[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
THE IMPACT OF FUEL PRICES
ON SMALL BUSINESS
=======================================================================
FIELD HEARING
before the
SUBCOMMITTEE ON REGULATORY REFORM
AND PAPERWORK REDUCTION
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
VALHALLA, NY, APRIL 18, 2000
__________
Serial No. 106-52
__________
Printed for the use of the Committee on Small Business
__________
U.S. GOVERNMENT PRINTING OFFICE
67-557 WASHINGTON : 2000
COMMITTEE ON SMALL BUSINESS
JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD,
DONALD A. MANZULLO, Illinois California
ROSCOE G. BARTLETT, Maryland DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey CAROLYN McCARTHY, New York
SUE W. KELLY, New York BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania DONNA M. CHRISTIAN-CHRISTENSEN,
DAVID M. McINTOSH, Indiana Virgin Islands
RICK HILL, Montana ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania TOM UDALL, New Mexico
JOHN E. SWEENEY, New York DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota GRACE F. NAPOLITANO, California
MARY BONO, California BRIAN BAIRD, Washington
MARK UDALL, Colorado
SHELLEY BERKLEY, Nevada
Harry Katrichis, Chief Counsel
Michael Day, Minority Staff Director
------
SUBCOMMITTEE ON REGULATORY REFORM AND PAPERWORK REDUCTION
SUE W. KELLY, New York, Chairwoman
LARRY COMBEST, Texas BILL PASCRELL, New Jersey
DAVID M. McINTOSH, Indiana ROBERT A. BRADY, Pennsylvania
JOHN E. SWEENEY, New York DENNIS MOORE, Kansas
JOHN THUNE, South Dakota
Meredith Matty, Professional Staff Member
C O N T E N T S
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Page
Hearing held on April 18, 2000................................... 1
WITNESSES
Gee, Robert, Assistant Secretary for Fossil Energy, U.S.
Department of Energy........................................... 3
Martinez, Debra, Chairwoman and Executive Director, New York
State Consumer Protection Board................................ 6
Flynn, William, Vice President, New York State Energy Research
and Development Authority...................................... 9
Morse, Stanley, Chapter President, American Society of Travel
Agents......................................................... 14
Fanelli, Joe, Owner, Joe's Body Shop............................. 16
THE IMPACT OF FUEL PRICES ON SMALL BUSINESS
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TUESDAY, APRIL 18, 2000
House of Representatives,
Subcommittee on Regulatory Reform and
Paperwork Reduction,
Committee on Small Business,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., at
the Mount Pleasant Town Hall, Valhalla, New York, Hon. Sue W.
Kelly (Chairwoman of the Subcommittee) presiding.
Chairwoman Kelly. Good morning. Welcome to the first of two
field hearings that are to be held in our area today to discuss
the impact of fuel prices on small businesses. I'd really like
to thank Congressman John Sweeney for joining me here this
morning. I look forward to handing the gavel over to him later
this afternoon at our second hearing in Castleton.
A near tripling in the price of crude oil from March 1999
to the first months of 2000, coupled with other developments
initially brought about sharp increases in the price of home
heating oil and diesel fuel. As you all know, the northeast has
been hit the hardest by these rising energy costs. We've made
it through the winter, but we must ensure that we avoid another
home heating oil crisis. Nevertheless, the northeast and the
nation has turned its attention to the new crisis, the price of
fuel. Moreover, the possibility of a sharp increase in
electricity rates is becoming more and more of a reality. I
brought with me this morning and there is available for anybody
who wants a copy, this article from the Wall Street Journal. It
says, ``Northeast Faces Electricity Price Surge.''
I think it's interesting, because it discusses how costly
fuel oil, costly oil-fired plants could drive up electricity
rates this summer.
New York is at a major disadvantage because it doesn't have
any refineries within its state. We do not have major gas
pipelines coming in here. We rely on refineries in other states
and overseas to meet our needs. This fact coupled with market
forces and the President's inability to compel OPEC to reach a
production agreement until two weeks ago, and his continued
reluctance to release oil from the Strategic Oil Petroleum
Reserve has forced us to examine this problem further.
Caught up in all of these issues are the consumers and
small business owners, people who could not have planned for
the oil price hike. Particularly with the possibility of rising
electricity rates on top of high oil prices, the Administration
has to keep its guard up.
The price of oil may have decreased and we may hope that
the crisis is over. Regardless, this nation's energy policy
remains in crisis. The Energy Information Administration
indicated on April 6 that it believed gasoline prices had
peaked, and that the national average price during the summer
might not exceed $1.51 a gallon, as the price that was observed
in mid-March. Unfortunately, the EIA added that the northeast
might see some spikes to higher levels. To small business
owners producing, distributing and consuming oil, this crisis
has really just begun. For this reason, Congress continues to
debate possible short-term and long-term courses of action.
That's why we're here today, to take the debate away from
the inside the beltway politics, home to New York where the
price of oil has had a terrible impact on our daily lives. I'm
really happy to welcome the assistant secretary of fossil fuels
of the Department of Energy, Mr. Robert W. Gee is here with us
today to discuss the Administration's most recent actions
regarding oil production and the views of the Department of
Energy on where we go from here. I trust he will listen
carefully to the testimony of our other witnesses and take
their suggestions and their stories back to the President.
Please.
We will also hear testimony today from Deborah Martinez,
Chair woman of the New York State Consumer Protection Board.
She will testify about how the State is responding to consumer
concerns, and we will hear from Bill Flynn, Vice President of
the New York State Energy Research and Development Authority
who will provide us with a historical perspective of the issue
and offer some real long term solutions. In addition, we will
hear today from witnesses who represent small business owners
from the trucking industry, the travel and tourism industry and
we'll also hear from a gas station owner. Welcome, he happens
to be walking up, welcome, Joe, your seat is right up here in
front with your name on it.
We will hear from Joe regarding the impact on fuel prices
on the profitability of his business. We thank all of you for
being here today, and I look forward to your testimony.
Now I'd like to recognize my colleague, neighbor and good
friend, Congressman Joe Sweeney and good friend for whatever
opening remarks he'd like to make.
Mr. Sweeney. Thank you, and let me thank you for this
opportunity. It was Ms. Kelly's idea to hold field hearings and
I should point out as a colleague of mine on the Small Business
Committee, I can't think of a more important use of our time
during this recess. I want to thank the panelists as well for
being here. It's going to be an interesting and I think
exciting bit of testimony that we're going to lend to this
issue.
We've come through a winter of incredible economic distress
and hardship. My District, which is slightly north of here, and
runs almost up to the Canadian border, felt the impact very
significantly of the fuel oil crisis, and I have to say that
the Administration's response has been somewhat lacking.
Nevertheless, Mr. Gee, thank you for joining us. I'm looking
forward to your testimony and hope you'll hear some of the
words of our constituents in the next couple of hours.
U.S. Production of oil has dropped by nearly 20 percent
since our last oil crisis, and in the past seven years we have
seen what I think is a disjointed response from the
Administration and from those of us with some responsibility,
so I'm hoping these hearings are going to lend some opportunity
for us to really begin to develop some real concise planning.
During the 25 years since the last oil crisis our reliance
on foreign oil has increased from 37 percent to nearly 57
percent today. This is in turn resulted in what we went through
this past winter, but has also resulted in some real hardships
in my District and I've heard that from my constituents, so I
think this hearing is indeed important.
Last week the House reauthorized the Strategic Petroleum
Reserve Bill, with a bipartisan vote of 416 to eight. I think
we are focused in Congress on many of the issues and that being
one of the most important steps towards hopefully developing a
more concise and across the board policy.
With that, I'll seek a motion or I'll ask for unanimous
consent to submit my full statement to the record, Ms. Kelly,
and I'm looking forward to the testimony of our experts,
because I think the real story lies with their testimony, and I
yield my time.
Chairwoman Kelly. So moved. Thank you very much, John.
Let's begin the hearing today by listening to the testimony
of Mr. Robert W. Gee. Mr. Gee.
STATEMENT OF ROBERT W. GEE, ASSISTANT SECRETARY FOR FOSSIL
ENERGY, U.S. DEPARTMENT OF ENERGY
Mr. Gee. Thank you, Madam Chairman and Congressman Sweeney.
I submitted a formal statement for the record and with the
Committee's permission I'll take a few seconds to summarize its
key points. The Department, primarily through its Energy
Information Administration, monitors patterns of fuel supply
and demand in the U.S. Economy. Our data, however do not always
reflect the individual impacts on specific market sectors. We
know clearly, however, that small businesses, especially those
whose profit margins are influenced significantly by the cost
of fuel, have experienced difficult times in recent weeks and
months.
My testimony today will focus on several actions the
Administration is taking to address this situation.
Our goal has not been to try to set an artificial price for
petroleum, rather, our goal is to lessen volatility in the
market, volatility that can make business decisions especially
difficult, particularly for small, energy intensive businesses.
The recent announcement by OPEC and others that more oil
will be flowing into global markets is good for consumers. It
will build inventories and as we have already seen in the last
couple of weeks, will reduce prices. But the recent price spike
reminds us that individuals can be affected by actions and
decisions that occur outside our borders. The recent volatility
in all markets is yet in another of a series of cycles, this
being more extreme in its roller coaster effects than others in
our past. It's a cycle that actually began in 1997 when OPEC
substantially increased production at just about the time when
economic downturn in Asia began to sharply reduce global oil
demand. This led to unprecedented low oil prices, the lowest in
50 years and much of our domestic industry suffered as a
result.
The most recent price spike came as a result of a series of
production cuts, as both OPEC and non-OPEC producing countries
attempted to compensate for the plunge in prices.
Unfortunately, these cuts came at the same time the Asian
economy began to rebound. The supply and demand imbalance
quickly swung the other way and suppliers began drawing on
petroleum stocks. Inventories were driven down to extremely low
levels and the price of crude oil and refined products shot up.
It is important to note that the dramatic swings in prices have
largely resulted from an imbalance of less than 3 percent in
oil supply and demand.
