will come to order i called a subcommittee hearing to order to examine the impact of increasing gas prices on small businesses gasoline and diesel fuel prices have been climbing at unprecedented rates and today will we will hear about how these rising costs are negatively impacting our nation's on your printer with small farms being the nation single largest employer we need to do everything we can to help them thrive just a couple weeks ago oil reach an all time of one hundred eleven dollars a barrel according to aaa the national average for a gallon of gasoline is now a record three dollars and thirty three cents in my own western pennsylvania district i have seen gas prices approach four dollars a gallon i hope today's hearing will give us a better understanding of how small firms are being impacted by these rising energy prices i'm sure we will hear from our panel of witnesses at the problem is widespread impacts both consumers and small businesses continued energy price hikes mean sacrifices in a local business is bottom line these costs can determine whether a construction firm is available to invest in a new storage facility and whether a family farmer can afford fertilizer for this year's crops the situation creates hardships in virtually every industry throughout the nation while this hits some sectors harder than others it affects businesses ranging from hotels and restaurants to the local grocery store asked to raise the price of bread that families depend on today we will hear from small businesses coping with rising energy costs we also have experts with us who will discuss the increasing demand limited supplies and market conditions associated with the price increases and what solutions are available to combat this growing problem unfortunately these trends deflate small business owners expectations for expansion in fact two thirds of entrepreneurs are anticipating lower profits this year when compared to previous years due in large part to increased energy costs also at issue are small businesses that use energy resources on a daily basis to meet their transportation needs take our nation's trucking companies the trucking industry is on pace to spend an unprecedented one hundred thirty five billion dollars on diesel costs alone this sum out is twenty two billion dollars more than what was reported just last year such rapidly rising costs pose a severe long term challenge to u s small businesses there are few options when it comes to confronting these costs as many companies are simply unable to reduce their energy consumption rising costs usually result in less available capital to expand small businesses which spells bad news for our economy as a whole to help ease the burden of increasing costs we must consider and enact a long term solutions there needs to be continued investment renewable energy and recognition that alternative sources of fuel are a vital part of addressing the problem we also need to continue providing business owners with the necessary resources to develop and purchase greater energy efficient technologies that is exactly why this committee last year shepherded the small energy efficient business act through congress now that actresses small businesses through investment in new renewable and green technologies but also expands traditional  our nation saw chipper nurse deserves every effort to provide them with the tools they need my hope is that today's hearing will be the first opportunity to discuss some of these challenges and offer solutions to assist our country small businesses in dealing with the current circumstances at this time i would welcome our new member to this committee my good friend and colleague mary fallin from oklahoma so i would yield to the ranking member fallon for her opening statement small businesses are the economic engine that drives our economy and job creation small businesses our families and provide goods and services to our community service innovation thirteen to fourteen times more patents per employee than large farms and small businesses participate in all major industries and represent ninety nine point seven percent of all employers and employ fifty percent of all private sector workers in addition thirty nine percent of the high tech workers scientists engineers computer workers all employed for the most part by small businesses rising gasoline and diesel fuel prices are impacting the economy from individual consumers who buy from small businesses to international conglomerates who do business with him small businesses are consistently ranked as one of the hardest hit sectors when it comes to rising fuel prices rising costs have profoundly impacted the day to day routine of running a business whether it is the cost of transportation and services the operation of machinery the mileage employ expense reports delayed receivables or even tighter access to capital and loans small businesses are feeling the pinch many large firms can pass on the increased cost to their consumers because small business concerns often operate on razor  margins and very competitive pricing passing on the fuel cost increase to their consumers could result in a loss of sales and in the long term even going out of business some small business well this nation was built on the backs of hard work we have benefited greatly from a rich history of american innovation and spirit we must do all that we can as a nation to support our small business owners and maintain an economic environment and rewards hard work and encourages sound investment and mr chairman i look forward to working with and again want to thank all of you for being here today and thank you for your green light for the first four minutes when the light turns yellow that means your and your last minute please sum up your remarks and then red light time is up so at this point i want to introduce our first witness mr chairman of