It is more than a month until the start of the summer driving season and already gas prices have topped $3 per gallon.
Californians are paying $40, $50, $60 or more for a tank of gas at the pump, and there is no end in sight. Prices have gone through the roof -- up more than 50 cents a gallon from a year ago and up from $1.46 since President Bush took office. Where will it end?
The time has come to shine some light on the oil and gas industry. As a beginning, we need transparency, record keeping and an audit trail.
Beyond that, it is time to take several steps that will reduce demand for gas, eliminate subsidies to an industry that clearly doesn't need them, move excess profits into research into energy alternatives, and prevent price gouging and the withholding of oil.
You'd think the energy industry would show restraint. But I've come to believe that the industry has a take-no-prisoners attitude. Its only concern is the bottom line -- no matter what the cost to consumers.
We saw this attitude on display five years ago during the California energy crisis, when California paid more than $40 billion in electricity costs.
We're seeing this again today.
Oil-industry profits have shot into the stratosphere. Exxon Mobil, for instance, made $36.1 billion in 2005 -- the most money made by any company in history. But Exxon Mobil is not alone.
The entire industry is making record profits, quarter after quarter, year after year. Take a look at the profits from 2005:
- Shell: $25.3 billion -- up 37 percent from 2004.
- BP: $22.3 billion -- up 31 percent from 2004.
- ConocoPhillips: $13.5 billion -- up 66 percent from 2004.
- ChevronTexaco: $14.1 billion -- up 5.75 percent from 2004.
- Since Bush took office, the companies have accumulated profits of $321 billion.
So what should we do to ease gas prices and ensure that these companies are on the level?
First, shine the light on energy trades. Today, up to 80 percent of trades take place on electronic trading exchanges where there is no record keeping and no audit trail. This means the government cannot determine if fraud or manipulation is taking place. So we need to put in place the same rules for electronic exchanges that exist in more traditional exchanges such as the New York Mercantile Exchange.
Second, impose a windfall tax. This would be a three-year tax of 50 percent for any profit oil companies make for oil sold above $40 a barrel. This could generate up to $36 billion (assuming a price of $70 per barrel) a year for research and development of energy alternatives.
Third, improve the fuel efficiency of SUVs and light trucks. We have the technology to equalize the fuel economy of light trucks and SUVs with that of passenger cars, but we don't have the will. The time has come to close the SUV loophole and to consider across-the-board fuel economy increases.
Fourth, ban price gouging, especially after natural disasters. It is simply wrong for the oil industry to profiteer in the wake of a natural disaster or other emergency. Americans should know that their government is on their side and that a basic commodity like gasoline will be available and affordable when they need it most. Additionally, companies must be prevented from withholding oil and gas in an effort to raise prices.
Fifth, end royalty relief for energy companies. It is outrageous that big oil stands to get a $7 billion handout at a time when energy companies are earning record profits and gasoline and natural gas prices have skyrocketed. Given the high price of oil and natural gas, I do not understand why these companies should benefit from additional federal incentives that they themselves said they do not need.
The energy industry is once again reaping huge profits at the expense of consumers. This is a situation that cries out for government intervention. The time has come for Democrats and Republicans to put ideological differences aside and work together to rein in Big Oil.