[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



                      RETAIL GAS PRICES (PART I):
                            CONSUMER EFFECTS

=======================================================================

                                HEARING

                               BEFORE THE

                    TASK FORCE ON COMPETITION POLICY
                           AND ANTITRUST LAWS

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 7, 2008

                               __________

                           Serial No. 110-102

                               __________

         Printed for the use of the Committee on the Judiciary












      Available via the World Wide Web: http://judiciary.house.gov

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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
ROBERT WEXLER, Florida               RIC KELLER, Florida
LINDA T. SANCHEZ, California         DARRELL ISSA, California
STEVE COHEN, Tennessee               MIKE PENCE, Indiana
HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio                   STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            Perry Apelbaum, Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel
                                 ------                                

          Task Force on Competition Policy and Antitrust Laws

                 JOHN CONYERS, Jr., Michigan, Chairman

RICK BOUCHER, Virginia               STEVE CHABOT, Ohio
ZOE LOFGREN, California              RIC KELLER, Florida
SHEILA JACKSON LEE, Texas            F. JAMES SENSENBRENNER, JR., 
MAXINE WATERS, California            Wisconsin
STEVE COHEN, Tennessee               BOB GOODLATTE, Virginia
BETTY SUTTON, Ohio                   CHRIS CANNON, Utah
ANTHONY D. WEINER, New York          DARRELL ISSA, California
DEBBIE WASSERMAN SCHULTZ, Florida    TOM FEENEY, Florida
                                     LAMAR SMITH, Texas, Ex Officio


            Perry Apelbaum, Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel




















                            C O N T E N T S

                              ----------                              

                              MAY 7, 2008

                                                                   Page

                           OPENING STATEMENTS

The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Chairman, Task Force on 
  Competition Policy and Antitrust Laws..........................     1
The Honorable Steve Chabot, a Representative in Congress from the 
  State of Ohio, and Ranking Member, Task Force on Competition 
  Policy and Antitrust Laws......................................     2
The Honorable Lamar Smith, a Representative in Congress from the 
  State of Texas, and Member (Ex Officio), Task Force on 
  Competition Policy and Antitrust Laws..........................     3
The Honorable Betty Sutton, a Representative in Congress from the 
  State of Ohio, and Member, Task Force on Competition Policy and 
  Antitrust Laws.................................................     5
The Honorable F. James Sensenbrenner, Jr., a Representative in 
  Congress from the State of Wisconsin, and Member, Task Force on 
  Competition Policy and Antitrust Laws..........................     6
The Honorable Darrell Issa, a Representative in Congress from the 
  State of California, and Member, Task Force on Competition 
  Policy and Antitrust Laws......................................     7
The Honorable Tom Feeney, a Representative in Congress from the 
  State of Florida, and Member, Task Force on Competition Policy 
  and Antitrust Laws.............................................     8
The Honorable Sheila Jackson Lee, a Representative in Congress 
  from the State of Texas, and Member, Task Force on Competition 
  Policy and Antitrust Laws......................................     9
The Honorable Chris Cannon, a Representative in Congress from the 
  State of Utah, and Member, Task Force on Competition Policy and 
  Antitrust Laws.................................................    10

                               WITNESSES

Mr. David Owen, President, The National Association of Small 
  Trucking Companies
  Oral Testimony.................................................    11
  Prepared Statement.............................................    14
Mr. Bill Douglass, Chief Executive Officer, Douglass Distributing 
  Company
  Oral Testimony.................................................    21
  Prepared Statement.............................................    23
Mr. Lucian Pugliaresi, President, Energy Policy Research 
  Foundation, Inc.
  Oral Testimony.................................................    36
  Prepared Statement.............................................    38
Mr. Mark Cooper, Director of Research, Consumer Federation of 
  America
  Oral Testimony.................................................    51
  Prepared Statement.............................................    53

