February 20, 2008

By Peter Hirschfeld Vermont Press Bureau

MONTPELIER – On a day when oil futures again topped $100 a barrel, Rep. Peter Welch called on President George Bush to offer Vermonters short-term relief from rising gas prices.

Welch's proposal would staunch the flow of oil into the nation's Strategic Petroleum Reserve, an approximately 700-million-barrel safety net stored in subterranean caverns near the Gulf of Mexico. Removing the United States as a major buyer on the open petroleum market, Welch said, would lower gas prices by as much as 25 cents in the near future.

"This isn't an energy policy, but it's a concrete step we can take right now," Welch said outside the Gulf station on State Street Tuesday afternoon. "In the short-term, we've got to do something to give folks relief at the pump."

The Strategic Petroleum Reserve, established in the wake of the oil embargoes of 1973 and 1974, exists to protect the nation against an interruption in oil supplies. With the reserve at 95 percent of its 727 million barrel capacity, Welch said, the United States presently holds an ample safeguard.

"The purchases we're making now are in effect topping off the reserve," Welch said.

Welch cited an economic analysis conducted by Goldman Sachs that said suspending oil-reserve purchases could lower pump prices by as much as 25 cents. He announced the plan at a Montpelier service station near the Statehouse, flanked by two Vermonters feeling the pinch.

Roland Bellavance is president of Bellavance Trucking, a freight-hauling company headquartered in Barre. Bellavance said he's watched profit margins shrink against the steady increase in diesel prices over the last five years.

His approximately 90-vehicle fleet drives 7 million miles a year. In 2002, with diesel prices averaging $1.38 per gallon, his company paid $34,000 a week in fuel costs. Last year, at an average price of $2.85, the company spent $74,000 a week to keep tanks filled.

"For us, it's the second-highest operating cost, next to labor," Bellavance said.

If diesel remains anywhere near the $3.69 per gallon his company is paying now, he said, the company could be paying $95,000 a week for fuel in 2008.

"If we were really able to save 25 cents a gallon, that would save us over $300,000 a year, which, for a firm of our size, is a huge amount of money," he said.

Welch said the country's energy crisis demands substantive policy changes, and pointed to recent legislation that will increase gas mileage standards and the efficiency of appliances. But he said Vermonters need more immediate relief, not only in their own personal fuel expense but in the institutions their tax dollars fund.

Ginny Burley is chairwoman of the Union-32 School Board. Rising gas prices, she said Tuesday, are among the major factors driving school costs.

"It's a big impact on school budgets and it's one we have no control over," Burley said.

U-32 students hail from scattered rural towns on the outskirts of Montpelier, and buses cover 240,000 miles a year to get them to and from school. Those transportation costs presently consume more than $700,000 a year from the district budget.

The President has the executive authority to suspend oil-reserve purchases. Failing that, Welch said, he and other congressional leaders will craft legislation mandating the suspension of new oil purchases. Welch opposes the release of fuel from the Strategic Petroleum Reserve, which held about $70 billion worth of fuel as of Tuesday's trading prices.

Matt Cota, director of the Vermont Fuel Dealers Association, said his organization supports any effort to lower gas prices. But he said long-term relief will come only when Congress closes the "Enron loophole" that breeds speculative trading in offshore markets.

A provision in the 2007 farm bill would close the loophole that deregulated the oil commodities market in 2002. The proposed bill presently is being debated in the U.S. Senate.