American Petroleum Institute Rejects Bipartisan Calls to Reinvest a Small Portion of Windfall Oil Profits in Helping Low-Income Consumers
After U.S. Senators Olympia J. Snowe (R-ME) and Jack Reed (D-RI) asked big oil companies reaping windfall profits to voluntarily contribute to a fund that would help low-income consumers deal with record high oil costs, the American Petroleum Institute (API) today rejected the bipartisan request.
On March 31, 2008, the senators wrote: "Americans are paying record high prices at the gas pump and to fill their oil tanks. Families and seniors across America are struggling to cope with these extraordinary prices. As a result, we are asking you to reconsider the concept of creating a voluntary assistance program modeled after LIHEAP and funded by API Members to offer low-income Americans help with rising energy costs, both to address this winter's heating bill and rising transportation costs this year."
In responding to the request, Red Cavaney, President and CEO of API replied: "Having industry step into a government role distorts the roles of both, and, in this particular case, will only serve to mask the longer-term energy challenges faced by your constituents, the industry, and our country as a whole."
The five biggest oil companies earned a record $123 billion in profits last year and are expected to announce another bumper year for oil profits next week.
"Unfortunately, the API has decided it's not their "role" to play an active part in alleviating the burden that skyrocketing gas and oil prices are having on low-income Americans and seniors," said Senator Snowe. "While the oil and gas industry enjoy record profits, the rest of America is forced to bear the brunt of the financial burden."
"These record high prices have been a windfall for big oil companies, but they've placed a heavy burden on the average American family," said Senator Reed. "We asked big oil companies to voluntarily reinvest some of their windfall profits back into the American economy. Now that they have rejected that proposal, Congress should take a closer look at curbing the billions of dollars in tax giveaways for big oil companies."
In October 2005, Senators Snowe and Reed wrote a similar letter requesting that larger members of the American Petroleum Institute create a voluntary LIHEAP initiative. In a letter dated November 7, 2005, the API declined to pursue the proposal. On the date of that response, oil prices were $59.40 per barrel. This month, crude oil futures set an all time high of $119 per barrel.
The average Mainer uses 850 gallon of home heating oil each year, which roughly accrues to $2,932 for each household this year - a staggering $900 increase from last year. When you consider that the per capita income in Maine is $23,226, and the average income of a LIHEAP recipient is $13,000, it is difficult to comprehend the burden that this increase has placed on Maine families.
In 2008, the average Rhode Island household with children will spend about $3,601 on transportation fuel costs. Unfortunately, neither families' salaries nor seniors' retirement checks are keeping pace with these increases.
According to the Energy Information Administration's Short-Term Energy Outlook, the price of heating oil was 36 percent higher this year than last. In 2001, it cost the average American household $627 to heat their home with oil in winter. This winter, it cost almost $2,000 on average to heat a home with oil.
The text of the letter sent to the API is provided below and the response letter is attached:
March 31st, 2008
Mr. Red Cavaney, President & CEO
American Petroleum Institute
1220 L Street, Northwest
Washington, D.C. 20005-4070
Dear Mr. Cavaney;
As you well know, the rise of commodity prices, most notably petroleum, has certainly been a significant factor in the slowdown of our economy and placed a considerable burden on working families and seniors. Indeed, over the last five months the increase in energy prices has effectively translated into a $150 billion tax for the American public.
In October 2005, we wrote to request that larger members of the American Petroleum Institute create a voluntary Low Income Home Energy Assistance Program (LIHEAP) initiative. In a letter dated November 7, 2005, you wrote that "the U.S. oil and natural gas industry recognizes the hardship on needy families of high energy costs and has consistently supported full funding of the LIHEAP program each year." On the date of your response, oil prices were $59.40 per barrel. This month, crude oil futures set an all time high of $108 per barrel, an eighty-one percent increase. Americans are paying record high prices at the gas pump and to fill their oil tanks. Families and seniors across America are struggling to cope with these extraordinary prices. As a result, we are asking you to reconsider the concept of creating a voluntary assistance program modeled after LIHEAP and funded by API Members to offer low-income Americans help with rising energy costs, both to address this winter's heating bill and rising transportation costs this year.
According to the Energy Information Administration's Short-Term Energy Outlook, the price of heating oil was 36 percent higher this year than last. In 2001, it cost the average American household $627 to heat their home with oil in winter. This winter, it cost almost $2,000 on average to heat a home with oil. In the Northeast, prices were even higher. It is difficult to comprehend the burden that this increase has placed on low-income families. In addition to this high home energy burden, low-income families and seniors are facing rising transportation costs as gas prices are 24 percent higher than last year at this time. Unfortunately, family incomes are not keeping pace with these increases.
In your earlier letter you stated that many oil and gas companies have announced large increases in their capital expenditure budgets for exploration of crude oil. While these investments could help address long-term supply, families require help in the immediate future to address rising costs and reduce their energy burdens. Savings from energy efficiency are our nation's greatest source of energy. The voluntary program, similar to LIHEAP, could be used to invest in weatherization and more efficient transportation for low-income families.
This winter it was exceptionally difficult for low income Americans to maintain a basic level of heat in their homes and this summer is likely to cause additional hardships. We believe that this assistance and effort would provide critical support at a very desperate time and would be greatly appreciated by the American people.
We thank you for your consideration and we look forward to your thoughtful reflection of this proposal.