Today the world consumes 75 million barrels of crude oil
per day. A 2 million barrel supply overhang led to the price
plunge in 1998. A 2 million barrel supply shortfall contributed
to the price hike of this year. This is the nature of the
global oil market that affects every American. Today, 52
percent of the oil consumed in the United States originates
from outside of our borders. That is not only due to declining
domestic production, but from a continuing rise in U.S. Demand.
Our petroleum appetite has increased more than 20 percent since
1985.
There are some short-term global actions that can help. We
have diversified our international sources of oil supply. Last
year we imported oil from 40 different countries. We have
engaging in global diplomacy and I believe Secretary Richardson
deserves an amount of credit for the moves he's made in recent
weeks. But in the longer run we must continue to take action
that strengthen our own domestic security and to protect those
Americans who have been harmed most by price hike fluctuations.
That is what the Department of Energy has been doing in the
last couple of months.
To ease the financial hardship caused by the winter runup
in price for distillate fuels in the Northeast, the
Administration released nearly $300 million from the low income
Home Energy Assistance Program. In the pending supplemental
appropriations bill he has asked Congress for another $600
million for this program, plus additional funding for
weatherizing the homes of low income families.
The Administration took action to insure the availability
of SBA loans for heating oil distributors who needed improved
cash flow in order to meet contractual obligations and make
deliveries.
In all, I've cited fifteen separate actions on pages 3 and
4 of my formal statement that the Administration took following
this winter's runup in fuel prices.
Within the last month the President proposed additional
measure. In his March 18 radio address to the nation he called
on Congress to support the establishment of a regional reserve
in the northeast. This would be a 2 million barrel emergency
supply of heating oil that could be released when supply
shortages threaten economic harm to consumers. We are currently
working on plans for this reserve and we are prepared to work
with Members to pass legislation that would establish clear
authorities for its creation and use.
The President also called on Congress to extend the Energy
Policy and Conservation Act, the legislation that provides
organic authority for our strategic petroleum reserves. Despite
the recent visibility and concern expressed over our nation's
oil situation and our energy security, the legislative
authorities for our most important energy emergency response
tool have been allowed to lapse. They expired on March 31. We
were encouraged last week when the House passed an extension of
the act through fiscal year 2003 and included provisions for
the heating oil reserve. The legislation has now been returned
to the Senate which previously passed a similar extension. It
is critical that Congress act soon to extend this legislation
to make certain the President has the opportunity to use all
available tools to respond to the needs of the United States
economy.
There are also opportunities to reduce our economy's
appetite for petroleum and supply a greater proportion of our
oil from domestic sources. Again in his radio address the
President announced several tax incentives to support domestic
oil production as well as reiterating his support for tax
credits that would encourage greater use of renewable fuels and
improve energy efficiency.
For the longer term we are strong believers in technology
both to make our economy more efficient and to develop
strategies to utilize domestic resources. One of our key energy
efficiency initiatives is to develop a prototype full size
automobile by 2004 that will get 80 miles per gallon. By the
same year we also want to improve light truck fuel efficiencies
by 35 percent while at the same time insuring that these
vehicles meet new air quality regulations. These efforts will
not only benefit millions of automobile owners, but also the
hundreds of thousands of businesses that rely on delivery
trucks and freight haulers to move their products to market.
Finally, let me make a final point that often gets
overlooked in a discussion about small businesses. We correctly
focus most of our attention on the small companies and family
owned businesses that consume petroleum. However, the majority
of today's oil producing companiesin our country are small
businesses. Today's petroleum industry is not the industry of big oil
that existed in the 1950's, '60s and '70s. For the most part, the large
oil companies have turned their attention to more lucrative prospects
overseas. I'll certainly be happy to share more information with you on
that.
Today 85 percent of the new oil and gas wells drilled in
the United States are drilled by the smaller independent
companies. Independents account for nearly half of the crude
oil produced in the lower 48 states. They are responsible for
two-thirds of the nation's natural gas supplies, nearly 80
percent of the more than 8,000 companies that now make up the
U.S. Oil industry have less than 20 employees.
The extreme price volatility we have witnessed is good for
neither the oil consumer nor the oil producer. Consequently,
Madam Chairwoman, we believe a truly comprehensive national
energy strategy must address both ends of the fuel spectrum;
the producer in the field and the consumer in the home or
business. There are remarkable opportunities at both ends of
the spectrum. If we can sustain a partnership between
Government and industry in developing new energy consuming
technologies and new energy producing technologies, we can look
forward to a day when the roller coaster rise of prices comes
to a stop.
Our goal is a future in which the United States is
producing the full potential of its domestic resource and
consuming those resources in the most efficient manner
possible. The more we drive towards that goal the greater the
likelihood that the cost of a barrel of oil in the future will
be dictated by markets not by cartels.
This concludes my opening statement, Madam Chairwoman, and
I'll be pleased to answer any questions you and Congressman
Sweeney may have. Thank you very much.
Chairwoman Kelly. Thank you very much, Mr. Gee.
Next we go to Ms. Martinez and Ms. Martinez we are glad to
have you here. The New York State Consumer Protection Board I'm
sure has some interesting things to say about this.
STATEMENT OF DEBRA MARTINEZ, CHAIRWOMAN AND EXECUTIVE DIRECTOR,
NEW YORK STATE CONSUMER PROTECTION BOARD
Ms. Martinez. Good morning Congresswoman Kelly and
Congressman Sweeney. My name is Debra Martinez and I am
chairwoman and executive director of the New York State
Consumer Protection Board. Thank you for the opportunity to
appear this morning to testify on this important subject.
The consumers and small businesses of New York State have
just endured a winter heating season that saw the price of home
heating oil propane, diesel fuel and gasoline at very high
levels. Many of our senior citizens, persons on fixed incomes
and low income families experienced difficulties making
payments for their home heating oil deliveries. To protect
consumers and small businesses and promote the health and
safety of all New Yorkers during this difficult period,
Governor George E. Pataki took quick and decisive steps, one,
to secure the release of 73.2 million in funding for the Home
Energy Assistance Program, HEAP, to assist New York State's low
income families; two, established a Governor's consumer action
line as an outlet for consumers to contact state officials and
report potentially unwarranted price hikes and suspected fuel
price gouging, and three, direct the appropriate state
agencies, authorities and personnel to insure that home owners
receive the critical supplies of heating oil that they needed.
In conjunction with Governor Pataki's efforts, the State
Consumer Protection Board responded to numerous complaints from
consumers and small businesses during the period regarding the
pricing, delivery, availability and billing for home heating
oil, propane, kerosene and diesel fuel. To date, a majority of
these complaints have been investigated, successfully mediated
and resolved.
We can use the lessons learned from the recent and sudden
increase in heating oil prices and apply them to the current
escalation in national gasoline prices. However, while price
increases in home heating oil, gasoline and diesel fuel can be
explained in part by the decision of the Organization of
Petroleum Exporting Countries, OPEC, member nations to limit
oil production, the problems faced by consumers as a result of
these circumstances are not necessarily the same. The principle
difference is that unlike the home heating oil, there are no
federal or state government assistance programs to help
individuals and small businesses who are unable to afford the
sharp and sudden increases in gasoline and diesel prices.
Consumers and businesses cannot lock in a gasoline price for
the driving season the way they can for home heating fuels, and
while not all households are heated with oil, almost all motor
vehicles must utilize gasoline or diesel fuel in order to
operate.
Nearly everyone in New York State will be affected by high
fuel prices in one way or another. The pricing and supply of
gasoline and diesel fuel impacts different regions of the
country in different ways, and unfortunately, there is little
that individual states can do to favorably impact the supply of
gasoline. New York like other states must rely on the federal
government to take the necessary steps to insure that ample
fuel supplies are available and that prices are stable and
fair.
Fortunately, it appears that recent negotiations between
the Federal Government and OPEC ministers will result in an
increase in the production of crude oil. With this development,
consumers will see and in some cases are already seeing, a
stabilization of gasoline and diesel prices at the pumps.
The Energy Information Agency, EIA, recently presented
further justification for increased consumer confidence
regarding the stabilization of fuel prices. The EIA revises
fuel cost estimates for its upcoming summer driving season.
Fuel prices are now expected to peak during April and May and
then gradually decline to an average price of $1.46 per gallon
during the summer months. This is promising news for consumers,
considering EIA's fuel cost projections of nearly $2 per gallon
by July.
Even with some limited relief on the horizon, consumers and
businesses will still pay about 25 percent more at the pumps
this year than they did last summer. The typical two car family
in the United States logs an average of approximately 12,000
total miles during the six month period between April and
September each year. This year the same family can expect to
pay an additional $170 for fuel during this period.
The Energy Information Agency has also warned that any
disruptions related to unexpected regional fuel refinery
problems would have a dramatic impact on the effected region.
Unanticipated refinery problems could be compounded during the
summer of 2000 due to record low fuel reserve levels across the
northeast. Preliminary figures from the Consumer Protection
Board's monthly gasoline pricing survey for the month of April
indicate that the price of gasoline in some regions of New York
State has increased by an average of 15 cents a gallon above
February prices, resulting in an average statewide increase of
about 50 cents per gallon above last year's prices during the
same period.
According to national figures released by EIA earlier this
month, New York State's figures are consistent with increases
in other places across the country. The recent increase in fuel
prices has had a definite impact on consumers and businesses
across New York State. The sudden nature of increases has added
significant cost to the daily operations of many businesses.
These increases have been particularly difficult for the
airline, trucking, including garbage and solid waste haulers
and delivery service industry who in many cases have been
forced to add a fuel surcharge to improve cash flow and
stabilize operational course. We are hopeful that as the price
of fuel decreases, the needs for these fuel surcharges will
also decrease.
It is encouraging that price relief is on the horizon for
consumers and businesses alike in New York State. In fact, in
many regions of our state and across the northeast, fuel prices
have begun to stabilize. At the direction of Governor Pataki,
the New York State Consumer Protection Board and all other
appropriate New York State agencies will continue to monitor
fuel costs, help to prevent price gouging and work to identify
creative solutions to minimize the impact of fuel cost
increases on New York's consumers and businesses.
To this end the Consumer Protection Board supports other
state consumer boards and the American Automobile Association
in offering the following common sense consumer tips to help
minimize fuel consumption during the upcoming summer driving
season.
