Skyrocketing Energy Prices

This afternoon, I'm speaking on the Senate floor about high energy prices. Unless something is done to make energy more affordable, the record-high prices will continue to reverberate throughout our economy, increasing the prices of transportation, food, manufacturing and everything in between. Skyrocketing energy prices are a threat to our economic and national security, and the time for action is long past.

One of the major causes of our energy crisis is the failed policies of the current administration. In January 2001, when President Bush took office, the price of oil was about $30 per barrel. The average price for a gallon of gasoline was about $1.50. Since President Bush took office, crude oil prices have nearly quadrupled, natural gas prices to heat our homes have almost doubled, gasoline prices have more than doubled, and diesel fuel prices have nearly tripled.

One key factor in price spikes of energy is rampant speculation in the energy markets. Traders are trading contracts for future delivery of oil in record amounts, creating a paper demand that is driving up prices and increasing price volatility solely to take a profit. Overall, the amount of trading of futures and options in oil on the New York Mercantile Exchange (NYMEX) has risen six-fold in recent years, from 500,000 outstanding contracts in 2001, to about 3 million contracts now.

Speculators in the oil market do not intend to use crude oil; instead they buy and sell contracts for crude oil just to make a profit from the changing prices. Many speculators simply buy and hold whole baskets of commodities including energy commodities, just like other speculators hold a variety of stocks in a mutual fund, in the expectation that prices will continue to rise. The number of futures and options contracts held by speculators has gone from around 100,000 contracts in 2001, which was 20% of the total number of outstanding contracts, to 1.2 million contracts currently held by speculators, which represents almost 40% of the outstanding futures and options contracts in oil on NYMEX.

In January of this year, as oil hit $100 barrel, Mr. Tim Evans, oil analyst for Citigroup, wrote "the larger supply and demand fundamentals do not support a further rise and are, in fact, more consistent with lower price levels." The president and CEO of Marathon Oil recently said, "$100 oil isn't justified by the physical demand in the market. It has to be speculation on the futures market that is fueling this."

My Senate Permanent Subcommittee on Investigations has conducted four separate investigations into how our energy markets can be made to work better. Last December, we had a joint hearing with the Senate Energy Subcommittee on the role of speculation in rising energy prices. As a result of these investigations and hearings, for several years I have been advocating a variety of measures to address rising energy costs and the rampant speculation and lack of regulation of energy markets which have led to sky high energy prices:

• Put a cop back on the beat in the energy markets to ensure these markets are free from excessive speculation and manipulation;
• Stop filling the Strategic Petroleum Reserve until prices are lower;
• Develop alternatives to fossil fuels to lessen our dependence on oil; and
• Impose a windfall profits tax on oil companies that have profited from the unjustified price increases.

Because the administration has proved itself unable and unwilling to take the necessary steps to provide affordable energy supplies to the American people, it is up to the Congress to try to jumpstart a comprehensive solution to skyrocketing energy prices.

Crossposted at MichiganLiberal.com.

Comments

[sdskelton03]

• Impose a windfall profits tax on oil companies that have profited from the unjustified price increases.


I trust senator Levin will be imposing a windfall profits tax on google, as their profit percentage was higher than any oil company

[youzaho]

I'm looking forward to Senator Levin's definition of justice. Once he's got that down he can move on to beauty and truth.

[FreedomRider]

Yea, good idea. They won't pass the taxes on to the consumer, NOT!!!

[cla62]

How can the democratic led houses possibly think they can do anything to get prices of oil down, which will directly lower the prices of fuel? This congress, with the lowest approval ratings in the history of ratings can't even get their noses wiped, they just want to blame everything on Bush, but for some reason the American people think he's doing a better job than them.

[Berettasskeeter]

Senator Levin, one more remark.
It is you, the Senate, who have stonewalled on the subject of new nuclear power plants, and on the funding of new ideas for handling spent nuclear power.
Again, enough of the politicking. It's up to you, the Senate!
Semper fi

[Berettasskeeter]

Senator Levin,
Your remarks are way off the mark, and serve only to distract the numbed readers about your behaviors (I speak of the entire Senate)! It is you who have prevented the U.S. from developing new sources of oil. It is you who have allowed short-sighted States to prevent drilling off our coasts, when China is drilling in the Gulf of Mexico. It is you who have prevented the construction of new oil refineries, thereby easing the supply bottleneck.
It is very easy to blame a President, but he has asked you to ease the way for exploitation of known oil reserves in and around our continent. But then, you're only playing to your choir, aren't you?!
Semper fi

[Paul]

Sen. Levin is one of the best we have in the Senate, and he has a responsibility to represent the interests of his state, but he is on the wrong track.