the plumbing heating cooling contractors national association as chairman he leads the government relations committee study of federal legislation and the recommendations board of directors on positions on industry issues established small one will tell you it's not an easy task this is never been more true than today remaining profitable has become increasingly difficult with the rising fuel prices unfortunately the slowing economy has had a fairly negative impact on all aspects increased fuel prices recently listed members comment regarding them pack fuel prices on their operations and their response was overwhelming over ninety percent said their businesses will suffer this year because of increased gas prices business and personal expectations fifty percent of consumers and sixteen middle american states now say that they believe the coming year will be bad for business that is up from thirty seven percent and twenty terms of their current financial position  thirty nine percent of respondents said they believe their financial situation will be worse for the consumers believe the next five years will bring periods of depression thirty seven percent in october women you'll notice are considerably more pessimistic than the decline numbers document some of the problems already occurring business bankruptcies risen for the last quarter the same time business optimism consumer sentiment declining as a result of rising unemployment inflation is impacting consumer price operate thousands of independent merchants are down along with ticket sales of movie theater small businesses are also starting to place many minorities women's and immigrants which is where they quite often begin their career and already on economic challenges are recognize problems this includes market analysis business strategy development and analysis of the impact of government policy and regulatory changes on business and industry his research specializes in renewable energy experts and professionals across thirty disciplines in ten countries welcome mr urban sh yeah let me just say that the reason the microphone is important is for the transcription that's being done recently for the past twenty or so years i've been focusing on agriculture issues and biofuels renewable fuels issues and i want to talk a little bit about the empacher of not only wise in gasoline prices but also the potential for renewable biofuels to address this particular problem american consumers of small businesses are reeling under the financial pressure rapidly rising fuel prices as you pointed out earlier crude oil prices of top the one hundred dollars barrel level which when combined with constrained refinery capacity is pushed retail gasoline and on highway deals diesel prices to new record levels according to the energy information administration americans used about one hundred thirty eight billion gallons of gasoline last year and fifty five billion gallons of number two diesel fuel for highway use at average pump prices this amounted to about three hundred ninety seven billion dollars of spending on gasoline and nearly one hundred in fifty nine billion dollars on diesel fuel the national average retail price of gasoline for all grades reached three dollars twenty six cents a gallon in march two thousand and eight that's twenty eight percent above where it was just a year ago while retail level diesel prices were about fifty two percent above the ergo levels  march averaging three eighty eight a gallon and frankly there is no end in sight for rising prices yesterday the energy information administration revised its short term energy outlook and projected oil prices at one hundred one dollars a barrel for the remainder of two thousand and eight and increase their projection for next year to ninety two dollars and fifty cents a barrel for two thousand and nine so we're in this mess for some time gas prices are expected now to average nearly three dollars and sixty cents a gallon this summer with projections for some areas of the country to top four dollars a barrel of four dollars a gallon excuse me increase motor fuel prices affect consumers in a number of different ways first high pump prices force consumer goods and services and rising fuel prices have been a major contributor to recent increases in inflation the c p i for all items increase at a four point two percent rate on average over the last four months about twice were was a year ago over that same critics have blamed the recent increases in consumer food prices and rising grain prices which is due in part to increased demand for biofuels well grain and other agriculture prices have increased sharply over the past year their impact on consumer food prices is overshadowed by energy and energy prices energy plays a significant role in the production of role agricultural commodities transportation and processing and distribution of consumer finished food products i conducted an analysis last year  was sponsored by the renewable fuels association that concluded that an increase in fuel prices when we looked at energy price particularly has twice the empacher on consumer food prices measured by the c p i that's what we all pay will only go to the grocery store as the same percentage increase in corn prices that's just one raw material that goes into that basket of food and biodiesel biofuels have a significant impact on restraining the increase in motor fuel prices increase production and use of ethanol is helping to displace gasoline demand and reduce prices at the pump last year we produce six and a half billion gallons ethanol this year we're going to produce close to nine billion the new energy independence security act of two thousand and eight requires thirty six billion gallons by two thousand and twenty two that's thirty percent of nation's motor fuel supply that's going to ex supplies and and increase and work to to to lower