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A Case Study: Rising Energy Prices by Congressman Randy Forbes
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Recent Energy Accomplishments

Called upon the Democratic House Leadership to debate solutions for the energy crisis rather than naming historic trails.  Congressman Forbes released a statement saying: “Another week has gone by in Congress without any action to address our current energy crisis. Instead of spending our time naming historic trails, perhaps we should be debating long-term solutions that will help drive down the price at the pump and move us towards energy independence. It’s time we address this national energy challenge with a bold initiative that gets at the scope of the problem. If the Majority leadership is short on ideas, I suggest the New Manhattan Project for Energy Independence. When our nation is facing one of the greatest challenges of this decade, we need to put the partisanship aside and adopt a bold plan that will move us in the direction of energy independence.”   Congressman Forbes introduced the New Manhattan Project for Energy Independence, H.R. 6260, on June 12, 2008. The New Manhattan Project challenges the United States to achieve 50% energy independence in 10 years and 100% energy independence in 20 years, and awards significant prizes to any individual, group, or entity who can reach one of seven established energy goals. H.R. 6260 has been referred to the Committee on Science and Technology and is awaiting action. For more information on the New Manhattan Project, click here.  To watch Congressman Forbes discuss his initiative on CNN, click here.

Signed a discharge petition to force House Leadership to bring H.R. 2208, the Coal-to-Liquid Fuel Act, to the floor. This legislation would spur development of coal-to-liquid projects that could expand U.S. energy supplies.  If a discharge petition is signed by a majority of the Members (218), the bill must be brought up for a vote on the House floor.  Majority leadership has not brought energy legislation to the House floor for a vote in recent weeks. This is the fourth energy discharge petition filed by House Republicans to try to force action on the energy issue.

Signed onto a letter urging Gov. Kaine to support a 50% waiver of the Renewable Fuel Standard (RFS).  Gov. Rick Perry of Texas submitted a waiver request to the Environmental Protection Agency (EPA) seeking a temporary 50% reduction in the congressionally-mandated RFS of 9 billion gallons of ethanol in 2008—twice the amount of ethanol mandated in 2007.   Poor weather, export restrictions, increasing energy prices, and global demand have increased commodity prices 300% compared to two years ago, which directly impacts food prices for Virginians. A recent study by agricultural economist Dr. Thomas Elam estimates that federal ethanol policies will add more than $421 million to the cost of feeding poultry and other livestock, and the increased production costs coupled with higher food costs for consumers will result in an estimated net loss of $863 million in Virginia’s economy alone. The temporary waiver provision under the RFS was created specifically to lessen severe economic harm to states. As such, members of the Virginia Congressional Delegation are calling on the Governor to support this waiver.

Was profiled in the Wall Street Journal for his work on The New Manhattan Project for Energy Independence, H.R. 6260, and called on Congressional Leadership to support this proposal.  This bill challenges the United States to achieve 50 percent energy independence in 10 years and 100 percent energy independence in 20 years. To achieve this goal, the New Manhattan Project will bring together the best and brightest scientists in our nation in a competitive format to effectively research one of seven established energy goals and will award significant prizes to any group, school, team, or company who accomplishes each goal. Rep. Forbes' initiative was also featured in other print publications, including the Virginian Pilot, the Petersburg Progress-Index, and the Richmond Times-Dispatch.

Appeared live on C-SPAN’s Washington Journal to discuss The New Manhattan Project for Energy Independence, H.R. 6260.   Rep. Forbes' also discussed his the initiative on WTOP 103.5 Radio in Washington, DC, and on Fox News Radio's Tom Sullivan Show.  During these appearances, he outlined his bold new plan to help the U.S. achieve 100 percent energy independence in 20 years, and awarding major prizes to any American who can achieve one of seven established energy goals in the areas of alternative fuel vehicles, green buildings, solar power, biofuels, carbon sequestration, nuclear waste, and nuclear fusion.  He also highlighted the historical significance of such an endeavor, explaining the need for a new national challenge in the face of our increasing dependence on foreign oil, and the need for both short- and long-term solutions to high gas prices. 


Signed a pledge to increase domestic energy supplies which states “I will vote to increase U.S. oil production to lower gas prices for Americans.”
 To date, this pledge has been signed by nearly 200 Members of Congress.  Congressman Forbes believes that in order to lower gas prices in the short-run and become energy independent in the long-run, it is critical to focus our energy policy on three main objectives: production, conservation, and alternative energy.  To learn more about what Congressman Forbes is doing to lower gas prices and help solve the energy crisis, visit http://randyforbes.house.gov/issues/energy.htm.   