Accelerate at a steady pace and avoid sudden throttle
starts. Drive and maintain moderate and safe speeds, always
adhering to posted speed limits. Avoid excessive or prolonged
vehicle idling. Make sure your vehicle is properly tuned. Check
the tire pressure at least once each month to insure proper
inflation. Make sure the vehicles wheels are properly aligned.
Change the oil and all filters at recommended intervals. Plan
all trips with efficiency and safety in mind. Refrain from
pumping the accelerator or racing the engine when the vehicle
is not in motion and avoid unnecessary braking and acceleration
by anticipating the traffic ahead.
While these tips may appear simple and obvious, if followed
by all New York State drivers, they will help reduce the amount
of fuel consumed and translate to significant cost savings for
consumers and businesses. Furthermore, these tips will help
insure the safety of all New Yorkers and those from outside our
state that use New York State's highways and byways.
In conclusion, I applaud Chairwoman Kelly and Congressman
Sweeney for their leadership and concern over this important
issue. By investigating the impact of fuel costs on New York
State's consumers and small businesses, Congresswoman Kelly and
Congressman Sweeney have demonstrated the leadership necessary
to address this important issue. It is also very encouraging to
have the participation and support of the assistant Secretary
of Energy, Robert Gee, as this and other testimony is presented
here today. As Chairwoman of the Consumer Protection Board, I
will report the information from these proceedings back to
Governor Pataki, and I stand ready to assist our Congressional
delegation and other appropriate parties in working to resolve
this situation for the benefit of New York consumers and
businesses.
On behalf of New York State consumers, I thank you for the
opportunity to appear before you today.
Chairwoman Kelly. Thank you very much, Ms. Martinez.
Now we move on to Mr. Flynn, from the New York State Energy
Research and Development Authority. We look forward to your
testimony.
STATEMENT OF WILLIAM M. FLYNN, VICE PRESIDENT, NEW YORK STATE
ENERGY RESEARCH AND DEVELOPMENT AUTHORITY
Mr. Flynn. Good morning, Chairman Kelly and Congressman
Sweeney. Thank you for the opportunity to testify here today on
the petroleum supply and price problems. As all the data isn't
in yet, I hope to frame some of the issues for you here today
from a historical perspective and hopefully looking forward.
New York State relies on heating oil more than any other
state in the nation for meeting its heating needs. We use 20
percent of the total United States distillate demand, and are
the largest consumer of heating oil and kerosene in the nation.
43 percent of New York State's households use oil for space
heating, over 2.9 million households.
In February retail heating prices soared to record levels
from $1.24 on January 17, to record breaking $2.02 a gallon
February 27, with New York City metropolitan area customers
paying $2.25 a gallon. For the lower Hudson valley, the heating
oil peaked at $2.14 a gallon during the first week of February.
As of April 10, the statewide average price declined to $1.39 a
gallon, but the retail price is still more than 50 percent
above a year ago levels. In the lower Hudson Valley, the prices
declined to $1.41 a gallon as compared to 83 cents a gallon
last year at this time.
The economic burden of spiralling oil prices is not
confined to heating oil. New York motorists annually consume
over 5.6 billion gallons of gasoline and nearly 1 billion
gallons of diesel fuel. This higher priced oil is significantly
increasing the cost of transporting people and goods of New
York. There is no single definable factor that we can point to
as the ultimate cause of the spike in heating oil and diesel
fuel prices and the current runup in gasoline prices. There
are, however, a number of market factors that contribute which
do bear mentioning.
One, economic growth and the strengthening economics of the
Pacific rim contributes to the resurgence in demand for
petroleum at the same time OPEC and non-OPEC countries reduce
production.
Two, the petroleum industry, like other industries, has
adopted just in time resupply of inventories. As a result New
York State's bulk storage capacity reduced 25 percent in the
past five years. There's not a lot of heating oil in storage to
ride out any disruption in the petroleum distribution chain.
Over the same period, in-state gasoline storage capacity fell
by 17 percent. During the best of times, there's only about
four days of heating oil supply in New York harbor.
Three, New York and New England do not have any refineries.
We rely on refineries in New Jersey, Pennsylvania, the gulf
coast and imports to meet our needs.
Four, weather. When the extreme cold weather arrived in
mid-January, we experienced a sharp increase in demand by all
sectors, creating greater competition among buyers, including
interruptible natural gas customers and electric generators.
Five, we experienced problems caused by icing on the Hudson
River and high seas and strong winds on Long Island Sound which
delayed barge shipments to keep coastal and inland oil
terminals exasperating the already tight supply situation.
Terminal operators on Long Island and New York harbor told us
this is the first time they experienced completely running out
of product for an extended period of time.
Assisting the resupply effort was the Coast Guard. The
Federal Government must insure there's adequate funding in
place for Coast Guard icebreakers. These icebreakers are
essential in keeping New York's waterways clear for the
movement of petroleum. Cost Guard icebreakershelped to move 105
million gallons of petroleum products from New York State harbors to
oil terminals on the Hudson River as far north as Troy and Congressman
Sweeney's District. We estimate these products had a retail value of
over $750 million.
As for gasoline, nationwide refinery outputs at the start
of April was about 8.4 million barrels a day, about 6 percent
more than last year, although national inventories are
currently 6 percent lower than year ago levels. The average
retail price for a gallon of regular gasoline in New York
escalated 18 cents a gallon in recent weeks from $1.43 a gallon
at the end of January to $1.61 in late March exceeding the
previous all time high of $1.51 a gallon at the end of the
Persian gulf war. This situation definitely bears watching as
we enter the summer driving season.
I know we have somebody here from the trucking industry
today, and truckers in New York and throughout the nation are
also feeling the pinch of high diesel prices. Although diesel
prices have dropped from the $2.30 to $2.70 range in February,
the full effect of these higher transportation costs have yet
to be felt in stores and by producers that rely on the trucking
industry to deliver their products.
Needless to say, Governor Pataki continues to be concerned
about the economic consequences of this unprecedented rise in
petroleum prices on New York citizens, particularly our
elderly, working poor and low income customers. Governor Pataki
moved quickly to insure no one was cut off from HEAP and
directed the following initiatives:
He established emergency provisions for shelter and heating
by working with our State Emergency Management Office and the
American Red Cross. NYSERDA was in constant contact with
emergency medical coordinators, U.S. Coast Guard, oil
distributors, terminal operators and oil operators;
Directed the New York State Public Service Commission to
work with public utilities to voluntarily keep their
interruptible natural gas customers who could switch to oil or
natural gas;.
Directed the State Department of Taxation and Finance to
issue temporary certificates to heating oil distributors and
trucking companies to allow them to buy heating oil from other
states.
The New York State Department of Environmental Conservation
granted a one week waiver to allow New York City municipal
facilities to use slightly higher sulfur oil to meet their
heating needs.
Governor Pataki asked the Consumer Protection Board and
NYSERDA to investigate causes of the current shortage and
recommend measures to prevent a reoccurrence. In response to
the Governor's directive, NYSERDA and the Consumer Protection
Board under the direction of Chairman Martinez are surveying
heating oil distributors, terminal operators, refiners,
electric generators, natural gas utilities and interruptible
customers to determine the causes and we expect to issue a
report later this spring which at that time we'll make
available to this Committee. Based on these initiatives, New
York State's response showed that communication and
coordination are effective strategies that do work. Besides the
actions that Governor Pataki took here at home, he also worked
for necessary federal action to safeguard New Yorkers.
We estimate that the heating oil price increase will cost
New York's economy about $650 million dollars more than last
year with nearly $450 million of this increase felt by
residential heating oil customers. Based on that, Governor
Pataki asked for emergency HEAP funds. The Governor also raised
the HEAP limits to help the elderly and working poor receive
assistance in funds to pay their heating bills.
Governor Pataki also asked for the release of oil from the
Strategic Petroleum Reserve. While that never happened, last
week the House passed legislation to establish a reasonable
product reserve, which I know Congressman Sweeney was one of
the leading proponents.
There are a number of policy options that the New York
State Government can pursue working with the marketplace to
better meet our future energy needs.
Once again, I wish to thank you, Congressman Kelly and
Congressman Sweeney for the opportunity to testify today, and
obviously I'll be more happy to answer any of your questions.
Chairwoman Kelly. Thank you very much Mr. Flynn. We
appreciate your testimony.
Now we're going to move to, I just noticed a huge 18
wheeler move around the circle here, so it's very appropriate,
Mr. Spencer, we have you here to testify this morning on behalf
of the trucking industry. Please proceed.
TESTIMONY OF TODD SPENCER, OWNER-OPERATOR, INDEPENDENT DRIVERS
ASSOCIATION
Mr. Spencer. Thank you and good morning, Madam Chairman,
Congress Sweeney. I am delighted to be here, and I did note
with interest the comment of my colleague from New York talking
about most New Yorkers have not seen the cost for higher diesel
fuel show up in the products that they buy, and that's simply
because our people have been eating those costs, and eating
that cost is quickly turning into a poison pill for many small
business truckers.
Simply put, the skyrocketing cost of the diesel fuel and
the inability of small business truckers to pass on those costs
to customers is causing financial ruin throughout the industry.
Small business truckers who own six or fewer trucks make up 70
percent of the industry. That's 70 percent here in New York,
and nationwide. Right now, they are paying hundreds of dollars
more per week for the diesel that is essential to them being
able to operate their trucks and meet the needs of society and
each one of us.
Under present circumstances, it is difficult for most
truckers to break even and many are operating at a loss. In
recent weeks, many small business truckers have simply gone out
of business, with thousands more approaching financial ruin.
Unless something is done, those hundreds will turn into
thousands and the entire country will face a real crisis. Many
members have told us that when they lose their business, they
are losing everything they have worked for.
The effects of the problems of truckers have begun to show
up in other areas of the economy. Truckers are missing their
insurance payments and not making truck payments. Truckers are
turning back their trucks to truck dealers in record numbers.
With a glut in the used truck market, and there certainly is
one now, truckers are only getting cents on the dollar for the
equity they hoped they were building up in the equipment they
have. This means that as they exit the industry, they exit the
industry with a significant debt that they have to carry with
them.
