American families and businesses are being squeezed by high energy costs. Since the beginning of the 110th Congress, Democrats have made progress in addressing America’s energy crisis by passing historic energy efficiency improvements for automobiles and light bulbs, mandating significant increases in our nation’s use of biofuels (the renewable fuels standard), halting oil deliveries to the Strategic Petroleum Reserve, and appropriating $786 million more for energy efficiency and renewable energy research and development than President Bush requested in his budgets.
Despite this progress, much more needs to be done. Urgent steps must be taken to eliminate excessive oil market speculation, promote renewable energy and energy efficiency, and increase domestic energy production on lands already leased to oil companies. Bush-McCain Republicans have relentlessly opposed these efforts, however, and have instead advocated a policy of drilling, drilling, and more drilling.
Senate Democrats will continue to urge our Republican colleagues to end their opposition to legislation that will help move our country away from the failed Bush/Cheney energy policies. As the debate on these proposals continue, Senate Republicans will have to decide whether they prefer the status quo of high gas and oil prices or work with us to solve our energy crisis. This Fact Sheet describes the Democratic proposals–which Republicans have opposed– that will address America’s energy crisis.
Eliminating Excessive Oil Market Speculation
On July 15, 2008, Senator Reid introduced S.3268, the Stop Excessive Energy Speculation Act of 2008, and was joined by Senators Durbin, Schumer, Dorgan, and Murray as original co-sponsors. Since its introduction, the legislation has been co-sponsored by Senators Brown, Cardin, Carper, Casey, Dodd, Johnson, Klobuchar, Lautenberg, Leahy, Menendez, Mikulski, Reed, Dodd, and Wyden. This legislation, developed after consultation with consumer advocates, oil market analysts, and experts from the financial and airline industries, seeks to reduce the amount of excessive speculation in the oil markets. The legislation would eliminate excessive oil market speculation by taking action on a host of measures, including:
- Increasing the resources (at least an additional 100 full-time employees) and authority needed by the Commodities Futures Trading Commission (CFTC) to detect, prevent, and punish price manipulation and excessive speculation;
- Giving the CFTC the emergency authority needed to rapidly implement the legislation. S.3268 would also strengthen the amount and quality of information available to the CFTC so that the Commission can better regulate all aspects of the energy futures markets;
- Closing the “London Loophole” so that oil traders using a foreign exchange cannot manipulate the price of oil in the United States; and
- Requiring the CFTC to implement position limits to restrict excessive speculation that would still allow for reasonable trading for price discovery, liquidity, and legitimate hedging purposes.
The following experts have identified excessive oil market speculation as a factor in rising oil and gas prices:
- Mark Zandi, the Chief Economist and co-founder of Moody’s Economy.com: Asked if he believes speculation plays a role in driving up oil prices, Mr. Zandi stated,”Yes, I believe so, yes. The oil market has become a financial market. And it’s affected by all kinds of speculators, momentum players, people just betting on prices increasing or falling, in this case, obviously, increasing. And so they ran in quickly and drove up the price. And that clearly has played a role.”
- Gerry Ramm, Petroleum Marketers Association: “Excessive speculation on energy trading facilities is the fuel that is driving this runaway train in crude oil prices today. Excessive speculation is being driven by what Michael Masters of Masters Capital Management refers to as index speculators, as compared to traditional speculators.”
- Walter Lukken, Acting Chairman of Commodity Futures Trading Commission: Mr.Lukken has stated that crude oil markets are “ripe for those wanting to illegally manipulate the markets.”
- Fadel Gheit, Oppenheimer & Company: “I believe the surge in crude oil price, which more than doubled in the last 12 months, was mainly due to excessive speculation and not due to an unexpected shift in market fundamentals. After all, demand growth in China, India and other developing countries was not a surprise and was reflected in crude oil futures a year ago.”
- Pope Benedict XVI: The world’s poorest people have become more vulnerable “because of speculation and financial turbulence and their perverse impact on food and energy.”
Supporting Renewable Energy and Energy Efficiency
Senate Democrats have worked tirelessly throughout the 110th Congress to support renewable energy and energy efficiency. We have succeeded in passing historic energy efficiency improvements for automobiles and light bulbs, significant increases in our nation’s use of biofuels, hundreds of millions of dollars of mandatory funding for advanced biofuel development, and the appropriation of $786 million more for energy efficiency and renewable energy research and development than President Bush requested in his budgets for Fiscal Years 2007 and 2008.
While these achievements are vital, they represent only the first steps needed to help move our country away from failed Bush/Cheney energy policies. One of the most critical next steps Congress must take to support renewable energy and energy efficiency is the passage of tax incentives that will spur additional investment in these areas. Bush Republicans have unfortunately opposed these efforts, choosing instead to protect :1) taxpayer subsidies for the oil companies even though these profits are at record highs; and 2) Senate Democrats most recent energy tax proposal, the Renewable Energy and Job Creation Act of 2008, which was blocked by Republicans, included the following provisions:
- An extension of the renewable energy production tax credit for wind for one year and the credit for other renewable energy systems like biomass and geothermal energy for three years;
- An extension of the 30 percent investment tax credit for solar energy and ten percent investment tax credit for fuel cells through 2014;
- Extensions of the deduction for energy efficient commercial buildings for five years and the credit for energy efficient appliances for three years; and
- A $3,000 tax credit for the purchase of a plug-in hybrid electric vehicle.
Supply, Demand and Taxpayer Fairness
Fast tracking domestic production. Right now, oil companies hold leases to 68 million acres of American land that they should be exploring and drilling (but are failing to do so). Democrats believe that we need to speed up the production of oil and gas from federal lands and also accelerate leasing land already available in Alaska, the Central and Western Gulf of Mexico, and other areas-without resorting to drilling in environmentally protected areas. All told, these new areas are estimated to contain tens of billions of barrels of oil. That’s enough to displace oil imports form the Persian Gulf for nearly a century.
Increasing oil supplies now. In June, Democrats passed legislation to direct the President to temporarily stop filling the Strategic Petroleum Reserve (SPR). Now, Democrats are proposing legislation to sell high-quality light crude oil now held in the SPR and replace it with lower-quality heavy crude. Once approved by the President, that oil would increase supply and begin reducing prices. Ninety percent of the proceeds generated from this sale would be invested in LIHEAP, the federal program to help families, senior citizens and people with disabilities afford the cost of heating and cooling their homes.
Reducing demand. Senate Democrats believe additional short-term steps are needed to tackle the demand side of the energy crisis. By promoting public transit and making smart investments in clean, renewable fuels and battery technologies, we can begin to end our addiction to oil. Democrats also believe that encouraging conservation through an American oil savings action plan, with targeted savings of 2.5 million barrels per day by 2016, growing to 10 million barrels per day in 2030, can help American consumers deal with rising prices at the pump.
Eliminating giveaways to Big Oil. As Big Oil companies continue to report record profits, it is time for the American people to stop paying for unnecessary giveaways to these companies. While Bush Republicans have blocked attempts in the Senate to repeal taxpayer subsides Democrats remain committed to eliminating them. We also believe that U.S. taxpayers deserve a fair share of the value from these public resources and support repealing mandatory deepwater and deep gas royalty relief for Outer Continental Shelf leases in the Gulf of Mexico. Democrats also want to make it easier for the Department of the Interior to collect the right amount of fees from the oil and gas companies that drill on public lands something that has not happened during the Bush Administration.