Voted in favor of H.R. 6346, the Federal Price Gouging Prevention Act.
 This bill would make it a federal crime for any person to sell gasoline during an energy emergency at a price that is “unconscionably excessive.”  It would also prohibit any retailer or wholesaler from taking unfair advantage of the circumstances related to an energy emergency in order to unreasonably increase prices.  

Appeared live on CNN to discuss his New Manhattan Project for Energy Independence, H.R. 6260.  This bill challenges the United States to achieve 50 percent energy independence in 10 years and 100 percent energy independence in 20 years. To achieve this goal, the New Manhattan Project will bring together the best and brightest scientists in our nation in a competitive format to effectively research one of seven established energy goals and will award significant prizes to any group, school, team, or company who accomplishes each goal. 

Delivered a speech before the House of Representatives on The New Manhattan Project for Energy Independence, H.R. 6260.  In this speech, Congressman Forbes outlined his bold new plan to help the U.S. achieve energy 100 percent energy independence in 20 years by establishing a commission that will bring together the best and brightest scientists in our nation, and awarding major prizes to any American who can achieve one of seven established energy goals in the areas of alternative fuel vehicles, green buildings, solar power, biofuels, carbon sequestration, nuclear waste, and nuclear fusion.  He also highlighted the historical significance of such an endeavor, explaining the need for a new national challenge in the face of our increasing dependence on foreign oil, and the need for both short- and long-term solutions to high gas prices.

Introduced H.R. 6260, the New Manhattan Project for Energy Independence Act of 2008.  This bill challenges the United States to achieve 50 percent energy independence in ten years and 100 percent energy independence in 20 years. To achieve this goal, the New Manhattan Project will bring together the best and brightest scientists in our nation in a competitive format to effectively research one of seven established energy goals and will award significant prizes to any group, school, team, or company who accomplishes the goal. The project will challenge scientists and researchers to:

- Double CAFE standards to 70 MPG while keeping vehicles affordable
- Cut home and business energy usage in half
- Make solar power work at the same cost as coal
- Make the production of biofuels cost-competitive with gasoline
- Safely and cheaply store carbon emissions from coal-powered plants
- Safely store or neutralize nuclear waste
- Produce usable electricity from a nuclear fusion reaction

Cosponsored H.R. 3089, the No More Excuses Energy Act of 2007.  This legislation would immediately impact the price at the pump by encouraging construction of new refineries, reducing greenhouse emissions, boosting alternative energy development, increasing American oil production and encouraging the construction of new nuclear power plants. 

Signed a discharge petition to bring H.R. 3089 to the House floor for a vote.  If a majority portion of the House of Representatives sign their name to have a vote on a bill that addresses energy prices, the Speaker would have no choice but to allow it to be considered.  Currently, 139 Members of Congress have signed the discharge petition for this bill.  
    

Cosponsored H.R. 2471, the Refinery Streamlined Permitting Act of 2007.  This bill would help streamline the oil refinery permitting process by requiring the various agencies responsible for permitting to work together to bring new refineries online.  According to the U.S. Energy Information Administration, there has not been a new refinery built in the United States since 1976, which has contributed to the higher price of gas by restricting supplies. 

Cosponsored H.R. 6107, the American Energy Independence and Price Reduction Act.  This bill would reduce the price of gasoline by opening the Arctic Energy Slope to environmentally sensitive American energy exploration.  The development footprint would be limited to 0.01% of the Refuge, and revenue received from the new leases would be invested in a long-term alternative energy trust fund.

Voted in favor of H.R. 6074, the Gas Price Relief for Consumers Act of 2008.  This bill would make it illegal for foreign countries to collude (such as in the case of OPEC) to limit the production or distribution or manipulate the price of oil, natural gas, or any other petroleum product.  It also would establish a Petroleum Industry Antitrust Task Force within the Department of Justice to investigate market abuses.

Voted in favor of H.R. 6022, the Strategic Petroleum Reserve Fill Suspension and Consumer Protection Act of 2008.  This bill will aid efforts to lower gas prices by temporarily suspending the addition of petroleum to the Strategic Petroleum Reserve (SPR) through December 31, 2008, until the weighted average price of petroleum in the United States for the most recent 90-day period is $75 or less per barrel.

Voted against H.R. 5351, the Renewable Energy and Energy Conservation Tax Act of 2008.  While Rep. Forbes supports improved conservation and renewable energy, and expanding consumer tax incentives for energy efficiency, the legislation also would increase the tax burden on U.S. energy-producing companies by $18 billion. The legislation would make it more expensive for current energy producers to operate within the U.S, which in the end would prevent the bill from making any impact on the rising gas prices for Virginians.  To learn more about why Rep. Forbes voted against the bill and the energy policies the congressman supports, click here.

