Consumer First Energy Act of 2008--Motion to Proceed--Continued

Floor Speech

CONSUMER-FIRST ENERGY ACT OF 2008--MOTION TO PROCEED--Continued -- (Senate - June 10, 2008)

BREAK IN TRANSCRIPT

Mr. VITTER. Mr. President, in the year 64 A.D., there was a tremendous fire in Rome, and legend has it that the Emperor Nero fiddled while Rome burned. Well, I am afraid that if we continue to fiddle in the Congress while gas prices continue to go up and up and hurt all of our constituents in a deep abiding way, Nero will outpace us in terms of his legendary action compared to our inaction.

We are truly fiddling while this enormous crisis of rising gasoline prices hits every family we purport to represent. We are doing nothing significant, nothing important to address this crisis.

Why do I say that? Well, when this new Democratically led Congress took office a couple of Januaries ago, prices at the pump were about $2.33. That new leadership of the Congress--the Democratic leader in the Senate as well as the Democratic leadership in the House--said that this was unacceptable. They vowed that this was a major issue they would address, that they would attack in a focused, meaningful way. Well, a year and a half later, things have changed. The price at the pump is now about $4 a gallon. It has gone up and up, and this Congress has done little to nothing.

To add insult to injury, the Democratic leadership in the Senate proposed legislation today that centered around major measures that can clearly change the price at the pump, such as a windfall profits tax and language to sue OPEC. I find this insulting, and I believe the American people do, because that sort of political demagoguery and posturing is no substitute for real energy policy.

Yesterday, I was in my home State of Louisiana. I had two townhall meetings. About a week before that, I was all around the State; I had nine others. Folks asked again and again: When is Congress going to act? When is Congress going to do something meaningful about these escalating gasoline prices? I laid out my ideas. They were reacted to in a very positive way, particularly the need for us to do more for ourselves right here at home to produce more energy.

Certainly nobody in those audiences had very kind words to say about OPEC. Nobody was standing up and lauding the big oil companies. But by the same token, they know the difference between political rhetoric and posturing and real energy policy. They certainly know that a bill to sue OPEC and try to impose a Carter-era windfall profits tax on big oil companies isn't going to do a darn thing, at least on the positive side of the equation, to stabilize and lower gasoline prices at the pump. It is going to have no meaningful impact, certainly, to produce more energy and bring those prices down.

So I come to the floor to urge all of us--Democrats and Republicans--to come together to get real and to act in the face of what is a true economic crisis for millions upon millions of American families.

As I say, it is easy to agree that OPEC or big oil is a cheap political target. It is easy to agree that it may be popular superficially to kick them around and to politically bash those easy targets. But I truly believe the American people are smarter than that and can distinguish between political posturing, political rhetoric, and a real energy policy. I think it is particularly true with the windfall profits tax proposed by the Democratic leadership today.

Now, why do I say that is not a real energy policy and it won't lead to stabilizing and reducing prices? Well, there are three main reasons:

First, the entire notion of a windfall profits tax is a misnomer. Oil company profits are very big when you look at them in dollar terms. Why is that? Mostly for one simple reason: Oil company activity--exploration and production--is enormously expensive. As a result of that, the major oil companies are enormously big companies--big economic actors--so the dollar terms we bandy about having to do with their activity is enormous. But, of course, when you talk about profit, you can't talk in simple dollar terms; you have to talk in percentages.

So what are those percentages? Are they, in fact, windfall profits? Well, the last year for which we have data is full calendar year 2007, and in that calendar year oil and gas companies' profits were, on average, 8.3 percent. How does that compare to everybody else? Well, for all of the U.S. manufacturing sector--a sector we always decry as in decline, being outsourced, being out-competed by competitors such as China and India coming on line--that entire sector had a profit of about 7.3 percent. If you take out U.S. auto companies, which have historically low profits, unfortunately, then the entire U.S. manufacturing sector made a profit of 8.9 percent. So these outrageous windfall profits folks talk about of the oil companies are, in fact, very much in line with that: the whole manufacturing sector, 7.3 percent compared to 8.3 percent. Take out auto manufacturers, and, in fact, then the profit rate is higher, 8.9 percent compared to 8.3 percent.