The way forward is mass transit, not chasing cheap energy by wishing for the past. Employees of Ford and GM - your constituents - will not be served by continuing to produce inferior automobiles that are inefficient because energy is cheap. But Ford and GM can lead the way to design a mass transit system that will make it unnecessary for the average American to own a car.

Without car payments, insurence, repairs and - oh yes - gasoline costs, the US economy will boom.

Side benefit - we can kiss the Saudi's and the middle-east goodbye.

So sponsor a tax on imported oil that will put gasoline at European levels - $6-$8/gal.

That is what we need now. Who knows, with a good mass transit system, maybe even Detroit will be livable again.

[MourningDude]

If you live in the West, or in rural areas anywhere around the country, mass transit is simply not very efficient or effective. People live too far away, and things are too spread out. Most of the cities are planned out so that people can (and must) drive their cars.

People have legitimate needs for personal transportation. We drive our children to a magnet public school. There isn't a school bus that serves our area. Driving it takes about 20 minutes each way, every day. Taking a bus there and back would take about 2 hours, and involve multiple bus changes. That's by far the lion's share of our gasoline budget each month. I ride a bike to work every day, and we own a relatively fuel efficient sedan, so I think we do our part.

Besides, there are now news stories about how mass transit can't afford higher gas prices either. Since 70% of the cost is subsidized by the government, higher fuel prices wreck their budgets. They're having to shut down bus lines as ridership is increasing.

[Paul]

I live in the Los Angeles area. I take a train to work 100 mi round-trip each day.

It will require a large chnage in housing patterns, but mass transit can work.

[lifeinfullcolor]

Thank-you Senator Levin,
If you in public office could bring this issue to the forefront, in a manner that the public can understand, then force the Congress to do something about it, well, it would show me that the Democratic Party still is looking out for the people. I've been posting on as many sites as I can how dispicable I find it that the speculation in the markets have chosen to make money on commodities. The price of food has gone up 80% in the last year, riots in Cairo, can't these traders leave something untouched, is there no decency left in the world. How can traders live with themselves, when they know that what they're doing is perhaps creating the death through hunger or starvation, just so they can buy and extra bottle of champagne. I went on wikepedia a month ago when I heard of the rise in food prices, to better understand commodities trading, this isn't commodities trading this is Vegas gambling. This weekend I was listening to NPR discuss the sub-prime meltdown, the bundled mortgages, what led to that debacle, where was the Congress then. I find it hard to believe that when the bubble bursts, that's when government goes, oh my God, look what happened!

[indypete]

I don't understand all this clever shit that the money gurus do but I do understand that our economy isn't supposeed to be Caesar's Palace! How about we leave gambling in Vegas and try a bit of honesty on Wall Street. Wait a minute... Wall Street doesn't understand honesty, it only understands the stacked deck and the fixed table!

[NoMoFearNoMoHate]

wall street is gambling - period.

[DrPaulProteus]

I'm sure your Senate Subcommittee will get to the bottom of this, Senator Levin. I trust you will proceed from there to pass legislation with real teeth and bring oil prices back in line, because Democrats in Congress have such a sterling track record of successfully opposing the draconian, treasury-depleting, constituti­on-shreddi­ng, country-destroying policies of the Bush Administration.

[KillTheMessenger]

Huh ... "bring oil prices back in line". Back in line with what? Was there a contractually guaranteed oil price that every American citizen got handed over at the time of their birth? Has this contract been violated or canceled by one side with no cancellation clause in place? If so, I would suggest you seek help from the courts. That's where contract violations are being taken care off.

[kavan]

So many problems would be solved be eliminating our need for oil. Bush/Cheney & their oil industry pals have only gotten away with what congress has permitted.
Congress lost much of my respect when Ms. Pelosi took impeachment off the table. The democrat ic party Senators have lost many more battles than they've won. Congress can't "jumpstart" anything the republicans don't want to allow. No testicular fortitude.