Cosponsored H.R. 2784, the National Environment and Energy Development Act.  This legislation would help increase domestic energy production and decrease our dependence on foreign oil by eliminating federal prohibitions against the use of federal funds to conduct natural gas leasing and preleasing activities for any area of the Outer Continental Shelf (OCS), and opening certain federal submerged lands to leasing for natural gas exploration and production.  H.R. 2784 also would express the intent of Congress that this Act result in a healthy and growing American industrial, manufacturing, transportation, and service sector employing America's workforce to assist in the development of affordable energy from the OCS.

Opposed the House version of H.R. 6, the Energy Bill, on December 13, 2007 and voted in favor of the Senate amendments to H.R. 6, the Energy Bill, on December 18, 2007. The House version of H.R. 6 would have established a controversial Renewable Portfolio Standard (RPS) and included nearly $21 billion in tax increases on energy producers. The Senate Amendments to H.R. 6 removed those controversial provisions while maintaining the increase in Corporate Average Fuel Economy (CAFE) Standards to a fleetwide standard of 35 miles per gallon by 2020, establishing a new Renewable Fuel Standard (RFS) to reach 36 billion gallons of renewable fuel by 2022, providing for new energy efficiency and conservation standards, and increasing funding for research and development of alternative energy sources such as geothermal and solar technologies. The President is expected to sign H.R. 6, as amended, into law, an important step towards decreasing our dependence on foreign sources of energy.

Supported lower energy prices for Virginians by voting against the Senate amendments to H.R. 6, a bill to overhaul the energy policies of the United States. The bill included policies that would mandate a federal renewable portfolio standard (RPS) and increased fuel efficiency for vehicles, but did not include provisions to increase U.S. domestic energy supplies or decrease U.S. reliance of foreign oil. The bill was estimated to result in higher gas and electricity prices for consumers, as well as over $1.1 billion in costs for Virginia by 2030 to implement the federal RPS. To learn more about why Congressman Forbes voted against the bill and what energy policies Congressman Forbes supports, click here.

Cosponsored H.R. 2927, which would increase the corporate average fuel economy standards for automobiles and promote the domestic development and production of advanced technology vehicles. This legislation would increase fleet-wide corporate average fuel economy (CAFE) standards for non-passenger and passenger automobiles to between 32 and 35 miles per gallon by 2020, and would establish separate standards for cars and light trucks. It also would establish an account to fund domestic commercialization and production of advanced technology vehicles and vehicle components and extend provisions providing manufacturing incentives for alternative fuel automobiles for 10 years.

Supported H.R. 3776, the Energy Storage Technology Advancement Act of 2007. H.R. 3776 would provide for a research, development, and demonstration program by the Secretary of Energy to support the ability of the United States to remain globally competitive in energy storage systems for vehicles, stationary applications, and electricity transmission and distribution.

Supported H.R. 3775, the Industrial Energy Efficiency Research and Development Act of 2007. H.R. 3775 would establish a program within the Department of Energy (DOE) to support the research and development of new industrial processes and technologies that optimize energy efficiency and environmental performance, utilize diverse sources of energy, and increase economic competitiveness.

Supported H.Res. 500, a resolution that expresses the sense of the House of Representatives that the United States should make clear to the governments of major natural gas exporting countries that it regards the manipulation of the supply of natural gas to the world market for the purpose of setting a nonmarket price, or as an instrument of political pressure, to be an unfriendly act prejudicial to the security of the United States and of the world. H.Res. 500 also states that the U.S. should develop a joint strategy with its allies and all countries that are importers of natural gas to prevent the establishment of a cartel and that we should work with our allies to reduce our dependence on natural gas and to increase and promote the utilization of clean energy sources.

Cosponsored H.R. 2230, which would prevent discriminatory taxation of natural gas pipeline property, including all property owned or used by a natural gas pipeline for the transportation or storage of natural gas. This legislation is designed to protect consumers from higher natural gas costs associated with taxes assessed by states on natural gas pipelines that may be higher than those assessed on other local commercial and industrial property in the same geographic area.

Voted in favor of H.R. 1716, the Green Energy Education Act of 2007, which would authorize the Secretary of Energy to contribute energy research and development funds to the National Science Foundation (NSF) for programs to support graduate education related to energy projects such as the design and construction of high performance buildings.

