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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

                       THE IMPACT OF FUEL PRICES

                           ON SMALL BUSINESS

=======================================================================

                             FIELD HEARING

                               before the

                   SUBCOMMITTEE ON REGULATORY REFORM
                        AND PAPERWORK REDUCTION

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                      VALHALLA, NY, APRIL 18, 2000

                               __________

                           Serial No. 106-52

                               __________

         Printed for the use of the Committee on Small Business

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
67-557                     WASHINGTON : 2000

                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director
                                 ------                                

       SUBCOMMITTEE ON REGULATORY REFORM AND PAPERWORK REDUCTION

                   SUE W. KELLY, New York, Chairwoman
LARRY COMBEST, Texas                 BILL PASCRELL, New Jersey
DAVID M. McINTOSH, Indiana           ROBERT A. BRADY, Pennsylvania
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
JOHN THUNE, South Dakota
               Meredith Matty, Professional Staff Member

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 18, 2000...................................     1

                               WITNESSES

Gee, Robert, Assistant Secretary for Fossil Energy, U.S. 
  Department of Energy...........................................     3
Martinez, Debra, Chairwoman and Executive Director, New York 
  State Consumer Protection Board................................     6
Flynn, William, Vice President, New York State Energy Research 
  and Development Authority......................................     9
Morse, Stanley, Chapter President, American Society of Travel 
  Agents.........................................................    14
Fanelli, Joe, Owner, Joe's Body Shop.............................    16

 
              THE IMPACT OF FUEL PRICES ON SMALL BUSINESS

                              ----------                              

                        TUESDAY, APRIL 18, 2000

              House of Representatives,    
      Subcommittee on Regulatory Reform and
                               Paperwork Reduction,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., at 
the Mount Pleasant Town Hall, Valhalla, New York, Hon. Sue W. 
Kelly (Chairwoman of the Subcommittee) presiding.
    Chairwoman Kelly. Good morning. Welcome to the first of two 
field hearings that are to be held in our area today to discuss 
the impact of fuel prices on small businesses. I'd really like 
to thank Congressman John Sweeney for joining me here this 
morning. I look forward to handing the gavel over to him later 
this afternoon at our second hearing in Castleton.
    A near tripling in the price of crude oil from March 1999 
to the first months of 2000, coupled with other developments 
initially brought about sharp increases in the price of home 
heating oil and diesel fuel. As you all know, the northeast has 
been hit the hardest by these rising energy costs. We've made 
it through the winter, but we must ensure that we avoid another 
home heating oil crisis. Nevertheless, the northeast and the 
nation has turned its attention to the new crisis, the price of 
fuel. Moreover, the possibility of a sharp increase in 
electricity rates is becoming more and more of a reality. I 
brought with me this morning and there is available for anybody 
who wants a copy, this article from the Wall Street Journal. It 
says, ``Northeast Faces Electricity Price Surge.''
    I think it's interesting, because it discusses how costly 
fuel oil, costly oil-fired plants could drive up electricity 
rates this summer.
    New York is at a major disadvantage because it doesn't have 
any refineries within its state. We do not have major gas 
pipelines coming in here. We rely on refineries in other states 
and overseas to meet our needs. This fact coupled with market 
forces and the President's inability to compel OPEC to reach a 
production agreement until two weeks ago, and his continued 
reluctance to release oil from the Strategic Oil Petroleum 
Reserve has forced us to examine this problem further.
    Caught up in all of these issues are the consumers and 
small business owners, people who could not have planned for 
the oil price hike. Particularly with the possibility of rising 
electricity rates on top of high oil prices, the Administration 
has to keep its guard up.
    The price of oil may have decreased and we may hope that 
the crisis is over. Regardless, this nation's energy policy 
remains in crisis. The Energy Information Administration 
indicated on April 6 that it believed gasoline prices had 
peaked, and that the national average price during the summer 
might not exceed $1.51 a gallon, as the price that was observed 
in mid-March. Unfortunately, the EIA added that the northeast 
might see some spikes to higher levels. To small business 
owners producing, distributing and consuming oil, this crisis 
has really just begun. For this reason, Congress continues to 
debate possible short-term and long-term courses of action.
    That's why we're here today, to take the debate away from 
the inside the beltway politics, home to New York where the 
price of oil has had a terrible impact on our daily lives. I'm 
really happy to welcome the assistant secretary of fossil fuels 
of the Department of Energy, Mr. Robert W. Gee is here with us 
today to discuss the Administration's most recent actions 
regarding oil production and the views of the Department of 
Energy on where we go from here. I trust he will listen 
carefully to the testimony of our other witnesses and take 
their suggestions and their stories back to the President. 
Please.
    We will also hear testimony today from Deborah Martinez, 
Chair woman of the New York State Consumer Protection Board. 
She will testify about how the State is responding to consumer 
concerns, and we will hear from Bill Flynn, Vice President of 
the New York State Energy Research and Development Authority 
who will provide us with a historical perspective of the issue 
and offer some real long term solutions. In addition, we will 
hear today from witnesses who represent small business owners 
from the trucking industry, the travel and tourism industry and 
we'll also hear from a gas station owner. Welcome, he happens 
to be walking up, welcome, Joe, your seat is right up here in 
front with your name on it.
    We will hear from Joe regarding the impact on fuel prices 
on the profitability of his business. We thank all of you for 
being here today, and I look forward to your testimony.
    Now I'd like to recognize my colleague, neighbor and good 
friend, Congressman Joe Sweeney and good friend for whatever 
opening remarks he'd like to make.
    Mr. Sweeney. Thank you, and let me thank you for this 
opportunity. It was Ms. Kelly's idea to hold field hearings and 
I should point out as a colleague of mine on the Small Business 
Committee, I can't think of a more important use of our time 
during this recess. I want to thank the panelists as well for 
being here. It's going to be an interesting and I think 
exciting bit of testimony that we're going to lend to this 
issue.
    We've come through a winter of incredible economic distress 
and hardship. My District, which is slightly north of here, and 
runs almost up to the Canadian border, felt the impact very 
significantly of the fuel oil crisis, and I have to say that 
the Administration's response has been somewhat lacking. 
Nevertheless, Mr. Gee, thank you for joining us. I'm looking 
forward to your testimony and hope you'll hear some of the 
words of our constituents in the next couple of hours.
    U.S. Production of oil has dropped by nearly 20 percent 
since our last oil crisis, and in the past seven years we have 
seen what I think is a disjointed response from the 
Administration and from those of us with some responsibility, 
so I'm hoping these hearings are going to lend some opportunity 
for us to really begin to develop some real concise planning.
    During the 25 years since the last oil crisis our reliance 
on foreign oil has increased from 37 percent to nearly 57 
percent today. This is in turn resulted in what we went through 
this past winter, but has also resulted in some real hardships 
in my District and I've heard that from my constituents, so I 
think this hearing is indeed important.
    Last week the House reauthorized the Strategic Petroleum 
Reserve Bill, with a bipartisan vote of 416 to eight. I think 
we are focused in Congress on many of the issues and that being 
one of the most important steps towards hopefully developing a 
more concise and across the board policy.
    With that, I'll seek a motion or I'll ask for unanimous 
consent to submit my full statement to the record, Ms. Kelly, 
and I'm looking forward to the testimony of our experts, 
because I think the real story lies with their testimony, and I 
yield my time.
    Chairwoman Kelly. So moved. Thank you very much, John.
    Let's begin the hearing today by listening to the testimony 
of Mr. Robert W. Gee. Mr. Gee.