The second reason this entire focus and argument is silly and not real energy policy is when you look at whom you are hurting. Now, the proponents of these sorts of measures talk about going after windfall profits as if oil company executives own it all. Well, they own some--1.5 percent of the companies we are talking about. Who owns the rest? Well, over half of oil company shares are owned by mutual fund companies which are widely owned by Americans. That manages to account for nearly 55 million American households. Median income of these households, by the way, is $70,000 or less.

Pension funds, both public and private, hold 27 percent of the shares in the energy industry. That means 129 million pension fund participants, who have accounts worth an average of about $63,000, own the companies we are talking about. Twenty-eight million of those pension funds are for public employees, including teachers, police, fire personnel, soldiers, and government workers. So these are the folks who own these companies that we are supposed to go after.

The final and most important and compelling reason this notion of a windfall profits tax is a red herring is that it won't produce more energy. It won't stabilize or lower prices at the pump. It won't help the situation. It will, in fact, make it worse.

Why do I say this? Because we have historical experience to turn to to see what happened. Under President Carter, we tried this experiment. In terms of boosting energy production, stabilizing or lowering prices, it was a miserable failure. From 1980 to 1988, we had a windfall profits tax. That reduced domestic oil production by up to 8 percent, while dependence on foreign oil grew over that time up to 13 percent.

So instead of this sort of tax approach to the oil companies' tax approach to energy, we need to produce more energy, more supply, to stabilize and lessen prices. As my colleague from Alabama mentioned a few minutes ago, one of the first rules of economics is, if you tax an activity, you are going to drive it down, lessen that activity; you are not going to drive it up.

If somehow this tax plan--windfall profits tax--or the myriad other tax proposals the Democratic leadership has brought to the floor would help solve our energy problems, I would be all for it. But it is going to make us produce less energy, not more. What will that do? That won't stabilize or lower gasoline prices at the pump. It will drive them up.

Let's get serious for once. As the American families we represent face a true crisis, let's put people ahead of politics. Let's put sound policy ahead of political posturing. Let's focus on what can make a positive impact. We need to do much in this regard, on the supply side as well as the demand side--conservation, greater efficiency, more R&D, and new fuel sources. But at the same time we need to focus on the demand side, on what can help us produce more safe, clean energy here at home. We have those resources here at home. We can access them safely and in an environmentally friendly way. But in order to do that, Congress needs to get out of the way and allow States and private industry to do just that.

Offshore is a big piece of that puzzle. That is why I have brought to the Senate floor my proposal that says if these outrageous prices at the pump actually hit $5 a gallon, then we will allow exploration and production in our ocean bottoms off our U.S. coast--but only if two things apply: First, the host State involved would have to want this activity. So the Governor and State legislature in that host State would have to say, yes, we want this activity off of our coast, we want to be part of the solution to help meet the Nation's energy needs. Secondly, that host State would get a fair share of the royalty, or revenue, from that ocean bottom production, 37 1/2 percent, building on the precedent, the policy we set 2 years ago in opening some limited new areas in the Gulf of Mexico. That actually does something about energy. That actually would increase supply right here at home, would lessen our dependence on dangerous foreign sources, would help stabilize and bring down prices at the pump--something the political posturing of suing OPEC or putting in a windfall profits tax, a Carter-era idea, on the big oil companies would not do.

Let's not fiddle while Rome burns. Let's get serious. Let's act respectfully to the situation, the real crisis so many Americans face. Let's come together in a bipartisan way and act, not posture, and debate and talk but act with real energy solutions. We need to do this, as I said, across the board, on the supply side and on the demand side to lessen demand through conservation, increased fuel efficiency, and new energy sources.

We need to come together and act now, rather than simply giving political speeches and endlessly posturing and going after easy political targets.

With that, I yield the floor.

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