                                APPENDIX

Material Submitted for the Hearing Record........................    87















 
                      RETAIL GAS PRICES (PART I): 
                            CONSUMER EFFECTS

                              ----------                              


                         WEDNESDAY, MAY 7, 2008

              House of Representatives,    
           Task Force on Competition Policy
                                 and Antitrust Laws
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Task Force met, pursuant to notice, at 12:09 p.m., in 
Room 2141, Rayburn House Office Building, the Honorable John 
Conyers, Jr. (Chairman of the Task Force) presiding.
    Present: Representatives Conyers, Jackson Lee, Sutton, 
Chabot, Keller, Sensenbrenner, Cannon, Issa, Feeney, and Smith.
    Staff present: Perry Apelbaum, Majority Staff Director and 
Chief Counsel; Anant Raut, Majority Counsel; Stacey Dansky, 
Majority Counsel; Sean McLaughlin, Minority Chief of Staff and 
General Counsel; and Stewart Jeffries, Minority Counsel.
    Mr. Conyers. Ladies and gentlemen, we are facing a crisis. 
What is happening in the oil industry today reflects the state 
of our trade policy, and how we have handled antitrust 
considerations. I want to begin our discussions here today 
considering the oil industry to be heavily consolidated.
    I want to look back for just a moment and, because this is 
the Antitrust Task Force, I am looking at it with that 
particular focus. Look at the mergers.
    Out of all the administrations, Exxon and Mobile, and then 
we went to Chevron and Texaco and Conoco and Phillips. And 
instead of achieving the economics, the economies of scale and 
consumer benefits, we received this bit of massive layoffs and 
increased consolidation and higher prices and profits.
    Currently pending before this Committee is our evaluation 
of Northwest Airlines and Delta.
    Now, over a century ago the gas-oil industry was a 
monopoly; John D. Rockefeller's Standard Oil. They controlled 
84 percent of crude oil. And their dominance was, to me, the 
main reason we got Chairman ``Andy Trust'' to begin with.
    That led to the breaking up of, then, Standard Oil and 
smaller companies. But now we are back to a literally 
vertically integrated monopoly where five companies control 
more than half of the refineries in the country, and their pre-
tax profits were $33 billion in the first quarter.
    After the so-called antitrust enforcers blessed the 
mergers; there was no oversight, no enforcement.
    Then Katrina, prices skyrocketing on the Gulf Coast and 
across the nation due to temporary supply disruptions. Not a 
single price-gouging case was ever brought.
    At the same time, in the face of what appears to be the 
most potent cartel the world has known, OPEC, we have not seen 
a single complaint, let alone legal action by the Department of 
Justice.
    So even though OPEC controls two-thirds of the world's oil 
reserves and 40 percent of the oil production, I think we have 
to factor that in as a big reason for why prices are likely to 
go up as the summer driving season commences.
    Now, last year, the House passed the Federal Price-Gouging 
Prevention Act, and we also passed another bill that would 
allow the Department of Justice to go after international oil 
cartels.
    I thought these were common-sense, pro-consumer bills, but 
they were stalled. And, as a matter of fact, they are stalled 
now.
    So this is not just any industry we are talking about. It 
is the key component of a modern industrial society, and we 
can't ignore the consequences of our failed antitrust policies 
with crude oil now reaching nearly $123 per barrel, some 
predicting it will be $200 per barrel within a couple of years.
    And we have got the average American family with two cars 
and purchases 1,200 gallons of gas in a year. The national 
average price is $3.61. In some States, $4 gasoline is a 
reality.
    So oil impacts every aspect of our economic life from the 
price of the gas to the cars sold that are made in Detroit to 
the price of food and plastic. And this Antitrust Task Force 
wants to inquire into this to see what it is that can be done 
about it.
    So we turn now to Steve Chabot, the distinguished Ranking 
Member of the Committee.
    Mr. Chabot. Thank you, Mr. Chairman. I appreciate the 
opportunity to speak.
    I would like to thank the Chairman for holding this 
important hearing today. There is not an issue that I hear more 
about from my constituents back home in Cincinnati, and who 
want to know what we are going to do about it, than the high 
price of gasoline in this country today.
    These concerns won't diminish until this Congress is 
willing to take steps to make energy more affordable to 
consumers.
    On Monday, the national average for a gallon of gas reached 
a record $3.63 a gallon; the sixth straight record in 14 days, 
according to our local newspaper.
    Just yesterday, the Department of Energy issued its 
projected gas price for this summer estimating prices to peak 
at approximately $4 a gallon at some point during the peak 
driving season, not too far ahead of us.
    As global demand, led by countries such as China and Russia 
and India continues to skyrocket and instability in certain 
regions of the world continues, there is no reason to believe 
that prices will decrease any time soon without significant 
action.
    There is no doubt that we need to focus on both short-and 
long-term strategies to address these concerns.
    We need, for example, increased domestic production in the 
Arctic National Wildlife Refuge (ANWR), up in Alaska; in the 
Outer Continental Shelf, as well as greater refinery capacity 
in this country.
    Now, relative to ANWR, this has been a subject of 
considerable debate in a number of votes in Congress for years 
now. And you will have people now that will say, well, even if 
we voted today to open up ANWR, we wouldn't see that oil for 
years and, therefore, that is not a real answer.
    Well, that is one reason that we should have passed this 
years ago. Then we would have it now, and it would be impacting 
prices here; obviously, lowering them if we had that additional 
oil available to us.
    So we should have done it a long time ago. And one of the 
reasons that oil prices continue to go up is because of 
speculation; what people think it is going to be tomorrow.
    So if we passed allowing us to go after the oil up in ANWR, 
which is 16 billion, 18 billion barrels, it would have, many of 
us believe, an immediate impact as would the Outer Continental 
Shelf.
    And so we need to do that.
    Relative to the oil refineries, we haven't built a new oil 
refinery in this country in over 30 years now. So even if we 
had the crude, we can't refine it quickly enough.
    And there is boutique fuels which is another problem.
    So we need to have a much stronger emphasis on those as 
well as additional emphasis and money and research into 
alternative sources of energy and conservation as well.
    So it has to be a multi-faceted approach.
    But too often in this Congress, especially as it is 
currently constituted, we talk about the things which will be 
there in the future, the alternative conservation, et cetera, 
but we don't do anything about domestic production.
    We absolutely have to.
    The hearing today is important because it gives us the 
opportunity to examine these daily price surges and their 
impact on consumers from another perspective through the 
antitrust lens.
    And so I certainly appreciate the Chairman holding this 
hearing.
    And I would now like to yield my time to the Ranking Member 
of the full Judiciary Committee, Mr. Lamar Smith from Texas.
    Mr. Smith. Mr. Chairman, I thank the gentleman from Ohio, 
Mr. Chabot, the Ranking Member of the Task Force, for yielding.
    But I also want to thank you, Mr. Chairman, for 
rescheduling this hearing.
    Normally, we meet at 10 o'clock. You were nice enough to 
back that up an hour so that members of the Republican 
Conference could go to the White House for a meeting with the 
President. And that is appreciated, as always.
    Mr. Conyers. Can you give us a briefing after the meeting?
    Mr. Smith. I would be happy to, Mr. Chairman.
    But the President actually did talk about the price of 
energy and what we could do about it.
    But part of that is incorporated into my statement, so we 
will get there.
    Mr. Chairman, fuel prices at the pump have caused a 
significant strain on individual and family finances across the 
nation.
    This week, the nationwide average price per gallon of 
gasoline was at $3.66, up $.56 from the same period last year.
    At every fill-up American families are reminded that 
driving anywhere is going to cost more than ever.
    As the Federal Trade Commission has reported, though, 
changes in world oil prices have explained 85 percent of the 
changes in the price of gasoline in the U.S.
    The price of gasoline at the pump closely tracks the price 
of a barrel of oil on the world market. Further, the FTC has 
repeatedly found that there is no broad-based collusion to fix 
prices or engage in price gouging in the retail sale of 
gasoline.
    So what can Congress do to reduce fuel prices? It can 
expand the domestic supply of energy that, time and again, the 
Democratic leadership has rejected opportunities to increase 
that supply and bring gas prices down.
    For example, last August 4, 217 of 231 House Democrats 
voted against a Republican proposal that would have opened up 
the Outer Continental Shelf and the Arctic National Wildlife 
Refuge to drilling for oil and natural gas.
    It is estimated that there may be as much as 86 billion 
barrels of oil in the OCS and ANWR; enough oil to keep America 
running for 5 years with no foreign imports at all.
    Drilling in ANWR alone could increase U.S. crude oil 
production by 20 percent over today's levels which would likely 
mean lower gas prices.
    While no one contends that opening up the OCS and ANWR to 
drilling will make the United States energy independent 
overnight, it is, in fact, a step in the right direction. It is 
also a signal to OPEC that the United States is serious about 
meeting its own energy needs and, in the long term, can reduce 
the cost of oil and, ultimately, the price at the pump.
    As important as alternative fuels are, including solar and 
wind, they account for only 6 percent of U.S. energy 
consumption. Even if we doubled our reliance on these types of 
energy, it would hardly be noticed at the gas pump.
    In fact, Investor's Business Daily recently reported that 
oil and natural gas will still account for 80 percent or more 
of U.S. energy use 10 years from now. With fossil fuels 
constituting so much of our energy consumption, both now and in 
the future, expanding our access to oil and natural gas must be 
a part of the solution in reducing gas prices.
    Any serious effort to address fuel prices must deal with 
the fundamental issue of American supply. This means drilling 
in the Outer Continental Shelf and Arctic National Wildlife 
Refuge.
    At a time when Americans are hurting financially, it is 
unconscionable that we are putting so much of our own oil 
supply off limits. Every time Congress decides to restrict the 
supply of oil, like deciding not to drill in the OCS or ANWR, 
it has an impact at the pump which cannot be ignored.
    There are several measures that have been introduced in 
this Congress that open up OCS and ANWR to exploration for oil 
and natural gas. Yet, despite the high cost of gas, not one has 
been brought up for a vote.
    Instead, as President Bush recently noted, Congress is 
considering bills to raise taxes on domestic energy production, 
impose new and costly mandates on producers, and demand drastic 
emissions cuts that would shut down coal plants. ``The cost of 
these actions would be passed on to consumers in the form of 
even higher prices at the pump.''
    Mr. Chairman, I hope we will focus on the facts today, and 
I hope that this Congress will finally consider legislation to 
address the very real problem that rising gas prices pose for 
American families.
    I now yield back.
    Mr. Conyers. Thank you very much.
    I would like, now, to recognize the gentle lady from Ohio, 
Betty Sutton.
    Ms. Sutton. Thank you, Mr. Chairman. And thank you for 
holding this important hearing today.
    American consumers across the country continue to pay 
outrageous prices at the pump. The price of gasoline and diesel 
has more than doubled in the past 6 years from about $1.50 per 
gallon in the second half of 2002 to a record national average 
of $3.61 per gallon today.
    What response has the record high prices of the last 2 
weeks elicited from the White House? The President says that a 
cost-benefit analysis of immediate action for consumers does 
not persuade him.
    Such an action is potentially disastrous as we enter the 
summer travel season when prices could surpass $4 a gallon.
    Speaker Pelosi has called on the President to suspend 
purchases of oil from the Strategic Petroleum Reserve 
temporarily. Filling the SPR takes 70,000 barrels of oil off 
the market each day even though the reserve is 97 percent full 
with plenty of oil to meet national security needs.
    Experts project that this could lower gas prices by as much 
as $.25 a gallon and provide some immediate relief. In 2000, 
just the announcement of an SPR moratorium dropped oil prices 
in the market from $30 to $20 a barrel.
    President Bush and Vice President Cheney, over the past 7 
years, have consistently blocked initiatives that will help 
Americans at the pumps and put our nation on a path to energy 
security and our economy on a path to a greener, cleaner 
future.
    The Administration's wrong-headed approach began with the 
Vice President writing an energy policy in secret with energy 
execs. This policy is no longer a secret. In the last 7 years, 
the Administration has doled out billions of dollars to the oil 
companies instead of working for an energy independence plan 
for America.
    Now, this Democratic Congress has taken significant steps 
to right the Administration's misguided path. Passing landmark 
energy independence and security acts that were signed into law 
in December will reduce our dependence on foreign oil and lower 
energy costs for consumers by raising CAFE standards and 
increasing the efficiency of buildings and appliances and 
lighting.
    And in February, the House passed a Renewable Energy and 
Energy Conservation Tax Act to extend tax credits for renewable 
energy sources like wind and solar power to 2011. These tax 
credits are paid for by repealing unnecessary subsidies to big 
oil companies.
    I would be shocked and dismayed if anyone dared to argue 
that the oil companies are struggling and in need of these 
subsidies.
    In 2007, the oil industry reported record profits of $155 
billion, 75 percent of which was earned by the five major oil 
companies. Exxon alone made $40 billion last year.
    Since 2002, the net income from domestic refining has 
accounted for about 44 percent of the total increase in 
domestic profits and grew almost three times as fast as income 
from foreign refining. The return on equity reported by these 
companies has skyrocketed compared to the rest of the economy.
    So it is crystal clear to me that the oil companies are not 
struggling. And yet some, including all of the Republican 
leadership, oppose repealing these subsidies and continue to 
block this important legislation's enactment.
    I strongly believe that investing in renewable energy now 
is vital to our long-term prosperity. The expanded renewable 
fuel standard enacted last year makes an unprecedented 
commitment to do so.
    Drilling in ANWR is not the answer. Not only will that oil 
fail to reach us in any timely way, weaning ourselves off of 
oil is the answer.
    With that, I yield back.
    Mr. Conyers. Thank you.
    Does the Chairman Emeritus have a comment?