  STATEMENT OF ROBERT W. GEE, ASSISTANT SECRETARY FOR FOSSIL 
               ENERGY, U.S. DEPARTMENT OF ENERGY

    Mr. Gee. Thank you, Madam Chairman and Congressman Sweeney. 
I submitted a formal statement for the record and with the 
Committee's permission I'll take a few seconds to summarize its 
key points. The Department, primarily through its Energy 
Information Administration, monitors patterns of fuel supply 
and demand in the U.S. Economy. Our data, however do not always 
reflect the individual impacts on specific market sectors. We 
know clearly, however, that small businesses, especially those 
whose profit margins are influenced significantly by the cost 
of fuel, have experienced difficult times in recent weeks and 
months.
    My testimony today will focus on several actions the 
Administration is taking to address this situation.
    Our goal has not been to try to set an artificial price for 
petroleum, rather, our goal is to lessen volatility in the 
market, volatility that can make business decisions especially 
difficult, particularly for small, energy intensive businesses.
    The recent announcement by OPEC and others that more oil 
will be flowing into global markets is good for consumers. It 
will build inventories and as we have already seen in the last 
couple of weeks, will reduce prices. But the recent price spike 
reminds us that individuals can be affected by actions and 
decisions that occur outside our borders. The recent volatility 
in all markets is yet in another of a series of cycles, this 
being more extreme in its roller coaster effects than others in 
our past. It's a cycle that actually began in 1997 when OPEC 
substantially increased production at just about the time when 
economic downturn in Asia began to sharply reduce global oil 
demand. This led to unprecedented low oil prices, the lowest in 
50 years and much of our domestic industry suffered as a 
result.
    The most recent price spike came as a result of a series of 
production cuts, as both OPEC and non-OPEC producing countries 
attempted to compensate for the plunge in prices. 
Unfortunately, these cuts came at the same time the Asian 
economy began to rebound. The supply and demand imbalance 
quickly swung the other way and suppliers began drawing on 
petroleum stocks. Inventories were driven down to extremely low 
levels and the price of crude oil and refined products shot up. 
It is important to note that the dramatic swings in prices have 
largely resulted from an imbalance of less than 3 percent in 
oil supply and demand.
    Today the world consumes 75 million barrels of crude oil 
per day. A 2 million barrel supply overhang led to the price 
plunge in 1998. A 2 million barrel supply shortfall contributed 
to the price hike of this year. This is the nature of the 
global oil market that affects every American. Today, 52 
percent of the oil consumed in the United States originates 
from outside of our borders. That is not only due to declining 
domestic production, but from a continuing rise in U.S. Demand. 
Our petroleum appetite has increased more than 20 percent since 
1985.
    There are some short-term global actions that can help. We 
have diversified our international sources of oil supply. Last 
year we imported oil from 40 different countries. We have 
engaging in global diplomacy and I believe Secretary Richardson 
deserves an amount of credit for the moves he's made in recent 
weeks. But in the longer run we must continue to take action 
that strengthen our own domestic security and to protect those 
Americans who have been harmed most by price hike fluctuations. 
That is what the Department of Energy has been doing in the 
last couple of months.
    To ease the financial hardship caused by the winter runup 
in price for distillate fuels in the Northeast, the 
Administration released nearly $300 million from the low income 
Home Energy Assistance Program. In the pending supplemental 
appropriations bill he has asked Congress for another $600 
million for this program, plus additional funding for 
weatherizing the homes of low income families.
    The Administration took action to insure the availability 
of SBA loans for heating oil distributors who needed improved 
cash flow in order to meet contractual obligations and make 
deliveries.
    In all, I've cited fifteen separate actions on pages 3 and 
4 of my formal statement that the Administration took following 
this winter's runup in fuel prices.
    Within the last month the President proposed additional 
measure. In his March 18 radio address to the nation he called 
on Congress to support the establishment of a regional reserve 
in the northeast. This would be a 2 million barrel emergency 
supply of heating oil that could be released when supply 
shortages threaten economic harm to consumers. We are currently 
working on plans for this reserve and we are prepared to work 
with Members to pass legislation that would establish clear 
authorities for its creation and use.
    The President also called on Congress to extend the Energy 
Policy and Conservation Act, the legislation that provides 
organic authority for our strategic petroleum reserves. Despite 
the recent visibility and concern expressed over our nation's 
oil situation and our energy security, the legislative 
authorities for our most important energy emergency response 
tool have been allowed to lapse. They expired on March 31. We 
were encouraged last week when the House passed an extension of 
the act through fiscal year 2003 and included provisions for 
the heating oil reserve. The legislation has now been returned 
to the Senate which previously passed a similar extension. It 
is critical that Congress act soon to extend this legislation 
to make certain the President has the opportunity to use all 
available tools to respond to the needs of the United States 
economy.
    There are also opportunities to reduce our economy's 
appetite for petroleum and supply a greater proportion of our 
oil from domestic sources. Again in his radio address the 
President announced several tax incentives to support domestic 
oil production as well as reiterating his support for tax 
credits that would encourage greater use of renewable fuels and 
improve energy efficiency.
    For the longer term we are strong believers in technology 
both to make our economy more efficient and to develop 
strategies to utilize domestic resources. One of our key energy 
efficiency initiatives is to develop a prototype full size 
automobile by 2004 that will get 80 miles per gallon. By the 
same year we also want to improve light truck fuel efficiencies 
by 35 percent while at the same time insuring that these 
vehicles meet new air quality regulations. These efforts will 
not only benefit millions of automobile owners, but also the 
hundreds of thousands of businesses that rely on delivery 
trucks and freight haulers to move their products to market.
    Finally, let me make a final point that often gets 
overlooked in a discussion about small businesses. We correctly 
focus most of our attention on the small companies and family 
owned businesses that consume petroleum. However, the majority 
of today's oil producing companiesin our country are small 
businesses. Today's petroleum industry is not the industry of big oil 
that existed in the 1950's, '60s and '70s. For the most part, the large 
oil companies have turned their attention to more lucrative prospects 
overseas. I'll certainly be happy to share more information with you on 
that.
    Today 85 percent of the new oil and gas wells drilled in 
the United States are drilled by the smaller independent 
companies. Independents account for nearly half of the crude 
oil produced in the lower 48 states. They are responsible for 
two-thirds of the nation's natural gas supplies, nearly 80 
percent of the more than 8,000 companies that now make up the 
U.S. Oil industry have less than 20 employees.
    The extreme price volatility we have witnessed is good for 
neither the oil consumer nor the oil producer. Consequently, 
Madam Chairwoman, we believe a truly comprehensive national 
energy strategy must address both ends of the fuel spectrum; 
the producer in the field and the consumer in the home or 
business. There are remarkable opportunities at both ends of 
the spectrum. If we can sustain a partnership between 
Government and industry in developing new energy consuming 
technologies and new energy producing technologies, we can look 
forward to a day when the roller coaster rise of prices comes 
to a stop.
    Our goal is a future in which the United States is 
producing the full potential of its domestic resource and 
consuming those resources in the most efficient manner 
possible. The more we drive towards that goal the greater the 
likelihood that the cost of a barrel of oil in the future will 
be dictated by markets not by cartels.
    This concludes my opening statement, Madam Chairwoman, and 
I'll be pleased to answer any questions you and Congressman 
Sweeney may have. Thank you very much.
    Chairwoman Kelly. Thank you very much, Mr. Gee.
    Next we go to Ms. Martinez and Ms. Martinez we are glad to 
have you here. The New York State Consumer Protection Board I'm 
sure has some interesting things to say about this.

STATEMENT OF DEBRA MARTINEZ, CHAIRWOMAN AND EXECUTIVE DIRECTOR, 
            NEW YORK STATE CONSUMER PROTECTION BOARD

    Ms. Martinez. Good morning Congresswoman Kelly and 
Congressman Sweeney. My name is Debra Martinez and I am 
chairwoman and executive director of the New York State 
Consumer Protection Board. Thank you for the opportunity to 
appear this morning to testify on this important subject.
    The consumers and small businesses of New York State have 
just endured a winter heating season that saw the price of home 
heating oil propane, diesel fuel and gasoline at very high 
levels. Many of our senior citizens, persons on fixed incomes 
and low income families experienced difficulties making 
payments for their home heating oil deliveries. To protect 
consumers and small businesses and promote the health and 
safety of all New Yorkers during this difficult period, 
Governor George E. Pataki took quick and decisive steps, one, 
to secure the release of 73.2 million in funding for the Home 
Energy Assistance Program, HEAP, to assist New York State's low 
income families; two, established a Governor's consumer action 
line as an outlet for consumers to contact state officials and 
report potentially unwarranted price hikes and suspected fuel 
price gouging, and three, direct the appropriate state 
agencies, authorities and personnel to insure that home owners 
receive the critical supplies of heating oil that they needed.
    In conjunction with Governor Pataki's efforts, the State 
Consumer Protection Board responded to numerous complaints from 
consumers and small businesses during the period regarding the 
pricing, delivery, availability and billing for home heating 
oil, propane, kerosene and diesel fuel. To date, a majority of 
these complaints have been investigated, successfully mediated 
and resolved.
    We can use the lessons learned from the recent and sudden 
increase in heating oil prices and apply them to the current 
escalation in national gasoline prices. However, while price 
increases in home heating oil, gasoline and diesel fuel can be 
explained in part by the decision of the Organization of 
Petroleum Exporting Countries, OPEC, member nations to limit 
oil production, the problems faced by consumers as a result of 
these circumstances are not necessarily the same. The principle 
difference is that unlike the home heating oil, there are no 
federal or state government assistance programs to help 
individuals and small businesses who are unable to afford the 
sharp and sudden increases in gasoline and diesel prices. 
Consumers and businesses cannot lock in a gasoline price for 
the driving season the way they can for home heating fuels, and 
while not all households are heated with oil, almost all motor 
vehicles must utilize gasoline or diesel fuel in order to 
operate.
    Nearly everyone in New York State will be affected by high 
fuel prices in one way or another. The pricing and supply of 
gasoline and diesel fuel impacts different regions of the 
country in different ways, and unfortunately, there is little 
that individual states can do to favorably impact the supply of 
gasoline. New York like other states must rely on the federal 
government to take the necessary steps to insure that ample 
fuel supplies are available and that prices are stable and 
fair.
    Fortunately, it appears that recent negotiations between 
the Federal Government and OPEC ministers will result in an 
increase in the production of crude oil. With this development, 
consumers will see and in some cases are already seeing, a 
stabilization of gasoline and diesel prices at the pumps.
    The Energy Information Agency, EIA, recently presented 
further justification for increased consumer confidence 
regarding the stabilization of fuel prices. The EIA revises 
fuel cost estimates for its upcoming summer driving season. 
Fuel prices are now expected to peak during April and May and 
then gradually decline to an average price of $1.46 per gallon 
during the summer months. This is promising news for consumers, 
considering EIA's fuel cost projections of nearly $2 per gallon 
by July.
    Even with some limited relief on the horizon, consumers and 
businesses will still pay about 25 percent more at the pumps 
this year than they did last summer. The typical two car family 
in the United States logs an average of approximately 12,000 
total miles during the six month period between April and 
September each year. This year the same family can expect to 
pay an additional $170 for fuel during this period.
    The Energy Information Agency has also warned that any 
disruptions related to unexpected regional fuel refinery 
problems would have a dramatic impact on the effected region. 
Unanticipated refinery problems could be compounded during the 
summer of 2000 due to record low fuel reserve levels across the 
northeast. Preliminary figures from the Consumer Protection 
Board's monthly gasoline pricing survey for the month of April 
indicate that the price of gasoline in some regions of New York 
State has increased by an average of 15 cents a gallon above 
February prices, resulting in an average statewide increase of 
about 50 cents per gallon above last year's prices during the 
same period.
    According to national figures released by EIA earlier this 
month, New York State's figures are consistent with increases 
in other places across the country. The recent increase in fuel 
prices has had a definite impact on consumers and businesses 
across New York State. The sudden nature of increases has added 
significant cost to the daily operations of many businesses. 
These increases have been particularly difficult for the 
airline, trucking, including garbage and solid waste haulers 
and delivery service industry who in many cases have been 
forced to add a fuel surcharge to improve cash flow and 
stabilize operational course. We are hopeful that as the price 
of fuel decreases, the needs for these fuel surcharges will 
also decrease.
    It is encouraging that price relief is on the horizon for 
consumers and businesses alike in New York State. In fact, in 
many regions of our state and across the northeast, fuel prices 
have begun to stabilize. At the direction of Governor Pataki, 
the New York State Consumer Protection Board and all other 
appropriate New York State agencies will continue to monitor 
fuel costs, help to prevent price gouging and work to identify 
creative solutions to minimize the impact of fuel cost 
increases on New York's consumers and businesses.
    To this end the Consumer Protection Board supports other 
state consumer boards and the American Automobile Association 
in offering the following common sense consumer tips to help 
minimize fuel consumption during the upcoming summer driving 
season.
    Accelerate at a steady pace and avoid sudden throttle 
starts. Drive and maintain moderate and safe speeds, always 
adhering to posted speed limits. Avoid excessive or prolonged 
vehicle idling. Make sure your vehicle is properly tuned. Check 
the tire pressure at least once each month to insure proper 
inflation. Make sure the vehicles wheels are properly aligned. 
Change the oil and all filters at recommended intervals. Plan 
all trips with efficiency and safety in mind. Refrain from 
pumping the accelerator or racing the engine when the vehicle 
is not in motion and avoid unnecessary braking and acceleration 
by anticipating the traffic ahead.
    While these tips may appear simple and obvious, if followed 
by all New York State drivers, they will help reduce the amount 
of fuel consumed and translate to significant cost savings for 
consumers and businesses. Furthermore, these tips will help 
insure the safety of all New Yorkers and those from outside our 
state that use New York State's highways and byways.
    In conclusion, I applaud Chairwoman Kelly and Congressman 
Sweeney for their leadership and concern over this important 
issue. By investigating the impact of fuel costs on New York 
State's consumers and small businesses, Congresswoman Kelly and 
Congressman Sweeney have demonstrated the leadership necessary 
to address this important issue. It is also very encouraging to 
have the participation and support of the assistant Secretary 
of Energy, Robert Gee, as this and other testimony is presented 
here today. As Chairwoman of the Consumer Protection Board, I 
will report the information from these proceedings back to 
Governor Pataki, and I stand ready to assist our Congressional 
delegation and other appropriate parties in working to resolve 
this situation for the benefit of New York consumers and 
businesses.
    On behalf of New York State consumers, I thank you for the 
opportunity to appear before you today.
    Chairwoman Kelly. Thank you very much, Ms. Martinez.
    Now we move on to Mr. Flynn, from the New York State Energy 
Research and Development Authority. We look forward to your 
testimony.

