6 , P.L. Background and Analysis

		Legislative Activities

The persistence of high gasoline prices led to a broad spectrum of proposed new legislation in the First Session of the 110 th Congress. Despite passage of the major Energy Policy Act of 2005 ( P.L. 109-58 . One such proposed policy was increasing CAFE standards for automobiles and light trucks, and the Energy Independence and Security Act of 2007 ( H.R. Senator Domenici introduced a bill emphasizing U.S. petroleum production, including opening the Outer Continental Shelf (OCS) and part of the Arctic National Wildlife Refuge (ANWR) for oil and gas leasing and encouraging leasing of oil shale deposits. This report reviews the major legislative initiatives to deal with the gasoline price issue. To put these proposals in perspective, it first describes some of the factors that have led to the high prices of both crude oil and gasoline. In 2004, a large number of factors combined to exert pressure on gasoline prices in all parts of the country. Another factor in recent months was been the decline in the value of the dollar compared to other currencies. The 2004 price surge intensified discussion of energy policy and led to further calls for passage of energy legislation. However, until the climax of the Katrina disaster, the urgency of previous energy crises had been lacking. At the beginning of the current crisis, the general expectation was that the price increase was a temporary phenomenon. In part, this may be due to the fact that there has been no physical shortage of gasoline or lines at the pump, as there were after the Arab oil embargo in 1973 and the Iranian revolution in 1979. But the continued and unrelenting increase in crude oil prices to record levels, even discounting inflation, is leading many to suggest that changing world market conditions may have led to permanent, or at least chronic, shortages of petroleum production capacity. Others continue to expect that growth in demand will moderate, and production will increase to meet demand, as it did following the shortages of the 1970s. 110-140 .
The high price of gasoline has been and continues to be a driving factor in consideration of energy policy proposals. Despite passage of the massive Energy Policy Act of 2005 (EPACT 2005, P.L. 109-58), and the Energy Independence and Security Act of 2007 (H.R. 6, P.L. 110-140), numerous other proposed initiatives came under active consideration in the Second Session of the 110th Congress. Measures proposed included opening the Outer Continental Shelf for oil and gas drilling, regulation of speculation in energy markets, and policies concerning the Strategic Petroleum Reserve.
A large number of factors combined to put pressure on gasoline prices, including increased world demand for crude oil and limited U.S. refinery capacity to supply gasoline. The war and continued violence in Iraq added uncertainty, and threats of supply disruption added pressure, particularly to the commodity futures markets. Concern that speculation added volatility and upward pressure was frequently cited. In recent months, a decline in the value of the dollar compared to other currencies increased the dollar price of oil on futures markets.
The gasoline price surge stimulated much legislative activity, but until the last year or so there was not the sense of the extreme urgency of previous energy crises. In part, this may be due to the fact that there was been no physical shortage of gasoline or lines at the pump, as there were after the Arab oil embargo in 1973 and the Iranian revolution in 1979. At that time there was expectation that prices were destined to grow ever higher, and many believed that the world's supply of oil was running out. Such views have been less prevalent during the current run-up. But the continued and unrelenting increase in crude oil prices to record levels, even discounting inflation, led many to suggest that changing world market conditions may cause permanent, or at least chronic, shortages of petroleum production capacity. Others continued to expect that growth in demand would moderate, and production increase to meet demand, as it did following the shortages of the 1970s.
The continuing high prices led to a further search for legislative remedies. This report, after analyzing factors that have contributed to high gasoline prices, describes the major legislative initiatives and discusses the issues involved.