[Snoop2]

We have had an energy crisis since the Arab oil embargo of the 80s. So basically for the last 30 years a bunch of lazy dick heads in Washington sat on their fat butts and did absoulely nothing! Thats's why a change is needed there. If you are not happy with Washington is doing e-mail your senators and congressman and let them know how you feel. If you sit back and do nothing you will get the government you deserve. It is time for a change, get involved!

[bethinCary]

thanks Sen Levin-agree with everything you've said.

Detroit needs to get their act together and listen to you as well on MPG standards-otherwise China, Japan possible even India-are getting the jump on making fuel efficient cars while Detroit still makes 12 mpg extended-cab trucks and SUVs.

that's just stupid.

[CaseyBabes]

"it is now up to Congress".­..........­..........­....barf. It turns my stomach to hear anyone in our effete, ineffective Congress bleat about doing something when those in that inaugust body are the cause of most of the USA's problems. Especially those turkies present for DECADES. We'll probably now hear something like the corn for gas debacle that Congress arranged, resulting in,of course, our spiraling out of control cost of living thru inflation. Want to help Senator? Resign.

[Stirner]

Why, we just know that Carl and his ilk will never resign, they can't resign, as they live off our taxes. So, it is no wonder that his idea to solve a problem (any problem, here being oil costs) is simply to raise taxes. Now, the great herd of American Sheep think that's a great idea because Carl (whose always assures us that heart is with the poor folk) tells them that he will punish the "rich guys", and like Robin Hood of yore, he will give the money to the poor. However, when the rich guy's company goes bankrupt and the poor folk are unemployed and become even poorer, the Sheep will once again turn to Carl for a solution -- which will be (you guessed it!) more "taxes". For Carl a win-win situation which will go on for the rest of his fat-cat tax-fed life. Ugh. Oh, and what of the "poor folk"? Well, as Dick Cheney has so eloquently phrased it: "So?"

[worldtraveller]

Who is John Galt..... :-)

[Taan]

The American public refuses to acknowledge that George W. Bush is clueless in leadership and governance, bereft of knowledge of cultures everywhere, boneheaded to a major fault, and patently marooned in a view of reality all his own. That any sober person would look to the Oval Office for leadership on any issue is a futile gesture. Bush has always been a square peg in a round hole and having been catapulted into the White House through no effort of his own, he remains in an intellectual fog, rudderless and drifting. That he was placed in the Oval Office twice reflects hugely on the U.S. electorate. Almost eight years in office, this is an administration which has failed in every way to address the most pressing issues weighing upon this nation. However, at the same time, it has managed to torpedo our standing among nations, drained our treasury, engendered fruitless military engagements and caused an immense number of military and civilian deaths. To look for any solution to the present spiraling energy crisis from this quarter is pointless. By the time the new Congress convenes, the spiral will have continued and the status will remain unchanged.­.

[CaseyBabes]

And the new Congress will do what? How's that ending the Iraq War thing goin' for you guys that believe Congress is anything more than a bunch of windbag good ol' boys sucking at the public's teat?

[worldtraveller]

Mr Levin if you are reading... I rarely get too serious on this site but will say this seriously now:

1- Speculation on Futures exchanges IS NOT a problem, for every buyer there must be a seller so all those contracts are matched equally and must be liquidated by speculators prior to expiration or they must be forced to take delivery which is rather a pain in the butt.

2- Speculation on exchanges that allows financial settlement of contracts for commodities, such as ICE is a huge problem as someone can buy buy buy forcing world prices up on all exchanges without fear of having to liquidate prior to expiration and be forced to take physical delivery. The more it goes up, the more profit he makes, the more he pushes and when the month ends he is magically flat and able to do it all over again.

ICE made the market gameable like never before.

[HeevenSteven]

Senator Levin,

I think it's more important for you to insure tax incentives for wind, solar, geothermal, efficiency, and other viable sources of energy, and energy use reduction.

How is the GOP able to filibuster everything, yet we barely ever hear that fact in the media? Whenever the Democrats threatened filibuster against the GOP majority, all we saw on TV was Frist or Delay or Santorum crying "up or down vote". Which brings me to another very important matter: Corporate media and ownership rules. The state of broadcast media is shameful. When a population has no way to separate truth from fact it is headed for tyrany. Net Neutrality is equally important, for the sake of liberal democracy, which is slipping away from us.