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December 18, 2007

Republican Senator Susan Collins blames market failure

Senator Susan Collins of Maine recently has taken an interest in the fuel price situation in Maine. Last week, an article in the Bangor Daily News described a "desperate" home heating crisis before the calendar has even passed winter solstice:

Home heating crisis in Maine now 'desperate'
By Anne Ravana - Saturday, December 08, 2007 - Bangor Daily News
BANGOR - Toys for Tots? How about Oil for Tots?

Many, if not most, of the state's neediest families are now in crisis when it comes to finding a way to pay for home heating oil, and assistance agencies are running so low on fuel funds that they are desperate for private donations.

That was the consensus at a fuel assistance resource meeting at U.S. Sen. Susan Collins's office Friday [Dec. 7]. Collins's office called the meeting to gather representatives from more than 10 social service agencies from area counties to determine how to use their existing resources most efficiently.

"A majority of people I see are in an emergency situation. They are out of oil when they call," said Harold Conners, director of social services for the Salvation Army office in Bangor.

Conners said he believes it is "a matter of weeks" before the state sees an overwhelming number of residents with empty oil tanks and no money to fill them. All the meeting attendees expressed concern that low-income families have little choice but to cut back on food, medicine and other essentials when their home energy costs rise.

The federal Low Income Home Energy Assistance Program is the primary source of aid for families whose income is 150 percent to 170 percent of the federal poverty limit. This year, the program is expected to help about 47,000 Maine households with average annual incomes of $13,000, according to Joanne Choate, LIHEAP manager for the Maine State Housing Authority.

This year, applications are pouring in in record numbers, and at least 51,000 people are expected to apply, Choate said. The Penquis program in Bangor already has denied at least 600 applications.

"We're seeing more and more requests from the working poor, people who work more than 40 hours a week and still can't pay their bills," said Nathalie Perry, director of Brewer Health and Human Services.

On average, families receive $580 in assistance, which is not enough to fill a 250-gallon tank with local prices for oil hovering around $3.20 a gallon.
In response, the Republican senator offered the following analysis, and proposals for hearings and legislative action:
The spike in energy costs is due to many causes: increased global demand for crude oil, instability that threatens supplies from the Middle East, the price-fixing actions of OPEC, insufficient refining capacity, and speculative trading on futures markets. Paramount among our challenges is our over-reliance on foreign oil, which threatens both our economic and national security.

To understand how we can meet this challenge, we should look back a half century to 1961 when President Kennedy set a goal of landing a man on the moon. It is time for another such Herculean effort; it is time for a national commitment to achieve energy independence.

We know that a commitment to energy independence can succeed. Last year, Brazil reached this goal through a concerted research effort that began in 1975 to develop ethanol from sugarcane. While it took Brazil 31 years to reach energy independence, experts tell me this goal can be achieved here by 2020, if we make it a national priority.

Energy independence will require a multipronged approach. Vital development of alternative fuels is already under way at institutions such as the University of Maine, where researchers are at the forefront of a technique known as "life cycle analysis" which identifies alternative fuels that reduce our dependence on imported oil while having the least environmental impact. When the energy bill was considered by the Senate in June, I offered a successful amendment to authorize $275 million over five years for research and development of new technologies to efficiently convert materials such as wood chips, switch grass and other organic waste to ethanol.

Energy independence also requires a stronger commitment to energy efficiency. The Senate energy bill establishes gas mileage standards for vehicles of 35 miles per gallon by 2020. By raising these standards, we can save more than a million barrels of oil each day. It is the single most important action we can take down the road to energy independence and will save consumers millions of dollars.

Congress must also pass legislation to help curb speculation on futures markets that artificially drives up energy prices. In my role as chairman of the Senate Homeland Security Committee in 2005, I asked one of the subcommittees, the Permanent Subcommittee on Investigations, to conduct an investigation into the price of gasoline and crude oil. That investigation concluded that speculators can create additional demand for oil, driving up the price.
How un-Republican of her! She describes a situation where the market system of mediating supply and price of essential energy commodities is a total failure, requiring immediate government intervention.

Just yesterday, the Bangor Daily News had another story about state wood products truckers and other hauling businesses being driven to the outer edges of viability by diesel prices approaching $4 per gallon:

Fuel costs imperiling businesses
By Nick Sambides Jr. - Monday, December 17, 2007 - Bangor Daily News
SKOWHEGAN, Maine -- After 33 years, high diesel fuel prices have driven John Harriman out of the construction trade. His eight trucks have been parked for two weeks and 16 people laid off because he can't afford to stay in business.

"It costs me $10,000 a week just to run the trucks," Harriman, of Harriman Bros. Construction in Frankfort, said Saturday. "I can't do it any more."

Harriman spoke at a meeting of the Coalition to Lower Fuel Prices in Maine at Skowhegan Area High School on Saturday. About 125 people attended the meeting, which was held to address the effects of the rising cost of diesel fuel.

The Coalition to Lower Fuel Prices in Maine has expanded its focus beyond logging truckers and the state's trucking industry, which has 5,000 to 6,500 state-registered trucks, to anyone affected by high fuel and home heating oil prices.

The diesel fuel crunch "affects everyone," said Larry Sidelinger, owner of Yankee Pride Transport of Damariscotta. "Guys [like Harriman] who haul gravel [for] the construction industry ... [and] truckers all over this country are going out of business at an alarming rate. ..."

"Everybody involved in this industry is making survival decisions rather than investment decisions," Sidelinger said. "We're all in survival mode, and that's not good for business."
Later in the piece comes this astonishing fuel price & consumption figure associated with a septic pumping & hauling business:
Prices have increased so fast -- about 54 cents in nine weeks -- that when Melodie Bliss opened Bliss Septic Services of Mercer in September, her service truck fuel costs went from $16,000 to $20,000 a month, she said. She had to raise advertised prices so much that customers could have wondered whether they were bait-and-switch victims.
Yeow! Is that just one truck? The article doesn't say. But at $3.55 per gallon, that's at least 4500 gallons of diesel fuel per month to run the business. That's 150 to 200 gallons per day, just for one business to go around pumping out people's excrement.

This points up what a pickle we are in here in Maine, or in any energy-poor hinterland for that matter. Absolutely all of this transportation fuel must be imported into this region. I'm curious how we can do enough "life cycle analysis" of environment-friendly alternative fuel to maintain us in this manner of doing business. It will be a tremendous leap to replace super-energy-dense diesel containing 130 megajoules per gallon with an effective, home-grown alternative that leads to Senator Collins's "multipronged approach" to "Energy independence." The $275 million for "research and development of new technologies" for various biofuels seems to me to be a drop in the bucket compared to America's now nearly $1.5 billion per day fuel bill.

A story was just on the radio that the US Congress has now passed an energy bill containing most of Senator Collins's language, along with an increase in fuel economy standards. Interestingly, it looks like Bush will sign it. It's a sign of the times, the crisis is desperate. But I get the feeling that the medicine will not bring relief soon enough to those most in need.

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