prices at the pump we estimated in a very recent study that ethanol save the american consumer an estimated ten point three cents a gallon at the retail pump in two thousand and seven for total savings of about six point eight billion dollars considering was going on with regard to oil and gasoline prices now we expect similar savings in two thousand and eight and as we move forward and increasing the supply of  biofuels it's going to relieve pressure on consumer prices thank you very much thank you and this is the first time we've used these new to get work the kinks out here with the  venture but since then he has expanded the business to a full time operation with twelve employees nine vehicles and forty four trailers craft trucking works with both national and local businesses and operates primarily in the north states of pennsylvania new york ohio new jersey and maryland welcome mr kraf several years we were suffering from increases that have caused us to lose efficiencies any road or profits in the past year diesel prices have continued to increase while today averaging around four dollars to four dollars and fifty cents a gallon at first were simply borne by the trucking companies and became so high that operating without fuel surcharges or increasing prices was no longer an option and what continues to be amazing is the fact a diesel fuel is less refined and therefore cross less but is averaging approximately seventy cents more per gallon than  industries are the fact that the fuel was the highest expense it has driven them out of business request your help the graph trucking is not the next company face to follow this path what is the driver for these  prices is energy trading and wall street playing a huge part of the fuel price wall street is not driven to provide affordable energy supplies due to limited overs energy trading and the dormant position in oil futures by investment banks and hedge funds may be contributing factor of prices leading to high gasoline diesel oil prices the government standard rate for transportation rate per mile charge for similar types modes of transportation fuel charges fuel in fuel surcharge rates what we need there is some help  the government to come up with some standardized rates this would allow for small business owners to be competitive not allow large companies to dictate their rates which is my fear i hate to see any more government involved in business than it is today but if the government does not step in now what we're going to have is large companies only and they're going to be dictating transportation rates transportation is the first impacted by these rates then filter through the economy and touch which everyone else has testified to there is potential for increased costs to all of our business sectors country is at risk there must take immediate steps to revenge the economy from slipping further  into a negative state and we are currently facing pennsylvania ryan from has the highest tax on diesel in the nation the government is considering implementing a toll on interstate eighty as well as discussion on privatizing the pennsylvania turnpike selling the pennsylvania turnpike these actions would have a continued detrimental effect on the transportation industry in pittsburgh a ten percent drink tax was initiated to help address financial struggles of the mass transit port authority these are not steps needed to resolve the issues that we are facing this committee as well as the federal state governments must work together to implement both short and long term solutions to allow small business owners such as myself the ability to continue to operate allowing us to provide employment service to our customers know what i would like to see our federal government help us out our alternative auxiliary power units where these tractor trailers do not have to sit along the roads and idle twenty four hours whatever so the drivers may stay cold on a summer stay warm in the winter auxiliary power units i'd like to see grant a grant some type of grant from our federal government we would decrease the emissions in the fuel usage these are the kind of answers that i'm looking for from our federal government i'm not looking for  free handouts whatever looking for grants whatever so that we can reduce and help our own industry survive this is what we need to have happening and we need to limit the price of fuel increases on a weekly basis so that monday when we bid our freight rates out for the week tuesday to fuel prices up fourteen fifteen cents a gallon our government needs to step in and help us with the process rising throughout the week opportunity to go to chesapeake rehab in my district in plum and mr gilbert and i had the opportunity to talk there and it's a medical provider medical equipment provider and when we talked about gas prices it  struck me at how pervasive this problem is across our economy that it's really affecting every type of business that's out there and that really was the genesis of this hearing that's why we wanted to have the hearing to demonstrate for everybody that this was not just to the trucking industry and it's not something that you can just target as having hit one industry but it really is affecting everybody and that's why i'm so happy that mr gilbert is here to tell his story gary gilberto is president of chesapeake rehab equipment and is president elect of the national coalition for systems in rehab technology they work to promote the interests of rehab and assist of technology industries and sharing adequate consumer access to appropriate technology and services w creating a stable business environment for providers and manufacturers of rehabilitation and assisted technology chesapeake rehabilitation equipment is a small regional company which provides rehab technology products and services to disabled alarming i thank you very much for this opportunity