    Mr. Sensenbrenner. After listening to that, he does. 
[Laughter.]
    Mr. Chairman, this hearing today duplicates hearings that 
have been held in this Committee and the Energy and Commerce 
Committee and in the Select Committee on Energy Independence 
and Global Warming.
    I think the reason that the audience part of this room is 
almost empty is because we really don't expect to hear anything 
new, and this is, once again, a duplication of effort in an 
attempt by the Democratic majority to lay the blame game on 
Republicans in Congress and the White House for high energy 
prices.
    I would remind both the distinguished Chairman and the 
gentlewoman from Ohio that before the last election, the, then, 
minority leader and now distinguished speaker of the house 
said, elect us and we will stop the increase in the price of 
gas at the pump.
    Well, that was about $1.25 a gallon ago, and the response 
that we have heard from the majority party is, it is not our 
fault even though we broke our promise.
    Now, all of that being said, at the Energy Independence and 
Global Warming Committee hearing where we had the CEOs of the 
five largest oil companies or their representatives in front of 
us, every one of them answered a question which I asked on what 
can Congress do to lower the price of gas at the pump the same 
way.
    Every one of them said increase domestic exploration and 
domestic production whether it is in ANWR, whether it is in the 
Gulf of Mexico or anyplace else.
    And what has the response been on the other side of the 
aisle? It has been no to practically everything.
    Now, energy prices are just as subject as anything else to 
the law of supply and demand. There has been a huge increase in 
demand in the emerging economies of China and India.
    And the price of crude oil, which represents about two-
thirds of the price of gas at the pump, has gone up in 
reflection of the fact that China and India are buying a lot 
more oil and consuming a lot more oil.
    And there isn't anything the U.S. Congress or the President 
can do to stop that. What we also should realize is that 
increasing taxes on domestic production of oil means that it is 
going to cost more money. And where does that end up being 
passed on to but the consumer.
    And if it is more expensive to produce oil domestically, 
then what are the oil companies going to do? Buy more from 
OPEC. And that increases the chokehold of OPEC on our domestic 
economy and our foreign policy.
    Folks, it is time for Congress to get down to passing 
Economics 101. From what I have heard today from the other side 
of the aisle, the grade is F. Let us get real.
    Mr. Conyers. I am real glad I called on you. [Laughter.]
    And I didn't really have to do that, but I wanted to get 
the full range of how we are feeling.
    How do you feel, Ric Keller?
    Mr. Keller. I feel great. I am ready to hear it.
    Mr. Conyers. Okay.
    Can I go to Darrell Issa? Good morning, sir.
    Mr. Issa. Good afternoon, Mr. Chairman. And I apologize 
that the morning slipped away on us because of events on the 
floor.
    I will be very brief.
    We are living with the sins of two decades of mistakes on a 
bipartisan basis. And I hope today's hearings remain 
bipartisan.
    It is very clear that high oil prices have a great deal to 
do with an absence of a comprehensive policy toward energy at a 
time when oil was $9 a barrel or $10 a barrel.
    I am a Californian, a very proud Californian. We are the 
greenest State in America. We have a lot to be proud of. We 
have a lot to answer for.
    We produce 1 million barrels a day. We consume 2 million 
barrels a day of oil. We, in fact, refine our fair share of it, 
more or less. But we boutique refine so many different types 
that we artificially raise our price beyond the national 
average.
    Back in the very old days when I still had a gavel and we 
looked into electricity, primarily, we discovered very quickly 
that the environmentalists were right. We could reach energy 
independence in electricity using renewables that would free up 
countless trillions of cubic feet or meters of natural gas; 
something that can, in fact, offset oil prices.
    All of that could be done. Unfortunately, what we 
discovered was that the coastline of California would be 
primarily-visible windmills from the north to the south.
    I, for one, consider that that may be a good tradeoff, but 
with a history of enjoying our sunsets in California, it is 
clear it would be a difficult and long road.
    Today's hearings are about high oil prices and whether 
gimmicks or short-fixes are going to really do the job versus a 
sustained policy that might have little effect for the first 
few weeks or months but likely would begin breaking the back of 
this persistent rise in oil prices.
    Mr. Chairman, I come out of the consumer electronics 
industry. If there is a shortage of iPods, no matter how 
severe, the price rise is fairly insignificant.
    However, as we have seen in corn, wheat, rice, and yes, 
oil, a relatively small unanswered demand can lead to a huge, 
even multiple huge, escalation in prices.
    I hope that we bear that in mind that the inelasticity of 
commodities is part of where we are today. And I look forward 
to hearing this.
    I think it is appropriate for us to look at this in terms 
of antitrust because we do not have enough competition giving 
us alternative and varied forms of energy in America today.
    With that, I yield back and thank the Chairman.
    Mr. Conyers. Thank you very much.
    Tom Feeney, good afternoon.
    Mr. Feeney. Thank you, Mr. Chairman. And thank you for 
holding this hearing.
    I want to associate myself with the remarks of, among 
others, Mr. Sensenbrenner.
    Every American business and every American consumer is now 
paying a huge price, and it is hurting very badly because of 
the high cost of energy.
    But to the extent that there is an antitrust problem 
involved here, I think that we need to break up congressional 
monopoly over new energy supply.
    For example, in the United States of America, we haven't 
built a nuclear power plant in something like 35 years.
    We haven't built new refineries since 1976.
    We are increasingly, State by State and regulation by 
regulation, prohibiting the use of clean coal and liquid coal 
even though America sits on 26 percent of the world's coal 
supplies.
    We have basically prohibited exploration all over the 
country, including ANWR, where some 80 percent of the Alaskan 
population wants it.
    And I will acknowledge that Floridians are going to need to 
stop being selfish when it comes time to drilling, far enough 
off the coast where they are not a distraction to our wonderful 
tourism industry, in a safe way.
    You cannot repeal the laws of supply and demand, as Mr. 
Sensenbrenner said. But that does not stop the United States 
Congress from trying to repeal those laws on a regular basis.
    We do need to expand into alternative uses of energy, solar 
and wind, for example. Ethanol, so far, in terms of the policy, 
while it may have been well-intended, has been a disaster.
    But I do believe that Congress has the antitrust problem. 
We need to break up the monopoly which is basically empowering 
people like Ahmadinejad and Chavez as we are totally dependent 
on foreign oil as opposed to alternative energy sources and 
more domestic supply.
    And with that, Mr. Chairman, thank you for the opportunity, 
and I will yield back.
    Mr. Conyers. Thank you.
    Sheila Jackson Lee, the gentle lady from Texas, good 
afternoon.
    Ms. Jackson Lee. Good afternoon, Mr. Chairman. And, again, 
this is a vital, vital hearing.
    I wear a conflicted hat representing Houston, Texas, which 
we often and properly call the energy capital of the world.
    I am reminded that energy is complex and diverse.
    Energy incorporates wind and alternative and bio-fuels and 
cellulite and, as well, fossil fuel which we have been, 
effectively, if you will, drilling in the Gulf for a number of 
years, decades, frankly, safely and securely.
    And some years ago, I added to one of the energy bills that 
may have passed, the idea of doing an inventory of the 
resources, domestically, that we have in the Gulf that have 
been able to be drilled or prospectively drilled under a safe 
and secure manner.
    I don't think we have been very effective in that way.
    We have closed our minds on the idea of building more 
refineries, of course.
    We have not looked at the idea of pressuring our large 
conglomerates to effectively develop the latest technology so 
that the final product that is produced can be produced in a 
more efficient and cost-savings manner.
    But we have to get relief. I, frankly, believe we do have 
the burden of giving relief to constituents, to truckers, small 
and large.
    Constituents of mine who own small trucking companies or 
smaller than small, maybe six trucks, ten trucks, are seeing 
their fuel prices jump exponentially. The airlines have 
suggested that is the case.
    Mr. Chairman, this is a vital, vital hearing to talk about 
what happens to the public when you have such a dominance by 
many of my constituents, and I hope they are listening.
    There have been a lot of discussions around suggestions 
that a gas tax holiday is political. I believe that we should 
not give short shrift to any idea that may give relief.
    And it is interesting that, as we look at these items, 
rather than studying them extensively and finding out what 
would work, we spend too much time saying what will not work.
    I think it is important.
    As the Offshore Technology Conference is being held in 
Houston as we speak, thousands upon thousands of people coming 
from the various energy countries from Nigeria to Guinea-Bissau 
to Angola, a number of the OPEC leaders, I don't know what 
involvement our government has, whether or not we have any 
advisors on the ground to discuss the increasing per-barrel 
cost and the reason for the increasing per-barrel cost and why 
it is being said and why OPEC is outside of our reach.
    And I, frankly, believe that is an abdication by this 
Administration and by this Congress. There are laws in place, 
but there are also laws that would give us a leeway of 
discussion.
    We need to be creative, adventurous, and we need to take 
risks on behalf of the American people.
    This hearing, I hope, will certainly share with us the pain 
that is going on, but I think in the long range, as the 
Chairman has so often tried to do in his legislative 
initiatives, we have got to find solutions.
    I am prepared to do so as one who represents a very vital 
area in the energy discussion.
    I, frankly, believe that calling energy leaders to 
Washington, to the White House, to come out in the light, not 
in the darkness of night as the Vice President attempted to do, 
but in the light, that we can collectively offer solutions, be 
they partly legislative or by executive order or by 
volunteerism, is what we need to do.
    The price per barrel is excessive, and the questions have 
to be raised of how we respond to the needs of the American 
people.
    So, Mr. Chairman, I hope to listen, in part, to the 
testimony. I am back and forth on the floor, but Houston is not 
going to go away. The energy capital is not going to go away.
    How do we make it work for the American people?
    And I believe that hard-working Houstonians who work for 
these companies truly believe that they can be part of the 
solution. Let us have that be the thrust of this hearing.
    And with that, I yield back as I look forward to being part 
of the solution as well.
    I yield back.
    Mr. Conyers. Thank you.
    The gentleman from Utah, Chris Cannon.
    Mr. Cannon. Thank you, Mr. Chairman. And thank you for 
holding this hearing.
    It is an important hearing. We have got the Wall Street 
Journal today talking about $150 a barrel for oil here in the 
summer; I was thinking the fall. Other people are predicting 
$200 a barrel. This is a lot of money for Americans, and this 
hearing, I think, is important.
    On the other hand--but I would like to congratulate Mrs. 
Jackson Lee, by the way, for two things. One is acknowledging 
the need for more oil. And secondly, for pointing out that her 
area is the energy capital of the world.
    We expect to change that soon because my area of the world, 
Utah, Colorado, and Wyoming, has trillions of barrels of oil in 
shale. That is essentially, some people are saying, five times 
as much oil as all the oil in the Middle East combined.
    And we have the first test for commercially taking oil out 
of shale in 30 years, and that should be done by mid-September. 
Those folks think they can make oil out of shale for less than 
$30 a barrel.
    Having looked at that, I think it is going to be quite a 
bit less than $30 a barrel. We are sitting here on massive 
resources.
    Our dear colleague, Mr. Bartlett from Maryland, does a 
presentation in the evening here in Congress and he talks about 
the limited resources that we have and reasonably raising some 
concern about where we are going and our domestic, in fact, 
worldwide, our typical historic traditional sources of fuel are 
decreasing.
    But they are dwarfed--all of the current resources that we 
are looking at or hoping for are dwarfed by the oil and shale 
in Utah, Colorado, and Wyoming.
    And it is oil that technology has allowed us to actually 
get much more easily than when we tried it in the late 1970's.
    Let me point out that there are other nontraditional 
sources that are dramatically important. We have walked away, 
in the Grand Staircase Escalante National Monument, 77 billion 
tons of coal. That is 150 barrels of oil if you turn coal into 
liquid.
    And, in fact, a lot of people think that coal is too 
expensive as a source for gas because the last time we had an 
energy crisis, coal was very expensive.
    And so, in fact, in 1977, one of my power plants entered 
into a series of 30-year contracts. They paid $85 a year for 
coal.
    Now, if that coal had been priced with inflation today, 
that would be about $300 per ton of coal. The actual price of 
coal when those contracts lapsed in 2005 was about $15 a ton.
    So in 1977, the actual price of a half a ton of coal, which 
you need to create a barrel of oil, was $45. And then you had 
the capital cost and the operational cost to gasify it.
    Today, the input cost is $7.50. That means your input costs 
are barely below seven and a half bucks. You can produce oil 
reasonably--now, it is a little higher than that right now, but 
not much higher.
    You can reasonably produce gas or gasoline or liquid from 
coal at a price that makes a lot of sense. These are not Area 
30 ideas.
    This is not turning the whole country on windmills, which I 
just had a meeting with some folks who were telling me that 
windmills have a huge cost when they are not operating because 
you have to keep the machinery warm and in place.
    The fact is, Mr. Chairman, we are in a world where we have 
energy in America.
    We just hope that not only when we talk about the high cost 
and some of the concerns that this Committee, as an antitrust 
Committee, has but I hope we will also focus on the 
alternatives that are available today and allow these guys to 
bring their prices down and get competitive in the world 
instead of creating an environment where the high cost of gas 
has created a huge market for innovation.
    Let us not ignore that innovation and those opportunities 
as we look at these fellows today.
    Thank you. And I yield back.
    Mr. Conyers. Thanks so much.
    David Owen has been known since 1989 as ``the voice for 
small trucking companies.''
    He co-founded the National Association of Small Trucking 
Companies, and I think he has got a real message to start us 
off today.
    I thank you very much for being here. All of your 
statements will be put, in their entirety, in the record and 
then you can talk with us from there.

