Wilmington, DE – As I travel around our state, I have heard from a number of Delawareans concerned that the high price of gasoline is making it particularly difficult for them to make ends meet. I am often asked what we in government can do to rein in the cost of gasoline. I thought I would take a few minutes to share with you some of the steps we have taken already and others we are contemplating.

A few days ago, I filled up my 2001 Chrysler Town and Country minivan and had to pay over $75. It was the most I have ever had to pay at the pump. As you know, the price of gasoline has soared over the past year, climbing from $3 a gallon a year ago to more than $4 a gallon today. Even more dramatic, though, the price of a barrel of oil has essentially doubled over the course of the past 12 months.

Fuel prices in the United States are going up for a number of reasons, starting with increased demand for oil. Today, much of the new demand comes from large and rapidly developing countries, like China and India, where the sale of vehicles is booming.

In this country, until recently, we’ve been our own worst enemy, building and buying large, fuel-inefficient cars, trucks and vans. In addition, the miles Americans drive has increased by 150 percent since the 1970s, meaning the demand for oil is going up, too.

While the global demand for oil has increased, oil production has remained largely constant. This factor, coupled with the decline in the value of the dollar, has put upward pressure on the price of oil. Earlier this month, billionaire investor George Soros testified before one of my committees that the run-up in oil prices can be explained in part because the oil producing nations are reluctant to exchange an appreciating asset – the oil under their ground – for a depreciating asset – the U.S. dollar. Unfortunately, I think he has a point. The value of the dollar has declined by 40 percent over the past six years, much of it over the past year or two. America consumes roughly 25 percent of the world’s production of oil, but we produce only 3 percent of it, so as the dollar’s value has plummeted, the price of oil and gas has climbed.

Finally, many of my colleagues and I believe that market manipulation and speculation are contributing to the dramatic rise in oil prices. There is substantial evidence supporting the conclusion that speculators may be driving up the price of oil by as much as a third. The Commodity Futures Trading Commission, which regulates commodity speculation, has been reluctant to use its authority to address the impact speculators are having on the price of oil. In fact, the Commission has exempted investors from rules limiting speculative trading and has even waived regulations that bar U.S. investors from capitalizing on unregulated foreign exchange markets, creating a giant “London loophole” that has made it easier to speculate on oil futures. 

On June 3, the Senate Committee on Commerce, Science and Transportation on which I serve held a hearing to find out what Congress and the Administration can do to reduce the impact of speculation on the price of oil. In recent weeks, Senator Bill Nelson (D-Fla.) introduced S. 3134, a bill banning unregulated speculative trading of oil futures. Senator Dianne Feinstein (D-Calif.) has introduced S. 3131, the Oil Speculation Control Act, which would require the Commodities Futures Trading Commission to review the trading practices of energy market investors to determine their impact on energy commodity prices. Finally, Senator Richard Durbin (D-IL) introduced S. 3130, the Increasing Transparency and Accountability in Oil Markets Act. Among other things, S. 3130 would prevent traders from excessive, unregulated energy market speculation by routing oil trades through foreign exchanges – the so-called London loophole.  All three bills have been referred to the Senate Committee on Agriculture, Nutrition and Forestry.  I look forward to one or more of these measures reaching the Senate floor for debate this year.

Congress has already passed legislation that would suspend oil deliveries to the Strategic Petroleum Reserve as long as oil prices stay above $75 per barrel. This should moderately decrease the price of gasoline through the busy summer travel season. A study by the Energy Information Administration estimates that adding 100,000 barrels of crude oil to the reserve each day increases the price of gasoline by 4 to 5 cents per gallon. The President signed the measure into law on May 19.

Last December, the President also signed into law CAFE legislation that I coauthored. This bill raised, for the first time in 30 years, the requirement that the vehicles sold in this country be more energy efficient. Under the new law, the average overall fuel efficiency of the cars, trucks and vans sold in this country must rise from 25 mpg to at least 35 mpg by 2020. The auto industry is already beginning to respond to the new law and to market pressures.

It’s not enough, though, for the federal government to basically tell the auto industry to “eat their spinach” and start building more energy-efficient vehicles. I believe that we have an obligation to invest tax dollars in research and development of technologies that will help reduce our dependence on foreign oil, while helping the industry produce more energy-efficient vehicles.

