Brad Swenson, Bemidji Pioneer
At a time when oil prices exceed $120 a barrel and gasoline more than $3.55 a gallon, the U.S. shouldn’t be stockpiling oil in underground salt domes.
The U.S. Senate on Tuesday voted 97-1 to suspend the Bush administration’s push to take 70,000 barrels of oil a day out of the marketplace and instead storing it in the government’s Strategic Petroleum Reserve.
The measure, which has no force of law, sends a message to President Bush to allow the oil to flow into the marketplace, at least until the end of the year, in an effort to stem higher gas prices at the pump.
The U.S. House was poised to act on the same measure later Tuesday.
The only senator dissenting to the oil storage halt was Sen. Wayne Allard, R-Colo.
“Our government should not be taking oil off the market at a time when hard-working families are paying record gas prices,’’ U.S. Sen. Amy Klobuchar, DFL-Minn., said in a statement after the vote. “While we also need a comprehensive, long-term energy policy, this is a smart step to help consumers immediately.’’
She said the emergency reserve is 97 percent full, and that by suspending the continuing storage, gas prices could drop 2 to 5 cents per gallon.
“This is a provision that has a lot of bipartisan support in Congress,” she said.
Klobuchar outlined that measure, and her support of the Consumer-First Energy Act that includes short-term measures to reduce high energy prices, to Minnesota reporters in a telephone news conference Monday.
“The first thing to focus on is the role that speculation has been playing in this, the way the oil market works with smaller margins that people can put in for oil,” Klobuchar said. “By all accounts, it has created a lot of problems.”
The bill that Klobuchar has co-sponsored would change the amount of money that traders have to put down on a deal by “substantially increasing” the margin requirement for all oil future trades, she said.
The bill would also change the margin minimum now at 5 to 7 percent to an unspecified higher margin specification as determined by the Commodity Futures Trading Commission, she said. “What happens is they buy an enormous amount of oil with a small amount of cash and it leads to volatility in the market.”
It would also stop traders from routing transactions through off-shore markets under which U.S. regulators have no control, Klobuchar said. “That’s what they do to get around any limits that are currently in place on speculators by U.S. regulators.”
Oil executives have testified in Congress that market fundamentals, oil prices are too high, that they should be $55 to $60 a barrel, the Minnesota Democrat said. “The hedge funds pulled out of the mortgage market, the sub-primes, and starting putting money lock and barrel into oil, and also commodities, which has created a lot of volatility in that area.”
Klobuchar also said she supports measures that would pressure OPEC to increase oil production by giving the U.S. attorney general authority to bring enforcement action against foreign governments that are colluding to set the price of oil.
“They are setting their oil production at an artificially low amount of oil, and the argument is that when we’ve got business relations with a lot of these countries, particularly Saudi Arabia, that we should use that power to push them to produce more oil,” Klobuchar said.
And to help find a solution for the nation’s long-term energy independence, Klobuchar has also said Congress should roll back the billions of dollars in tax giveaways that oil companies currently receive and invest the revenue in long-term solutions, including renewable, alternative fuels.
“There’s $17 billion that the oil companies get in tax breaks over 10 years, and this act would roll it back and instead invest these taxpayer dollars to improve the renewable energy, put it into energy efficiency and into some kind of security trust fund,” Klobuchar said.
The bill also calls for a windfall profits tax of 25 percent on those companies that fail to invest in increased capacity, such as refineries and renewable energy sources, she said. “It’s a carrot and stick approach — if they do that, then they don’t get that windfall profits tax.”
Right now, “the big five oil companies have been making record profits while the consumers have been paying a the pump and we don’t see the kind of transition we should be having to alternative fuels we’ve seen in other countries,” Klobuchar said.
A so-called “Enron rule” is in the current farm bill, she said, which would remove the exemption that electronic energy trades have from regulation by federal commodities regulations. Klobuchar quipped that the United States regulates meat more than it does oil.
But long-term measures are needed as well as short-term solutions to seeking lower gas prices, she added.
“Some of the long-term solutions are more investment in alternative fuels and the next generation of alternative fuels,” she said, “which is cellulostic, which is switch grass, prairie grass, other parts of the corn, residue from logging, all kinds of things.”
Controversy has arisen over using corn to make ethanol, that the crop diverted to alternative fuels has affected prices for corn as feedstock and food. That’s why there has to be movement to other crop resident and grasses, she said.
Klobuchar also noted a role for sugar beets, citing Brazil’s reliance on sugar cane to make ethanol there. “They’ve actually leapfrogged our country … with a lot of sugar cane and a government policy that pushes investment in biofuels.”
Also needed is development of hybrid and electric cars, she said. “They’re not that far away … this is no longer science fiction or environmental talk. These are things that are really going to happen.”
Klobuchar said she doesn’t like either Sen. Hillary Rodham Clinton’s or Sen. John McCain’s push to suspend the federal gas tax for the summer.
“Sen. McCain’s proposal isn’t even paid for at all for this gas tax holiday,” she said. “The oil companies could do whatever they want.”
If it was done that way, then the tax cuts given the oil companies should be rolled back to pay for it, she said. “It would be much better to do it for more money. Sen. Obama’s proposal, which I prefer, gives a $1,000 rebate to middle class families, and I think that’s the better way to go.”
Klobuchar, a super delegate to the Democratic National Convention, has already sided with Sen. Barrack Obama over Clinton for the Democratic presidential nomination.
“What we’re talking about is much bigger than a summer gas tax holiday,” Klobuchar said. “We’re taking all of the giveaways — $17 billion over 10 years — and putting that in the hands of renewable (energy), consumers and others.”
Senate Republicans were unable to get their energy plan considered on Tuesday, which would have opened the Arctic National Wildlife Refuge in Alaska to oil drilling as well as some off-shore sites.