This morning here with me is one of our members from the
area, Mr. Brad Chadwick from Shrub Oak, who is one of those
people that's out there meeting the needs of principally people
in New York. Brad's been a dump truck operator for thirteen
years, and I suppose he might say it's better now than it was,
but during February, the price of diesel fuel for truckers in
New York and in much of New England increased by a dollar a
gallon, and it had been building up prior to that, and of
course I noticed the dollar figures that were mentioned for
heating oil obviously don't include myriad of taxes that
truckers pay, so for many truckers, the price of a gallon of
diesel fuelwas $2.50 a gallon, and that diesel fuel for a
trucker is the largest single cost they will have every year, day in
and day out, and it's essential to them being able to operate their
business.
And the difficulty our people have is in passing along
those costs. Brad tells me that his experience in the customers
that he has is that he's been able to increase his rates a
little, and about half of those customers have agreed to pay
it. The other half just simply said no, we'll just simply find
somebody else.
So another member that I hoped would be here today is Fred
Ferber, who runs Smith Avenue Moving Company. Fred's been in
the moving business for 43 years, right in New York. He reports
to me that the highest diesel prices he paid were $2.15 a
gallon, and he operates his business, and this is an old
business, an old family business on a 1 to 3 percent profit
margin, and with a 1 to 3 percent profit margin, he can't even
get a loan to keep his business going, and he's looking right
now at increased costs of about $15,000, just attributable to
fuel, and the net result of that for him is that for smaller
people, smaller moves, he just can't perform the service
anymore. He just can't simply afford to.
This morning, I talked to him early this morning, he's on
his way up to Venetia, delivering some people's goods, and he
told me that if he were here, he'd like to say he'd play the
tape, ``The Little Man'' by Alan Jackson, that he said that for
him----
Mr. Sweeney. If I could interrupt you, I was going to start
my questioning citing that song.
Mr. Spencer. And for literally hundreds of thousands of
small business truckers, they can relate to that song. Because
it's tough, and it's a struggle, and as I mentioned, Brad's a
relative newcomer. Fred's been 43 years in the business, he's
never done anything different. He typifies what a family
business is all about. His 82 year old mother answers the phone
if you call Smith Avenue Moving. These people have hope, but
now they need action. If we don't fix this problem soon, more
truckers will continue to lose their businesses or will refuse
to drive unprofitably and just stop trucking. When they do, we
are going to begin to see greater disruptions and increased
costs in our economy as goods do not get to market and just in
time deliveries to manufacturers cease to be just in time.
OIDA would like to recommend three proposals to address
this problem. First, we believe Congress should create a
mandatory fuel surcharge program to be imposed by motor
carriers, brokers and freight forwarders that takes effect when
there are sharp increases in fuel prices, and it's sufficient
to compensate for those higher costs and is automatically
passed through to the person who pays for the fuel. Both before
and since deregulation of the trucking industry, fuel crises
have had a devastating effect on small business truckers.
During each oil crisis, a fuel surcharge was the remedy used to
help the small business trucker, and in every instance, it did
have to be mandated. This is a much needed short-term solution
that would immediately help owner operators and small carriers
recover their additional costs, but it will also be a long term
solution that would respond to unpredictable fuel price
increase without requiring additional legislative or regulatory
action.
Such legislation would give truckers the ability to pass
along their increased costs to the people who benefit from
their services, the public at large. In this way the burden of
increased fuel costs will be spread thinly among a greater
number of people, rather than heaped solely on small business
truckers that quite simply can't afford it.
Second, we would also ask Congress to invest, to launch a
Government investigation into destructive and predatory rate
making processes that have been raging through the trucking
industry. If truckers are operating at a loss, there is the
substantial risk that they will not have the necessary
resources to properly maintain their vehicles. We do believe
that safety is a factor.
Third, it would be helpful to our members if there could be
an emergency low interest SBA loan to help truckers who have
come under financial hardship due to the fuel crisis. As I've
said, independent truckers pay for the cost of fuel out of
their own pockets. Desperate truckers trying to stay in
business have had to go into debt or face foreclosure on their
vehicles or even homes trying to stay in business during this
difficult time. The introduction of a mandatory fuel surcharge
alone would not make up for all these men and women have lost
in the last few months. An SBA loan specific for truckers at a
low interest rate and made quickly would help.
In the longer term, on our rate investigation, if drivers
were properly compensated for their costs, this fuel prices
would be a mere bump in the road. A fuel surcharge is clearly a
viable solution for today's and future fuel crises. SBA loans
would be an excellent complement to a fuel surcharge. And I
need to add too that our organization, OIDA was formed in the
1970's as a result of the very first Arab oil embargo, which
literally changed America, we thought forever. I can tell you,
it rocked the trucking industry, and it stopped it, and for all
of these years, then, in the '70s, the only way to make an
impact that truckers have would be to stop, to create
disruptions, to make a scene as a cry for help. The only
leverage they had was to do that.
Our organization was formed from that situation, from that
melting pot, so to speak, and with the message to truckers that
if we worked within the system, the system will respond. Our
lawmakers care, and we believe me, it's hard to maintain that
and it's hard to sell that when it seems like the smallest
things take forever, and that the system in so many instances
really doesn't respond.
I certainly beg the members of the Congress and I thank
this Committee for having this hearing, to focus attention on
these issues, because they do need to be focused on. Truckers
are essential. Those that you don't know, I mentioned Fred
Ferber earlier. I don't know, I'm sure there may be some people
in the room that know Ed Arace, who is the economic director
for Empire State. Fred has moved Ed three times. He's also
moved Congressman Maurice Henche three times. Owner operators
provide professional services every one of us needs in every
area of our economy. Thank you.
Chairwoman Kelly. Thank you very much, Mr. Spencer. As you
mentioned that question of whether or not we could do some
special SBA loans, I just turned to our special counsel, Mr.
Harry Katrichis, who is here this morning. He is counsel for
the Small Business Committee. So we will, I think this is an
interesting situation and I think we can explore that further.
Don't you think so, Mr. Sweeney?
Mr. Sweeney. I do.
Chairwoman Kelly. We'll move now to Mr. Morse. Mr. Morse,
we're delighted to have you here and we're delighted to hear
testimony from, I assume you're here representing ASTA.
Mr. Morse. That's correct.
Chairwoman Kelly. Please proceed.
STATEMENT OF STANLEY MORSE, CHAPTER PRESIDENT, AMERICAN SOCIETY
OF TRAVEL AGENTS
Mr. Morse. Congresswoman Kelly, Congressman Sweeney, thank
you very much for inviting me here. This is a wonderful
democracy that we can be here to have a sharing of ideas.
Thank you for the opportunity to address the subject of
fuel prices as they concern the travel agent community of the
Hudson Valley, New York. As the elected president of the Hudson
Valley chapter of the American Society of Travel Agents, ASTA,
my organization of over 100 agencies and membership exceeding
250 has been impacted in two distinct and significant ways
during the winter and spring of year 2000.
The way we are most affected involves the airlines'
continuing failure to include fuel and other surcharges in air
fare displays. It is these air fare displays which are used to
research, book and ultimately ticket an airline reservation for
a client traveling anywhere by air. If fuel charges were listed
openly and honestly, there are three places they should appear.
One, in the air fair displays filed with the airline tariff
publishing Corporation, ATPCO; they should appear in the
airline computer reservation systems used by travel agencies
and in the airline owned or managed web sites which are
available to the open public.
The airline practice of excluding fuel surcharges is
deceptive mainly to the consumer. May I digress to say here
that my presentation focuses on the consumer, not the travel
agents. We'll take care of ourselves.
When a client requests an airline ticket quote, the travel
agent uses the computer reservation system to research the
quote. Since fuel surcharges are not posted in the system, the
quotes we provide the client are often understated. The
surcharge can be anywhere up to $20 per ticket. Fuel surcharges
are not consistent by amount, geographical location, that is,
city payers as known by travel agents, and the airlines, and
not all airlines have apparently imposed the surcharge.
When the client is quoted an air fare, it's the travel
agent's view that the fare quoted should be the actual price
charged at ticketing. When the agent has to make a followup
call to the client, however, often a toll call, to tell them
about the new ticket cost, client frustration and mistrust of
the travel agent set in. After all, shouldn't a professional
travel adviser know and be expected to be accurate in quoting
an air fare? And all the explanations in the world often do not
satisfy the frustrated client.
The travel agent in this example plays the unwitting and
unnecessary messenger of bad news. We don't like this role,
although we're forced to play it daily.
Since the airlines have not posted surcharges openly and
honestly, it is anyone's guess whether and how much they apply.
What's most troubling in this practice is that it lures
customers by listing fares which are actually lower than those
really available for purchase. Also, by airlines not listing
their surcharges, those with self imposed surcharges are listed
on a par with airlines which don't charge such surcharges or
fees. Its deception by any stretch of the imagination.
But the second and perhaps more galling aspect of fuel
surcharges is that they are commissionable to travel agents.
Since a travel agent benefits, however small in nature, from a
cut of the fuel surcharge, we might be expected to shut up,
take the money and run. Now, in fact, the average benefit to
the travel agent measures in pennies on a ticket, given the
algorithm of ticket costing. To the contrary, though, I found
most agents in my organization to be upset with the practice.
It's not what we learned at our mother's knee. After all, a
fuel surcharge should be meant to cover unacceptable costs of
airline fuel. It should not be used as a ruse for making more
money, but this is not how the system works.
Rather, fuel surcharges are apparently another method of
lining the pockets of the airlines. While fuel costs are higher
this year than last, and while surcharges will probably go to
offset fuel cost increases, most agents are highly suspicious
of the amount airlines really need to cover increased
surcharges. If the airlines are willing to kick back a portion
of the surcharge in the form of travel agent commission, it
doesn't take a college education to conclude there's something
also in it to the airlines. And given the highest levels of
airline profits in history, the current fuel surcharges are
suspect at the least.
The six major U.S. Carriers; American, Continental, Delta,
Northwest, United and U.S. Airways control over 80 percent of
airline tickets issued in the United States. As such, the big
six are an oligopoly headed swiftly for a monopoly and it is
the big six which have lead the fuel surcharges.
