WASHINGTON -- Several petroleum and convenience store industry executives, including Paul Reid, president of Reid Petroleum Corp., Lockport, N.Y., appeared on behalf of the National Association of Convenience Stores (NACS) and the Society of Independent Gasoline Marketers of America (SIGMA), and Red Cavaney, president and CEO of the American Petroleum Institute (API), gave testimony before the U.S. House Committee on Energy & Commerce last week at the Gasoline: Supply and Price Specifications hearing.
There are no short-term fixes to increase gasoline [image-nocss] supplies or dramatically reduce gasoline prices; therefore, we urge Congress and this committee to focus attention on options that will benefit consumers in the long-term, said Reid, who currently serves as SIGMA's first vice president and chairman of SIGMA's Legislative Committee.
Reid explained the overwhelming majority of retail motor fuel outlets are owned and operated by independent marketers, and that major oil companies own and operate fewer than 5% of U.S. retail locations. Independent marketers do not refine gasoline or diesel fuel"we are dependent on refiners and importers for the product we sell; therefore, we have long supported policies that expand supplies and promote a competitive market, he said.
Commenting that gasoline supplies"although tight"are adequately meeting consumer demand, Reid suggested that federal regulatory reforms are necessary to ensure that additional domestic refining capacity comes on line as quickly as possible.
With respect to high gasoline prices, and contrary to the assumptions of some public opinion leaders, Reid said that retailers do not reap the benefits of higher fuel costs when prices at the pump increase. Rising wholesale and retail gasoline prices generally do not translate into higher profit margins for gasoline retailers. In fact, the opposite is true, he said.
To curb current fuel costs, Reid suggested that Congress should enact a temporary suspension of the U.S. tariff of imported ethanol. Such a tariff suspension will attract additional ethanol supplies to those markets where it is most needed, such as the East Coast, the Gulf Coast and California, he said, adding, Such developments will put downward pressure on ethanol prices.
Reid also raised two industry concerns: improving Section 1541 of the Energy Policy Act of 2005 (EPAct) as it relates to boutique fuels and current legislative proposals that seek to mandate the use of the E-85 ethanol fuel blend. He said that while Section 1541 has slowed the Balkanization of the gasoline and diesel fuel markets, the industry is supporting additional relief that would amend the boutique fuels cap to gradually reduce the number of boutique fuels currently used in the United States.
He added, Second, we encourage Congress to address the proliferation of state alternative boutique fuel mandates, such as ethanol and biodiesel mandates. NACS and SIGMA are also urging Congress to consider amending the Environmental Protection Agency's fuel specification emergency supply waivers to include a hold harmless provision for states, he said.
In closing, Reid highlighted industry concerns about recent legislative proposals mandating the use of E85. Some independent marketers already sell E85, and many more may do so in the future if there is demand for the product and ethanol is priced at a level that makes E85 competitive with gasoline, he said, adding that Congress should rely on market-based mechanisms to encourage more widespread use of the ethanol-blended gasoline rather than a command and control mandate that would require all retailers to sell the fuel.
Click here to read the full text of Paul Reid's complete testimony before the House Energy & Commerce Committee.
Cavaney said the United States should avoid repeating the energy policy mistakes of the past and concentrate on a multi-pronged approach to meet the energy challenges of the future.
In his testimony, Cavaney said the solution to the current energy challenges is to increase and diversify energy supplies, including alternatives, expand energy infrastructure and reduce demand through energy conservation and improved efficiency.
We have sufficient domestic oil and gas resources remaining to be discovered in the U.S."enough oil to power more than 60 million cars and heat more than 25 million homes for 60 years, and enough natural gas to heat 60 million homes for 160 years", Cavaney said. Only government policies stand in the way of increasing access to these resources, facilitating refining capacity and pipeline expansions, and increasing energy security.
Cavaney said U.S. oil and natural gas companies understand the frustrations consumers have expressed about fuel price rises and the adverse impact higher prices have on individuals, businesses and, potentially, the nation's economy. He said API member companies are working very hard to meet demand while also meeting some of the world's most stringent environmental regulations. They are investing billions on expanding production and refining capacity, he said, noting that the oil and natural gas industry has reinvested $98 billion dollars since 2000 on emerging energy technologies, 73% of the total amount invested by the U.S. government and private-sector companies combined.
During the week ending April 21, refineries were operating above 90% of capacity, and for the month of March, utilization at the refineries that were back to normal operations after the hurricanes was 90.8%, which is higher than for March 2005. To address refining capacity concerns, API member companies have spent billions of dollars to recover from last year's hurricanes and boost production capacity, Cavaney said. An additional 1.3 million barrels of new refining capacity is expected to come on stream between now and 2011.
The industry has also undertaken major investment to meet the four-billion-gallon Renewable Fuels Standard for 2006, while also delivering new gasoline with 90% less sulfur and on-road diesel fuel with 97% less sulfur, said Cavaney.
"Oil and gas is a long lead-time business, and we are making the necessary reinvestments," Cavaney said. Since 1992, oil companies in the U.S. have reinvested more than $1 trillion, compared to their cumulative earnings over the same period of nearly $700 billion.
Click here to read the full text of Red Caveney's opening statement before the House Energy & Commerce Committee.
Click here to view Red Caveney's complete testimony before the House Energy & Commerce Committee.
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