TESTIMONY OF DAVID OWEN, PRESIDENT, THE NATIONAL ASSOCIATION OF 
                    SMALL TRUCKING COMPANIES

    Mr. Owen. Thank you, sir. It is an honor and privilege to 
be here, and I hope that some of my comments will have an 
impact.
    It is certainly humbling to be representing our niche 
market in trucking. We represent small, full truck, long haul, 
irregular route carriers.
    I am not going to give any information about my 
organization, as that is in the record.
    This meeting is about gas prices, and I would respectfully 
correct that to fuel prices. Everything that we talk about and 
everything that we burn is diesel fuel.
    And there is a difference between the impact of diesel and 
the impact of gasoline. And I would like to try to connect some 
of those dots today and maybe say some of the obvious.
    But truthfully, I think the driving purpose, and sometimes 
Congress and regulatory agencies don't connect the dots between 
diesel fuel and how all the stuff in this room got here.
    Everything in this room that you see came on a truck at 
least once, and maybe two or three times, before it got here.
    The high price of fuel, if you are buying gasoline and you 
are driving a car, you have got several choices. You can buy a 
smaller car; you can drive less; you can cut back on your 
trips; you can carpool.
    Trucking companies don't have any options because they have 
to run. And that is something that is unique about our 
industry. They are between a rock and a hard place.
    There has been a lot of talk over the last few months about 
stoppages and protests and strikes in trucking to try to bring 
attention to this crippling effect of the cost of diesel fuel.
    Quite frankly, a trucking company can't stop running if you 
think about it. If they stop running a day, they lose their 
drivers because the driver is paid by the mile. There is a 
driver shortage. A driver can get a new job in 30 minutes. So 
he will drive for somebody that will run.
    If they stop, they lose their customer. If you don't haul 
my goods today, I will find somebody else to carry it.
    So they lose their drivers first, then they lose their 
customer. Then the truck is not turning any revenue, and they 
can't pay for the truck.
    So they have got a couple of choices. They can get out of 
the business and start doing something else, or they can 
continue to run.
    My father, during World War II was frozen on his job with 
the railroad because it was a critical part of the defense 
effort. And, quite frankly, the industry, the trucking industry 
is de facto frozen on their jobs because every day they pick up 
this country and bring it back to itself.
    And if they stop running, guys, our whole distribution 
system would come to a halt and we would be on our knees in a 
matter of days, not weeks.
    Up until about a year and a half ago, the driver was the 
biggest cost factor in trucking. And about a year and a half 
ago, fuel became the biggest cost factor.
    And in some cases now, if you go a thousand miles at five 
miles to the gallon and you pay a driver $.40 a mile, which is 
pretty high, at $4 a gallon, you are going to burn $800 in fuel 
costs in a thousand miles.
    Here again, we don't have any options about whether to run 
or not; we have to keep running.
    We invented something that is called a fuel surcharge, and 
that is the only way the trucking industry has survived this 
onslaught of diesel prices, and I am sure you are familiar with 
it.
    I won't go into detail how a fuel surcharge works, but 
there is some--I heard yesterday, as a matter of fact, there is 
some legislation up here that is originating about regulating 
fuel surcharges.
    But this crippling effect starts with the independent one-
truck guy, goes to the small trucking company, goes up the 
supply chain, and eventually gets right back to you and me, the 
consumer.
    I would like to point out, too, that in our industry which 
represents one in every 11 people that work, the transportation 
industry, we get the dubious pleasure of paying for it at the 
pump and then turn around and pay for it again when we buy it 
at the cash register.
    There is plenty of blame to go around, plenty of theories.
    You guys are a whole lot smarter than me, but increased 
demand by China, the move to a global market, the weakness of 
the dollar, lack of refinery capacity, hedge fund operators 
manipulating the market, the war in Iraq, the unrest in the 
Middle East, profiteering by big oil, failure to become less 
dependent on OPEC, the policies of the Bush Administration, the 
policies of Clinton Administration, failure to tap the 
resources in Alaska----
    I can tell you one thing, though, we don't need to point 
the finger at the retailer. Our largest truck stop chain showed 
losses of $140 million the last two quarters.
    In summation, what is worse than $4 diesel fuel? What is 
worse than $7 diesel fuel? No diesel fuel at all.
    Our most sensitive and essential distribution leg is 
getting that oil from the refineries to the street. And if we 
ever lose that, guys, if the pipelines quit running and if the 
trucks that haul the fuel quit running, this country will come 
to its knees.
    Thank you.
    [The prepared statement of Mr. Owen follows:]
                    Prepared Statement of David Owen



    Mr. Conyers. Thank you. We notice you have some solutions 
in your statement. We are going to come back to those.
    Mr. Owen. Okay.
    Mr. Conyers. Mr. Bill Douglass is the member and former 
director of the Texas Petroleum Convenience Store Association, 
past chairman of the National Association of Convenience Store 
and Petroleum Retailers, and is currently chief executive 
officer of the Douglass Distributing Company.
    And we welcome you to this hearing, sir.

 TESTIMONY OF BILL DOUGLASS, CHIEF EXECUTIVE OFFICER, DOUGLASS 
                      DISTRIBUTING COMPANY

    Mr. Douglass. Thank you.
    Good afternoon, Mr. Chairman.
    As you hear, my name is Bill Douglass and our company is 
headquartered in Sherman, Texas. We operate 15 retail stores 
and supply 150 other independent retail facilities.
    Understandably, your constituents are concerned about the 
price of gasoline. And as you continue this issue, I want to 
share with you how the higher prices are affecting your local 
retailer.
    First, let me explain that the retail petroleum market is 
the most transparent and competitive market for consumer goods 
in the nation.
    We advertise our prices on large signs along the side of 
the road. And that empowers the customers to make shopping 
decisions for the best value while they are driving 45 miles an 
hour.
    Yet, while most consumers can tell you what the price is in 
their neighborhood, they can't tell you who owns those 
facilities.
    Our industry is dominated by small businesses. Nearly 60 
percent of convenience stores are owned by individuals that 
operate just one store.
    Despite common misperceptions, the integrated oil companies 
own and operate fewer than 3 percent of retail outlets, and 
this number is declining. Shell, Exxon, BP are all selling off 
whole retail markets.
    When you read the earnings reports released by the major 
integrated oil companies, remember that your neighborhood 
convenience store is not sharing in these profits.
    In fact, last year the average convenience store made about 
$23,000 in profit. Most of that profit was generated inside the 
store on products like coffee and sandwiches.
    However, gasoline is essential for us to attract customers. 
This means our fuel prices must be as competitive as possible.
    According to a recent survey, one-third of the customers 
say they will drive 10 minutes just to save $.03 a gallon. Such 
competitive pressures have made it very difficult, at this 
time, to make a profit on gasoline sales.
    And this chart that we have over here shows the average 
retail price for gasoline has increased $1.78 per gallon since 
2002.
    However, the retailers' gross margin has decreased from 9 
percent to a historic low of 3.7 percent. And we refer to this 
chart as the ``misery index.'' That 3.7 percent is before we 
pay our biggest expense.
    Last week, the Oil Price Information Service reported that 
the average retail price of gasoline was $3.57 and the average 
retailer margin was only 8.9 cents. At this price, every time 
you swipe your credit card to pay for gasoline, the credit card 
company collects approximately $.09 per gallon. This leaves the 
retailer with nothing to pay for all the other expenses.
    In 2007, our industry paid $7.6 billion in credit card fees 
while reporting only 3.4 billion in profit. On average, the 
banks and the card companies are making more than the retailer 
on every gallon of gasoline, and the card company profits just 
keep going up with the price.
    Many retailers cannot survive on these small margins, and a 
number of them are on the brink of bankruptcy, and we think it 
is reaching a dangerous level.
    In fact, in the past 4 months, 10 of the dealers whom I 
supply fuel have offered me the deeds to their business. They 
are so leveraged that the slim margins they make on their sales 
can't service their financial obligations.
    This is a serious situation. Retailers are being forced out 
of business because they are unable to pass through the 
increasing cost of inventory and operating expenses.
    So what can Congress do?
    First, I think there is two elements that can make a 
lasting, positive impact on market conditions.
    One, we have heard this morning, increase crude supplies. 
Crude oil now represents 72 percent of the retail price of 
gasoline, higher than any other time in history.
    If substantial supplies of additional crude were brought 
onto the market, basic economics tell us this would have a 
deflationary effect on crude oil prices. But perhaps, more 
importantly, such an increase in supply would send a signal to 
the noncommercial market traders.
    A significant factor influencing crude oil prices has been 
the entry of the commodity investors seeking a safe haven from 
the volatility of the real-estate and stock markets.
    This huge influx of capital has violated the traditional 
supply-demand equation and grossly inflated fuel prices.
    Additional supplies would help correct this speculation.
    And, two, Mr. Chairman, enact your bill that is to give the 
retailers the ability to negotiate with Visa and Master Card, 
the Credit Card Fair Fee Act. It is a critical piece of 
legislation.
    And this could help reduce the financial burden on the 
retailers and provide them with the opportunity to remain 
competitive in this market.
    Many more of my dealer customers would be able to cover 
their expenses if they were not forced to turn over more than 
half their gross fuel margins dollars to the credit card 
companies.
    Therefore, I urge you to move forward quickly to enact H.R. 
5546.
    And thank you for the opportunity to share the perspective 
of the convenience and petroleum retailers in the nation.
    [The prepared statement of Mr. Douglass follows:]
                  Prepared Statement of Bill Douglass



    Mr. Conyers. Thanks so much, Mr. Douglass.
    Our final witness before we vote is Mr. Lou Pugliaresi who 
has been a White House staffer. He has worked with the EPA, 
Interior, Energy, and State Department.
    He has written extensively for the Oil and Gas Journal, and 
we are pleased to have you here this afternoon.

          TESTIMONY OF LUCIAN PUGLIARESI, PRESIDENT, 
            ENERGY POLICY RESEARCH FOUNDATION, INC.

