gasoline rose to record levels in recent months, the oil companies were earning increasingly high profits on each gallon of gasoline. One measure is the ``domestic spread,'' the retail gasoline pump price minus the cost of crude oil and taxes. During the 1900s, the domestic spread was about 40 cents per gallon for regular gas. This number has grown sharply since 2000. The domestic spread averaged above 50 cents per gallon between 2000 and 2004, and has reached as high as over 70 cents per gallon in recent months. In other words, the oil companies are earning much more today for a gallon of gas, even factoring in the higher price of crude oil.

Growing oil company profits also demonstrate this point: Oil industry profits, after tax, increased by $100 billion in the 5 years from 2000 to 2004, as compared to the previous 5-year period. ExxonMobil's earnings for the first 9 months of 2005--over $25 billion--already exceeded its full-year earnings for all of 2004. So obviously, these companies are doing much more than just passing along higher crude oil prices to customers.

One major reason for these soaring prices and profits is the oil industry's failure to increase refining capacity in the face of rising demand for refined petroleum products. A new refinery has not been built in the United States since the 1970s, and many oil refineries have been closed. In 1985, refining capacity equaled daily consumption of petroleum products. By 2002, daily consumption exceeded refining capacity by almost 20 percent.

As domestic supply falls short of domestic demand, three very dangerous things happen: 1, we are forced to rely on more imports. 2, we pay higher and higher prices for our fuel. And, 3, our economy is increasingly vulnerable to disasters and disruptions--like those we saw in the wake of Hurricanes Katrina and Rita.

The bill we are introducing would authorize the Department of Energy to create a refining capacity equal to 5 percent of current domestic consumption. These refineries would supply the Federal Government's need for petroleum products, estimated to be roughly 2 percent of U.S. consumption. The extra 3 percent of capacity would be available for emergencies and market disruptions.

This ``Strategic Refining Reserve'' would have a direct effect on energy prices to the consumer. It would get the Federal Government out of the private market where its huge demand for energy drives up prices. And it would increase the amount of oil that can be refined in this country in times when the oil companies' refining capacity is tapped out.

We have a duty to protect consumers, our economy, and our national security from an industry that often seems focused only on the short-term bottom line. We have a duty to respond with concrete help for the families and businesses that tell us daily of the enormous financial threat posed by soaring energy prices. And we have a duty to make sure our military has access to a steady, affordable supply of domestically refined fuel.

Though we will not be able to offer this proposal as an amendment to the DOD authorization bill, we have introduced it as a bill, and we plan to continue to look for opportunities for a vote. We need to take sole control of fuel prices away from the oil companies. We need to take charge and bring the price of fuel down by building this ``Strategic Refinery Reserve.''

I ask unanimous consent that the text of the bill be printed in the RECORD.

There being objection, the bill was ordered to be printed in the RECORD, as follows:

S. 1979


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