Rising Gas Prices Hit Nearly Every Economic Sector

May 9, 2007

Rising Gas Prices Hit Nearly Every Economic Sector

Sensenbrenner: More Taxes Not the Answer

Washington, D.C., May 9 - Farmers and small business owners told Congress on Wednesday that rising gasoline costs ripple through the economy, affecting nearly every sector. From transportation expenses to fertilizer costs, higher fuel prices are making it more expensive to operate a small business, they told the House Select Committee on Energy Independence and Global Warming.

During the hearing titled "Economics of Dependence on Foreign Oil - Rising Gasoline Prices," members of Congress learned that dependency on foreign oil is one of many factors helping push gas prices higher.

"Whatever the cause, the volatile and increasing price of gasoline is wreaking havoc on America's small businesses," said Michael Mitternight, president of Factory Service Agency, Inc., in Metairie, La.

Worldwide demand for oil is rising, while OPEC production controls and lingering geopolitical tensions help keep the value of oil high, said Dr. John Felmy, chief economist of API, the national trade association of the U.S. oil and natural gas industry.

U.S. Rep. Jim Sensenbrenner, R-Wis., the select committee's ranking Republican, said gasoline refinery capacity issues were contributing to higher gas prices in his district, located in the area surrounding Milwaukee. He cited a story in the Milwaukee Journal Sentinel that said area residents were paying 21 cents more for gas than the national average of $3.07 a gallon, partly due to a power failure, a fire and scheduled maintenance at regional refining facilities.

"The residents of my district often experience the hidden fee caused by limited refinery capacity," Sensenbrenner said. He also noted that the U.S. hasn't added a new refinery in nearly 30 years, partly due to onerous and expensive regulations that deter companies from making the investment.

"If American drivers are going to see gas prices drop, we need to break our country's dependency on foreign oil, but we also need to break Washington's dependency on taxes and regulation," Sensenbrenner said. "Lowering the cost of gas is about freeing drivers from regulations that keep prices high and about reducing dependency on foreign oil"

Business owners and farmers also described some of the costs associated with higher fuel costs. Donn Teske, president of the Kansas Farmers Union, said higher fuel prices are adding up to $600 in additional transportation costs on a 20 ton load of hay that sells for about $3,500.

Sylvia Estes, president of Pipeline and Industrial Group, Inc. of Virginia Beach, Va., said higher fuel prices are raising the costs of operating necessary equipment, buying material like copper, steal, and concrete, and paying employees. Some school districts are limiting their use of school buses, partly due to increased fuel costs, said Terrence Thomas, president and CEO of Community Bus Services in Youngstown, Ohio.

"My small business cannot afford to absorb much more volatility or increasing fuel costs," Estes said in her statement to the select committee.

Sensenbrenner said he worried that policy proposals designed to address global warming would also lead to higher gas prices. He cited a recent article in The Washington Post that said a recent proposal by the U.N.'s Intergovernmental Panel on Climate Change could result in a tax of up to $1 a gallon on gasoline.

"Today's testimony shows that $4 a gallon gas would be a blow to the economy," said Sensenbrenner, adding that any environmental legislation must provide real environmental benefits, must include new technology, must protect American jobs and the economy, and must include participation by countries like India and China."

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Select Committee on Energy Independence and Global Warming - Republicans
H2-344 Ford House Office Building
Washington, D.C. 20515
Phone: (202) 225-0110 | Fax: (202) 225-0095

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