[Congressional Record Volume 142, Number 59 (Thursday, May 2, 1996)]
[Senate]
[Page S4579]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        RISE IN GASOLINE PRICES

  Mr. WELLSTONE. Mr. President, I come to the floor to read a letter 
that I have today as the Senator from Minnesota sent out to a number of 
oil companies in our country.
  I ask unanimous consent to have this letter printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:
                                                      May 2, 1996.
       Much has been said recently about the rise in the price of 
     gasoline, attributing this rise to a number of factors. As 
     you may know, the Senate Energy and Natural Resources 
     Committee, of which I am a member, will be holding a hearing 
     to look into this matter on May 9, 1996.
       My understanding of the industry position on this question 
     is that several unrelated factors have led to the recent 
     increase of gasoline prices: high demand for heating oil due 
     to the long winter, seasonal refinery maintenance practices, 
     refinery shutdowns, and the failure of Iraqi oil to enter the 
     market as expected. Although all of these are credible 
     explanations, there is an argument that runs counter to this 
     position which I would like you to address.
       The crux of my concern relates to the industry practice of 
     ``just-in-time'' inventory management. It appears that the 
     inventories of crude oil and petroleum products are now being 
     held by the industry at significantly lower levels than have 
     historically been the practice. In fact, a particularly 
     significant drop in inventories seems to have occurred during 
     the summer of 1995, not during the winter as one might 
     expect. As you know, when inventory levels are so low as to 
     impact the availability of gasoline, consumers and the 
     economy can be exposed to the risk of price spikes by 
     otherwise unremarkable increases in demand. My fear is that 
     while oil companies may use this management technique to save 
     money, the result is that the consumer may end up paying the 
     price.
       I would hope that the oil industry would not use this 
     management technique to ring up huge profits on the backs of 
     the American consumer.
       In helping me prepare for any upcoming action in the Senate 
     Energy and Natural Resources Committee, please explain why 
     industry inventories of crude oil and petroleum products have 
     been maintained recently so far below the usual level, and 
     what effect ``just-in-time'' inventory management may have 
     had in contributing to or aggravating the current price 
     increase. In crafting your response, please explain why 
     inventories were reportedly decreased so drastically in June 
     and July of 1995. In addition, I would appreciate knowing 
     whether the matter of low inventories or any other issues 
     relating to the recent increase in the consumer price of 
     gasoline have been the subject of discussions between 
     representatives of your company and other officials in the 
     industry. Finally, please provide any further information you 
     feel may be useful to me and to the Committee in our review 
     of this matter.
       Thank you for your prompt reply.
           Sincerely,
                                                Paul D. Wellstone,
                                                     U.S. Senator.

  Mr. WELLSTONE. Mr. President, I will quote from sections of the 
letter:

       Much has been said recently about the rise in the price of 
     gasoline, attributing this rise to a number of factors. As 
     you may know, the Senate Energy and Natural Resources 
     Committee, of which I am a member, will hold a hearing to 
     look into this matter on May 9, 1996.

  That is next week.

       My understanding of the industry position on this question 
     is that several unrelated factors have led to the increase of 
     gasoline prices: high demand for heating oil due to the long 
     winter, seasonal refinery maintenance practices, refinery 
     shutdowns, and the failure of Iraqi oil to enter the market 
     as expected. Although all of these are credible explanations, 
     there is an argument that runs counter to this position which 
     I would like you to address.

  This letter is in the spirit of all of us having the information we 
need to make responsible decisions.
  Mr. President, what I am talking about is what ways this low 
inventory may have affected this spike in the prices that consumers are 
experiencing. Since there has been a lot of information that has been 
coming around, or at least a lot of speeches given, it seems to me one 
of the things we want to do as Senators, whether we are Republicans or 
Democrats, is get to the bottom of this and try to really understand 
the why of this spike, the why of this rather dramatic increase in 
gasoline prices.
  These low inventories, really record low inventories, are something 
that I think we ought to look at. Undoubtedly, this saves money for the 
companies. But on the other hand, what happens if demand goes up at all 
with the inventory, the supplies, kept down by the oil companies? Then 
your supply-and-demand curve is such that it could lead to the very 
spike in prices that we are now experiencing in the country.
  I have sent this letter to the oil companies. I am hoping that they 
will be forthcoming with the requested information. On May 9, in the 
Energy and Natural Resources Committee, I will put the questions to the 
oil companies. I hope they will be accountable. Those of us in the U.S. 
Senate, Democrats and Republicans alike, will have this information. I 
think it is a very important issue. I think it is extremely important 
that we understand what is now happening to consumers that we 
represent. I yield the floor.
  Mr. BRYAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nevada.

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