Statement of Ben Lieberman Before Subcommittee on Energy Policy, Natural Resources, and Regulatory Affairs, House Committee on G

Full Document Available in PDF

Good morning, Mr. Chairman and members of this subcommittee, and thank you for inviting me to testify.  My name is Ben Lieberman and I am the Director of Air Quality Policy with the Competitive Enterprise Institute, a public policy organization committed to advancing the principles of free markets and limited government.  My comments today will focus on those measures I believe Congress should consider to reduce the likelihood and severity of future gasoline price increases such as the one we’ve experienced in recent months.

Several factors influence the price of gasoline and are responsible for the 50 cent per gallon price rise from the beginning of the year through early June.  There’s no question that the most important one is the cost of oil.   The price per barrel of crude began the year a bit above $30 per barrel, and reached $42 on June 1st before falling back to $36 – $38.   Oil is responsible for nearly half the price at the pump, and every dollar per barrel increase translates into roughly 2.5 cents more per gallon of gas.  The jump in oil prices explains more than half of the national average increase from $1.50 to over $2.00 per gallon of gas.  

While the global price of oil is the single biggest reason for the gas price spike of 2004, it is also something that is largely beyond Congressional control.  There is only so much that can be done to influence such factors as OPEC production quotas, political turmoil and terrorism in oil producing nations, oil worker strikes, and the global demand for oil.  Yes, Congress could allow increased domestic oil production, including the billions of barrels of recoverable oil in a small portion of the Arctic National Wildlife Refuge (ANWR).[1]  More domestic output would help lower prices at least a little over the long term, but there are factors beyond the price of oil that that Congress should be considering.

Obviously, we don’t put oil into our fuel tanks, it first has to be refined into gasoline and diesel fuel.  And it is at this step that the federal government has created a regulatory burden that has also contributed to higher prices.   Unlike the price of oil, which has fluctuated in recent years and will likely continue to do so, this regulatory burden has steadily increased and is set to get even more stringent in the years ahead.   And unlike oil, the cost of these federal regulations is squarely within Congressional control.   My testimony will focus on ideas for reducing these regulatory costs.

[1] US Geological Survey, “Arctic National Wildlife Refuge, 1002 Area, Petroleum Assessment, 1998, Including Economic Analysis.”