 STATEMENT OF WILLIAM M. FLYNN, VICE PRESIDENT, NEW YORK STATE 
           ENERGY RESEARCH AND DEVELOPMENT AUTHORITY

    Mr. Flynn. Good morning, Chairman Kelly and Congressman 
Sweeney. Thank you for the opportunity to testify here today on 
the petroleum supply and price problems. As all the data isn't 
in yet, I hope to frame some of the issues for you here today 
from a historical perspective and hopefully looking forward.
    New York State relies on heating oil more than any other 
state in the nation for meeting its heating needs. We use 20 
percent of the total United States distillate demand, and are 
the largest consumer of heating oil and kerosene in the nation. 
43 percent of New York State's households use oil for space 
heating, over 2.9 million households.
    In February retail heating prices soared to record levels 
from $1.24 on January 17, to record breaking $2.02 a gallon 
February 27, with New York City metropolitan area customers 
paying $2.25 a gallon. For the lower Hudson valley, the heating 
oil peaked at $2.14 a gallon during the first week of February. 
As of April 10, the statewide average price declined to $1.39 a 
gallon, but the retail price is still more than 50 percent 
above a year ago levels. In the lower Hudson Valley, the prices 
declined to $1.41 a gallon as compared to 83 cents a gallon 
last year at this time.
    The economic burden of spiralling oil prices is not 
confined to heating oil. New York motorists annually consume 
over 5.6 billion gallons of gasoline and nearly 1 billion 
gallons of diesel fuel. This higher priced oil is significantly 
increasing the cost of transporting people and goods of New 
York. There is no single definable factor that we can point to 
as the ultimate cause of the spike in heating oil and diesel 
fuel prices and the current runup in gasoline prices. There 
are, however, a number of market factors that contribute which 
do bear mentioning.
    One, economic growth and the strengthening economics of the 
Pacific rim contributes to the resurgence in demand for 
petroleum at the same time OPEC and non-OPEC countries reduce 
production.
    Two, the petroleum industry, like other industries, has 
adopted just in time resupply of inventories. As a result New 
York State's bulk storage capacity reduced 25 percent in the 
past five years. There's not a lot of heating oil in storage to 
ride out any disruption in the petroleum distribution chain. 
Over the same period, in-state gasoline storage capacity fell 
by 17 percent. During the best of times, there's only about 
four days of heating oil supply in New York harbor.
    Three, New York and New England do not have any refineries. 
We rely on refineries in New Jersey, Pennsylvania, the gulf 
coast and imports to meet our needs.
    Four, weather. When the extreme cold weather arrived in 
mid-January, we experienced a sharp increase in demand by all 
sectors, creating greater competition among buyers, including 
interruptible natural gas customers and electric generators.
    Five, we experienced problems caused by icing on the Hudson 
River and high seas and strong winds on Long Island Sound which 
delayed barge shipments to keep coastal and inland oil 
terminals exasperating the already tight supply situation. 
Terminal operators on Long Island and New York harbor told us 
this is the first time they experienced completely running out 
of product for an extended period of time.
    Assisting the resupply effort was the Coast Guard. The 
Federal Government must insure there's adequate funding in 
place for Coast Guard icebreakers. These icebreakers are 
essential in keeping New York's waterways clear for the 
movement of petroleum. Cost Guard icebreakershelped to move 105 
million gallons of petroleum products from New York State harbors to 
oil terminals on the Hudson River as far north as Troy and Congressman 
Sweeney's District. We estimate these products had a retail value of 
over $750 million.
    As for gasoline, nationwide refinery outputs at the start 
of April was about 8.4 million barrels a day, about 6 percent 
more than last year, although national inventories are 
currently 6 percent lower than year ago levels. The average 
retail price for a gallon of regular gasoline in New York 
escalated 18 cents a gallon in recent weeks from $1.43 a gallon 
at the end of January to $1.61 in late March exceeding the 
previous all time high of $1.51 a gallon at the end of the 
Persian gulf war. This situation definitely bears watching as 
we enter the summer driving season.
    I know we have somebody here from the trucking industry 
today, and truckers in New York and throughout the nation are 
also feeling the pinch of high diesel prices. Although diesel 
prices have dropped from the $2.30 to $2.70 range in February, 
the full effect of these higher transportation costs have yet 
to be felt in stores and by producers that rely on the trucking 
industry to deliver their products.
    Needless to say, Governor Pataki continues to be concerned 
about the economic consequences of this unprecedented rise in 
petroleum prices on New York citizens, particularly our 
elderly, working poor and low income customers. Governor Pataki 
moved quickly to insure no one was cut off from HEAP and 
directed the following initiatives:
    He established emergency provisions for shelter and heating 
by working with our State Emergency Management Office and the 
American Red Cross. NYSERDA was in constant contact with 
emergency medical coordinators, U.S. Coast Guard, oil 
distributors, terminal operators and oil operators;
    Directed the New York State Public Service Commission to 
work with public utilities to voluntarily keep their 
interruptible natural gas customers who could switch to oil or 
natural gas;.
    Directed the State Department of Taxation and Finance to 
issue temporary certificates to heating oil distributors and 
trucking companies to allow them to buy heating oil from other 
states.
    The New York State Department of Environmental Conservation 
granted a one week waiver to allow New York City municipal 
facilities to use slightly higher sulfur oil to meet their 
heating needs.
    Governor Pataki asked the Consumer Protection Board and 
NYSERDA to investigate causes of the current shortage and 
recommend measures to prevent a reoccurrence. In response to 
the Governor's directive, NYSERDA and the Consumer Protection 
Board under the direction of Chairman Martinez are surveying 
heating oil distributors, terminal operators, refiners, 
electric generators, natural gas utilities and interruptible 
customers to determine the causes and we expect to issue a 
report later this spring which at that time we'll make 
available to this Committee. Based on these initiatives, New 
York State's response showed that communication and 
coordination are effective strategies that do work. Besides the 
actions that Governor Pataki took here at home, he also worked 
for necessary federal action to safeguard New Yorkers.
    We estimate that the heating oil price increase will cost 
New York's economy about $650 million dollars more than last 
year with nearly $450 million of this increase felt by 
residential heating oil customers. Based on that, Governor 
Pataki asked for emergency HEAP funds. The Governor also raised 
the HEAP limits to help the elderly and working poor receive 
assistance in funds to pay their heating bills.
    Governor Pataki also asked for the release of oil from the 
Strategic Petroleum Reserve. While that never happened, last 
week the House passed legislation to establish a reasonable 
product reserve, which I know Congressman Sweeney was one of 
the leading proponents.
    There are a number of policy options that the New York 
State Government can pursue working with the marketplace to 
better meet our future energy needs.
    Once again, I wish to thank you, Congressman Kelly and 
Congressman Sweeney for the opportunity to testify today, and 
obviously I'll be more happy to answer any of your questions.
    Chairwoman Kelly. Thank you very much Mr. Flynn. We 
appreciate your testimony.
    Now we're going to move to, I just noticed a huge 18 
wheeler move around the circle here, so it's very appropriate, 
Mr. Spencer, we have you here to testify this morning on behalf 
of the trucking industry. Please proceed.