The flying public is to a large measure unaware of what's
happening. In the short run, fuel surcharges are expected to be
present through the summer of year 2000. In the long run, and
assuming fuel surcharges are really necessary, travel agents
can only hope the airlines will remove the surcharges when no
longer applicable. We express this hope with skepticism.
In closing, self-imposed fuel surcharges are the latest in
a growing list of actions used by the airlines to relentlessly
pursue profitability to the significant detriment of the
American consumer. End of prepared remarks. I can only add to
that, in the travel trade news education, one of our
publications, it indicates in the month of March as reported by
AAA, the cost of leisure air fares are up 7 percent.
Thank you very much for a chance to testify.
Chairwoman Kelly. Thank you very much Mr. Morse. Would you
like to have us insert the travel piece into the record, that
newsletter into the record?
Mr. Morse. Certainly.
Chairwoman Kelly. Thank you very much. So moved.
Finally we have Mr. Joe Fanelli, the owner of Joe's Body
Shop. Mr. Fanelli, thank you.
STATEMENT OF JOE FANELLI, OWNER, JOE'S BODY SHOP
Mr. Fanelli. Hi, Miss Kelly, Congressman Sweeney. I own a
gas station, and when gas went up, it would usually go up one,
two cents a gallon, but the prices from each gas load were
going up 10 to 12 cents a gallon, and there's no way that
people in service stations would raise their prices immediately
because of being scared they're going to lose gas volume, which
means, you know, you lose profit, and you have a lot of people
get mad at you coming in and yelling at us as gas station
owners, blaming us that gas is going up.
I think people drive their cars less, because, which hurts
our business, because they don't have as much maintenance on
the cars, and I think the mom and pop store gas stations which
are smaller volume gas stations, which I have, I don't have ten
pumps, I have two pumps, and we can't afford to hold the price
down too long, because we have to pay people. I have a full
service station, and really the profit margin is very small to
begin with, it's only 10 to 12 cents, if that, if we can do
that going outside, and I don't think too many people would
want to work for that kind of profit.
I think the big major oil companies, they tend to go up
slower than the little guy, because they're the ones that own
the oil, and they can afford to keep the prices down. They
control the rack prices which fuel distributors get gas from.
Fuel distributors are the middlemen that try to move gas for
bigger companies, and I think the government should release oil
in the wintertime for heating oil. A lot of these things are
nice that they're releasing money, but it's kind of a little
too late. It's almost getting warm out and a lot of people
suffer already.
Gas problems, you know, the demand was, when the demand is
high, the gas prices go up.
We as repair shops, we have to take waste oil for free.
When gas went way down last year, they wouldn't take our waste
oil for free. We had to pay for it. And by law, we have to take
waste oil, Gene Perro's office gave us a letter that we were
going to get a $10,000 fine if we don't take the oil from the
public. We certainly don't want people to flush it down the
toilet, but we don't want to pay to get rid of other people's
oil. You know, I must have had to empty two or three times
already. I just pay for it. This is money that's coming out of
my pocket.
On the credit cards, gas was going up to, we were paying
over a $1.60 a gallon and people paying with credit card, so we
lose 3 percent of the total sale. So at $1.60 at our cost,
we're losing almost 5 cents a gallon to begin with before we
make any kind of profit at all.
The sales tax, they were only charging 7 cents a gallon
prepaid sales tax. At the end of this quarter, a lot of gas
stations got rude awakenings when they had to pay thousands of
dollars back to the state because it was only 7 percent on the
dollar.
The commercial tax on heating oil with garage doors always
going up and down, were paying over $2 a gallon, and the gas
stations were usually, you know, were poorly insulated and the
doors, you use a lot of heating oil because the doors are
always going up and down. And the gas stations are all being
forced to sell candy bars and milk and everything else, because
there's not any kind of profit in gas.
You know, all's we want is to have a steady price, if they
can have at least oil that's sold at a price that stays steady,
and I think it's all mental in the public's eyes, because they
see the price going up and down and I think they get aggravated
more than anything else. And I hear a lot of people with their
big Suburbans, they're going to buy smaller cars. So that means
different kind of cars, and big G M and stuff are going to have
a problem selling these cars and that's going to impact their
selling of bigger vehicles, because you know, we had to buy an
emission machine, inspection machine that costs us a lot of
money, maybe a couple of years ago. It's not that far down the
road and people are just starting to rebound a little bit from
this, and now this winter we got hit with the higher fuel
prices and gas prices.
I just hope that they can have a steady price at some
point. Thank you.
Chairwoman Kelly. Thank you very much, Mr. Fanelli, we
really appreciate your testimony. I think it's important that
we hear from somebody who is actually pumping the gas at the
gas pump and having to face the public. And now I'd like to
begin some questioning.
Mr. Gee, I noticed in hearing your written testimony, some
allusions to Secretary Richardson's recent, and I'm putting
those in quotes, success in working with foreign oil ministers
to increase production. What I really find interesting about
this is that your agency head, who just months ago admitted
that the Administration was caught napping on the issue, is now
heralding success in addressing the resultant problem. I'd like
to know how you respond to that.
Mr. Gee. Thank you very much, Madam Chairwoman for the
question. I know a lot of people had questions about what the
Department has been doing, what Secretary Richardson has been
doing over the course of last year. As you recall, we began the
year last year with oil prices actually down at ten dollars a
barrel. A lot of our attention was focused on economic
conditions and where the oil was being produced domestically to
try to maintain our productive capacity. What Secretary
Richardson was alluding to was the fact that around September
or October of last year, if you look at where we were in terms
of home heating oil inventories going into the winter heating
season, there wasn't really anything that our EIA, our Energy
Information Administration saw to raise concern at that time
based on their then expectations of weather and inventory
stocks. And in fact, even going into December, they began to
see a decline in the availability of heating oil stocks, but
they had assumed that that was because largely of the Y2K
problem, where they thought a lot of inventory was being
removed from the primary level of inventory down to the
secondary and tertiary level of stock.
So what Secretary Richardson was referring to, was that
based upon known market indicators and expectations of how
heating oil was being deployed at that time, there wasn't
anything that anybody could have expected that would cause a
severe problem.
The other thing, as you know, is that OPEC did decide
around, I believe, springtime, to tighten up on the amount of
oil that they would produce. And again, that didn't raise any
suspicions in anybody's mind, because that was an ordinary
market response to the fact that they weren't fetching a global
price that was satisfactory. The price had been so low for a
sustained period of time, nobody really thought that the price
would spike that rapidly. I think all indication showed that
this administration was acting in a way that could have only
been anticipated based upon market indicators at the time.
Since then, as my testimony explains, we've taken a number of
actions to try to alleviate the problems within the northeast
about the distribution of home heating oil, to insure that
relief was secured sometime in January.
Again, this obviously is after the fact, but it's as best
as we could do, given what we know at that point in time, going
into the winter heating season.
Chairwoman Kelly. Mr. Gee, the Administration's admission,
basically is what you just did, you admitted that there was a
complacency. It's really, I have to say that's no surprise to
me. I wrote early, I wrote, I believe my first letter went out
to the President asking for a release of oil sometime late
January, first part of February, like around February 3rd. I
wrote six letters just as an individual talking about my
District, and I have to say, I'm not the only one. I know
Congressman Sweeney wrote letters. I know a lot of us wrote
letters. We built a coalition. We were writing letters and
signing lots of other people's letters as well, begging for
action. I had a meeting with Secretary Richardson and I told
him directly what was happening in my District, what was
happening in the northeast, what was happening to the whole of
New York. Nothing happened. His comment to us at that time was,
``I will take it to the President.''.
And I think it's a good thing that foreign countries have
increased their production, but I think we need to keep in mind
the so-called success did very little to help the small
business owner like Mr. Fanelli, who experiences serious
hardships; to the trucking industry which Mr. Spencer is
representing. These folks had serious hardships, while
Secretary Richardson was trying to sweet talk OPEC. And the
President refused to release our strategic petroleum reserve
oil, which could have been done. We need to make sure this sort
of thing doesn't happen again. I know that in recent weeks,
there's been talk about the worst being passed, but I hope this
Administration has learned a lesson about the cost of inaction,
and what we in the northeast have experienced, we have really
paid a price.
I think now is not the time to let your guard down. I think
the problem may be with the EIA, and I'm sure that NYSERDA
warned the Administration of problems. Just because we were
applying free market principles doesn't mean we need to ignore
other factors. We were in trouble up here. We have a man here
who just told you what he experiences when he goes out to pump
a gallon of gas. We have a trucker here who has talked about
what he experiences when he has to buy a gallon of diesel.
Now is not the time to let your guard down. It's the time
to strengthen the commitment to our energy policy, because my
concern is we don't want to see this issue crop up this summer
with high electricity rates. Just think how this is going to
translate. We in this region already havebeen told our
electricity rates are going up. That's energy, sir. Had these electric
companies been able to prepare earlier when we were begging for relief,
and we were going directly to the President, and directly to Secretary
Richardson, I believe honestly that our energy, electricity rates and
our home heating oil prices now would be lower, and I am very concerned
about this.
I want to ask you a further question. Does the Department
of Energy still expect the gasoline price to peak during the
driving season of summer, because that's what there was a
prediction about.
Mr. Gee. I believe the EIA's near term outlook for the
summer, is that they believe that the gasoline, the price of
gasoline should go up, let me get that figure. I'm just looking
it up for the hearing. They believe that it should peak at
about 1.52 on average throughout the rest of the country in
April and decline to around 1.39 a gallon by September, after
the summer driving season, so I think nationally, I don't know
exactly where that number is as of today, I think here in New
York, I was looking at some numbers, it's around, New York
State average is around 1.57 per gallon as of today, as of
yesterday. I don't know how that would factor into the overall
national number that EIA released just about a week ago, but we
do anticipate that there would be ultimately by the end of the
summer a decline of some 12 to 13 cents per gallon average.
Chairwoman Kelly. Mr. Flynn, would you like to address
this? I'm sure your figures may not show exactly the same
thing.