Voted in favor of H.R. 632, the H-Prize Act of 2007, which would direct the Secretary of Energy to award competitive cash prizes biennially to advance the research, development, demonstration, and commercial application of hydrogen energy technologies. Prizes would be awarded for: advancements in certain hydrogen components or systems; prototypes of hydrogen-powered vehicles or other hydrogen-based products; and transformational changes in technologies for hydrogen distribution or production.

Voted in favor of H.R. 1252, the Federal Price Gouging Prevention Act. H.R. 1252 would make "price gouging" of crude oil, gas, or natural gas an offense punishable by fines or jail time, if the act occurs during an energy emergency as declared by the President. Additionally, this legislation would allow a state attorney general to pursue civil action against companies or individuals who violate this law. A Consumer Relief Trust Fund would be established from the fines collected and used to provide financial assistance under the Low Income Home Energy Assistance Program.

Joined the Renewable Energy and Efficiency Caucus,
a bipartisan group of Members of Congress whose mission is to increase awareness of the various forms of renewable energy and energy efficiency technologies.

Voted in favor of H.R. 2264, which would make oil-producing and exporting cartels, such as the Organization of the Petroleum Exporting Countries (OPEC), illegal under U.S. law. This legislation would prohibit foreign countries from forming cartels or other associations to affect the market, supply, price, or distribution of oil, natural gas, or other petroleum product in the United States. The Attorney General would be authorized to enforce this legislation under U.S. antitrust laws. The possibility of sovereign immunity for foreign states found in violation of this legislation would be waived.

Participated in a hearing of the Judiciary Committee Antitrust Task Force on "Prices at the Pump: Market Failure and the Oil Industry." Congressman Forbes attended this hearing to investigate how factors such as retail station costs, refinery capacity, marketing and distribution costs, state and local taxes, and oil company profits impact gas prices. In addition, the Task Force heard testimony from witnesses about anticompetitive behavior on the part of the oil industry and the Organization of Petroleum Exporting Countries (OPEC), whose 11 members account for 40% of world oil production.

Supported The Advanced Fuels Infrastructure Research and Development Act, H.R. 547, which would establish a research and development program for biofuels additives that would make them compatible with existing fuel storage and transportation infrastructure. Biofuel, a renewable energy source, is any fuel that is derived from biomass, which consists of recently living organisms or their metabolic byproducts such as manure.



Randy's Point of View



The rising price of gasoline continues to be one of the issues I am hearing about the most from constituents in the 4th district – and that is understandably so. The concern over gas prices is widespread and having animpact on almost everyone. I appreciate the e-mails, phone calls, and letters that I have received on this issue and I am devoting a significant amount of time to researching and addressing this. Many of those I have heard from have expressed their desire to understand why gasoline prices have risen so quickly.

The price of gasoline at the consumer level is the result of a combination of factors. These factors include breaks in the distribution network, as we saw happen in the aftermath of Hurricane Katrina and general instability in major oil producing regions such as South America and the Middle East. Combined with increased demand around the world and state and federal taxes averaging nearly $.60 per gallon, gas prices have reached all time highs.

This edition of the Capitol Monitor has been designed to answer the most common questions regarding gas prices that are coming into my office. Please take a moment to review this publication and to also visit my website at www.house.gov/forbes to share your thoughts and concerns on gas prices and what you are experiencing in your community and how it is impacting your family or business. I look forward to hearing from you.

Why have gas prices risen so dramatically over the last couple of years?

The Recent History of Gas Prices


A large number of factors combine to exert pressure on gasoline prices in all parts of the country. Some of these factors have affected the price of crude oil and others the cost of producing and marketing gasoline.

In the past month, there has been a dramatic drop in total gasoline inventories due in part to the transition from Methyl Tertiary Butyl Ether (MTBE) reformulated gasoline (RFG) to ethanol RFG. Another factor contributing to this drop is related to terminals getting rid of their winter-grade gasoline to make room for the summer-grade gasoline.

Past energy crises have demonstrated that oil is traded in a world market, in which events in remote areas affect the price of crude for almost everyone. In recent years, these events included:


- Decisions by the Organization of Petroleum Exporting Countries (OPEC) cartel, after having reduced production quotas in 2002, to raise them only slowly and reluctantly;

- Unexpected demand growth in China and India;

- Disruptions in oil production in major exporters, including Venezuela, Iraq and Nigeria;

- Decline in the value of the U.S. dollar, the currency in which oil is traded in the world market, compared to other major currencies, particularly the Euro;

- Uncertainty and fear of major disruptions in Iraq and Saudi Arabia, in the context of the war in Iraq and the threat of terrorism.