TESTIMONY OF TODD SPENCER, OWNER-OPERATOR, INDEPENDENT DRIVERS 
                          ASSOCIATION

    Mr. Spencer. Thank you and good morning, Madam Chairman, 
Congress Sweeney. I am delighted to be here, and I did note 
with interest the comment of my colleague from New York talking 
about most New Yorkers have not seen the cost for higher diesel 
fuel show up in the products that they buy, and that's simply 
because our people have been eating those costs, and eating 
that cost is quickly turning into a poison pill for many small 
business truckers.
    Simply put, the skyrocketing cost of the diesel fuel and 
the inability of small business truckers to pass on those costs 
to customers is causing financial ruin throughout the industry. 
Small business truckers who own six or fewer trucks make up 70 
percent of the industry. That's 70 percent here in New York, 
and nationwide. Right now, they are paying hundreds of dollars 
more per week for the diesel that is essential to them being 
able to operate their trucks and meet the needs of society and 
each one of us.
    Under present circumstances, it is difficult for most 
truckers to break even and many are operating at a loss. In 
recent weeks, many small business truckers have simply gone out 
of business, with thousands more approaching financial ruin. 
Unless something is done, those hundreds will turn into 
thousands and the entire country will face a real crisis. Many 
members have told us that when they lose their business, they 
are losing everything they have worked for.
    The effects of the problems of truckers have begun to show 
up in other areas of the economy. Truckers are missing their 
insurance payments and not making truck payments. Truckers are 
turning back their trucks to truck dealers in record numbers. 
With a glut in the used truck market, and there certainly is 
one now, truckers are only getting cents on the dollar for the 
equity they hoped they were building up in the equipment they 
have. This means that as they exit the industry, they exit the 
industry with a significant debt that they have to carry with 
them.
    This morning here with me is one of our members from the 
area, Mr. Brad Chadwick from Shrub Oak, who is one of those 
people that's out there meeting the needs of principally people 
in New York. Brad's been a dump truck operator for thirteen 
years, and I suppose he might say it's better now than it was, 
but during February, the price of diesel fuel for truckers in 
New York and in much of New England increased by a dollar a 
gallon, and it had been building up prior to that, and of 
course I noticed the dollar figures that were mentioned for 
heating oil obviously don't include myriad of taxes that 
truckers pay, so for many truckers, the price of a gallon of 
diesel fuelwas $2.50 a gallon, and that diesel fuel for a 
trucker is the largest single cost they will have every year, day in 
and day out, and it's essential to them being able to operate their 
business.
    And the difficulty our people have is in passing along 
those costs. Brad tells me that his experience in the customers 
that he has is that he's been able to increase his rates a 
little, and about half of those customers have agreed to pay 
it. The other half just simply said no, we'll just simply find 
somebody else.
    So another member that I hoped would be here today is Fred 
Ferber, who runs Smith Avenue Moving Company. Fred's been in 
the moving business for 43 years, right in New York. He reports 
to me that the highest diesel prices he paid were $2.15 a 
gallon, and he operates his business, and this is an old 
business, an old family business on a 1 to 3 percent profit 
margin, and with a 1 to 3 percent profit margin, he can't even 
get a loan to keep his business going, and he's looking right 
now at increased costs of about $15,000, just attributable to 
fuel, and the net result of that for him is that for smaller 
people, smaller moves, he just can't perform the service 
anymore. He just can't simply afford to.
    This morning, I talked to him early this morning, he's on 
his way up to Venetia, delivering some people's goods, and he 
told me that if he were here, he'd like to say he'd play the 
tape, ``The Little Man'' by Alan Jackson, that he said that for 
him----
    Mr. Sweeney. If I could interrupt you, I was going to start 
my questioning citing that song.
    Mr. Spencer. And for literally hundreds of thousands of 
small business truckers, they can relate to that song. Because 
it's tough, and it's a struggle, and as I mentioned, Brad's a 
relative newcomer. Fred's been 43 years in the business, he's 
never done anything different. He typifies what a family 
business is all about. His 82 year old mother answers the phone 
if you call Smith Avenue Moving. These people have hope, but 
now they need action. If we don't fix this problem soon, more 
truckers will continue to lose their businesses or will refuse 
to drive unprofitably and just stop trucking. When they do, we 
are going to begin to see greater disruptions and increased 
costs in our economy as goods do not get to market and just in 
time deliveries to manufacturers cease to be just in time.
    OIDA would like to recommend three proposals to address 
this problem. First, we believe Congress should create a 
mandatory fuel surcharge program to be imposed by motor 
carriers, brokers and freight forwarders that takes effect when 
there are sharp increases in fuel prices, and it's sufficient 
to compensate for those higher costs and is automatically 
passed through to the person who pays for the fuel. Both before 
and since deregulation of the trucking industry, fuel crises 
have had a devastating effect on small business truckers. 
During each oil crisis, a fuel surcharge was the remedy used to 
help the small business trucker, and in every instance, it did 
have to be mandated. This is a much needed short-term solution 
that would immediately help owner operators and small carriers 
recover their additional costs, but it will also be a long term 
solution that would respond to unpredictable fuel price 
increase without requiring additional legislative or regulatory 
action.
    Such legislation would give truckers the ability to pass 
along their increased costs to the people who benefit from 
their services, the public at large. In this way the burden of 
increased fuel costs will be spread thinly among a greater 
number of people, rather than heaped solely on small business 
truckers that quite simply can't afford it.
    Second, we would also ask Congress to invest, to launch a 
Government investigation into destructive and predatory rate 
making processes that have been raging through the trucking 
industry. If truckers are operating at a loss, there is the 
substantial risk that they will not have the necessary 
resources to properly maintain their vehicles. We do believe 
that safety is a factor.
    Third, it would be helpful to our members if there could be 
an emergency low interest SBA loan to help truckers who have 
come under financial hardship due to the fuel crisis. As I've 
said, independent truckers pay for the cost of fuel out of 
their own pockets. Desperate truckers trying to stay in 
business have had to go into debt or face foreclosure on their 
vehicles or even homes trying to stay in business during this 
difficult time. The introduction of a mandatory fuel surcharge 
alone would not make up for all these men and women have lost 
in the last few months. An SBA loan specific for truckers at a 
low interest rate and made quickly would help.
    In the longer term, on our rate investigation, if drivers 
were properly compensated for their costs, this fuel prices 
would be a mere bump in the road. A fuel surcharge is clearly a 
viable solution for today's and future fuel crises. SBA loans 
would be an excellent complement to a fuel surcharge. And I 
need to add too that our organization, OIDA was formed in the 
1970's as a result of the very first Arab oil embargo, which 
literally changed America, we thought forever. I can tell you, 
it rocked the trucking industry, and it stopped it, and for all 
of these years, then, in the '70s, the only way to make an 
impact that truckers have would be to stop, to create 
disruptions, to make a scene as a cry for help. The only 
leverage they had was to do that.
    Our organization was formed from that situation, from that 
melting pot, so to speak, and with the message to truckers that 
if we worked within the system, the system will respond. Our 
lawmakers care, and we believe me, it's hard to maintain that 
and it's hard to sell that when it seems like the smallest 
things take forever, and that the system in so many instances 
really doesn't respond.
    I certainly beg the members of the Congress and I thank 
this Committee for having this hearing, to focus attention on 
these issues, because they do need to be focused on. Truckers 
are essential. Those that you don't know, I mentioned Fred 
Ferber earlier. I don't know, I'm sure there may be some people 
in the room that know Ed Arace, who is the economic director 
for Empire State. Fred has moved Ed three times. He's also 
moved Congressman Maurice Henche three times. Owner operators 
provide professional services every one of us needs in every 
area of our economy. Thank you.
    Chairwoman Kelly. Thank you very much, Mr. Spencer. As you 
mentioned that question of whether or not we could do some 
special SBA loans, I just turned to our special counsel, Mr. 
Harry Katrichis, who is here this morning. He is counsel for 
the Small Business Committee. So we will, I think this is an 
interesting situation and I think we can explore that further. 
Don't you think so, Mr. Sweeney?
    Mr. Sweeney. I do.
    Chairwoman Kelly. We'll move now to Mr. Morse. Mr. Morse, 
we're delighted to have you here and we're delighted to hear 
testimony from, I assume you're here representing ASTA.
    Mr. Morse. That's correct.
    Chairwoman Kelly. Please proceed.

STATEMENT OF STANLEY MORSE, CHAPTER PRESIDENT, AMERICAN SOCIETY 
                        OF TRAVEL AGENTS

    Mr. Morse. Congresswoman Kelly, Congressman Sweeney, thank 
you very much for inviting me here. This is a wonderful 
democracy that we can be here to have a sharing of ideas.
    Thank you for the opportunity to address the subject of 
fuel prices as they concern the travel agent community of the 
Hudson Valley, New York. As the elected president of the Hudson 
Valley chapter of the American Society of Travel Agents, ASTA, 
my organization of over 100 agencies and membership exceeding 
250 has been impacted in two distinct and significant ways 
during the winter and spring of year 2000.
    The way we are most affected involves the airlines' 
continuing failure to include fuel and other surcharges in air 
fare displays. It is these air fare displays which are used to 
research, book and ultimately ticket an airline reservation for 
a client traveling anywhere by air. If fuel charges were listed 
openly and honestly, there are three places they should appear. 
One, in the air fair displays filed with the airline tariff 
publishing Corporation, ATPCO; they should appear in the 
airline computer reservation systems used by travel agencies 
and in the airline owned or managed web sites which are 
available to the open public.
    The airline practice of excluding fuel surcharges is 
deceptive mainly to the consumer. May I digress to say here 
that my presentation focuses on the consumer, not the travel 
agents. We'll take care of ourselves.
    When a client requests an airline ticket quote, the travel 
agent uses the computer reservation system to research the 
quote. Since fuel surcharges are not posted in the system, the 
quotes we provide the client are often understated. The 
surcharge can be anywhere up to $20 per ticket. Fuel surcharges 
are not consistent by amount, geographical location, that is, 
city payers as known by travel agents, and the airlines, and 
not all airlines have apparently imposed the surcharge.
    When the client is quoted an air fare, it's the travel 
agent's view that the fare quoted should be the actual price 
charged at ticketing. When the agent has to make a followup 
call to the client, however, often a toll call, to tell them 
about the new ticket cost, client frustration and mistrust of 
the travel agent set in. After all, shouldn't a professional 
travel adviser know and be expected to be accurate in quoting 
an air fare? And all the explanations in the world often do not 
satisfy the frustrated client.
    The travel agent in this example plays the unwitting and 
unnecessary messenger of bad news. We don't like this role, 
although we're forced to play it daily.
    Since the airlines have not posted surcharges openly and 
honestly, it is anyone's guess whether and how much they apply. 
What's most troubling in this practice is that it lures 
customers by listing fares which are actually lower than those 
really available for purchase. Also, by airlines not listing 
their surcharges, those with self imposed surcharges are listed 
on a par with airlines which don't charge such surcharges or 
fees. Its deception by any stretch of the imagination.
    But the second and perhaps more galling aspect of fuel 
surcharges is that they are commissionable to travel agents. 
Since a travel agent benefits, however small in nature, from a 
cut of the fuel surcharge, we might be expected to shut up, 
take the money and run. Now, in fact, the average benefit to 
the travel agent measures in pennies on a ticket, given the 
algorithm of ticket costing. To the contrary, though, I found 
most agents in my organization to be upset with the practice. 
It's not what we learned at our mother's knee. After all, a 
fuel surcharge should be meant to cover unacceptable costs of 
airline fuel. It should not be used as a ruse for making more 
money, but this is not how the system works.
    Rather, fuel surcharges are apparently another method of 
lining the pockets of the airlines. While fuel costs are higher 
this year than last, and while surcharges will probably go to 
offset fuel cost increases, most agents are highly suspicious 
of the amount airlines really need to cover increased 
surcharges. If the airlines are willing to kick back a portion 
of the surcharge in the form of travel agent commission, it 
doesn't take a college education to conclude there's something 
also in it to the airlines. And given the highest levels of 
airline profits in history, the current fuel surcharges are 
suspect at the least.
    The six major U.S. Carriers; American, Continental, Delta, 
Northwest, United and U.S. Airways control over 80 percent of 
airline tickets issued in the United States. As such, the big 
six are an oligopoly headed swiftly for a monopoly and it is 
the big six which have lead the fuel surcharges.
    The flying public is to a large measure unaware of what's 
happening. In the short run, fuel surcharges are expected to be 
present through the summer of year 2000. In the long run, and 
assuming fuel surcharges are really necessary, travel agents 
can only hope the airlines will remove the surcharges when no 
longer applicable. We express this hope with skepticism.
    In closing, self-imposed fuel surcharges are the latest in 
a growing list of actions used by the airlines to relentlessly 
pursue profitability to the significant detriment of the 
American consumer. End of prepared remarks. I can only add to 
that, in the travel trade news education, one of our 
publications, it indicates in the month of March as reported by 
AAA, the cost of leisure air fares are up 7 percent.
    Thank you very much for a chance to testify.
    Chairwoman Kelly. Thank you very much Mr. Morse. Would you 
like to have us insert the travel piece into the record, that 
newsletter into the record?
    Mr. Morse. Certainly.
    Chairwoman Kelly. Thank you very much. So moved.
    Finally we have Mr. Joe Fanelli, the owner of Joe's Body 
Shop. Mr. Fanelli, thank you.