and hopefully we can see some solutions in the near future thank you mr gilbert and thanks to the entire panel we will now open up for questions and i want to of small u s businesses do you have information on how energy prices impact small businesses compared to large businesses and if you could provide us with a comparison between the expenditures and percent of total revenues for example small then when we're actually on the project and expanding funds for that project then the project is already a loser you do the best you can you look out into the future and take the estimates that some of these folks have referred to and hope that you get it right and if you don't then you're already dealing with a loser  mr graef talked about the direct impact that gas prices have which is obvious for everyone to see but i appreciate you continuing to talk about the problem but i'm wondering about indirect gas prices because we think of a trucking company you think well the price of gas goes up and therefore you have to pay more for gas and that's going to hit your bottom line but you're getting hit in other ways on gas prices also and i was wondering if you could talk about the indirect ways that the increase in fuel prices are hurting your your worker's compensation to your health insurance every thing that can be hot you're looking at your cottage was spoken here before health insurance employees got to pay more for their health insurance it all goes back to the trickle down effect the domino effect we're cutting everything we can actually cut our industry to stay alive we need help in so many different ways it was talked about  spending the state tax the federal tax with a government i want to hear this they don't want to hear because of their highway project we're not going to have anybody traveling these highways if it continues on the way it is i mean we need help in a lot of ways and i'm asking for the government to help put a panel together do something our industry by the way we've got to have help thank you and i'm going to temporarily turn the chairmanship over to mr gonzales and i'm going to yield to the gentleman from oklahoma for five minutes of questioning i'll be back ethanol when we look at the causes a nation of ass and all compared to producing gasoline can you tell me if there is a cost difference between getting that product to market cost in producing those refined products is crude oil prices when you're looking at ethanol or looking at bio diesel again the feedstock whether it's corn or sugar in the case of other countries or soybean ethanol to blend with gasoline and helps keep that product competitive with gasoline the the real issue here is perhaps not so much the today's basic economics which would which clearly i believe are favoring and the use of biofuels but as we move forward into the future was as we increase our reliance and dependence on producing biofuels in the world that they play those prices are going to come down it's going to retain its competitiveness and  improve and improve the economic benefit to consumers across the board my question i guess because i've heard that like three to one for production cost of ethanol to gasoline and just just actually producing it and getting the marketplace is more expensive it's more expensive i don't think it's three to one i think the number is probably closer to one and a half to one today in terms of just flat out production and distribution costs  tax incentives that we have what is that because the tax incentives that are then as we ended when you when you take a look at the cost of producing distributing that is from  the refinery to the consumer when you blend ten percent ethanol with gasoline in two thousand and seven it provided a ten and ten point three percent benefit to consumers the price of ethanol bunda gasoline was ten point lower than it would have been without the use of ethanol and we expect that that that number is going to be about ten cents in two thousand and eight as well and when you move forward through time and we've looked at this through two thousand and seventeen  asking our staffs to get some information to us so we can ask a question that becomes quite relevant during your remarks and i do have one here that i'm going to read to you in a minute secondly i want to make the observation that many members of the committee are somewhat familiar with your situations and the reason for that is that chairwoman velasquez has these roundtable breakfast says and we have different small business representatives there so we're familiar with with the heating cooling and plumbing opportunities presented to small businesses in the expanding biofuels and alternative fuel fields mr graef we've heard from the truckers we've heard from the independents and i'm going to be asking you a question of why independents are treated differently let's way ahead of us all but it is important today and i've heard some long term solutions here dr orses touched on it mr urban charter i'm from texas you know annoying and gas guy and i've got my colleague to my left and i have oklahoma so you know where we're coming from many times but i think dr is is going to is correct it's a wide range in portfolio of fuel sources and not to promote one at the expense of another and we haven't been doing that and we can go on and on with that but the truth is when it comes to ethanol how many eighty five stations do we really have out there what we have today we don't have the infrastructure and these gentlemen here can't wait that there won't be in business by the time that we have that kind of infrastructure when we finally get the cost of producing ethanol whether reasonable price and so on so i guess what i really want to concentrate on is going to be  what can we do immediately and we have had a couple of suggestions here such as waiving our reducing the tax today on on diesel