By U.S. Senator Amy Klobuchar
With summer driving season just around the corner, millions of Americans are experiencing sticker shock at the gas pump.
The average price of gas in Minnesota, which was $2.80 a year ago, has shot up to more than $3.50. The price of oil has more than tripled since 2002 — but paychecks haven't tripled to make up the difference.
Many Minnesotans are asking if they'll be able to afford that drive up north this summer, or to put their boats in the water — or even fill the tank in the family car without breaking the family budget.
In Congress we can't control the laws of supply and demand. But we can make sure that markets are working the way they're supposed to for consumers. Last month a panel of energy analysts testified before Congress that the current price of oil cannot be explained by normal market fundamentals. An executive from Exxon Mobil said the price of oil should be about $50 to $55 per barrel based on the forces of supply and demand — yet oil was actually trading at $118 at the time.
The weak dollar explains part of why oil costs so much in the U.S., but it cannot be the whole explanation. In fact, one leading oil finance analyst testified that market speculators are a big reason for the run-up in world oil prices.
"I call it the world's largest gambling hall,'' said Fadel Gheit of Oppenheimer & Co. "It's totally unregulated. This is like a highway with no cops and no speed limit.''
This wouldn't be the first case of energy market manipulation. In 2000 and 2001 California electricity prices soared to unreasonable levels, and we found out later that speculators had been gaming the market.
That's why Sen. Maria Cantwell and I have asked the Department of Justice to expand its Corporate Fraud Task Force to look into the oil and gas markets. The Task Force has a good track record; since it was formed after the Enron scandal it has produced more than 1,200 corporate fraud convictions and obtained more than $1 billion in fraud-related forfeitures by U.S. businesses, and returned that money to American consumers.
In another step to ensure market transparency, we should close the "Enron loophole'' that prevents federal commodities regulators from supervising electronic trading in energy futures. What was once a tiny niche market is now a booming industry of speculators, attracting hedge funds and big investment firms with the power to make oil and gas prices much more volatile.
Meanwhile, there are other immediate steps we can take to bring a little relief at the gas pump. Sens. Charles Schumer and Byron Dorgan and I have asked President Bush to use his bargaining power with OPEC — a cartel that exists purely to control oil production and prices — to increase production enough to stabilize world oil markets. We have also asked President Bush to temporarily suspend oil purchases for the federal government's Strategic Petroleum Reserve. While the reserve serves a good purpose, there is no reason for the government to be taking oil off the market at a time of record high prices.
But in addition to these short-term measures, we need a smart, strong, long-term energy strategy. The truth is that high prices can sometimes be signals of long-term trends - signals that we need to conserve energy and develop alternatives to finite fossil fuels. Last year, as part of the 2007 energy bill, we adopted the first increase in vehicle fuel-efficiency standards since the 1970s. That will raise average fuel efficiency by 40 percent — saving the average family $1,000 in fuel costs annually — in addition to slowing the increase in greenhouse gas emissions.
Our next step should be to boost investment in cutting-edge conservation technology, such as hybrid electric vehicles, and the next generation of homegrown biofuels.
Minnesota already is a leader in wind energy and ethanol. It has the ingenuity and the people to be a leader in the next generation of renewable fuels, such as cellulosic ethanol, which uses crops that can be grown on marginal land. While these fuels aren't economically competitive with today's prices and technology, they could be soon.
Remember the first computers? They were expensive and big enough to fill a room. But Americans invested for the long run and exercised their ingenuity, and today that same computing power fits on a laptop that costs $500.
If we do away with the current oil giveaways in drilling leases — making sure that oil companies pay fair lease payments to the American taxpayer for drilling in public lands — we can raise the revenue to make those investments and give consumers cleaner and cheaper alternatives to foreign oil.
Much as President John Kennedy challenged our country to put a man on the moon, we must challenge ourselves to become energy independent. It is a challenge we can meet — if we begin today.
There is no one silver bullet we can use to solve the problem of skyrocketing energy costs. But with imagination and leadership we can design a "silver buckshot'' strategy — solutions that give consumers a fair shake in the marketplace today and a fair shot at energy independence in the future.
U.S. Sen. Amy Klobuchar, D-Minn, is a member of the Commerce Committee and the Environment Committee.