Just as a number of factors led to increased crude prices, a combination of features in the U.S. refinery industry contributed to an increase in gasoline prices.

- U.S. demand for gasoline has increased as economic growth has resumed.

- Domestic refining capacity has declined, both in number of refineries and in total capacity.

- The structure of the refining industry has changed. In 1981 most refining capacity was owned and operated by integrated oil companies that supplied their own crude oil, refined it, distributed it, and marketed the products. Refining was only one part of the company's profit-making operation, and frequently was not an important profit maker. Now the refining industry is characterized more by independently owned, nonintegrated firms. When refineries are the sole source of revenue to the owners, it becomes more important that the operation be profitable, leading to pressure to raise prices.

- The refining industry has been operating with lower inventories of both crude oil and gasoline, as a means of cutting costs. The side effect has been reduced ability to meet unanticipated demand, leading to greater price pressure.

- Gasoline markets are fragmented regionally because air quality requirements have led to numerous different formulations to meet varying standards. In meeting demand for these regional formulations, called "boutique fuels," refiners lose flexibility to meet local variations in demand elsewhere, leading to increased price pressure.


What national factors impact gas prices?
Causes of Overall Gasoline Price Fluctuations


Several outside forces influence the price of gasoline. These include time of year, environmental standards, and domestic or world events.

- Gas prices will go up during the summer and holiday seasons. Nice weather and vacations increase the American summer gas demand by 5% compared to the rest of the year. This results in higher gas prices before and during the summer season.

- Crude oil prices are determined by worldwide supply and demand, with significant influence by the Oil Producing and Exporting Countries (OPEC) as they determine how much oil to produce and sell to other nations. The more crude oil OPEC elects to produce or release, generally the lower the price. OPEC holds 2/3 of the world’s estimated crude oil reserves.

- Worldwide demand for oil has sky-rocketed, causing the competition for the existing oil to increase its price.

- The United States is currently experiencing a shortage in oil refineries. Without the necessary number of refineries the oil cannot be transformed into gasoline fast enough to meet the demand of the American people.

- Fears of a terrorist attack crippling the market have driven oil prices up as much as 15 dollars a barrel.

- Domestic instability within oil exporting nations will also lead to jumps in gas prices. The possibility of major disruptions in the oil market will cause the price of crude oil to increase.

For additional information: Energy Information Agency's Primer on Gas Prices


Why is gas so high in my area?
Causes of Regional Gas Price Fluctuations


There are several reasons why there is fluctuation in regional gas prices. These include:

- Americans living farther from the Gulf Coast (the source of half of the gasoline produced in the US) tend to have higher gas prices because the cost to transport gas from the refinery affects the price at the pump.

- Like any product, gas prices are influenced by competition. Consumers in remote locations face a trade off between higher local prices and driving to an area with competitive lower priced alternatives.

- Some areas of the country have stricter environmental programs targeted at reducing air pollution. These programs require reformulated gasoline and restrictions on transportation and storage, leading to an increased pump price.


Where does my money go at the pump?
Gasoline Price Components

- The cost of crude oil is the largest factor in determining gasoline prices. 55 percent of the price of gasoline is reflective of the cost of crude oil. Local gasoline prices take about seven weeks to reflect changes in crude oil prices.

- The cost to refine oil and the process to transform crude oil into gasoline make up 22 percent of the total cost of gas.

- Local, state and federal taxes are levied on gasoline, accounting for 19 percent of the total cost.

- Gas prices fluctuate based on where you live, taking into account the distance from ports and the difficulty of transporting gas to certain locations. Costs incurred by gasoline company’s advertising campaigns are passed onto you, the consumer, and account for approximately 4 percent of the total cost of gasoline.

Source: Energy Information Administration


How do I know I’m not being ripped off?
Avoiding Price Gauging

Most experts agree that it is difficult for a consumer to make a definitive judgment as to whether they are the victim of price gauging.

Gouging is distinct, by definition, from price fixing, which is the collusion of multiple gas stations to set prices. Gouging is the act of an individual station taking advantage of supply problems (and even perceived supply problems). The actual definition is determined by state governments, who define what taking 'unfair advantage' of a crisis is. Attorneys General monitor these situations closely.

If you see prices at a station that far exceed your regional average, that's when to take note, save your receipt, and get in touch with the Virginia Attorney General's office at (804)786-2071. You should also take down the prices of all the varieties of gasoline available at the station, from regular to high grade.

AAA offers the Daily Fuel Gauge Report which allows consumers to see both national and regional averages for gas prices.


Where can I go for more information?
Useful Links & Websites


Energy Information Administration
United States Department of Energy