Mr. Flynn. I think that the figures that we have are around
1.59 a gallon. But I think that what I would like to comment on
is your view that there needs to be something done, don't let
your guard down. I think what we have had is a situation of,
the Department of Energy has lack of coordination between EIA
and the Department itself. Last October we were able to put
together at our urging a winter outlook in October, and at this
winter outlook conference, we were able to pull together some
people who I have a list of here. Home heating oil dealers,
propane dealers, U.S. Coast Guard, the pipeline industry, EIA,
the trucking industry, Department of Public Service, Department
of Transportation, New York City Emergency Management Office
and reps from some three or four northeastern states.
We had the Governor's director of state operations be our
keynote speaker, Jim Natoli, and we do this on an annual basis
and the thought behind putting this meeting together is to look
at long range weather forecasts, delivery driver hours, coast
guard operations, supply disruptions and price.
The point I'm trying to make here as I stated in some of my
comments, is coordination and strategy. I think at the federal
level that's what's lacking not only at Department of Energy
but EPA and others and it all starts at the top. Luckily we
have a Governor that pays attention to cooperation,
coordination and strategy, and based upon his leadership in
this area, not only in this situation here, but as soon as
people started writing that this situation was over, we have
the Administration still reminding the people at our authority
and at CPB that don't let your guard down. I mean, we know that
it's just April, but the summer driving season is around the
corner and before we know it, the winter is going to be here
again and the last thing we want to hear is excuses that we
unanticipated the situation.
So I think that the best message that we get from these
hearings today to the Administration at the Federal level is
that there has to be at least on behalf of the northeastern
states, better coordination between the Federal government,
DOE, EPA, EIE within DOE so we're all on the same page and we
anticipate the problems in the future so we're not back here
next year in Mount Pleasant, much as I love being here today,
talking about this issue again.
Chairwoman Kelly. Thank you very much, Mr. Flynn. I have
one more question for Mr. Gee.
Mr. Gee. Certainly.
Chairwoman Kelly. I have many questions for you, sir, but
in the interests of time I'm going to hold it to this one
question. Just last Friday we experienced black Friday, the
stock market went down, and some people have speculated that
this country may be on the verge of an economic downturn. If
that were true, how would a period of recession have an impact
on fuel prices and does the Administration have any plans to
mitigate problems that could be caused by rising fuel prices,
if that is the case?
Mr. Gee. If we undergo an economic recession, is that your
question?
Chairwoman Kelly. Yes, and economic downturn. I didn't use
the word ``recession'' I said ``downturn''.
Mr. Gee. Downturn. Do we have--this, I'm going to give you
a straight answer as I can, since I am only responsible for a
narrow sliver of the pie as you know. I'm not with the Commerce
Department and I'm certainly not with our Office of Management
and Budget.
Chairwoman Kelly. Which probably points out the point that
Mr. Flynn was trying to make.
Mr. Gee. Right. I think the best way to address the
problems of market price volatility that we're talking about
here is to have fuel diversity and a broad comprehensive effort
under any market condition, whether it's a robust economic
environment or recessionary economic environment to be able to
have stable prices like Mr. Fanelli said. I think that's best
insured by having fuel diversity, having an intelligent program
to encourage wise, efficient use of energy, to be able to rely
upon both domestic resources, to put the proper tax incentives
that the President has proposed to stimulate domestic
production, and also insure that our lines of communication
with our diverse sources of foreign supply are open and
communicated more broadly on an ongoing basis. I think that's
exactly what President Clinton has done and that's what this
administration has done.
Chairwoman Kelly. Well, there are some of us who really
feel that the Administration has not fulfilled that promise.
Mr. Gee. I understand that, certainly.
Chairwoman Kelly. Especially in the area, of when you speak
of fuel diversity that doesn't help us here in the northeast,
we don't have access to fuel diversity and that is a problem
for us.
Mr. Gee. May I address that?
Chairwoman Kelly. Yes.
Mr. Gee. The President has directed the Department to
undertake a study that is due within the next couple of weeks
to determine what are the options for the northeast to minimize
reliance on home heating oil as a heating resource, because we
are very aware of the limitations or lack of fuel diversity
that this region has to labor under during home heating oil or
during the winter heating season, and that is something that
we're working on to seeing what types of policies would best
promote greater options for consumers in the northeast.
Chairwoman Kelly. I think that's a positive step, but I
think what the message is, you basically heard Mr. Flynn from
the northeast, and that is, we want you to take to the
Administration our concern and our need to have an increased
communication between agencies, and a productive plan in place.
Mr. Gee. Certainly.
Chairwoman Kelly. And that can only be done with the kind
of thing that our Governor has initiated. You need to do that
kind of thing.
Mr. Gee. Again, may I respond?
Chairwoman Kelly. Yes.
Mr. Gee. I understand Mr. Flynn's opinions and will take
them under advisement. I think that we do have communication
within our Government. We've had communication between our
Government and the state officials. I recall at the time of the
home heating oil crisis we in fact invited and welcomed the
participation of state officials where the Chairman of your
Public Service Commission came and spoke to us about the
occasion of interruptible customers on natural gas resorting
back to home heating oil use, thereby driving up demand for
home heating oil. We've had those lines of communication open.
We're certainly open and willing to continue working with
Governor Pataki's administration and with all the members of
the New York State Government.
Chairwoman Kelly. Good. But please carry our message to the
administration as well. Thank you, sir.
Mr. Gee. I will.
Chairwoman Kelly. With that, Congressman Sweeney, I will
turn the questioning over to you. I actually have questions for
some of these other people that I'll go back to, but I thought
perhaps we could go one at a time.
Mr. Sweeney. I thank the distinguished Chairwoman. Let me
say that the testimony of this panel, I've been at a number of
hearings, as a witness myself, in Commerce, on energy, and as a
witness on the Ways And Means Committee, as a member of the
Transportation Committee, we conducted hearings, and I have to
say that this is the most compelling testimony that I have been
subjected to, and I want to congratulate each of you.
Secretary Gee, I don't want to turn this into a gratuitous
feeding frenzy on the Department of Energy and I appreciate you
being here. I'm trying to compose myself up here, because as I
sit here and listen as you nobly are trying to defend the
Administration's seven years of inactivity, and as someone who
represents a District that has been pounded in the past several
months, I find it very difficult.
And if I could, Madam Chairwoman, let me, I kind of wanted
to turn it back into a different focus and start with a
question to Mr. Fanelli, because I think the important thing
here, as Mr. Spencer pointed out, actually I had written a note
I was going to quote that song by Alan Jackson, Mr. Chadwick is
here, this is really about the little people, my constituents.
I consider myself one, but when I go to Washington, I am
honored to be able to represent them. This is really about
putting food on the table. This is really about them being able
to pay for their children's tuition, college, or save for their
children's tuition to college. This has an incredible impact
and last December I met Secretary Richardson who admitted at
that time and subsequently publicly admitted that the
Administration was not focused and was not coordinated. I think
maybe I'm biased in this sense, but I think it relates to a
different agenda, one that has negated the importance of
developing independence from foreign markets and one that is
driven by other political concerns, and I think that if indeed
that is true, and I hope I'm wrong, that it is devastating and
shame on the Administration for that kind of notion.
Let me ask Mr. Fanelli, you gave great testimony, and you
talked about in real life terms what the effect this past fall
and winter's fuel crisis was on you. If you can as honestly as
you can on tax day, can you tell us what kind of margin you
operate under?
Mr. Fanelli. It was at some point averaged 12 cents and
some points I'd average as low as 8. My business is really
repairs. I was never, I was an auto mechanic, I was never
really into the gas business, I didn't know that much about it
until I had a gas station. When I first started, I really
didn't like gas, but you know, you want to keep the price down
because people believe and all the people that come in believe
there's plenty of oil, and that it's just another way for price
gauging to go on.
Mr. Sweeney. That's how you get consumers in your shop,
correct?
Mr. Fanelli. Yeah, they're mad, they say there's plenty of
oil, what are they doing. The only question I have, I've been
in business for twenty years, I did okay, I've been able to go
on vacations, and the only boats I'd see in the water when I
was oversees was Esso, which is Exxon. The only question I've
been asking myself is the merger between Exxon and Mobil have
anything to do with the oil prices shooting up the way they
did, at 10 to 12, 13 cents a day from one day to the next. I
just couldn't believe what was happening.
Mr. Sweeney. If I could, you have a concern that there
isn't enough diversity in the market?
Mr. Fanelli. Yeah.
Mr. Sweeney. Let me ask you one more question. What effect
did this have on your margin, what effect did this crisis have
on your business, how much did you lose, percentage, rough?
Mr. Fanelli. There was a point where I sell diesel, I
couldn't even get it. 6,000, 7,000? I can't even, you know,
for, within a few months. Between the gas part and just selling
it, I guess at least $7,000.
Chairwoman Kelly. If you don't mind, Mr. Sweeney, Mr.
Fanelli, would you describe zone pricing and talk to us about
how that has an impact on your business?
Mr. Fanelli. Zone pricing gives the oil companies the
opportunity to charge a station higher price than the next
station maybe on the same block, because they believe that's
more of an area where they're going to sell gas more and I
think it's just an excuse, if say if an oil company doesn't
like you, they can raise the price on you and drop it on
somebody else, for whatever reason they have.
Chairwoman Kelly. You're saying the company that sells you,
the wholesale, the product, can sell it to you at a certain
price per gallon and then go two blocks down and sell it to
someone else at a lower price or an increased price?
Mr. Fanelli. Right, increased price where they make more
money and they justify that it's in that type of an area where
maybe there's more money in that area, or it's in a better spot
that it's going to pump more gas, for whatever, but it really
should be all the same price. Everybody should really get a
chance to get the same price, this way everybody has a fair
shot at making the same kind of living as the guy down the
street. I mean, that's, you're actually being penalized for
being in maybe a certain area or you're being overcharged for
whatever reason, that, you know, it's just really, it could be
an excuse for price gouging, and--.
Chairwoman Kelly. What effect does that have on your
business?
Mr. Fanelli. Gasoline has been slowly, I did okay, when I
first started maybe twelve years ago. I really don't make
hardly anything on it anymore, and I kind of concentrate in the
garage.
