Federal Update
Lawmakers pitching proposals for temporary and permanent relief from skyrocketing fuel costs

By Jami Jones
senior editor


With record fuel prices showing no signs of retreat, voters calling for relief have federal lawmakers scrambling for solutions to wrangle the situation under control.

The contention by fuel experts and lawmakers alike that there is not much Congress can do to ease the crunch caused by high fuel prices has done little to slow proposals seeking to lower fuel prices.

Many lawmakers in both the House of Representatives and in the Senate are proposing, among other things, fuel tax holidays, stopping the diversion of oil to the Strategic Petroleum Reserve, and temporary adjustments to the federal fuel tax.

Moves on Capitol Hill could be developing into a one-two punch both to give temporary relief from high fuel prices and to permanently deal with the fuel price crisis.

The first punch could come with short-term fixes such as stopping the diversion of oil to the Strategic Petroleum Reserve are finding backers on both sides of the aisle – in both chambers. Senators and representatives, Republicans and Democrats are saying that because the reserve is 96 percent to 97 percent full, adding more of the $100-plus-per-barrel oil to it needs to stop.

Even though lawmakers only started proposing the end of diversions to the SPR in March, Jim Johnston, president and CEO of the Owner-Operator Independent Drivers Association, had written a letter to the president in late January calling for that very thing.

More and more lawmakers are jumping on the bandwagon calling for an end to the diversions – but the president continues to resist, claiming it won’t provide any relief.

A number of federal lawmakers, including Sen. Hillary Clinton, D-NY, and Sen. John McCain, R-AZ, have called for a fuel tax holiday. Clinton went a step further and also wants to levy a windfall profits tax against Big Oil. She wants to use the revenue from such a tax to bolster the federal highway fund.

However, fuel tax holidays aren’t without opposition.

Democratic presidential hopeful Sen. Barack Obama, D-IL, came out against the idea of a federal fuel tax holiday this summer, calling it a “short term, quick fix” proposal.

Playing with fuel taxes can be a slippery slope. There is resistance from some groups who do not want to see the Highway Trust Fund shortchanged any more than it already is by diversion of its funds.

A CNN poll conducted at the end of April showed 84 percent of the respondents did not support a fuel tax holiday.

Sen. Olympia Snowe, R-ME, hit on fuel taxes from a different angle. She recognized that diesel users, such as truckers, pay more in federal fuel taxes than gasoline users. She’s pitched the idea of dropping the federal tax on diesel to 18.3 cents per gallon – the same as it is on gasoline. Her measure proposed that the cut last through the end of 2008. As of press time it had not been approved.

Some lawmakers are looking beyond the short term. Sen. Maria Cantwell, D-WA, is winding up to deliver what could be the two-punch on fuel prices in an attempt to address the situation once and for all.

She has teamed up with Rep. Jay Inslee, D-WA, to tackle the possible manipulation of oil prices that could be happening just about anywhere from Wall Street to Big Oil all the way down to the retailers.

The pair pointed out in letters to the president and U.S. attorney general that the price of oil and gas can no longer be explained or predicted by “normal market dynamics or their historic understanding of supply and demand fundamentals.”

In their letters Cantwell and Inslee reminded the president and the attorney general that an official from Exxon Mobil testified under oath in a congressional hearing that the price of crude oil should be about $50 to $55 per barrel, based on supply and demand fundamentals. Yet oil is trading well above the $100 per barrel mark with little relief in sight.

 “With prices for (oil and gas) more than tripling since 2002, families, businesses and hardworking Americans are struggling to make ends meet with ever-shrinking disposable incomes,” the pair wrote in the letters.

Manipulation in the oil and gas markets has been exposed in the past, according to the pair. In the wake of Hurricanes Katrina and Rita, the Federal Trade Commission found 15 examples at the refining, wholesale or retail level that fit the definition of price gouging.

Also, in July 2007, Marathon Oil Corp. agreed to pay a $1 million fine to settle charges that one of its subsidiaries attempted to manipulate crude oil prices in 2003.

Many contend consumers don’t need more government guarding them, but at the same time, consumers look to the government for protection.

 “We learned that consumers are best protected when energy markets are subject to aggressive regulation and enforcement,” the two legislators wrote in the letters. “And, unless there is a cop on the beat vigilantly policing energy markets, sophisticated companies can fleece consumer pocketbooks without fear of penalty.”

Earlier in April, Cantwell, along with four other senators, encouraged the FTC to step up and implement a new power granted by Congress to tackle manipulation in the oil and gas markets.

Cantwell – along with Sens. Byron Dorgan, D-ND; Olympia Snowe, R-ME; Daniel Inouye, D-HI; and Gordon Smith, R-OR – sent a letter to the chairman and commissioners of the FTC calling for the agency to complete a rulemaking to implement the new power by the end of the year.

The Energy Independence and Security Act of 2007 gives the FTC authority similar to anti-manipulation authority utilized by the Securities and Exchange Commission and the Federal Energy Regulatory Commission. The provision also empowers the FTC to levy civil penalties of up to $1 million per day.

 “Utilized effectively, we believe this new authority will substantially augment consumer protections, help lower and stabilize prices, increase market transparency, and provide drivers the confidence that retail gasoline and diesel prices are free from the influence of anticompetitive practices and the exercise of market power, which might rightly be considered manipulation,” the senators wrote. LL