    Mr. Pugliaresi. Mr. Chairman, thank you so much.
    First, we very much appreciate the opportunity to testify 
today.
    I am the president of the Energy Policy Research 
Foundation. We used to be called the Petroleum Industry 
Research Foundation. We have been around since 1944.
    We have probably looked more at the downstream markets and 
the petroleum markets, both in the U.S., worldwide, than almost 
any other institution. We have been doing this a very long 
time.
    And what I would like to do today is just make a couple of 
basic points pulled from our analysis.
    The first is the fundamental issue these gentlemen are 
talking about is the price of crude.
    In fact, you can just do the simple math. At $122 a barrel, 
with about $.50 of Federal, State, and sales tax, you get to 
$3.36 a gallon. So 93 percent today of the problem is the feed 
stock cost, the price of crude oil.
    And we have been doing a lot of work on this, looking at 
this and trying to figure out why our crude price is so high.
    I mean, I think that is the sort of fundamental sort of 
issue I would like to discuss with you. And if you go back to 
2001, 2002, the market, the buyers and sellers in the market 
had a set of expectations on future production.
    This is actually not unusual. It is not just what is 
happening in the prompt period; it is what do the participants 
in the market think about what is going to happen over time.
    We always say the 1973, 1974 Arab Oil Embargo wasn't an 
embargo; it was a signal to the marketplace that oil and gas 
was going to be developed at a much lower pace, as a slower 
pace.
    So if you go to 2001, 2002, and you look at expectations on 
developing ANWR, expectations on leasing developments in 
Nigeria, Russia, Venezuela, across the entire major-producing 
regions, we generally had an era of positive expectations.
    We thought that production would come on online. And, in 
fact, if you take EIA's forecast and take it through to 2008, 
2009, it wasn't that bad had we not had what we call a ``series 
of unfortunate events.''
    And virtually everything that could go wrong did go wrong.
    We had civil war and strife in Nigeria. We have turmoil in 
Sudan. We had the Venezuelans begin to expropriate property. We 
failed to proceed on an aggressive leasing program here in the 
United States. We passed up a lot of opportunities such as 
opening up ANWR.
    All that gets folded into the market. And, in fact, if you 
go through our analysis and go through each and every one, we 
think we are, right now, in the midst of a rather large supply 
disruption.
    Yes, we have had growth in demand from China and India, and 
that has moved prices up. But the market is probably missing 
upwards to five million barrels a day. And that is having a big 
effect on prices.
    So that is sort of the main point I want to leave you with.
    The other issue on the diesel part that I think is a good 
one, world diesel demand has grown about twice the rate of 
gasoline. And world refining capacity was really not set up to 
meet that demand.
    And, in fact, what is happening is--this sounds a bit 
strange--but it is not that diesel is so expensive; it is that 
gasoline is so cheap.
    Now, of course, both of those products are very expensive, 
but what is happening is as the European and Asian refining 
centers are trying to hit their diesel targets--because of the 
way refineries are built, they produce gasoline components.
    Those gasoline components come into the United States, and 
they come in at a pretty good price.
    So I think the question of diesel fuel, that can get fixed 
over time as more refining capacity comes online, not just here 
in the U.S., but worldwide.
    So I would like to sort of leave you with one last issue, 
which is if we are now above where we think the long-run price 
of oil is, than we may be in a position of bringing to market a 
lot of ideas, a lot of regulatory programs which would impose a 
very heavy cost.
    What we have to ask ourselves is: Do we really want to go 
forward and proceed in that way? I mean, it may be that trying 
to specify the fuels of the future, to put together a program 
that tries to, sort of, almost centrally plan how we ought to 
transition is not going to be as productive as allowing 
opportunities for conventional fuels to fill in this gap as 
these alternative fuels have a greater opportunity to make it 
to the market.
    Thank you.
    [The prepared statement of Mr. Pugliaresi follows:]
                Prepared Statement of Lucian Pugliaresi



    Mr. Conyers. Thank you so much.
    We will be back very, very shortly.
    [Recess.]
    Mr. Conyers. Our final witness this morning is Dr. Mark 
Cooper, director of research at Consumer Federation of America.
    He has been working on this general subject matter for 
several decades. He has got a Ph.D. from Yale. We are very 
interested in his perspective because he has testified on this 
area quite often.
    And we are so pleased to have you this afternoon, sir.

   TESTIMONY OF MARK COOPER, DIRECTOR OF RESEARCH, CONSUMER 
                     FEDERATION OF AMERICA

    Mr. Cooper. Thank you, Mr. Chairman.
    In my remarks today, I will focus on the aspect of the 
gasoline price problem that is in the jurisdiction of this 
Committee and make the case that that is an awfully big part of 
the problem.
    In large part, significant part, current high gas and oil 
prices are the result of a long-term combination of an 
international crude oil cartel and a tight domestic refining 
monopoly, both of which have systematically underinvested in 
production capacity.
    Our failing to expand production capacity to meet demand 
and provide a reasonable reserve in an industry with very low 
elasticity to supply and demand, one that is prone to accidents 
and disruptions, that have created a tight and volatile market 
and the opportunity to raise prices and profits.
    For cartels and oligopolies, supply is a strategic 
variable.
    You learn that in Economics 102 when you study market 
power.
    While crude oil is the largest component of gasoline 
prices, there have been months over the past 5 years when the 
domestic spread, the amount of money that domestic refining and 
market account for in the pump price, have been over $1 a 
gallon.
    That domestic spread creates a tug-of-war between the crude 
oil cartel and the domestic refining oligopoly.
    They fight over the extraction of consumer surplus, and 
here is why.
    The U.S. gasoline market accounts for about one-quarter of 
all the gasoline consumed in the world and is, by far, the 
single largest product market in the oil sector.
    So as U.S. refiners increase their margins, OPEC receives a 
signal that markets will support higher prices and pushes for 
higher crude price to recapture their share of the rent. They 
are a rent-seeking cartel.
    Crude oil pushes gasoline prices up, yes, it does. But U.S. 
gasoline prices also pull crude oil prices up in a vicious 
anti-consumer spiral. And, of course, rising crude oil prices 
pull up the prices across the entire energy complex.
    Speculation also has played an increasing role in driving 
up prices. There has been a huge influx of money; too much 
money chasing too few goods and money that does nothing but 
arbitrage.
    A barrel of oil may trade 30 times between the well head 
and the burner tip. It is not clear. All those transactions are 
free or costless.
    Volume, volatility, and risk drive up the price of oil.
    The Senate Committee on Oversight Investigations concluded 
in 2006 that speculation accounted for one-third of the oil 
price. In today's dollars, that is a big number.
    Growing global demand certainly has played a role in 
triggering this price spiral, but a well-functioning market 
with growing demand would not cause such a powerful upward 
surge in prices and huge increases in volatility.
    It is the failure on the supply side to invest, mergers 
that resulted in highly-concentrated refining markets, and 
barriers to entry that are part of the natural structure of 
this industry that have allowed the cartel and the oligopoly to 
profit at the expense of the public and to feed the speculative 
bubble.
    If we did not have an international crude cartel and a 
domestic refining oligopoly, the price of gasoline would be 
about $2 a gallon this summer, not heading to $4 a gallon.
    So make no mistake about it; the matters that this 
Committee oversees, the market structural matters that it 
oversees, are, in fact, at the heart of the problem.
    And, frankly, if we had $2 a gallon, we would not be 
talking about exotic alternatives. The economics of all those 
alternatives would disappear.
    So solve the traditional problem. It will be tough, but 
don't ignore the traditional problem. Don't be hemmed into a 
little bubble that says, ``Here we are stuck in this situation; 
how do we produce ourselves out of it within the situation?''
    The bubble has been made by anti-competitive, anti-consumer 
practices and structures, and that is the jurisdiction of this 
Committee.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Cooper follows:]
                   Prepared Statement of Mark Cooper



