STATEMENT FOR THE RECORD - MICHAEL C. BURGESS

ENERGY AND COMMERCE HEARING

"Gasoline: Supply, Price, and Specifications"

May 10, 2006

Mr. Chairman, thank you for convening this hearing this morning. And thanks to our panelists for coming before us today.

As we are hearing from our constituents on this topic, I think the information provided by the panelists today will help this committee get beyond the rhetoric to the facts.

There are a number of factors that contribute to high gasoline prices, including: crude oil prices, refinery capacity, environmental regulations, and consumer demand. As we learned during our hearing on World Crude Supply last week, approximately 55 percent of the cost of a gallon of gasoline is the crude oil.

The geography of oil and gas has led our country to place our energy assurance in the hands of leaders such as Venezuelan President Hugo Chavez and inflexible or unstable dictators of the Middle East. Last week, several panelists, including Dr. Daniel Yergin, referenced the "risk premium" associated with ongoing concerns about the stability of supply from Russia and the Nigeria Delta Region, as well as the impact of Iran's nuclear posturing and the recent nationalization of energy infrastructure in Bolivia.

All of these geopolitical uncertainties make foreign oil unpredictable and unaffordable. The best way to bring down prices is to increase supply while decreasing this risk premium. That means we need to increase not only production, but domestic production. Today, we import nearly 60% of our oil, but we've prohibited exploration in the OCS, in ANWR, and on other federal land.

I believe we should allow, and in fact, encourage exploration and production here at home. A barrel of oil coming from the Gulf Coast or the oil shale in Utah is significantly safer than a barrel of oil coming from Iran. That is the surest way to bring down gasoline prices in the short run.

However, there is another phenomenon affecting the price of gasoline, especially in the Dallas-Fort Worth Metroplex, and that is the transition from methyl tertiary butyl ether (MTBE) and ethanol. Areas, such as the Dallas-Fort Worth Metroplex, which use RFG to meet Clean Air Act requirements during the summer driving season, have been more heavily impacted by this fuel switching.

Not only has there been an inadequate supply of ethanol to meet the demand, there have been logistical problems due to the different physical characteristics of the two substances.

Unlike gasoline containing MTBE, gasoline containing ethanol is not able to be transported via pipeline, which means that the ethanol must travel via truck and rail and mixed once it arrives to the area in which it will be used. All of these factors further push up the price at the pump.

Another factor, affecting the price of gasoline is the patchwork of different "boutique" fuels in use across the country. Non-federal fuel specification requirements reduce the fungibility of gasoline. That means that gasoline that can be used in Lubbock cannot be used in Fort Worth. Gasoline used in Utah cannot be used in Chicago. This limited inability to move gasoline across the country in response to local demand results in increased prices at the pump.

I am looking forward to hearing from our panelists today about how gasoline prices are set in general, and specifically how they are impacted by the transition from MTBE to ethanol and by the use of "boutique" fuels.

I'd like to thank our panelists again for giving up their time to testify before us this morning. And with that, Mr. Chairman, I yield back.