        STATEMENT OF JOE FANELLI, OWNER, JOE'S BODY SHOP

    Mr. Fanelli. Hi, Miss Kelly, Congressman Sweeney. I own a 
gas station, and when gas went up, it would usually go up one, 
two cents a gallon, but the prices from each gas load were 
going up 10 to 12 cents a gallon, and there's no way that 
people in service stations would raise their prices immediately 
because of being scared they're going to lose gas volume, which 
means, you know, you lose profit, and you have a lot of people 
get mad at you coming in and yelling at us as gas station 
owners, blaming us that gas is going up.
    I think people drive their cars less, because, which hurts 
our business, because they don't have as much maintenance on 
the cars, and I think the mom and pop store gas stations which 
are smaller volume gas stations, which I have, I don't have ten 
pumps, I have two pumps, and we can't afford to hold the price 
down too long, because we have to pay people. I have a full 
service station, and really the profit margin is very small to 
begin with, it's only 10 to 12 cents, if that, if we can do 
that going outside, and I don't think too many people would 
want to work for that kind of profit.
    I think the big major oil companies, they tend to go up 
slower than the little guy, because they're the ones that own 
the oil, and they can afford to keep the prices down. They 
control the rack prices which fuel distributors get gas from. 
Fuel distributors are the middlemen that try to move gas for 
bigger companies, and I think the government should release oil 
in the wintertime for heating oil. A lot of these things are 
nice that they're releasing money, but it's kind of a little 
too late. It's almost getting warm out and a lot of people 
suffer already.
    Gas problems, you know, the demand was, when the demand is 
high, the gas prices go up.
    We as repair shops, we have to take waste oil for free. 
When gas went way down last year, they wouldn't take our waste 
oil for free. We had to pay for it. And by law, we have to take 
waste oil, Gene Perro's office gave us a letter that we were 
going to get a $10,000 fine if we don't take the oil from the 
public. We certainly don't want people to flush it down the 
toilet, but we don't want to pay to get rid of other people's 
oil. You know, I must have had to empty two or three times 
already. I just pay for it. This is money that's coming out of 
my pocket.
    On the credit cards, gas was going up to, we were paying 
over a $1.60 a gallon and people paying with credit card, so we 
lose 3 percent of the total sale. So at $1.60 at our cost, 
we're losing almost 5 cents a gallon to begin with before we 
make any kind of profit at all.
    The sales tax, they were only charging 7 cents a gallon 
prepaid sales tax. At the end of this quarter, a lot of gas 
stations got rude awakenings when they had to pay thousands of 
dollars back to the state because it was only 7 percent on the 
dollar.
    The commercial tax on heating oil with garage doors always 
going up and down, were paying over $2 a gallon, and the gas 
stations were usually, you know, were poorly insulated and the 
doors, you use a lot of heating oil because the doors are 
always going up and down. And the gas stations are all being 
forced to sell candy bars and milk and everything else, because 
there's not any kind of profit in gas.
    You know, all's we want is to have a steady price, if they 
can have at least oil that's sold at a price that stays steady, 
and I think it's all mental in the public's eyes, because they 
see the price going up and down and I think they get aggravated 
more than anything else. And I hear a lot of people with their 
big Suburbans, they're going to buy smaller cars. So that means 
different kind of cars, and big G M and stuff are going to have 
a problem selling these cars and that's going to impact their 
selling of bigger vehicles, because you know, we had to buy an 
emission machine, inspection machine that costs us a lot of 
money, maybe a couple of years ago. It's not that far down the 
road and people are just starting to rebound a little bit from 
this, and now this winter we got hit with the higher fuel 
prices and gas prices.
    I just hope that they can have a steady price at some 
point. Thank you.
    Chairwoman Kelly. Thank you very much, Mr. Fanelli, we 
really appreciate your testimony. I think it's important that 
we hear from somebody who is actually pumping the gas at the 
gas pump and having to face the public. And now I'd like to 
begin some questioning.
    Mr. Gee, I noticed in hearing your written testimony, some 
allusions to Secretary Richardson's recent, and I'm putting 
those in quotes, success in working with foreign oil ministers 
to increase production. What I really find interesting about 
this is that your agency head, who just months ago admitted 
that the Administration was caught napping on the issue, is now 
heralding success in addressing the resultant problem. I'd like 
to know how you respond to that.
    Mr. Gee. Thank you very much, Madam Chairwoman for the 
question. I know a lot of people had questions about what the 
Department has been doing, what Secretary Richardson has been 
doing over the course of last year. As you recall, we began the 
year last year with oil prices actually down at ten dollars a 
barrel. A lot of our attention was focused on economic 
conditions and where the oil was being produced domestically to 
try to maintain our productive capacity. What Secretary 
Richardson was alluding to was the fact that around September 
or October of last year, if you look at where we were in terms 
of home heating oil inventories going into the winter heating 
season, there wasn't really anything that our EIA, our Energy 
Information Administration saw to raise concern at that time 
based on their then expectations of weather and inventory 
stocks. And in fact, even going into December, they began to 
see a decline in the availability of heating oil stocks, but 
they had assumed that that was because largely of the Y2K 
problem, where they thought a lot of inventory was being 
removed from the primary level of inventory down to the 
secondary and tertiary level of stock.
    So what Secretary Richardson was referring to, was that 
based upon known market indicators and expectations of how 
heating oil was being deployed at that time, there wasn't 
anything that anybody could have expected that would cause a 
severe problem.
    The other thing, as you know, is that OPEC did decide 
around, I believe, springtime, to tighten up on the amount of 
oil that they would produce. And again, that didn't raise any 
suspicions in anybody's mind, because that was an ordinary 
market response to the fact that they weren't fetching a global 
price that was satisfactory. The price had been so low for a 
sustained period of time, nobody really thought that the price 
would spike that rapidly. I think all indication showed that 
this administration was acting in a way that could have only 
been anticipated based upon market indicators at the time. 
Since then, as my testimony explains, we've taken a number of 
actions to try to alleviate the problems within the northeast 
about the distribution of home heating oil, to insure that 
relief was secured sometime in January.
    Again, this obviously is after the fact, but it's as best 
as we could do, given what we know at that point in time, going 
into the winter heating season.
    Chairwoman Kelly. Mr. Gee, the Administration's admission, 
basically is what you just did, you admitted that there was a 
complacency. It's really, I have to say that's no surprise to 
me. I wrote early, I wrote, I believe my first letter went out 
to the President asking for a release of oil sometime late 
January, first part of February, like around February 3rd. I 
wrote six letters just as an individual talking about my 
District, and I have to say, I'm not the only one. I know 
Congressman Sweeney wrote letters. I know a lot of us wrote 
letters. We built a coalition. We were writing letters and 
signing lots of other people's letters as well, begging for 
action. I had a meeting with Secretary Richardson and I told 
him directly what was happening in my District, what was 
happening in the northeast, what was happening to the whole of 
New York. Nothing happened. His comment to us at that time was, 
``I will take it to the President.''.
    And I think it's a good thing that foreign countries have 
increased their production, but I think we need to keep in mind 
the so-called success did very little to help the small 
business owner like Mr. Fanelli, who experiences serious 
hardships; to the trucking industry which Mr. Spencer is 
representing. These folks had serious hardships, while 
Secretary Richardson was trying to sweet talk OPEC. And the 
President refused to release our strategic petroleum reserve 
oil, which could have been done. We need to make sure this sort 
of thing doesn't happen again. I know that in recent weeks, 
there's been talk about the worst being passed, but I hope this 
Administration has learned a lesson about the cost of inaction, 
and what we in the northeast have experienced, we have really 
paid a price.
    I think now is not the time to let your guard down. I think 
the problem may be with the EIA, and I'm sure that NYSERDA 
warned the Administration of problems. Just because we were 
applying free market principles doesn't mean we need to ignore 
other factors. We were in trouble up here. We have a man here 
who just told you what he experiences when he goes out to pump 
a gallon of gas. We have a trucker here who has talked about 
what he experiences when he has to buy a gallon of diesel.
    Now is not the time to let your guard down. It's the time 
to strengthen the commitment to our energy policy, because my 
concern is we don't want to see this issue crop up this summer 
with high electricity rates. Just think how this is going to 
translate. We in this region already havebeen told our 
electricity rates are going up. That's energy, sir. Had these electric 
companies been able to prepare earlier when we were begging for relief, 
and we were going directly to the President, and directly to Secretary 
Richardson, I believe honestly that our energy, electricity rates and 
our home heating oil prices now would be lower, and I am very concerned 
about this.
    I want to ask you a further question. Does the Department 
of Energy still expect the gasoline price to peak during the 
driving season of summer, because that's what there was a 
prediction about.
    Mr. Gee. I believe the EIA's near term outlook for the 
summer, is that they believe that the gasoline, the price of 
gasoline should go up, let me get that figure. I'm just looking 
it up for the hearing. They believe that it should peak at 
about 1.52 on average throughout the rest of the country in 
April and decline to around 1.39 a gallon by September, after 
the summer driving season, so I think nationally, I don't know 
exactly where that number is as of today, I think here in New 
York, I was looking at some numbers, it's around, New York 
State average is around 1.57 per gallon as of today, as of 
yesterday. I don't know how that would factor into the overall 
national number that EIA released just about a week ago, but we 
do anticipate that there would be ultimately by the end of the 
summer a decline of some 12 to 13 cents per gallon average.
    Chairwoman Kelly. Mr. Flynn, would you like to address 
this? I'm sure your figures may not show exactly the same 
thing.
    Mr. Flynn. I think that the figures that we have are around 
1.59 a gallon. But I think that what I would like to comment on 
is your view that there needs to be something done, don't let 
your guard down. I think what we have had is a situation of, 
the Department of Energy has lack of coordination between EIA 
and the Department itself. Last October we were able to put 
together at our urging a winter outlook in October, and at this 
winter outlook conference, we were able to pull together some 
people who I have a list of here. Home heating oil dealers, 
propane dealers, U.S. Coast Guard, the pipeline industry, EIA, 
the trucking industry, Department of Public Service, Department 
of Transportation, New York City Emergency Management Office 
and reps from some three or four northeastern states.
    We had the Governor's director of state operations be our 
keynote speaker, Jim Natoli, and we do this on an annual basis 