    Mr. Conyers. Thank you so much.
    Ric Keller, would you begin the questioning, please?
    Mr. Keller. Thank you very much, Mr. Chairman.
    I will just tell you up front what I am going to be asking 
you about.
    Mr. Pugliaresi, I am going to ask you about refining 
capacity.
    And, Mr. Douglass, I am going to ask you a little bit about 
interchange fees in your testimony.
    But I want to, first, begin with a little straight talk on 
both sides as to how we got here. And I am going to try to be 
fair to both sides here.
    First, Speaker Pelosi, on April 26, 2006, said, ``Democrats 
have a common-sense plan to help bring down skyrocketing gas 
prices.''
    Since she became speaker, gas prices have increased 55 
percent. They are $1.29 a gallon more than they were when she 
took over. For example, today, they are $3.62; when she took 
over, $2.33.
    Did we expand our supply by drilling in ANWR? No.
    Did we reduce our demand by building alternative energy 
sources or nuclear plants? No.
    Did we streamline or bottleneck the process with 
refineries? No.
    And that is a little straight-talk on that side.
    The promise should have never been made. I think it was 
political.
    In fairness to Speaker Pelosi, let me say the other side.
    The one law that she cannot change is the law of supply and 
demand. And, obviously, the main reason we have skyrocketing 
gas prices is because crude oil is a commodity which she or I 
or anyone else doesn't have any control over, and it has gone 
up dramatically.
    She can't, also, help the fact that China and India have 
come online and are using more crude oil and gasoline than 
ever. And that is out of her hands as well.
    And so let me present where we are in sort of a straight-
talk capacity.
    Also, I think there is some things this Congress has done 
to, at least, make an effort. We have increased the CAFE 
standards, which I voted for, from 25 to 35 miles a gallon. We 
generally support, on a bipartisan basis, tax incentives to buy 
hybrids and that sort of thing.
    So, with that as a background, let me begin with you, Mr. 
Pugliaresi, and let us talk about refineries.
    And I want to tell you both sides what I hear, and you tell 
me your opinion.
    We haven't built a refinery in 32 years, since 1976. One 
side says, well, these companies that own the refineries don't 
want us to build any more refineries and that they are wanting 
to keep a limited capacity to jack up their profits; and that 
there has only been one request for a permit to be granted in 
32 years and it was granted.
    The other side says no, it is very expensive to build a 
refinery. It takes a lot of red tape in getting it through the 
State and regulatory processes.
    The last refinery permit to be granted was for an Arizona 
company years ago, and it took that company 19 years to do it. 
And as a result of it being so expensive and burdensome, these 
companies find it cheaper just to build refineries elsewhere.
    I am not an expert in the field, but I just laid out what I 
have been told.
    Can you give me your opinion, Mr. Pugliaresi, as to what 
the reason is we are not having more refineries built if 
everybody seems to think we need more built?
    Mr. Pugliaresi. Yes.
    Mr. Keller. Your mike needs to be on.
    Mr. Pugliaresi. Obviously, none of these have a simple 
answer. We have been adding capacity. And, unfortunately, that 
is the one table I didn't bring with me, but we have been 
adding capacity at existing refineries.
    And the capacity has moved up equivalent, I think, of 
somewhere between 150, 200,000 barrels a day per year. So there 
is a lot of debottle-necking.
    Also, the industry has had to--it is not just installation 
capacity that we worry about. As the crude gets heavier, as the 
refined products get cleaner, as the sophistication of the 
processes change over time, a lot of capital investment goes 
into treating and beating up the barrel more.
    Mr. Keller. Even our side, you know, Joe Barton says we 
need five million gallons more capacity. I mean, do you 
disagree that we need more capacity? More refineries?
    Mr. Pugliaresi. I think if the permitting process were 
smoother and it were, you know, easier to make additions and 
the cost structure was--I mean, there is a lot of risks out 
there if you build a refinery.
    You don't know what the Congress is going to do on the 
climate control. You have the new ozone standards coming along.
    So the cost structure is pretty high.
    And you also have ethanol moving into the market at pretty 
high rates.
    So total demand for gasoline in the U.S. may be coming 
down.
    Mr. Keller. I don't want to cut you off, but I sense a no 
clear-cut answer to that refinery thing, and I have only got a 
few seconds left to ask Mr. Douglass about the interchange 
fees.
    You are paying, roughly, on average, about 2 percent 
interchange fees to credit card companies?
    Mr. Douglass. It varies between 1 1/2 for a debit card and 
4 percent for----
    Mr. Keller. The premium cards.
    Mr. Douglass [continuing]. American Express.
    Mr. Keller. And that is really where you get hit, the 
premium cards, the 4 percent fee versus a 2 percent fee?
    Mr. Douglass. Yes.
    Mr. Keller. Mr. Chairman, will you indulge me for another 
minute to follow up on the interchange fee question?
    What were you paying about 10 years ago in interchange 
fees? Rather than 2 percent, was it about 1 percent?
    Mr. Douglass. One percent.
    Mr. Keller. So you have seen an increase. You like Mr. 
Conyers bill, I take it?
    Mr. Douglass. Absolutely.
    Mr. Keller. Okay.
    If we were to pass his bill and you were to have some 
favorable reduction long-term through some market-based 
approach and your interchange fees went down from an average of 
2 percent to 1 percent, would the companies you represent pass 
those savings along to consumers? Or would they use that to 
enhance their profits, in your opinion?
    Mr. Douglass. In my opinion, it would always go to the 
consumer because we are in such a transparent industry. We use 
two-foot letters, numbers, if you will, to advertise what we 
are selling our product for.
    And so you can tell, at any reasonable speed, what that 
particular location is selling at, and so their margin is 
compressed by the fact that everybody else has a sign.
    It isn't like going into a store and shopping and you have 
to look at the sales and so on. We can drive by at 50 miles an 
hour and tell what the neighborhood's price is.
    But they have to give it to the customer because the 
competition demands it. We are in the business of pulling 
customers in to a convenience store to buy fuel. We use fuel as 
the attractor.
    Mr. Keller. So your answer is you would pass it on to 
consumers because you have to because you are in such a 
competitive environment?
    Mr. Douglass. Yes, sir.
    Mr. Keller. Now, let me give you one hard question, if you 
don't mind, since I gave you----
    Mr. Douglass. Okay.
    Mr. Keller [continuing]. A more modest one.
    On Mr. Conyers' bill, he is not setting the rate. You would 
go to this arbitration panel and one side would say to the 
panel, for example, the electronic payment folks may say, well, 
we want you to set an interchange fee at 4 percent.
    And your side may say we want you to set an interchange fee 
at 1 percent.
    Are you concerned at all that the arbitrator may go with a 
4 percent fee which is higher than you are paying now on 
average? Or are you just willing to take your chances?
    Give me your thoughts on that issue.
    Mr. Douglass. It is really the opportunity to talk to these 
folks.
    We have a contract that is 1,550 pages, as we understand 
it, with Visa and Master Card, but they won't let us see it.
    So we are virtually shut out of the process. I am not 
allowed to talk to them.
    And, as a group, my association can't get together and talk 
to them because there is antitrust violations there.
    So, essentially, I am controlled by a duopoly that doesn't 
give me a chance to negotiate. All we ask in the bill is the 
right to have a discussion with them.
    If they choose not to have a discussion, that is the only 
time it would go to arbitration. And we would take whatever 
they decided. It has to be better, at least in discussion, than 
we have today where they won't talk to us.
    Mr. Keller. Thank you, Mr. Chairman. My time is expired, 
and I will yield back.
    Mr. Conyers. Thank you.
    Dr. Cooper is going to have to excuse himself at 2 o'clock. 
That shouldn't present any problem, but I want everyone to know 
it in advance.
    How do we deal with the biggest problem that you suggest is 
in structural and we are the only antitrust group on this side 
of the House----
    How do we start off, Mark Cooper?
    Mr. Cooper. Well, there has actually been legislation 
directly addressing some of these issues that have been 
introduced in the last couple years that would start the 
process.
    It will be a long, slow process. But one is giving the 
antitrust division the clear right to go to court with OPEC.
    Now, I understand people shake in their boots about OPEC, 
but if you think about it, and there was this article, an 
opinion piece in the Post today made the point.
    When we put a nickel of a tariff on some commodity, we get 
hauled into world court in the blink of an eye.
    And OPEC has been taking $50 billion, $100 billion in 
monopoly rent for decades and nobody does anything about it.
    And so his point is it is time to say this is economic 
warfare and to stand up. It will take time, but, you know, that 
threat may actually work.
    Instead of holding their hand, maybe we ought to push it 
away and begin that process.
    Mr. Conyers. But what about some diplomacy? Let us take a 
middle course.
    Mr. Cooper. Well--sometimes works, but, you know, a cartel 
is tough to run as a general proposition. But when everybody's 
pockets are full of money, as has happened over the past years, 
it gets real easy because there is no incentive to cheat 
anymore.
    And so you really now have--and just go back and look over 
the past few years. What you will see is OPEC was defending $40 
a barrel. You had a huge jump in domestic spread in the U.S., 
and then OPEC is defending $60 a barrel.
    Then you get another jump in the domestic spread in the 
U.S., and OPEC is defending $80 a barrel.
    The Saudis now say they are defending $80 a barrel, and 
they are talking about not investing in more production when, 
in fact, their costs of production are down in the 20's at 
most.
    Now, that is a massive rate of profit which, in a 
competitive industry, would attract entry, but it is not a 
competitive industry.
    So the answer is we have to start the process of signaling 
that we are going to fight back.
    The same thing is true in the domestic industry in terms of 
refining. You know, the Saudis offered to fund these expensive 
refineries years ago.
    Bush offered military bases to get over the nimby problem, 
and the oil industry said no thanks.
    The shortfall in refining capacity in this country has 
doubled in the past 15 years. Yes, they expanded a little bit, 
but they haven't tried to build new ones and they don't want to 
try to build new ones.
    Mr. Conyers. Why?
    Mr. Conner. Because it maximizes their profits.
    Mr. Conyers. Okay.
    Mr. Conner. Now, that may be a different Committee, but you 
have to look at that as unilateral action.
    Senator Specter had a bill in. We have to start to tell the 
antitrust authorities that in a market that is this 
concentrated, where market forces are this weak, unilateral 
actions can, in fact, harm the public and need to be 
investigated.
    Mr. Conyers. More things than you think are in this 
Committee.
    Mr. Conner. I know that Committees have that view of the 
world, sir.
    Mr. Conyers. Shale, nuclear, tax holiday, coal, drilling, 
drilling, drilling--what are we to do?
    Mr. Conner. Well, let me start with the one that is 
universally seen as a bad idea.
    The tax holiday is not a good idea. And the interesting 
thing is it is particularly not a good idea for two reasons.
    One is it turns out to be a tax cut for the wealthy. The 
top one-fifth of consumers in this country, 20 percent, with 
household incomes above $85,000, consume 32 percent of the 
gasoline. They get the bulk of the tax cut.
    The bottom 40 percent of the households in this country 
consume about 20 percent of the gasoline, so they get a smaller 
part.
    It is a very regressive way to go.
    Second of all, when you do that tax cut, as I described, 
the industry has market power. They will eat a large part of 
it. It gives them head room to increase their margins.
    Ironically, if you combine that with a windfall-profits 