For many years, through an initiative called the American Freedom Car, the federal government has invested hundreds of millions of dollars in fuel cell technology that allows hydrogen fuel to be mixed with oxygen to create electricity that powers a wide range of vehicles emitting only H₂O, or water.

Another more recent example is battery technology. The federal government is investing roughly $100 million this year in a partnership with industry and academia to develop a different kind of lithium ion battery, one which will soon provide power for flex-fuel, plug-in hybrid vehicles like the Chevrolet Volt. Available in the next 24 months or so, the Volt will run for 40 miles alone on a single battery charge and then use auxiliary power to raise fuel efficiency to as high as 70 or 80 miles per gallon. If we can beat the Japanese and Europeans to the market with flex-fuel, plug-in hybrid vehicles, we will not only reduce our reliance on foreign oil, we will reduce harmful emissions into our air and atmosphere, and will help to revitalize the American auto industry, which has shrunk to a shadow of what it was just ten or twenty years ago.

A second thing that the federal government is doing to reduce demand for oil and gasoline is to use its own purchasing power to help commercialize energy efficient, advanced technology vehicles, whether they’re traditional hybrids, flex-fuel plug-in hybrids, very low-emission diesels or fuel cell powered vehicles. Beginning this year, legislation that I authored requires that 70 percent of the cars, trucks and vans that the federal government purchases – both for civilian and for military use – be advanced-technology vehicles. This also includes vehicles purchased by the U.S. Postal Service.

A third thing that the federal government is doing to help bring down demand for gasoline – and ultimately its cost – is to offer significant tax credits to encourage consumers to buy highly energy efficient hybrid and low-emission, clean diesel-powered vehicles as they come to market. The energy bill that we adopted in 2005 does just that, providing consumers who purchase highly energy-efficient vehicles with tax credits of as much as $3,500 per vehicle. 

I would also like to mention that our local DuPont Company has been a leader in developing ethanol from cellulosic materials like cornstalks, wood chips and switch grass. Biobutanol, the product of a joint venture between DuPont and BP that is far superior to corn-derived ethanol, is now being test marketed in the United Kingdom.  And, recently, I learned that GM has taken an equity position in a promising new company that can create ethanol out of plant waste, municipal waste, even vehicle tires.  This new biofuel uses less than a gallon of water to create a gallon of ethanol. The fuel provides seven times more energy than is required to produce it. And, this new fuel emits less greenhouse gases than gasoline.

In addition, a number of us in Congress have been pushing hard – and with growing success – to direct more federal resources into transit options and inter-city rail service.  That is evidenced by the new diesel-hybrid buses that our congressional delegation has helped bring to Delaware to provide service to its growing ridership. SEPTA service will also continue to expand, and I hope that rail transit service next year will connect Newark to Perryville, Maryland. Meanwhile, Amtrak ridership is up again this year, growing over the past eight months by almost 15 percent above the same time period last year.

A few other items that address either directly or indirectly oil supply and demand are also ones that are not without controversy. They include building a new generation of clean, safe nuclear power plants – something that I support – or drilling for oil in areas like the Arctic National Wildlife Refuge and in the outer-continental shelf.

Critics of drilling in environmentally sensitive areas argue that it would not likely produce significant amounts of oil for at least six or seven years into the future and drilling of this nature is not without environmental risk. Congress has, however, recently allowed additional drilling to occur in certain parts of the Gulf of Mexico and may soon decide to open some of the other areas there that are presently off-limits. 

I voted a year or two ago for a proposal by Senator John Warner (R-VA) to allow states to sign off in certain instances and allow – after consultation with states contiguous to them – offshore drilling in the outer continental shelf for natural gas; however, I believe that most royalties that would accrue to the federal government from such activity should be used primarily to help develop renewable forms of energy.

Ultimately, we cannot ignore the impact of rising energy costs on individuals and businesses in our state and nation. I believe that America’s current energy policy is out of step with today’s energy needs, and we urgently need a long-term vision for our energy future. If we follow through with these initiatives, twenty years from now our nation could be celebrating its energy independence, not falling victim to higher energy prices.

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