[Congressional Record (Bound Edition), Volume 151 (2005), Part 17]
[Extensions of Remarks]
[Pages 23250-23251]
[From the U.S. Government Publishing Office, www.gpo.gov]




   PETROLEUM REFINERIES: WILL RECORD PROFITS SPUR INVESTMENT IN NEW 
                           DOMESTIC CAPACITY?

                                 ______
                                 

                        HON. DENNIS J. KUCINICH

                                of ohio

                    in the house of representatives

                      Wednesday, October 19, 2005

  Mr. KUCINICH. Mr. Speaker, I would like to submit the following 
statement for the Record.

       ``Will Record Profits spur investment in new domestic 
     capacity?'' That is the title of this hearing. In a 
     competitive market, the question would not be worth asking in 
     Congress. There would be no doubt about the answer.
       But the petroleum refining industry is not a competitive 
     market. Ten companies control 80 percent of the refining 
     capacity, and just 5 companies control half of the Nation's 
     capacity all by themselves.
       Since 1981, the concentration of refining capacity supply 
     in fewer and fewer hands has increased. Mergers and 
     acquisitions have fueled industry concentration. The result 
     is astonishing:
       Operable capacity stopped rising in 1981, as it had for the 
     previous 30 years.
       Instead, it went into decline, before it plateauing. For 
     the past 20 years, capacity has been held relatively 
     constant.
       Economics 101 teaches that rising demand meets constant 
     supply at higher and higher prices. We can be confident that 
     the industry is familiar with that economics lesson, and they 
     have profited handsomely as a result.
       The question we should address is why should the U.S. 
     Government continue to permit an anti-competitive environment 
     that enables a few companies to rein in supply and drive up 
     record profits?
       I am sure that we will hear from the industry a lot about 
     onerous environmental regulations. They want the public to 
     believe that they would have built more refineries if only 
     they'd been allowed to do it.
       Not only is that not true, but it is a smokescreen. The 
     industry hasn't tried but once in 25 years to build a new 
     refinery. Yet, between 1994 and 2004, they closed 30 
     refineries. On balance, they have been closing refineries, 
     not trying to open new ones. Closing refineries tightens 
     supply, driving up prices when demand is rising. That is 
     exactly what has happened, and they've made record profits.
       If there were no environmental regulations, the industry 
     would have to invent them or something equivalent in order to 
     disguise a corporate strategy to hold down supply. That is 
     the real issue and Americans are paying mightily for it. 
     Since 2001, according to Public Citizen, the largest 5 oil 
     companies operating in the United States enjoyed after-tax 
     profits of $254 billion.
       There are things Congress can do. One would be to pass H.R. 
     2070, the Gas Price Spike Act of 2005. This bill, which I 
     introduced with 39 cosponsors, would implement a windfall 
     profit tax on gasoline and diesel. Such a tax would be 
     imposed on key oil industry profits above a reasonable rate 
     of return. If oil companies are collecting excessive profits 
     on the backs of consumers, they should be subject to a stiff 
     tax on those excessive profits. The threat of heavy taxation 
     will send a clear signal to oil companies that price gouging, 
     and shorting supply, will not pay.

[[Page 23251]]

       In addition, H.R. 2070 will direct the revenue from the 
     windfall profits tax to Americans who buy ultra efficient 
     cars made in America. These individuals would receive a $6000 
     tax credit. The credit would be phased in, and cars that 
     achieved 65 miles per gallon would receive a full tax credit. 
     Today average cars get less than 30 miles per gallon. This 
     tax credit will stimulate the market in ultra efficient 
     vehicles.
       Lastly, the bill makes funding available to regional 
     transit authorities to offset significantly reduced mass 
     transit fares during times of gas price spikes. Providing 
     low-cost mass transit will slow demand for gas and ease the 
     price of gasoline, benefiting all Americans.

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