and the thought behind putting this meeting together is to look 
at long range weather forecasts, delivery driver hours, coast 
guard operations, supply disruptions and price.
    The point I'm trying to make here as I stated in some of my 
comments, is coordination and strategy. I think at the federal 
level that's what's lacking not only at Department of Energy 
but EPA and others and it all starts at the top. Luckily we 
have a Governor that pays attention to cooperation, 
coordination and strategy, and based upon his leadership in 
this area, not only in this situation here, but as soon as 
people started writing that this situation was over, we have 
the Administration still reminding the people at our authority 
and at CPB that don't let your guard down. I mean, we know that 
it's just April, but the summer driving season is around the 
corner and before we know it, the winter is going to be here 
again and the last thing we want to hear is excuses that we 
unanticipated the situation.
    So I think that the best message that we get from these 
hearings today to the Administration at the Federal level is 
that there has to be at least on behalf of the northeastern 
states, better coordination between the Federal government, 
DOE, EPA, EIE within DOE so we're all on the same page and we 
anticipate the problems in the future so we're not back here 
next year in Mount Pleasant, much as I love being here today, 
talking about this issue again.
    Chairwoman Kelly. Thank you very much, Mr. Flynn. I have 
one more question for Mr. Gee.
    Mr. Gee. Certainly.
    Chairwoman Kelly. I have many questions for you, sir, but 
in the interests of time I'm going to hold it to this one 
question. Just last Friday we experienced black Friday, the 
stock market went down, and some people have speculated that 
this country may be on the verge of an economic downturn. If 
that were true, how would a period of recession have an impact 
on fuel prices and does the Administration have any plans to 
mitigate problems that could be caused by rising fuel prices, 
if that is the case?
    Mr. Gee. If we undergo an economic recession, is that your 
question?
    Chairwoman Kelly. Yes, and economic downturn. I didn't use 
the word ``recession'' I said ``downturn''.
    Mr. Gee. Downturn. Do we have--this, I'm going to give you 
a straight answer as I can, since I am only responsible for a 
narrow sliver of the pie as you know. I'm not with the Commerce 
Department and I'm certainly not with our Office of Management 
and Budget.
    Chairwoman Kelly. Which probably points out the point that 
Mr. Flynn was trying to make.
    Mr. Gee. Right. I think the best way to address the 
problems of market price volatility that we're talking about 
here is to have fuel diversity and a broad comprehensive effort 
under any market condition, whether it's a robust economic 
environment or recessionary economic environment to be able to 
have stable prices like Mr. Fanelli said. I think that's best 
insured by having fuel diversity, having an intelligent program 
to encourage wise, efficient use of energy, to be able to rely 
upon both domestic resources, to put the proper tax incentives 
that the President has proposed to stimulate domestic 
production, and also insure that our lines of communication 
with our diverse sources of foreign supply are open and 
communicated more broadly on an ongoing basis. I think that's 
exactly what President Clinton has done and that's what this 
administration has done.
    Chairwoman Kelly. Well, there are some of us who really 
feel that the Administration has not fulfilled that promise.
    Mr. Gee. I understand that, certainly.
    Chairwoman Kelly. Especially in the area, of when you speak 
of fuel diversity that doesn't help us here in the northeast, 
we don't have access to fuel diversity and that is a problem 
for us.
    Mr. Gee. May I address that?
    Chairwoman Kelly. Yes.
    Mr. Gee. The President has directed the Department to 
undertake a study that is due within the next couple of weeks 
to determine what are the options for the northeast to minimize 
reliance on home heating oil as a heating resource, because we 
are very aware of the limitations or lack of fuel diversity 
that this region has to labor under during home heating oil or 
during the winter heating season, and that is something that 
we're working on to seeing what types of policies would best 
promote greater options for consumers in the northeast.
    Chairwoman Kelly. I think that's a positive step, but I 
think what the message is, you basically heard Mr. Flynn from 
the northeast, and that is, we want you to take to the 
Administration our concern and our need to have an increased 
communication between agencies, and a productive plan in place.
    Mr. Gee. Certainly.
    Chairwoman Kelly. And that can only be done with the kind 
of thing that our Governor has initiated. You need to do that 
kind of thing.
    Mr. Gee. Again, may I respond?
    Chairwoman Kelly. Yes.
    Mr. Gee. I understand Mr. Flynn's opinions and will take 
them under advisement. I think that we do have communication 
within our Government. We've had communication between our 
Government and the state officials. I recall at the time of the 
home heating oil crisis we in fact invited and welcomed the 
participation of state officials where the Chairman of your 
Public Service Commission came and spoke to us about the 
occasion of interruptible customers on natural gas resorting 
back to home heating oil use, thereby driving up demand for 
home heating oil. We've had those lines of communication open. 
We're certainly open and willing to continue working with 
Governor Pataki's administration and with all the members of 
the New York State Government.
    Chairwoman Kelly. Good. But please carry our message to the 
administration as well. Thank you, sir.
    Mr. Gee. I will.
    Chairwoman Kelly. With that, Congressman Sweeney, I will 
turn the questioning over to you. I actually have questions for 
some of these other people that I'll go back to, but I thought 
perhaps we could go one at a time.
    Mr. Sweeney. I thank the distinguished Chairwoman. Let me 
say that the testimony of this panel, I've been at a number of 
hearings, as a witness myself, in Commerce, on energy, and as a 
witness on the Ways And Means Committee, as a member of the 
Transportation Committee, we conducted hearings, and I have to 
say that this is the most compelling testimony that I have been 
subjected to, and I want to congratulate each of you.
    Secretary Gee, I don't want to turn this into a gratuitous 
feeding frenzy on the Department of Energy and I appreciate you 
being here. I'm trying to compose myself up here, because as I 
sit here and listen as you nobly are trying to defend the 
Administration's seven years of inactivity, and as someone who 
represents a District that has been pounded in the past several 
months, I find it very difficult.
    And if I could, Madam Chairwoman, let me, I kind of wanted 
to turn it back into a different focus and start with a 
question to Mr. Fanelli, because I think the important thing 
here, as Mr. Spencer pointed out, actually I had written a note 
I was going to quote that song by Alan Jackson, Mr. Chadwick is 
here, this is really about the little people, my constituents. 
I consider myself one, but when I go to Washington, I am 
honored to be able to represent them. This is really about 
putting food on the table. This is really about them being able 
to pay for their children's tuition, college, or save for their 
children's tuition to college. This has an incredible impact 
and last December I met Secretary Richardson who admitted at 
that time and subsequently publicly admitted that the 
Administration was not focused and was not coordinated. I think 
maybe I'm biased in this sense, but I think it relates to a 
different agenda, one that has negated the importance of 
developing independence from foreign markets and one that is 
driven by other political concerns, and I think that if indeed 
that is true, and I hope I'm wrong, that it is devastating and 
shame on the Administration for that kind of notion.
    Let me ask Mr. Fanelli, you gave great testimony, and you 
talked about in real life terms what the effect this past fall 
and winter's fuel crisis was on you. If you can as honestly as 
you can on tax day, can you tell us what kind of margin you 
operate under?
    Mr. Fanelli. It was at some point averaged 12 cents and 
some points I'd average as low as 8. My business is really 
repairs. I was never, I was an auto mechanic, I was never 
really into the gas business, I didn't know that much about it 
until I had a gas station. When I first started, I really 
didn't like gas, but you know, you want to keep the price down 
because people believe and all the people that come in believe 
there's plenty of oil, and that it's just another way for price 
gauging to go on.
    Mr. Sweeney. That's how you get consumers in your shop, 
correct?
    Mr. Fanelli. Yeah, they're mad, they say there's plenty of 
oil, what are they doing. The only question I have, I've been 
in business for twenty years, I did okay, I've been able to go 
on vacations, and the only boats I'd see in the water when I 
was oversees was Esso, which is Exxon. The only question I've 
been asking myself is the merger between Exxon and Mobil have 
anything to do with the oil prices shooting up the way they 
did, at 10 to 12, 13 cents a day from one day to the next. I 
just couldn't believe what was happening.
    Mr. Sweeney. If I could, you have a concern that there 
isn't enough diversity in the market?
    Mr. Fanelli. Yeah.
    Mr. Sweeney. Let me ask you one more question. What effect 
did this have on your margin, what effect did this crisis have 
on your business, how much did you lose, percentage, rough?
    Mr. Fanelli. There was a point where I sell diesel, I 
couldn't even get it. 6,000, 7,000? I can't even, you know, 
for, within a few months. Between the gas part and just selling 
it, I guess at least $7,000.
    Chairwoman Kelly. If you don't mind, Mr. Sweeney, Mr. 
Fanelli, would you describe zone pricing and talk to us about 
how that has an impact on your business?
    Mr. Fanelli. Zone pricing gives the oil companies the 
opportunity to charge a station higher price than the next 
station maybe on the same block, because they believe that's 
more of an area where they're going to sell gas more and I 
think it's just an excuse, if say if an oil company doesn't 
like you, they can raise the price on you and drop it on 
somebody else, for whatever reason they have.
    Chairwoman Kelly. You're saying the company that sells you, 
the wholesale, the product, can sell it to you at a certain 
price per gallon and then go two blocks down and sell it to 
someone else at a lower price or an increased price?
    Mr. Fanelli. Right, increased price where they make more 
money and they justify that it's in that type of an area where 
maybe there's more money in that area, or it's in a better spot 
that it's going to pump more gas, for whatever, but it really 
should be all the same price. Everybody should really get a 
chance to get the same price, this way everybody has a fair 
shot at making the same kind of living as the guy down the 
street. I mean, that's, you're actually being penalized for 
being in maybe a certain area or you're being overcharged for 
whatever reason, that, you know, it's just really, it could be 
an excuse for price gouging, and--.
    Chairwoman Kelly. What effect does that have on your 
business?
    Mr. Fanelli. Gasoline has been slowly, I did okay, when I 
first started maybe twelve years ago. I really don't make 
hardly anything on it anymore, and I kind of concentrate in the 
garage.
    Chairwoman Kelly. Is that because of zone pricing?
    Mr. Fanelli. Zone pricing, different kinds of pricing. Some 
of this pricing is because of environmental reasons. They may 
have a problem with a station that had an environmental 
problem, which is legitimately I guess there should be some 
kind of fund to make up for that, butto have different prices 
at all different stations is really the kind of controlling everybody, 
I think the oil company's controlling everybody.
    Chairwoman Kelly. Thank you.
    Mr. Sweeney. If I could, I think as well as Mr. Chadwick 
and Mr. Fanelli, there are other little people that we need to 
remember, and I'm sure Chairman Martinez appreciates the fact 
