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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 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

LINDA T. SA ́ NCHEZ, California 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

BETTY SUTTON, Ohio 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

KEITH ELLISON, Minnesota 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

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 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

BETTY SUTTON, Ohio 

ANTHONY D. WEINER, New York 

DEBBIE WASSERMAN SCHULTZ, Florida 

STEVE CHABOT, Ohio 

RIC KELLER, Florida 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

BOB GOODLATTE, Virginia 

CHRIS CANNON, Utah 

DARRELL ISSA, California 

TOM FEENEY, Florida 

LAMAR SMITH, Texas, Ex Officio 

PERRY APELBAUM, Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

(III) 

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 

(1) 

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. 

2 

Then Katrina, prices skyrocketing on the Gulf Coast and across 

the nation due to temporary supply disruptions. Not a single pricegouging 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 longterm 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 

3 

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. 

4 

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. 

5 

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 

6 

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. 

7 

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. 

8 

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. 

9 

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. 

10 

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. 

11 

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. 

12 

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. 

13 

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:] 

14 

PREPARED STATEMENT OF DAVID OWEN


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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. 

22 

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:] 

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PREPARED STATEMENT OF BILL DOUGLASS


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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. 

37 

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:] 

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PREPARED STATEMENT OF LUCIAN PUGLIARESI


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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 rentseeking 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. 

52 

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:] 

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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 

74 

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 clearcut 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. 

75 

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 twofoot 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. 

76 

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? 

77 

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 onefifth 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. 

78 

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 deVerDate Aug 31 2005 16:06 Aug 19, 2008 Jkt 000000 PO 00000 Frm 00082 Fmt 6633 Sfmt 6601 H:\WORK\ATRUST3\050708\42215.000 HJUD1 PsN: 42215
79 

fending 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. 

80 

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. 

81 

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 

82 

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—— 

83 

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 truck- ers 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. 

84 

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 En- ergy 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. 

85 

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 counterOPEC 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. 

86 

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.] 

(87) 

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