Specter Says Rising Gas Prices May Lead to Tax on Oil Profits


April 23 (Bloomberg) -- Republican Senator Arlen Specter said the U.S. Congress should consider taxing the ``windfall profits'' reaped by oil companies as a result of surging crude oil prices.
Specter, chairman of the Judiciary Committee, and other lawmakers are responding to what they say is rising voter anger over gasoline prices, which exceed $3 a gallon in some regions of the country, about 31 percent higher than a year ago.
Specter, of Pennsylvania, earlier this month introduced legislation to strengthen antitrust enforcement of the oil and natural gas industry to counter the consolidation of production and refining operations. Democratic Senator Byron Dorgan of North Dakota is proposing a 50 percent excise tax on profits from oil sold at more than $40 a barrel.
``Windfall profits, eliminating the antitrust exemption, considering the excessive concentration of power are all items we ought to be addressing,'' Specter said today on CNN's ``Late Edition'' program. ``Anybody up for election this year ought to be working very hard, taking it very seriously.''
As the price of crude oil has climbed -- hitting a record $75.35 a barrel in New York on Friday -- the combined 2005 earnings of Exxon Mobil, the world's biggest oil company, BP Plc, the second-biggest, Royal Dutch Shell Plc, Chevron Corp. and ConocoPhillips, topped $111 billion. At the same time, 70 percent of U.S. adults in an April 6-9 Washington Post/ABC News polls said the recent gasoline price increases are causing them a financial hardship.
``Candidates for elective office ought to always be worried,'' Specter said. The entire House of Representatives and one-third of the U.S. Senate face elections in November.
`Obscene' Profits
Senator Carl Levin, a Michigan Democrat, said President George W. Bush should call oil company executives to the White House and tell them he'll support a new tax on their profits unless they lower prices.
``I'll bet that the price of gasoline would come down within a matter of days,'' Levin said on the CNN program. ``We need a windfall profits tax because these profits have been absolutely obscene.''
Oil companies blame surging crude oil prices and government regulations dictating the composition of gasoline or higher prices. U.S. Energy Secretary Samuel Bodman on April 21 said a switch under way to ethanol in gasoline may cause supply disruptions for several months.
`Tough Summer'
Bush, in California yesterday to promote his initiative on alternative fuels, said a lack of refining capacity in the U.S. and the thirst for oil in emerging economies such as China and India are contributing to increased energy costs. He said he recognized the price of gasoline is hurting consumers and warned that the price is likely to go higher.
``We're going to have a tough summer because people are beginning to drive now during tight supply,'' Bush said in West Sacramento, California, where he was touring a facility that is developing hydrogen fuel cells for vehicles.
Bush has pushed for incentives for production and building refineries as well as research on alternative fuels. Democratic Senator Bill Nelson of Florida yesterday said in his party's weekly radio address that the president's policies amount to ``billion-dollar giveaways to the oil companies.''
In the past month, the U.S. average pump price of regular gasoline has risen 17 percent to $2.90 a gallon according to the GasBuddy.com, a website that tracks gasoline prices.
House Speaker Dennis Hastert and Senate Majority Leader Bill Frist said last week they supported Federal Trade Commission and Justice Department inquiries into possible price gouging. Hastert also wants congressional hearings into whether oil company profits are too high.
Specter has focused his attention on oil industry consolidation and competition. ``We have allowed too many companies to get together to reduce competition,'' he said.
There were more than 2,600 mergers in the oil industry in the 1990s, according to James Wells, director of natural resources and the environment for the Government Accountability Office. A study by the GAO, Congress's research arm, found that concentration of market power may have added as much as 7 cents to the price of fuel, he said.
To contact the reporter on this story:
Jim Efstathiou Jr. in Washington at jefstathiou@bloomberg.net.