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Obscene gas prices hurt consumers

The Detroit News

Friday, June 13, 2008

James P. Hoffa

Obscene gas prices hurt consumers

Congress should rein in oil firms with a windfall profits tax

If you have any doubt whether gas prices are seriously hurting working families, you should talk to Denise Renedo. A dispatch clerk at Roadway Express’ Detroit facility, Renedo is a single mother working a solid 40 hours a week.

“There’s no doubt that the high gas prices hurt,” Renedo said. “People have to cut into their budget in other places to afford the gas, taking some harsh but necessary steps.”

To fill the tank of her Ford F-150, which Renedo does every two weeks, she needs more than $100, a steep increase over last year. To compensate, she limits her recreational driving. Neighbors, she said, have eliminated trips not related to commuting. “Gas is getting so expensive that they have to conserve it or else cut into their budget somewhere else, like with food,” she said.

This is outrageous. People in Detroit work hard and deserve to commute and travel in their community without cutting into their food budget. Unfortunately, workers here and across the country are facing major problems affording the costs of gas. Those problems are reverberating throughout our economy. Freight and parcel-delivery companies, airlines, police departments, grocery chains and school bus companies must compensate somehow for the added fuel expense.

For the first time, the national average price for a gallon of gas topped the $4 mark this past weekend, and the cost of crude oil is quickly soaring toward $150 a barrel. Working families are taking the hit. It’s no coincidence that we just saw the biggest spike in the unemployment rate in 22 years, to 5.5 percent.

Yet oil companies and President Bush are oblivious to working families’ plight. Bush, a former oil company executive, expressed surprise earlier this year that the average price for gas was headed toward $4 a gallon. (The price is nearly a dollar higher than in January, and a Goldman Sachs analyst who foretold that cost predicts it will rise to $6 a gallon by 2010.)

Meanwhile, oil companies are gouging Americans at the pumps. ExxonMobil had an income of more than $404 billion last year, a total that tops 120 countries’ gross domestic product. The company’s profits were a record-setting $40.6 billion last year — that’s not just a company record but also the largest annual profit for any company ever. To reach its obscene milestone, the company profited more than $77,287 per minute last year. Can you imagine that? Many working families in Michigan are fortunate if they earn that much in a year.

All told, the five largest oil companies pumped $116 billion in profits last year from nearly $14.7 trillion in revenue, according to the Congressional Research Service. Royal Dutch Shell turned a $31 billion profit, Chevron sucked in $18.7 billion, BP earned $17.2 billion and ConocoPhillips earned $11.9 billion. The companies are on a pace to top those totals this year, having reported total profits of approximately $36 billion through March.

Last month, oil executives for the largest oil companies testified before Congress, explaining away their obscene profits. But their claim that the chief culprit is supply and demand is misleading. Clear and simple, it’s greed that leads to their massive profits.

Oil companies’ objective is to wring as much money as they can from their product. One telling moment occurred during the hearings. A member of Congress asked the executive vice president of ConocoPhillips how much he was paid in 2007. He did not know. What a position to be in, not needing to worry about your salary. It’s clearly preferable to worrying that the cost of gas will lead to you not being able to afford to drive to work.

As we research alternative energy sources and consumers become more energy-efficient, the oil companies should be forced to contribute a greater percentage of their windfall profits to such pursuits. The Consumer-First Energy Act, a bill unveiled by Senate Majority Leader Harry Reid, D-Nev., would do just that. It would also punish price gouging and create a temporary windfall profits tax on major oil companies.

The bill would also prevent speculators from cashing in on off-shore transactions. It would also allow the attorney general to take action against any country or company that fixes the price of any petroleum product.

Reid’s bill is a common-sense approach to protecting American workers from greedy corporations and speculators. We can’t continue to let the entire U.S. economy take a hit just so a handful of oil companies make obscene profits.

James P. Hoffa is president of the International Brotherhood of Teamsters. E-mail comments to[email protected].

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