for instance because that's the fuel of choice for most commercial enterprises out there i don't know how realistic that is the state level federal level and so on i just don't see that actually happening and for you to be able to pass it along whether you're going to have surcharges built in your contracts that's another issue the question is can we help you somehow inexpensive out is there something further that this government can do to help you in our tax policies that might assist you in mediately improving on what you have available to you today and i don't know what we do about fuel efficient vehicles to be honest video are real sure there are any out there for commercial use i don't see hybrids out there when it comes to lighter heavy duty trucks i mean none of that is happening so it's the here and now williford and is there anything that the federal government can do immediately and that's absent you know weigh in on all the taxes and all that is duration of that time out and the fact that something along the way you reimpose it what are we waiting for to happen in that period of time that will promote some sort of solution for them in the interim i don't have that answer and  hate to disappoint you with that but i think there has to be some sort of immediate relief and i'm not sure that you're going to get it was some sort of price controls i don't know if anyone's going to go and suspend the gas tax i think that needs to be viewed actually realistically mr urban character i know that you're in the barrios and so on but the individuals here really can't wait for the development of the technology and the distribution system that would be required to aid them in in a lower cost of fuel  are all kinds of problems associated with that again any time you take one action there are countervailing actions on the other side that create additional problems that have to be analyzed but that short term as you say businesses can't wait for the intermediate term the solution to this is a medium to long term solution of one addressing issue of demand which is being done through the marketplace clearly and technology is improving that but expanding supply and that's where the issue of biofuels comes into play because it's ten percent ethanol or diesel you are increasing expanding the supply of motor fuel available  ethanol around the country would expand that a veil ability of motor fuel and help relieve pressure on prices that's going to take obviously some time to happen that's an intermediate approach to that so it's really a  have a problem in those countries even if we had more crude oil we don't have the capacity to turn it into finished products so we also have to move aggressively at the federal state level my time's running out and i want to make sure i get  opportunity and i'm just talking about the here and now what are we going to do immediately i know you're saying to spend the tax and that's about it mr graef real quick i just want to tell you that what you asked the question why is diesel costing so much more and we in san antonio we valero and sorrow in their refiners and i just want to tell you basically what they're always telling us price of crude is still a large factor number to process and respond in the diesel is now more expensive than processing gasoline this is due to the fact that diesel has to meet new low sulfur spec specifications and it is more expensive process to meet those specifications diesel has been more expensive generally since two thousand and four higher federal excise tax on diesel six cents per gallon but tru and for one thing one comment was made that speculation has driven some of the more recent rises in the price of gasoline and oil well one of the things that affect speculation is when the marketplace laws are being passed that put more and more of our oil and gas flame its limits and i i'm on the natural resources committee it's been breaking my heart for the last fifteen months bills that we keep passing and that committee i wouldn't necessarily call and tree huggers i know they love the world they love the country but they have the idea that the higher the price of gasoline then the less people will use and therefore the better it will be for the country and world and i appreciate that i just don't appreciate passing bills that cause it to go that put more and more of our oil and gas off limits and then blaming people on my side of the aisle for the rising costs in oil and gas but what you see the market doing it seems is when they see as passing these laws putting more off limits then they end  up speculation is the price is going to go up and that drives the speculation up some of hard to make that we may have twenty percent of the price of oil maybe more that is directly due to speculation driving that price tax reduced or eliminated the problem with that is then you start developing road and infrastructure problems and we get too far behind and we're already falling behind you guys now that over the road problems  filed a bill in the last congress called the state of the reform act that simply said and i just want to help our states that are being hypocrites by saying if you do not allow or gas exploration or production in your state or in your contiguous coastal areas then you're prohibited from importing any oil and gas from states that do you know that way that allow them to not be so hypocritical and one of my friends from florida said that  helped mike the point in florida that if they're going to keep sucking energy out other states they ought to really allow it to be produced i didn't realize i got on the resources committee how much natural gas we have vast amounts off the west coast east coast gulf that's not allowed to be tapped the great lakes the good news is canada is apparently davenant and they're willing to sell us our gas back to cuba is allowing drilling off its coast