that we understand that they're the alternatives. So I'll turn 
some questions to you, Mr. Spencer.
    Your testimony is true. Especially because you were 
tangible and direct, three solid proposals. Two of which I 
wholeheartedly support, one of which I'm a bit apprehensive, so 
I'm going to turn on you.
    We are debating in Congress whether we should repeal 
certain transportation taxes on fuel costs, and some believe 
that to repeal such taxes would have a short-term minimal 
impact, long term very negative impact in terms of rebuilding 
our infrastructures and things like that. Others believe that 
at least it will provide some immediate relief to the 
consumers. In imposing a mandatory fuel surcharge program 
brings some apprehension because many would view it as just an 
additional tax on the consumer, so I just say to you there is a 
great apprehension. Let me ask you this question, because I'd 
like to look at it from a different side and how we can insure 
that one segment of the people we represent is indeed protected 
to some degree as best we can in a long term energy plan, and 
that is that I'm considering drafting legislation that would 
allow independent truckers and some other entities a deduction. 
We made the tax code so complicated, I understand, this gets 
people nervous, but until we get to real simplification, we're 
looking for ways to make it easy, to make America work, a 
deduction or tax credit directly attached to increases in fuel 
prices. My question to you is would your membership support 
such a move and at what level, how much of a tax credit would 
you guess would be applicable?
    Mr. Spencer. Well to answer your question, yes, our members 
small business truckers are going to be open to relief wherever 
they find it, whether it be through the tax code. As I 
mentioned in my testimony, we believe that the only viable real 
answer is for increased fuel costs to simply be reflected 
fairly, not exorbitant, but we understand there are others who 
see things differently.
    I guess the idea of a change in the tax code to provide a 
credit, again, it would be a benefit, but the thought that I 
have in my head is that this is not going to be immediate 
relief that actually is really needed right now. If we're going 
to wait until the end of this year for a credit on a return, I 
mean, there may be, the return that's filed may be on a 
bankrupt business. That's the concern that I have.
    Mr. Sweeney. It's a great point. That in conjunction, 
though, with your third proposal, which is developing an 
emergency low interest SBA loan program, might be able to 
provide some sort of short-term stop gaps, and I'll say this, 
on the record, that if Madam Chairwoman wants to be the 
original sponsor on that, I'll join her.
    Chairwoman Kelly. I've already discussed it with counsel.
    Mr. Sweeney. I understand that, understanding that the 
House operates pretty much on seniority, she gets to make that 
call and I would follow her on that.
    Let me ask Mr. Flynn a question, if I can, thank you for 
your testimony. You mention in your testimony that we do not 
have in New York in any capacity any refineries, a capacity 
thereof. What do you think the greatest impediments to 
establishing New York refineries is?
    Mr. Flynn. I think that you yourself has answered that 
question by a piece of legislation that I think you introduced 
recently with a regional product reserve and I think that's one 
of the answers. And I've had the honor to testify about this in 
front of some other Congressional committees. I believe that an 
RPR would be an invaluable asset not only to New York State but 
to the northeast, in situations when we do find ourselves in a 
crisis situation, and I believe this issue has been studied on 
and off for the last twenty years at the Department of Energy 
and other levels of the Federal Government. When it was first 
brought to our attention and the Governor sought our advice as 
to the up sides and the down sides of it, it's not just as 
simple as saying it's the thing to do, because there are a lot 
of issues that are behind just placing this regional reserve.
    I think some of the issues that you as a leader in this 
area should make sure that we all address is how much and what 
kind of petroleum products would be left at this reserve, the 
environmental requirements and regulations that would go along 
with siting something like this, the sulfur context that would 
be stored here, whether there would be enough storage capacity 
for all the northeast, who would administer the reserve, who 
would make the call as to when we would release reserves, who 
would pay for it, and these are just a few of the questions 
that as you and Congresswoman Kelly go forward on looking at 
something like this, make sure that you look at those areas and 
always NYSERDA is there for you to help you answer those 
questions, and I think that's one area that we can really help 
out in fuel diversity.
    Mr. Sweeney. Let me turn to you, Secretary, and say that 
now six months after we called for a reserve, I'm happy to see 
that the Administration has now seemingly endorsed such a 
policy. I won't belabor the point at this hearing, but I'd like 
to work with you and I know Chairwoman Kelly would like to work 
with you.
    Mr. Gee. Let me say something, and I'm happy you brought 
this up. It was the Department that undertook a study just 
about two years ago on the merits of a regional product 
reserve. So I understand your view that we haven't done enough, 
but in fact we were doing something.
    Mr. Sweeney. If I can reclaim my time, six months ago the 
Secretary punted on that.
    Chairwoman Kelly. Will you yield a point? Why has it taken 
you so long?
    Mr. Gee. So long----
    Chairwoman Kelly. To develop this, you say you started way 
back----
    Mr. Gee. To commission a study.
    Chairwoman Kelly. Why did it take so long to get a study?
    Mr. Gee. The study started out with different options, how 
large the reserve, what the cost would be, and whether the cost 
would outweigh the benefits. That was a 1998 study that was 
brought out by a smaller price spike in 1996. We originally 
took the position that based upon certain scenarios that were 
undertaken in the study, such as the likelihood of the need for 
drawdown of the product reserve, that there was no immediacy to 
developing one because of the prospect that the costs would 
outweigh the benefits again based on certain scenarios. We 
concluded that if one could be down to 2 million barrels of 
inventory, because of the likelihood, particularly because of 
what we experienced this winter, because of a very cold winter 
accompanied by short inventory, that in fact one could be 
justified on a cost benefit basis. It wasn't simply the fact 
that we sat there and decided to do nothing. What the study 
said was that depending upon the size and configuration of the 
research, the cost would not justify the benefits. But we 
concluded if you can configure it down to 2 million barrels 
which is one of the scenarios and given the likelihood of what 
we experienced this past winter where there was a temperature 
plunge, that one could be cost justified under certain 
assumptions, and that's how we proceeded, that's why the 
President decided to go ahead and call for its creation and 
that's what our department is working on. I might add for Mr. 
Flynn's benefit, we'll certainly be happy to workwith New York 
State. The very questions that he's raised are being looked at very 
intensively by our staff at this moment.
    Mr. Sweeney. When would you, if I could, when would you 
anticipate action?
    Mr. Gee. We're gratified to see that Congress, rather, the 
House, passed legislation that would create one. As the 
President said, he would like to have the legislation enacted 
that would authorize its creation. Failing Congressional 
action, he still holds the option of going ahead and 
administratively going forward under existing law, under EPCA, 
assuming it's reauthorized, as you know it now lapsed. If the 
Energy Policy Conservation Act is authorized, he does have the 
authority to create one under existing law. We have our staff 
working full tilt right now working on it.
    Mr. Sweeney. You do not have a defined time line?
    Mr. Gee. Not a defined time line but we're under orders, 
instructions from Secretary Richardson to get one going as soon 
as possible to get it ironed out.
    Mr. Sweeney. Let me pull things back a little bit. Explain 
for me how you compare U.S. Inventories to world inventories, 
and is there a greater vulnerability here in America than there 
is in other parts of the world?
    Mr. Gee. You're talking about production quantities as 
opposed to refined inventories?
    Mr. Sweeney. Mm-hmm.
    Mr. Gee. It's certainly having a decline. We experienced a 
decline in domestic production since 1985. It did not begin 
with this Administration, midpoint in the Reagan 
Administration.
    Mr. Sweeney. You will concede that the Administration 
though has not been an enthusiastic supporter of increased 
domestic production?
    Mr. Gee. I would disagree with that, Mr. Congressman, 
because I in fact personally have been involved in working, I 
spent an awful lot of time with domestic producers, that's my 
job. I know what their positions are. When the price plunged 10 
dollars a barrel I was spending a lot of time with people from 
east Texas, west taxes California, Oklahoma, we were pushing 
and gratified to see the President announced his support for 
tax incentives to maintain an increased domestic production.
    Mr. Sweeney. I'll extremely disagree with you and I'll send 
you a list of pieces of legislation that the Administration has 
either blocked or proposed that are contrary to that position.
    Let me ask you this question, then, if you've been a 
proponent and you studied the issues, what are the capacities 
for domestic production? What's the potential?
    Mr. Gee. I think right now our domestic production is 
around the mid 40's, 40 percentile of what we currently 
consume. We're hopeful that the decline in production can be 
arrested and ultimately would be brought to a halt sometime 
around the midpoint of this decade.
    Mr. Sweeney. What are the greatest impediments to that?
    Mr. Gee. Greatest impediments are economic forces and the 
issues of production which to a certain extent are not directly 
within any government's control.
    I'll give you an example. Oil is just much more expensive 
to produce in the United States today than it was a couple of 
decades ago. The types of fields that we're now exploring are 
largely for the most part very extensively explored and 
developed as opposed to foreign sources, which as I mentioned a 
lot of the large majors are going to because it's simply 
cheaper to produce.
    One thing we're doing is trying to lower the cost of the 
production. We've been working very closely to try to lower the 
oil production costs, lowering the cost of electricity which 
makes up 40 percent of the production costs. Those are some of 
the things that we've been focussing on, that I've been 
personally focussing on.
    Mr. Sweeney. Let me thank you for that and point out that 
you contradicted yourself saying it's not as simple as 
government doing something. I think it is. A lot of smaller 
refineries have been put out of business based on tax policy, 
environmental policy, based on a whole bunch of restrictions. 
If I can move on----
    Mr. Gee. You're not going to resume the volume of 
production we once had. That was my point. We already explored 
that.
    Chairwoman Kelly. I just want to ask, we are short on time, 
obviously always, we never have enough time. So just so you all 
understand, I'm going to hold the hearings open for fourteen 
days. You may get written, additional written questions from us 
to answer in writing and I appreciate the fact that you will 
get them back to us fairly soon, we have fourteen days to do 
all that.
    I want to turn to Ms. Martinez. I'm really pleased that you 
are there, and I bet your agency works as well as it does. You 
do a great deal of good for all consumers. I'm wondering about 
whether or not you think there's merit to the possibility that 
the oil price increase is going to have a significant impact on 
electricity rates. I've raised that issue and I'm wondering 
what you think. Do you feel that that's going to happen?
    Ms. Martinez. Well I'm not sure of how much of an effect 