tax, this is the one circumstance in which they can easily make 
the public pay for the windfall-profits tax because they will 
increase their profits. You will try and tax it away, and you 
will end up paying it at the pump.
    So that is a bad idea.
    The other issues of shale and those kinds of things, if you 
could solve that problem in the market structure, we wouldn't 
be talking about those high-cost alternatives.
    So what you have here is an industry structure that has 
constrained opportunities, and now you look at this very narrow 
set of very expensive back stop and say, boy, we got to build a 
back stop someplace. At $120 a barrel, let us do this. When the 
real solution is to fix the market structure.
    Mr. Conyers. Well, that is why we are here. Should I put 
these other items, those, Dr. Cooper, on hold? Drilling and 
nuclear and coal and shale?
    Mr. Cooper. Well, I don't believe that drilling in the U.S. 
will have an impact on the world price in part because the 
cartel can anticipate and see this takes 10 years. It certainly 
won't lower my gasoline bills in the near term.
    The cartel will see what the supply is and adjust to it.
    So I don't know that we get any advantage out of that.
    With respect to nuclear, Congress passed legislation that 
was supposed to expedite the permitting process and the nuclear 
industry can't come up with a standard design. They are driving 
the NRC crazy by constantly changing their own designs.
    So Congress tried, and now they are going to blame it on 
the regulator, but, in fact, the industry really can't figure 
out how to build those.
    Coal to liquids, if you solve the market structure problem, 
it goes away. It is not economic if the price of crude and 
gasoline were economically set, not politically set.
    Mr. Conyers. Well, that gets us out of the gate anyway.
    I would like to continue some of these examinations of the 
circumstance.
    And, Mr. Chabot, I would like to recognize you now.
    Mr. Chabot. Thank you very much, Mr. Chairman.
    Mr. Cooper, you had indicated you would not be in favor of 
drilling in ANWR. Do you include the Outer Continental Shelf in 
that or not?
    Mr. Cooper. Well, in my view, the domestic resource base is 
not sufficiently large to influence the world price of oil as 
long as you have this cartel in place, because that cartel can 
easily offset whatever you want to do.
    Mr. Chabot. So the answer is yes?
    I mean, you would keep both ANWR and the Outer Continental 
Shelf off limits at this point; is that correct?
    Mr. Cooper. I am telling you it wouldn't do the consumer 
any good. And I want you to do stuff that will help the 
consumer.
    Mr. Chabot. All right. Thank you.
    If I could ask the other three members of the panel your 
opinion on whether or not you believe that part of the solution 
to the problem that we, as a nation, find ourselves in with 
fuel costs continuing to rise, if you could tell me your belief 
relative to ANWR and the Outer Continental Shelf as to whether 
we ought to go there or not.
    I guess I will start with you, Mr. Pugliaresi.
    Mr. Pugliaresi. First, Mr. Cooper's comments are 
interesting.
    But the first question you have to ask yourself is: Why 
would Congress leave all this money on the table? I was curious 
about that.
    You look at the Norwegians. They are a very socially-
advanced country, very environmentally sensitive yet they lease 
and operate in some of the most harsh, environmentally-
sensitive offshore regions.
    Our assets, both ANWR--are worth billions of dollars, and 
they would be collected by the U.S. Government.
    Second, I am not sure I agree that--I agree that the scarce 
resource is crude oil. This is a scarce resource.
    I mean, the energy security problem is, to some extent, a 
concentration of those resources in parts of the world that can 
be very unstable.
    If you want to put some discipline in the cartel, we need 
to do two things. We need to expand output; really start 
drilling, as Newsweek recently said. And we need to have 
reductions in net demand.
    I refer everyone to the collapse in oil prices that 
occurred in the mid-1980's. This occurred largely because the 
high prices brought about so much conservation and so much 
increase in non-OPEC production that Saudi Arabia lowered its 
output to the point, in defending that price, to where it could 
barely produce enough associated gas to run its utilities.
    At that point, they said, we are not defending the price 
any more.
    So supply response from non-OPEC countries will have a 
positive response on OPEC. It may take time.
    The other issue is if we don't do it, we are not going to 
break expectations. And this market is driven a great deal by 
expectations.
    Mr. Chabot. So, yes, we should drill in ANWR and the Outer 
Continental Shelf?
    Mr. Pugliaresi. Absolutely.
    Mr. Chabot. Mr. Douglass?
    Mr. Douglass. Yes. Absolutely. Yes, we should drill ANWR.
    We should be in Colorado with shale oil. And, obviously, 
off both coasts because if we don't produce our, if you will, 
our speculators, our commodity traders and so on will be given 
the signal that this isn't ever going to happen.
    They can continue to pile on, and the price continues to 
escalate both by raw product costs and by the speculators 
investing in the future that says we aren't going to produce it 
ourselves; therefore, it is a good hedge against inflation.
    Mr. Chabot. Thank you.
    And Mr. Owen?
    Mr. Owen. I would concur. I have heard it all my life, you 
know, we need to reduce our dependency on foreign oil. And by 
producing more here, yes, I think that is a good idea.
    But I don't feel qualified. I mean, I do understand what 
the doctor was talking about regarding it being a global 
commodity now. And I think that the impact of drilling today 
would be less than it would have been eight or 10 years ago.
    Mr. Chabot. Right. And in my opening statement, that is one 
of the points that I was trying to make was the fact that this 
is something we should have done many years ago. We didn't.
    Congress was partially responsible for that. President 
Clinton vetoed drilling up there prior to that.
    So, yes, we should have done it back then, but if we did it 
now, it is my view, that--we talked about the impact that 
speculation has on the price in the markets.
    I think it would have almost an immediate impact on that 
because they would know that we are serious about this and we 
are actually doing something about it.
    Mr. Owen?
    Mr. Owen. I think that the speculative nature of treating 
fuel as a commodity by the hedge funds, people with a lot of 
money that aren't going to take delivery on the product and 
have no extension of doing that, is probably one of biggest 
parts of this whole problem.
    Mr. Chabot. Thank you.
    Dr. Cooper----
    Mr. Owen. One more important point.
    It is true that when you learn a lot about a new technology 
helps you get more. But what you really learn is you get the 
knowledge of the geology.
    And the Permian Basin and the San Joachin Basins are very 
interesting. Every forecast made on total recovery from those 
basins turned out to be wrong even as late at 1982. And they 
were wrong by an order of magnitude.
    So when we don't drill in new regions, we lose the oil. We 
also lose the knowledge. And that knowledge can have sustaining 
value for a long period of time.
    Mr. Chabot. Thank you.
    Dr. Cooper, our Chairman had asked me to ask you why would 
we want to leave money on the table, as Mr. Pugliaresi has 
indicated we shouldn't do.
    Mr. Cooper. Well, I am told, and I would have to look, we 
have a very low tax rate on oil compared to other producing 
nations in the world.
    Clearly, we spend lots of money on lots of things, and, you 
know, we don't tax everything.
    We have made a social choice about where we want to drill 
and how we want our environment to be managed.
    My view of drilling in those places is not about getting 
money. Someone recommended that we sell the national parks. Why 
don't we sell the national parks? We could get a lot of money 
for selling the national parks.
    The answer is we make social choices.
    The question here is not how much money we left on the 
table, but whether or not those decisions would have a 
significant impact on the price and the structure of the world 
oil industry.
    If we had started drilling ANWR 10 years ago, it would be 
starting on its decline now. It is not that big of a resource.
    OCS may be a little bit bigger, but, again, we just don't 
have the kind of resources here to significantly, in my 
opinion, effect the market.
    With respect to the speculative bubble, sending a signal 
about expectations--the two most important things we could do 
about sending a signal about expectations is, one--and fix this 
bubble--is close the Enron loophole.
    We regulate onions more than we do oil. And, frankly, oil 
is an awful lot more important.
    Second of all, we could raise the margin requirement so 
that people who are playing with this kind of physical 
commodity do not, in fact, have so much leverage.
    We need to chase a lot of that funny money out of this 
market. That is the way to, in the long term, address the 
speculative problem which has not afflicted us since we created 
the Enron loophole.
    Remember, the speculation in energy began right after we 
decided that we were not going to regulate these commodities, 
and it has grown worse and worse year after year.
    So that is the way to fix speculation.
    Mr. Chabot. Thank you, Mr. Chairman.
    I would just like the record to reflect that 75 percent of 
the panel indicated they thought we should drill in ANWR and 
the Outer Continental Shelf.
    Mr. Conyers. One of the 75 percent disclaimed any 
expertise.
    Mr. Chabot. But nonetheless, ventured an opinion and we 
appreciate that opinion and we agree with that opinion.
    Mr. Conyers. He is going to have to live with that, too.
    By the way, how are your relationships with the teamsters?
    Mr. Owen. Actually, we have very, very little to do with--
most of our companies, sir, are family-owned, privately-held, 
grass-roots type businesses.
    We have 2,200 member companies, and I think maybe one or 
two that even are union shops.
    Mr. Conyers. Uh-huh. Thank you.
    Chris Cannon?
    Mr. Cannon. Thank you, Mr. Chairman. I am hoping that our 
clock will run fast and the clock on the floor will run slow.
    I want to reiterate, first of all, Mr. Pugliaresi, your 
point was profound that not drilling means foregoing knowledge 
that is profoundly important for the future because there are a 
lot of things we don't know about the geology.
    And then, Dr. Cooper, as I understand it, I think there is 
only a minor difference between you and Mr. Pugliaresi, but my 
understanding of our decision is that if we drill in ANWR, then 
OPEC will lower the amount they produce and, therefore, we will 
get no net benefit out of ANWR or other marginal sources of 
production.
    Is that, essentially, your position?
    Mr. Cooper. My concern is that when you can see it coming, 
if it is not big, than you can adjust to it. If it were big and 
you would make someone cheat, that would be different.
    Mr. Cannon. Pardon me. Because of the limited time, I think 
we understand each other and I, largely, agree.
    Mr. Pugliaresi is only suggesting, in difference from your 
opinion, that over time that would have an effect. So that 
difference is marginal.
    So what I really want to focus on is what happens when you 
get a larger resource that is available. And I hope that is 
where we will agree that you might see a significant change.
    You referred to shale, for instance, as one of the high-
cost alternatives. And I think you are probably referring to 
CTL, coal to liquid, as one of those high-cost alternatives.
    As you view the world today, what are the input costs for 
coal to liquid, and what do you think coal is going to be 
costing us? I mean, in your calculations, what do you think 
that cost would be?
    Mr. Cooper. Well, my point is that at $40 a barrel, I don't 
think you will get a lot of coal to liquids.
    Mr. Cannon. In other words, if OPEC brings the price of oil 
down to $40 a barrel, you won't----
    Mr. Cooper. The economic, in my opinion--the oil company 
executives testified a few weeks ago it is $50 a barrel. And I 
assume that they are inflating it.
    So at $40 a barrel, I don't think you will get a lot of 
coal to liquid.
    Mr. Cannon. I think that is about the right price. Frankly, 
it might be a little less than that, and, especially, if we 
made coal available like the 77 billion tons in Utah, which is 
150 billion tons of oil which is now locked up.