to russia china and i think venezuela is going to get in there and and i bet they're going to be willing to sell us our own gas back but it's ridiculous to put all that off limits i have concerns when i hear government needs to step in and dictate rights because that makes takes me back to the late seventy's when we had the long gas lines but i love your comment about diesel just eliminate the extra process that we had a refinery in my town growing up and they said they still always be cheaper because it's lower on the cracking power doesn't cost as much to produce and therefore to be cheaper and we keep having all these requirements so i appreciate your comments there that not be something we could do quickly and if the market sees us taking those actions it might cut down at a lower the speculation there as well but this hearing were so limited in what we can do and say i'm just challenge you to think about these things it won't hurt our highways won't won't hurt the won't create gas lines it doesn't have to and at this hearing you can submit things in writing that we can consider put together and build because when i was really getting this committee takes small business propositions very seriously and you will often see it being made into a law that filed and getting support behind it and let me just get comments trucking companies compete with larger counterparts i don't know if that's been talked about today because you go into that a little more detail how that small trucking firms perhaps what the opinion of the larger trucking firms are and then just along with their fuel surcharge what happens to the rest of the industry is out to brokers brokers nationally little closet broom closet people or whatever what they have and what they would like to see some kind of guidance from the government is what they're doing is snagging part of the fuel surcharge and not pass it on to the trucking company their property to bring greater ours are a lot less and that's why i said i don't want to see any more government involved but i think the government needs to step in here and find out where all these fuel surcharges are going because everybody's fuel surcharge should be the same it is the same or the carriers getting it  large carriers yes your small broker your small trucking companies are not getting it that's the difference between the fuel surcharges and that's what's happening can you argue from the other side in the larger trucking firms are with that with the larger trucking firms be on the same page with escalating cost of scale last year they negotiated a fuel goes up to three dollars and ten cents here's the max this is what will lock you in for a year the large companies are sitting there saying we're maxed out our fuel but we've got to drill we've got to and that does mean off the coast and it probably eventually does mean in places like alaska it's good that we're using but we're going to have to use our own as well the industry has been pretty good in terms of drilling and  things of that sort there are exceptions but generally speaking we've been good at it you mentioned earlier we have built a refinery in this country in a long time that is a solution but it is a long term solution and finally forgive me i our leaders of those companies and the people coming out of our colleges universities can find alternatives there are solutions good ones get out a long time ago like it or not nuclear works and they've done a very very well and we're afraid of some of these things but we haven't been investing the money to make america energy independent richard nixon talked about it first time i remember hearing about it that's nearly thirty years ago we've got to invest the time and money and oil companies one hundred bucks are now spending the money to find alternatives because they know as well this is a dead end street at some point and we need alternative is to add to that i think it's very very important that we recognize that we are a truly global economy and that what happens other countries and china and india particularly as examples of rapidly growing and developing literally moving from internal combustion engines are putting tremendous pressure on resources globally that means that we market's going to determine where we with regard to those and then government can play a role in that but the best thing government can do frankly get out of the way business is work most effectively in making those decisions but again simultaneously in order to really address this problem effectively thank you and i know i said that was the last question but i understand mr ellsworth has another question he's recognized for five minutes represent employees a little bit and their ability one of the problems we've had with fuel prices employees starting to look elsewhere to go to work because they want to be closer to their employment now because they have to commute maybe the stimulus package will be able to put some of that money to mentioned if the government could step out of the way just a little bit reduce the regulatory burden of the record keeping requirements on small business tort reform former life i was an attorney so i know of what i speak you know that would be a big help and i know that there has been pending in congress before an effort for the government to withhold three percent contractors for all of their contracts thank you again for telling your story helps us work through the issue and look at what the next steps might be this is the first of what we hope will be an ongoing dialogue with each of you and please feel free to contact any of us individually or through the committee with any concerns or recommendations that you might have moving forward at this time i ask unanimous consent that members will have five days to submit statements and supporting materials for the record without objection so ordered the hearing is now