that will have but I do know consumers have called us about 
letters that they have received warning them of greater 
electricity rates in the next few months and offering them to 
lock into a fixed price for the winter heating season. I'm not 
sure, we have not had enough investigation in this area, 
whether they are creating a condition where they want a 
consumer to make a decision about a fixed price using their 
market power to encourage the consumer to come back to the 
major producer of electricity and challenging the free market, 
the available newcomers into the electric market. So we've seen 
many of these letters come out from the major producers of 
electricity. As a matter of fact we've gotten several of them 
and several calls from Syracuse area, journalists asking us 
questions and we're in the midst of figuring out why now are 
they sending these questionnaires or marketing strategy fliers 
to consumers at this time. So they seem to be indicating it's 
going to happen, but we've seen no other indication in the 
market that it's happening. So we really don't have an answer 
this time, but I'll share with you what information we get back 
from our investigation.
    But one of the beauties of the Consumer Protection Board is 
we have a complaint line, and real people answer and real 
people speak to you and real people hear your complaint, 
similar to you, when they come in and are exasperated to 
prices. So we get a really good feel of the market before 
sometimes big events happen, and that's why we're very glad to 
work with, especially this Governor, asked for the information, 
we work with NYSERDA, we share information to try to get ahead 
of the problem instead of waiting for it to happen and trying 
to get redress once people have been negatively impacted.
    Chairwoman Kelly. You've heard Mr. Fanelli testify to the 
irritation he sees in his customers when they see the oil 
prices are so volatile, the gas prices are so volatile. Have 
you had a majority of your complaints about that particular 
aspect? What kind of, what are the majority of complaints 
about?
    Ms. Martinez. We get a lot of complaints about utilities, 
the changes in market forces of having electric choice, 
telephone choice and the agreements that people make with each 
other.
    Chairwoman Kelly. What about this?
    Ms. Martinez. In terms of oil and gas, we have seen an 
increase over the last year. We've been seeing a constant 
increase in gas prices over the last year, we've been speaking 
to the public about it, trying to share tips, trying to 
encourage them to look for the best price. Now you've given me 
one of the reasons why it could be 12 cents different if you 
drive around your neighborhood, you can save 12 cents a gallon 
if you shop around. Now I see there's a reason why. We're 
asking consumers to shop wisely, buy more conservatively using 
other options of pairing up to drive, trying to cut the edge 
off their pocket books so it won't be so damaging to especially 
people on fixed incomes, we get a lot of complaints from our 
individuals who don't have the flexibility, they have to make 
the decision to buy either food or gas or this item or that, 
and we get a lot of that exasperation from consumers in New 
York State.
    Chairwoman Kelly. It's really a conundrum when you're 
thinking you're advising people to drive around and find the 
lowest price and Mr. Fanelli is locked into a price because of 
the zone pricing. So it really is very difficult to get this 
resolved, so Mr. Gee, we do need your help.
    I want to move just quickly to Mr. Morse. Moving away from 
the fuel charge issue that you had talked about, I wonder if 
you could tell us about the impact of fuel prices on companies 
you work with and travel and tourism industry. For example, the 
small limo companies, the cab drivers, the bus drivers, the bed 
and breakfast people. Are they experiencing a difficulty?
    Mr. Morse. They're probably experiencing incremental 
changes, but not major. Remember that when you go on vacations, 
you're generally using discretionary monies. We feel the impact 
in our industry, particularly my agency is almost unmeasurable. 
We're so small, the volumes are so small, the number of clients 
are not voluminous enough to statistically get an impact on 
what's happening there. Yes, we have complaints from our limo 
drivers, but they've held their prices so far. They're 
anticipating perhaps some downturns or stabilization, they're 
hoping for it. In fact there was a startup in our town in the 
last few months.
    The B & B's, we don't have contact with them, they're not 
commissionable to a travel agent, so there isn't a strong 
relationship, so I can't comment on that there.
    Chairwoman Kelly. What about the bus companies. We see a 
lot of people going by bus now to Atlantic City or up to the 
Catskills Adirondack areas.
    Mr. Morse. So far the touring companies seem to have held 
their prices. Once they announce a price for the given year, 
they put out the brochure for 2000 back in 1999, midsummer. 
They're locked in at that point, they have to absorb what it 
is. We've not experienced any considerable number of them 
saying oh, by the way there's a fuel surcharge increase in the 
price. That we've not experienced. So we're not seeing a lot of 
it.
    I think for the small travel agent we're probably seeing 
some incremental loss of business. We just don't know what it 
is or how to measure it. In a given week you might have a good 
sale that would overcome the loss of one or two clients that 
week. We do realize statistically our industry follows the rest 
of the country and when you have a price increase, let's say 7 
percent in March, you will probably lose some small portion of 
the business, people who were just on that border who can't 
afford it. You see a ticket at 19 0 is maybe saleable. 210, 2 
15, it's not. It's hard to measure exactly what that impact is.
    Chairwoman Kelly. Thank you. Mr. Fanelli, I see you nodding 
your head. I'm sure you pump gas for some limo companies and 
I'm sure you probably have heard them comment. Would you like 
to make a comment?
    Mr. Fanelli. A lot of taxi and limo guys said the prices 
stayed the same and they're eating the additional prices that 
it costs them to go out, and that's why I think if there was 
some way to make a price range where it would stabilize for a 
period of time, a long period of time, I know it was cold this 
year for three weeks, but it kind of warmed up. I don't think I 
used any more heating oil last year than I did this year. 
That's what makes me wonder a little bit what happened.
    Chairwoman Kelly. I think that's a very important point you 
just made. Because it got warm and the prices were still high. 
And I know that we wrote four letters and I co-sponsored 
Chairman Sweeney's----
    Mr. Sweeney. Thank you.
    Chairwoman Kelly. I co-sponsored Mr. Sweeney's bill in 
Congress and a few others, all of which the Administration 
never acted on. I think that it's very important that the 
message go back to the administration that as Mr. Sweeney was 
talking about, it is individuals. It's every person in this 
area, in the Northeast, who is on a fixed income, and I have 
had people come to my office, senior citizens on fixed incomes, 
saying they no longer can drive back and forth, to have some 
joy in their life. They volunteer. They no longer can drive to 
their volunteer job.
    So there's a spillover effect of the Administration's oil 
policy, and I feel that they really dragged their feet in 
December. I think that spillover effect is magnified time after 
time, possibly person by person here in the Northeast. It is 
critical that we get some relief, and we can't really wait for 
new technology. We really can't wait for anything except a very 
hard look and some increase in our gas and oil that's being 
pumped into this area.
    I think with that said, I'm going to, I think we're going 
to head up to Castleton where we have another hearing. Mr. Gee 
will join us again and we can continue this dialogue. I really 
want to say--Mr. Flynn?
    Mr. Flynn. Can I just say two things here? Mr. Fanelli 
asked a question concerning the Exxon Mobil merger, I would 
ask, being a former prosecutor this Committee may want to 
contact the Department of Justice Attorney General Reno and 
asked on behalf of Mr. Fanelli and New York State and ask the 
Department of Justice to look into whether there's been any 
collusion between----
    Mr. Sweeney. May I state, I was going to reframe my 
question and make comments and they were going to be directed 
to you, and Mr. Morse, too. We have asked the Attorney General 
to look at price fixing allegations. I wanted to get this on 
the record, I don't have much confidence there's going to be 
much movement on the part of the Attorney General to do 
anything here, so I would encourage you Chairwoman and your 49 
other colleagues to do it at the state level as best you can to 
maybe create that impetus. Mr. Morse, I'm the vice chairman of 
the Aviation Committee, principal sponsor of the Passenger's 
Bill of Rights, anti price gouging legislation, I want you to 
know I agree with you on the full disclosure of the airlines. 
Big six have been predators from pricing and services, as 
Congresswoman Kelly will attest to we in upstate New York pay a 
heavy, heavy price being as underserved as we are, so not to 
necessarily ask you a question, let you know that we are aware 
and I'm going to continue to pursue with the Aviation Committee 
and through Transportation those requests and desires.
    Mr. Morse. Thank you. We love your Passenger Bill of 
Rights.
    Mr. Flynn. I've testified now at three Congressional 
committees and state committees each time there's been a 
Department of Energy official. I think we're lucky to have Mr. 
Gee come here today because from my own humble experience he's 
been the most forthcoming official from the Department of 
Energy. There have been E I A officials who don't get into 
policy or there have been other officials who say they're too 
low on the chain to do policy. It seems Mr.Gee is in a position 
that he does policy and I think this Committee is lucky to have him 
here today. Whether you agree with him or not, he's forthcoming.
    Mr. Gee. Just part of my job.
    Chairwoman Kelly. Well, Mr. Flynn, you've just taken the 
words out of my mouth, this is what I was about to say. I'm 
glad you did say them. Please continue.
    Mr. Flynn. The regional product reserve I agree on that 
issue, but 2 million barrels on that reserve would not be 
enough.
    Chairwoman Kelly. Mr. Gee, we do thank you for being here, 
it's a choice you've made to be with us, and I hope you've 
learned something from listening to our witnesses. I'm also 
very pleased that the Governor saw fit to allow we have two 
state agencies here that are very important agencies, and I'm 
delighted that they were willing to share with us their 
knowledge, so, and we're going to move on to Castleton. Mr. 
Spencer, I can't tell you how just relieved and delighted I was 
when I heard you were going to come and testify, because I 
think your testimony is very strong and I think that you speak 
very well for the truckers, and I think it's important that the 
general public understand that the truckers are really hurting 
because they're having to eat that difference in their 
contracts when they're doing such simple things as helping a 
family make a move, bringing fresh vegetables to the 
supermarkets, and doing numerous other things, because as I 
know and Mr. Sweeney knows, because we're both on the 
Transportation Committee in Congress, we understand how much of 
the goods and services actually of much of what we're able to 
do in the United States move by truck, so we're pleased to be 
here today.
    Mr. Morse, I thank you very much for your testimony, and as 
you know, I too am very interested in the airline passenger 
rights, and Mr. Fanelli, you have been really illuminating in 
what you've had to say. I think you brought in some very 
important issues before us today. I hope we can all learn from 
your testimony and I very much appreciate your taking time out 
from your business to be here, to be with us today.
    Mr. Fanelli. Thank you.
    Chairwoman Kelly. I thank all of you, and with that, I'm 
going to conclude the hearing. Thank you.
    [Whereupon, at 12:05 p.m., the Subcommittee was adjourned.]

                                
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