    So that is coal, I think, that can be had, at an economic 
cost, for less than $20, probably about $15 a ton; meaning an 
input cost of seven and a half dollars per barrel; meaning that 
you are way under the $40 a barrel.
    So it is a matter of resource availability among other 
things.
    But on the other hand, are you aware that we have some 
serious activity in oil shale right now? Now, not on public 
lands. DLM is prohibited by the Democrats from developing 
shale.
    But we have a commercial test on school trust lands that 
has begun, and that should be done by about the middle of 
September. They are thinking that--they are saying their cost 
is $30 or less.
    I think that is inflated myself. I think the real costs are 
going to be in the ballpark of just under $20 a barrel.
    That is literally trillions of barrels of oil that we have 
locked up that is available at a cost--and there are five or 
six or seven companies out there that have particular developed 
technologies to get that oil out.
    Oil shale--what do we have? Maybe three to five trillions 
barrels available in shale. That changes the dynamic to OPEC; 
does it not?
    Mr. Cooper. Well, the development of those resources, the 
numbers I have seen, does not make them economic at the market 
clearing price of oil.
    Mr. Cannon. What is that market clearing price in your 
mind?
    Mr. Cooper. And the environmental cost has to be factored 
in.
    Mr. Cannon. Granted. Although, I think that the 
environmental costs are going to be much less than what most 
people are thinking.
    What do you think the clearing cost of oil is?
    Is that the $40 a barrel we talked about a moment ago?
    Mr. Cooper. $40 a barrel is--for today's prices, if there 
were no political constraints, if we had had good investment 
over the----
    Mr. Cannon. What I want to know is----
    Mr. Cooper [continuing]. It would be--the marginal cost of 
lifting a barrel of oil in Saudi Arabia is $10.
    Mr. Cannon. Right.
    Mr. Cooper. Or $15.
    Mr. Cannon. So what is the clearing cost in America that is 
low enough so that Saudi Arabia and the rest of OPEC does not 
drop its price below some point where we can't compete? Or it 
doesn't make sense to get oil in America?
    Mr. Cooper. Well, the oil companies say that their costs 
are $50 a barrel at the margin. I think the number is a lot 
lower than that if there were not a cartel which was 
manipulating and refusing to invest.
    The Saudis just said they are not going to expand more than 
11 percent.
    Mr. Cannon. You said $50. When you talk about $15 in Saudi 
Arabia, there is some point between $15 and $50 where OPEC 
can't constrain the market. Is that $30, do you think?
    Mr. Cooper. Well, OPEC constrains the market as long as 
they can control cheating, which is real easy at $120 a barrel.
    Mr. Cannon. Right.
    Mr. Cooper. You heard the description of what happened when 
they were backed down. We can't back them down----
    Mr. Cannon. If the Chair would indulge me----
    If we had $30 a barrel oil in virtually unlimited amounts 
in America, would that break the cartel?
    Mr. Cooper. That would certainly help, as would the 
Canadians. The Canadians are not producing much of their shale 
either.
    There is not a lot of shale all over the world being 
produced, and it may well be that people don't believe the $120 
price, but the economics suggest that where they can, they 
haven't produced it.
    Mr. Cannon. Well----
    Mr. Cooper. Where they can, they haven't produced it.
    Mr. Cannon. Technology has changed the world, and people 
are going to catch up with that.
    Mr. Chairman, I have a million more questions. I appreciate 
the hearing.
    The time has passed, and I hope some time is left on the 
clock on the floor.
    Thank you, and I yield back.
    Mr. Conyers. Ric Keller?
    Mr. Keller. Thank you, Mr. Chairman.
    My final question, I will just direct to my fellow 
Tennessean there, Mr. Owen.
    I believe you testified that your truckers buy, on average, 
about a hundred gallons of diesel fuel a day. Is that right?
    Mr. Owen. Yes, sir.
    Mr. Keller. According to the Department of Energy, diesel 
fuel, this week, is about $4.15 a gallon. Does that sound about 
right?
    Mr. Owen. I believe that is a national average. It is 
higher in California and lower in Georgia. But, yes, that is 
about right.
    Mr. Keller. Even as a national average, that means your 
truckers are paying about $4.15 end of day in diesel fuel 
costs. Is that right?
    Mr. Owen. That is correct.
    Mr. Keller. Okay.
    What is the number one thing you would like to see Congress 
do in the short term to provide relief to your truckers who are 
struck with the skyrocketing cost of $4.15 a day in fuel costs?
    Mr. Owen. I believe number two on my list there--in our 
part of the industry, our drivers sleep in their trucks. They 
sleep in the sleeper unit, and they are required to rest 10 
hours uninterrupted a day.
    Mr. Keller. Right.
    Mr. Owen. And in order to do that, they sleep in their 
sleeper units. And in order to secure the load, secure 
themselves, they have to lock themselves in the truck, 
basically, and take their rest.
    And you have to have air-conditioning in the summer time 
and heat in the winter time to do that. And so they idle their 
truck.
    And there is a thing called an APU, which is the auxiliary 
power unit that a lot of companies are already putting on 
trucks. They range in price from $6,000 to $10,000.
    But they cut that cost of idling by, you know, 65, 70 
percent.
    It is a big winner for everybody.
    Mr. Keller. Do you want a tax incentive for the APU?
    Mr. Owen. I would love to see a tax credit for APUs. Yes, 
sir.
    And I would like to also see some kind of standardization 
for idling laws.
    The EPA is working on that, but every law is different. It 
is different in California. It is different in New York. And we 
go everywhere.
    Mr. Keller. And, right now, there is no tax incentive to 
buy the APU?
    Mr. Owen. Not that I am aware.
    Mr. Keller. Okay.
    And the final question deals with the proposed gas tax 
increase. And I want to be fair to both sides here on this 
issue.
    But I want to get your opinion on what impact the gas-tax 
increase would have on truckers.
    A very well-respected Democrat, Mr. Dingell, Chairman of 
Energy and Commerce, has called for a $.50 gas-tax increase. 
Don Young, a senior respected, powerful Republican, called for 
a dollar tax increase on gas.
    These are senior respected, knowledgeable guys, far more 
powerful than me. The other side--and I will tell you my view.
    At a time when people are hurting in this country and 
paying higher costs for gasoline, mortgages, and food, I think 
it is flat-out wrong to take their taxes only to see Congress 
spend it on things like hippie museums and bridges to nowhere.
    What impact do you think an increase in the gas tax of $.50 
or a dollar would have on your truckers? And is that something 
you favor or oppose?
    Mr. Owen. Thank you for asking that question.
    We are taxed federally at the rate of 24.4 cents a gallon. 
This gentleman over here will average making about $0.08 or 
$0.09 a gallon before the exchange fees.
    So the government is making more off of fuel, by far, than 
anybody else. That doesn't include the State taxes nor the 
local taxes.
    I think we are an overtaxed industry. I think we are 
overregulated and overtaxed and unappreciated, quite frankly.
    So my first take is no, we can't. But everybody else in the 
industry but me and you think it is a good idea.
    And I think the reason being that the infrastructure is in 
such horrible shape and the bridges and the roads and the 
amounts of money that are needed to do that, and a lot of the 
States who are required to keep the interstates viable are 
turning to alternative way of financing.
    I don't want more fuel taxes. I would like less. But I 
don't want our States selling our interstate system off to a 
private enterprise either.
    Mr. Keller. So the summary of your position, you are 
against a gas tax increase, but you don't think it is 
necessarily a good idea to suspend the existing tax because we 
still have got to build roads and bridges. Is that a fair 
summary?
    Mr. Owen. I think so. And that would run contrary to the 
ATA and other organizations who have, in my opinion, copped out 
for higher fuel taxes.
    Mr. Keller. Okay. Thank you.
    And, Mr. Chairman, thank you very much for letting me ask 
those additional questions.
    Mr. Conyers. Well, I was very happy to get the responses, 
as you were.
    Thank you, gentlemen.
    We have invited, at our next hearing, the secretary general 
of the Organization of Petroleum Exporting Countries or his 
representative.
    We believe in the discussion being very important to what 
our attitudes are going to be in the near future toward each 
other. And for that reason, we are asking them to come and join 
us in this discussion so that we make sure that we have their 
perspective.
    Do you have any recommendations about this approach, Mr. 
Pugliaresi?
    Mr. Pugliaresi. Mr. Chairman, first, we do need a counter-
OPEC strategy. I agree.
    I just don't think using the legal side of the ledger is 
likely to yield any results that we are going to like. These 
are sovereign countries making decisions on how much to 
produce.
    Part of the problem is, in this particular market, when 
Venezuela misbehaves or if countries engage in resource 
nationalism in this type market, prices go up. And it tends to 
sort of mask their bad behavior.
    So I think Dr. Cooper is wrong about the supply response.
    If we have a concerted supply response on this side, OPEC 
behavior will change. It might not change right away, but it 
will change.
    Some of these OPEC countries are doing things that are 
actually making the problem a lot worse on the demand side, I 
believe.
    Almost the entire Middle East has highly-subsidized 
gasoline prices. I mean, we are talking Iran is charging $.07 a 
gallon. Parts of China and India still have subsidized a lot of 
subsidies in their fuel sectors.
    That would, clearly, be an area where they ought to be 
doing a lot more.
    Mr. Conyers. What about the discussion part of it? Is there 
any room for diplomacy at this stage of our relationships?
    Mr. Pugliaresi. I presume you are talking about some sort 
of consumer-producer dialogue.
    Mr. Conyers. Well, I haven't shaped the dialogue yet. That 
is what I am asking you.
    Mr. Pugliaresi. Some of this is very perplexing to me 
because I do not believe that, for example, these existing 
price structures are in the interests of some of the OPEC 
producers.
    Some of the OPEC producers with very large reserves are 
going to end up seeing too much demand with destruction over 
time. And, for whatever reason, they did not expand capacity 
fast enough to keep up with it.
    Others may benefit directly, those are smaller reserves.
    So, once again, I think we need to find out whatever trade 
negotiations we have, sort of explain to them, yes, you should 
probably be worried about demand destruction and the response 
from the West because it is likely to be cumulative and be 
substantial over time.
    Mr. Conyers. I was hoping to edge you toward more support 
for the diplomatic approach.
    Mr. Pugliaresi. You know, I understand you are sort of 
having the President ask them to produce more. I think we are 
in a kind of difficult position.
    I mean, I don't see a problem with that necessarily, but we 
are not willing to produce more. It is kind of a problem.
    I mean, we are sitting here with a very bad example of 
resource nationalism in a way, and we are so restrictive on our 
ability to produce more.
    It is going to be hard to argue you ought to produce more. 
I think it is in their interest to produce more.
    Mr. Conyers. Well, I didn't mean that particular point. But 
I mean to begin to have extended discussions.
    There are other issues.
    I see I am not very successful this afternoon. [Laughter.]
    But, look, that is what diplomacy itself is all about. You 
have to keep talking. So I will have to keep talking with you. 
[Laughter.]
    Thank you very much. This was a very important beginning of 
our re-examination of our responsibility in terms of the 
antitrust question which is where the Sherman Antitrust Laws 
first came from, wasn't it? From oil?
    And here we are back again looking at them.
    Thank you so much.
    [Whereupon, at 2:09 p.m., the Task Force was adjourned.]
                            A P P E N D I X

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               Material Submitted for the Hearing Record



                                 
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