WASHINGTON – Today, Congressman Stupak (D-MI) questioned witnesses testifying on high gas prices before the Energy and Commerce Committee on the growing “risk premium” that is added to oil contracts sold on the New York Mercantile Exchange. A “risk premium” results from the fear that events, such as a terrorist attack, could crimp our nation’s oil supply.

“This pervasive instability in the Middle East and the Iraq war has lead to a commodity futures market where an additional $10 to $15 “risk premium” is added to each crude oil contract sold on the market,” Stupak said. “This directly correlates to higher prices at the pump for consumers and only increases with concerns over natural disasters such as Hurricane Katrina.”

More than 5,000 complaints were logged in at the Energy Department's gas-price gouging hotline, and reports indicate gas prices jumped from $2.50 per gallon to $6 per gallon in some parts of the country.  Stupak reminded the committee that the record breaking prices per barrel were being set weeks prior to Hurricane Katrina but the Bush Administration did not respond until the situation was out of control.

“Many weeks prior to Hurricane Katrina’s wrath, gas prices had been increasing at an alarming rate,” Stupak said. “During this time, the Administration did nothing to curb rising prices despite the urging of myself and other Members of Congress to defer shipments of oil and tap into the Strategic Petroleum Reserve. Instead, the Administration chose to wait until Hurricane Katrina put the country in dire straights before releasing this desperately needed oil.  Had they immediately released this oil, Americans would have realized relief at the pump weeks ago.”

Gas prices in northern Michigan topped out at over $3.50 and remain nearly $.50 above the state average. However, prior to the economic aftermath of Hurricane Katrina, northern Michigan prices jumped $.30 in early August causing many residents who must commute many miles, to work the first hour or two just to pay for gas to and from their job. 

“As every member of the Committee knows first hand, our constituents are angry about high gas prices – and they have a right to be!” Stupak said. “My home state has been hit particularly hard by these prices, especially in my Northern Michigan district. With tourism as the largest industry in the region during the summer months, gas prices have taken a toll on small businesses this year even before Katrina.”

With much of the United States refining capacity concentrated in the southern states devastated by Katrina, the rise in gas prices only added to the already straining prices. Additionally it displayed the increasing vulnerability of both the U.S. dependency on oil as well as our reliance on foreign supplies. 

“While many existing refineries have expanded operations, they have barely kept pace with demand.  Most U.S. refineries are operating at or near 94 percent capacity, and the United States now has to import 10 percent of already refined gasoline,” Stupak said. “For the current refiners, this limited capacity keeps gasoline prices high and profits up. But for the consumer, and the overall health of the American economy, it's a potential disaster.”

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