Chairwoman Kelly. Is that because of zone pricing?
Mr. Fanelli. Zone pricing, different kinds of pricing. Some
of this pricing is because of environmental reasons. They may
have a problem with a station that had an environmental
problem, which is legitimately I guess there should be some
kind of fund to make up for that, butto have different prices
at all different stations is really the kind of controlling everybody,
I think the oil company's controlling everybody.
Chairwoman Kelly. Thank you.
Mr. Sweeney. If I could, I think as well as Mr. Chadwick
and Mr. Fanelli, there are other little people that we need to
remember, and I'm sure Chairman Martinez appreciates the fact
that we understand that they're the alternatives. So I'll turn
some questions to you, Mr. Spencer.
Your testimony is true. Especially because you were
tangible and direct, three solid proposals. Two of which I
wholeheartedly support, one of which I'm a bit apprehensive, so
I'm going to turn on you.
We are debating in Congress whether we should repeal
certain transportation taxes on fuel costs, and some believe
that to repeal such taxes would have a short-term minimal
impact, long term very negative impact in terms of rebuilding
our infrastructures and things like that. Others believe that
at least it will provide some immediate relief to the
consumers. In imposing a mandatory fuel surcharge program
brings some apprehension because many would view it as just an
additional tax on the consumer, so I just say to you there is a
great apprehension. Let me ask you this question, because I'd
like to look at it from a different side and how we can insure
that one segment of the people we represent is indeed protected
to some degree as best we can in a long term energy plan, and
that is that I'm considering drafting legislation that would
allow independent truckers and some other entities a deduction.
We made the tax code so complicated, I understand, this gets
people nervous, but until we get to real simplification, we're
looking for ways to make it easy, to make America work, a
deduction or tax credit directly attached to increases in fuel
prices. My question to you is would your membership support
such a move and at what level, how much of a tax credit would
you guess would be applicable?
Mr. Spencer. Well to answer your question, yes, our members
small business truckers are going to be open to relief wherever
they find it, whether it be through the tax code. As I
mentioned in my testimony, we believe that the only viable real
answer is for increased fuel costs to simply be reflected
fairly, not exorbitant, but we understand there are others who
see things differently.
I guess the idea of a change in the tax code to provide a
credit, again, it would be a benefit, but the thought that I
have in my head is that this is not going to be immediate
relief that actually is really needed right now. If we're going
to wait until the end of this year for a credit on a return, I
mean, there may be, the return that's filed may be on a
bankrupt business. That's the concern that I have.
Mr. Sweeney. It's a great point. That in conjunction,
though, with your third proposal, which is developing an
emergency low interest SBA loan program, might be able to
provide some sort of short-term stop gaps, and I'll say this,
on the record, that if Madam Chairwoman wants to be the
original sponsor on that, I'll join her.
Chairwoman Kelly. I've already discussed it with counsel.
Mr. Sweeney. I understand that, understanding that the
House operates pretty much on seniority, she gets to make that
call and I would follow her on that.
Let me ask Mr. Flynn a question, if I can, thank you for
your testimony. You mention in your testimony that we do not
have in New York in any capacity any refineries, a capacity
thereof. What do you think the greatest impediments to
establishing New York refineries is?
Mr. Flynn. I think that you yourself has answered that
question by a piece of legislation that I think you introduced
recently with a regional product reserve and I think that's one
of the answers. And I've had the honor to testify about this in
front of some other Congressional committees. I believe that an
RPR would be an invaluable asset not only to New York State but
to the northeast, in situations when we do find ourselves in a
crisis situation, and I believe this issue has been studied on
and off for the last twenty years at the Department of Energy
and other levels of the Federal Government. When it was first
brought to our attention and the Governor sought our advice as
to the up sides and the down sides of it, it's not just as
simple as saying it's the thing to do, because there are a lot
of issues that are behind just placing this regional reserve.
I think some of the issues that you as a leader in this
area should make sure that we all address is how much and what
kind of petroleum products would be left at this reserve, the
environmental requirements and regulations that would go along
with siting something like this, the sulfur context that would
be stored here, whether there would be enough storage capacity
for all the northeast, who would administer the reserve, who
would make the call as to when we would release reserves, who
would pay for it, and these are just a few of the questions
that as you and Congresswoman Kelly go forward on looking at
something like this, make sure that you look at those areas and
always NYSERDA is there for you to help you answer those
questions, and I think that's one area that we can really help
out in fuel diversity.
Mr. Sweeney. Let me turn to you, Secretary, and say that
now six months after we called for a reserve, I'm happy to see
that the Administration has now seemingly endorsed such a
policy. I won't belabor the point at this hearing, but I'd like
to work with you and I know Chairwoman Kelly would like to work
with you.
Mr. Gee. Let me say something, and I'm happy you brought
this up. It was the Department that undertook a study just
about two years ago on the merits of a regional product
reserve. So I understand your view that we haven't done enough,
but in fact we were doing something.
Mr. Sweeney. If I can reclaim my time, six months ago the
Secretary punted on that.
Chairwoman Kelly. Will you yield a point? Why has it taken
you so long?
Mr. Gee. So long----
Chairwoman Kelly. To develop this, you say you started way
back----
Mr. Gee. To commission a study.
Chairwoman Kelly. Why did it take so long to get a study?
Mr. Gee. The study started out with different options, how
large the reserve, what the cost would be, and whether the cost
would outweigh the benefits. That was a 1998 study that was
brought out by a smaller price spike in 1996. We originally
took the position that based upon certain scenarios that were
undertaken in the study, such as the likelihood of the need for
drawdown of the product reserve, that there was no immediacy to
developing one because of the prospect that the costs would
outweigh the benefits again based on certain scenarios. We
concluded that if one could be down to 2 million barrels of
inventory, because of the likelihood, particularly because of
what we experienced this winter, because of a very cold winter
accompanied by short inventory, that in fact one could be
justified on a cost benefit basis. It wasn't simply the fact
that we sat there and decided to do nothing. What the study
said was that depending upon the size and configuration of the
research, the cost would not justify the benefits. But we
concluded if you can configure it down to 2 million barrels
which is one of the scenarios and given the likelihood of what
we experienced this past winter where there was a temperature
plunge, that one could be cost justified under certain
assumptions, and that's how we proceeded, that's why the
President decided to go ahead and call for its creation and
that's what our department is working on. I might add for Mr.
Flynn's benefit, we'll certainly be happy to workwith New York
State. The very questions that he's raised are being looked at very
intensively by our staff at this moment.
Mr. Sweeney. When would you, if I could, when would you
anticipate action?
Mr. Gee. We're gratified to see that Congress, rather, the
House, passed legislation that would create one. As the
President said, he would like to have the legislation enacted
that would authorize its creation. Failing Congressional
action, he still holds the option of going ahead and
administratively going forward under existing law, under EPCA,
assuming it's reauthorized, as you know it now lapsed. If the
Energy Policy Conservation Act is authorized, he does have the
authority to create one under existing law. We have our staff
working full tilt right now working on it.
Mr. Sweeney. You do not have a defined time line?
Mr. Gee. Not a defined time line but we're under orders,
instructions from Secretary Richardson to get one going as soon
as possible to get it ironed out.
Mr. Sweeney. Let me pull things back a little bit. Explain
for me how you compare U.S. Inventories to world inventories,
and is there a greater vulnerability here in America than there
is in other parts of the world?
Mr. Gee. You're talking about production quantities as
opposed to refined inventories?
Mr. Sweeney. Mm-hmm.
Mr. Gee. It's certainly having a decline. We experienced a
decline in domestic production since 1985. It did not begin
with this Administration, midpoint in the Reagan
Administration.
Mr. Sweeney. You will concede that the Administration
though has not been an enthusiastic supporter of increased
domestic production?
Mr. Gee. I would disagree with that, Mr. Congressman,
because I in fact personally have been involved in working, I
spent an awful lot of time with domestic producers, that's my
job. I know what their positions are. When the price plunged 10
dollars a barrel I was spending a lot of time with people from
east Texas, west taxes California, Oklahoma, we were pushing
and gratified to see the President announced his support for
tax incentives to maintain an increased domestic production.
Mr. Sweeney. I'll extremely disagree with you and I'll send
you a list of pieces of legislation that the Administration has
either blocked or proposed that are contrary to that position.
Let me ask you this question, then, if you've been a
proponent and you studied the issues, what are the capacities
for domestic production? What's the potential?
Mr. Gee. I think right now our domestic production is
around the mid 40's, 40 percentile of what we currently
consume. We're hopeful that the decline in production can be
arrested and ultimately would be brought to a halt sometime
around the midpoint of this decade.
Mr. Sweeney. What are the greatest impediments to that?
Mr. Gee. Greatest impediments are economic forces and the
issues of production which to a certain extent are not directly
within any government's control.
I'll give you an example. Oil is just much more expensive
to produce in the United States today than it was a couple of
decades ago. The types of fields that we're now exploring are
largely for the most part very extensively explored and
developed as opposed to foreign sources, which as I mentioned a
lot of the large majors are going to because it's simply
cheaper to produce.
One thing we're doing is trying to lower the cost of the
production. We've been working very closely to try to lower the
oil production costs, lowering the cost of electricity which
makes up 40 percent of the production costs. Those are some of
the things that we've been focussing on, that I've been
personally focussing on.
Mr. Sweeney. Let me thank you for that and point out that
you contradicted yourself saying it's not as simple as
government doing something. I think it is. A lot of smaller
refineries have been put out of business based on tax policy,
environmental policy, based on a whole bunch of restrictions.
If I can move on----
Mr. Gee. You're not going to resume the volume of
production we once had. That was my point. We already explored
that.
Chairwoman Kelly. I just want to ask, we are short on time,
obviously always, we never have enough time. So just so you all
understand, I'm going to hold the hearings open for fourteen
days. You may get written, additional written questions from us
to answer in writing and I appreciate the fact that you will
get them back to us fairly soon, we have fourteen days to do
all that.
I want to turn to Ms. Martinez. I'm really pleased that you
are there, and I bet your agency works as well as it does. You
do a great deal of good for all consumers. I'm wondering about
whether or not you think there's merit to the possibility that
the oil price increase is going to have a significant impact on
electricity rates. I've raised that issue and I'm wondering
what you think. Do you feel that that's going to happen?
Ms. Martinez. Well I'm not sure of how much of an effect
that will have but I do know consumers have called us about
letters that they have received warning them of greater
electricity rates in the next few months and offering them to
lock into a fixed price for the winter heating season. I'm not
sure, we have not had enough investigation in this area,
whether they are creating a condition where they want a
consumer to make a decision about a fixed price using their
market power to encourage the consumer to come back to the
major producer of electricity and challenging the free market,
the available newcomers into the electric market. So we've seen
many of these letters come out from the major producers of
electricity. As a matter of fact we've gotten several of them
and several calls from Syracuse area, journalists asking us
questions and we're in the midst of figuring out why now are
they sending these questionnaires or marketing strategy fliers
to consumers at this time. So they seem to be indicating it's
going to happen, but we've seen no other indication in the
market that it's happening. So we really don't have an answer
this time, but I'll share with you what information we get back
from our investigation.
But one of the beauties of the Consumer Protection Board is
we have a complaint line, and real people answer and real
people speak to you and real people hear your complaint,
similar to you, when they come in and are exasperated to
prices. So we get a really good feel of the market before
sometimes big events happen, and that's why we're very glad to
work with, especially this Governor, asked for the information,
we work with NYSERDA, we share information to try to get ahead
of the problem instead of waiting for it to happen and trying
to get redress once people have been negatively impacted.
Chairwoman Kelly. You've heard Mr. Fanelli testify to the
irritation he sees in his customers when they see the oil
prices are so volatile, the gas prices are so volatile. Have
you had a majority of your complaints about that particular
aspect? What kind of, what are the majority of complaints
about?
Ms. Martinez. We get a lot of complaints about utilities,
the changes in market forces of having electric choice,
telephone choice and the agreements that people make with each
other.
Chairwoman Kelly. What about this?
Ms. Martinez. In terms of oil and gas, we have seen an
increase over the last year. We've been seeing a constant
increase in gas prices over the last year, we've been speaking
to the public about it, trying to share tips, trying to
encourage them to look for the best price. Now you've given me
one of the reasons why it could be 12 cents different if you
drive around your neighborhood, you can save 12 cents a gallon
if you shop around. Now I see there's a reason why. We're
asking consumers to shop wisely, buy more conservatively using
other options of pairing up to drive, trying to cut the edge
off their pocket books so it won't be so damaging to especially
people on fixed incomes, we get a lot of complaints from our
individuals who don't have the flexibility, they have to make
the decision to buy either food or gas or this item or that,
and we get a lot of that exasperation from consumers in New
York State.
Chairwoman Kelly. It's really a conundrum when you're
thinking you're advising people to drive around and find the
lowest price and Mr. Fanelli is locked into a price because of
the zone pricing. So it really is very difficult to get this
resolved, so Mr. Gee, we do need your help.
I want to move just quickly to Mr. Morse. Moving away from
the fuel charge issue that you had talked about, I wonder if
you could tell us about the impact of fuel prices on companies
you work with and travel and tourism industry. For example, the
small limo companies, the cab drivers, the bus drivers, the bed
and breakfast people. Are they experiencing a difficulty?
Mr. Morse. They're probably experiencing incremental
changes, but not major. Remember that when you go on vacations,
you're generally using discretionary monies. We feel the impact
in our industry, particularly my agency is almost unmeasurable.
We're so small, the volumes are so small, the number of clients
are not voluminous enough to statistically get an impact on
what's happening there. Yes, we have complaints from our limo
drivers, but they've held their prices so far. They're
anticipating perhaps some downturns or stabilization, they're
hoping for it. In fact there was a startup in our town in the
last few months.
The B & B's, we don't have contact with them, they're not
commissionable to a travel agent, so there isn't a strong
relationship, so I can't comment on that there.
Chairwoman Kelly. What about the bus companies. We see a
lot of people going by bus now to Atlantic City or up to the
Catskills Adirondack areas.
Mr. Morse. So far the touring companies seem to have held
their prices. Once they announce a price for the given year,
they put out the brochure for 2000 back in 1999, midsummer.
They're locked in at that point, they have to absorb what it
is. We've not experienced any considerable number of them
saying oh, by the way there's a fuel surcharge increase in the
price. That we've not experienced. So we're not seeing a lot of
it.
I think for the small travel agent we're probably seeing
some incremental loss of business. We just don't know what it
is or how to measure it. In a given week you might have a good
sale that would overcome the loss of one or two clients that
week. We do realize statistically our industry follows the rest
of the country and when you have a price increase, let's say 7
percent in March, you will probably lose some small portion of
the business, people who were just on that border who can't
afford it. You see a ticket at 19 0 is maybe saleable. 210, 2
15, it's not. It's hard to measure exactly what that impact is.
Chairwoman Kelly. Thank you. Mr. Fanelli, I see you nodding
your head. I'm sure you pump gas for some limo companies and
I'm sure you probably have heard them comment. Would you like
to make a comment?
Mr. Fanelli. A lot of taxi and limo guys said the prices
stayed the same and they're eating the additional prices that
it costs them to go out, and that's why I think if there was
some way to make a price range where it would stabilize for a
period of time, a long period of time, I know it was cold this
year for three weeks, but it kind of warmed up. I don't think I
used any more heating oil last year than I did this year.
That's what makes me wonder a little bit what happened.
Chairwoman Kelly. I think that's a very important point you
just made. Because it got warm and the prices were still high.
And I know that we wrote four letters and I co-sponsored
Chairman Sweeney's----
Mr. Sweeney. Thank you.
Chairwoman Kelly. I co-sponsored Mr. Sweeney's bill in
Congress and a few others, all of which the Administration
never acted on. I think that it's very important that the
message go back to the administration that as Mr. Sweeney was
talking about, it is individuals. It's every person in this
area, in the Northeast, who is on a fixed income, and I have
had people come to my office, senior citizens on fixed incomes,
saying they no longer can drive back and forth, to have some
joy in their life. They volunteer. They no longer can drive to
their volunteer job.
So there's a spillover effect of the Administration's oil
policy, and I feel that they really dragged their feet in
December. I think that spillover effect is magnified time after
time, possibly person by person here in the Northeast. It is
critical that we get some relief, and we can't really wait for
new technology. We really can't wait for anything except a very
hard look and some increase in our gas and oil that's being
pumped into this area.
I think with that said, I'm going to, I think we're going
to head up to Castleton where we have another hearing. Mr. Gee
will join us again and we can continue this dialogue. I really
want to say--Mr. Flynn?
Mr. Flynn. Can I just say two things here? Mr. Fanelli
asked a question concerning the Exxon Mobil merger, I would
ask, being a former prosecutor this Committee may want to
contact the Department of Justice Attorney General Reno and
asked on behalf of Mr. Fanelli and New York State and ask the
Department of Justice to look into whether there's been any
collusion between----
Mr. Sweeney. May I state, I was going to reframe my
question and make comments and they were going to be directed
to you, and Mr. Morse, too. We have asked the Attorney General
to look at price fixing allegations. I wanted to get this on
the record, I don't have much confidence there's going to be
much movement on the part of the Attorney General to do
anything here, so I would encourage you Chairwoman and your 49
other colleagues to do it at the state level as best you can to
maybe create that impetus. Mr. Morse, I'm the vice chairman of
the Aviation Committee, principal sponsor of the Passenger's
Bill of Rights, anti price gouging legislation, I want you to
know I agree with you on the full disclosure of the airlines.
Big six have been predators from pricing and services, as
Congresswoman Kelly will attest to we in upstate New York pay a
heavy, heavy price being as underserved as we are, so not to
necessarily ask you a question, let you know that we are aware
and I'm going to continue to pursue with the Aviation Committee
and through Transportation those requests and desires.
Mr. Morse. Thank you. We love your Passenger Bill of
Rights.
Mr. Flynn. I've testified now at three Congressional
committees and state committees each time there's been a
Department of Energy official. I think we're lucky to have Mr.
Gee come here today because from my own humble experience he's
been the most forthcoming official from the Department of
Energy. There have been E I A officials who don't get into
policy or there have been other officials who say they're too
low on the chain to do policy. It seems Mr.Gee is in a position
that he does policy and I think this Committee is lucky to have him
here today. Whether you agree with him or not, he's forthcoming.
Mr. Gee. Just part of my job.
Chairwoman Kelly. Well, Mr. Flynn, you've just taken the
words out of my mouth, this is what I was about to say. I'm
glad you did say them. Please continue.
Mr. Flynn. The regional product reserve I agree on that
issue, but 2 million barrels on that reserve would not be
enough.
Chairwoman Kelly. Mr. Gee, we do thank you for being here,
it's a choice you've made to be with us, and I hope you've
learned something from listening to our witnesses. I'm also
very pleased that the Governor saw fit to allow we have two
state agencies here that are very important agencies, and I'm
delighted that they were willing to share with us their
knowledge, so, and we're going to move on to Castleton. Mr.
Spencer, I can't tell you how just relieved and delighted I was
when I heard you were going to come and testify, because I
think your testimony is very strong and I think that you speak
very well for the truckers, and I think it's important that the
general public understand that the truckers are really hurting
because they're having to eat that difference in their
contracts when they're doing such simple things as helping a
family make a move, bringing fresh vegetables to the
supermarkets, and doing numerous other things, because as I
know and Mr. Sweeney knows, because we're both on the
Transportation Committee in Congress, we understand how much of
the goods and services actually of much of what we're able to
do in the United States move by truck, so we're pleased to be
here today.
Mr. Morse, I thank you very much for your testimony, and as
you know, I too am very interested in the airline passenger
rights, and Mr. Fanelli, you have been really illuminating in
what you've had to say. I think you brought in some very
important issues before us today. I hope we can all learn from
your testimony and I very much appreciate your taking time out
from your business to be here, to be with us today.
Mr. Fanelli. Thank you.
Chairwoman Kelly. I thank all of you, and with that, I'm
going to conclude the hearing. Thank you.
[Whereupon, at 12:05 p.m., the Subcommittee was adjourned.]