Kerry Campaign Fact Sheet: Mismanagement In Iraq Has Contributed To Rising Gas Prices; John Kerry Plans To Restore Confidence

5/26/2004

From: Allison Dobson of John Kerry for President, 202-712-3000, Web: http://www.johnkerry.com

SEATTLE, May 26 -- The following fact sheet on rising gas prices was released today by the Kerry campaign:

The current Administration's failure to manage the war in Iraq and to effectively wage the war on terror has had an adverse impact on America's security and economy. These international failures are an important reason for the rise in oil prices over the past three years. Economists estimate that Americans are now paying a "terror premium" of $10 to $15 per barrel for oil. The mismanagement of the war in Iraq has led to instability in the region and volatility in the oil market, and has contributed to higher oil prices. John Kerry will restore confidence across the globe and in the Middle East, restore the reputation of the United States and provide stability to the oil market.

MISMANAGEMENT OF THE WAR IN IRAQ CONTRIBUTES TO THE RISING GAS PRICES:

-- Mismanagement of the War in Iraq Has Contributed to the Terror Premium on Oil. George Bush's failure to manage the war in Iraq has contributed to the increase in oil prices. Octane Week reported, "The premium, the largest in 10 years, reflects recent terrorist-related attacks in southern Iraq at Basra and at Saudi Arabia's Yanbu refining and petrochemical complex, said Bruce Lanni of A.G. Edwards & Sons." (Octane Week, 5/10/04)

-- Oil is now $15.98 higher than what was expected before the Iraq war. On March 8 2003 - one day before the start of the Iraq war - light sweet crude oil was trading at $34.93 per barrel. The futures market expected the price to come down to $24.94 by June 2004. Instead, the price has risen and as of May 24th, 2004 is trading at $40.92. That is $15.98 higher than the futures market predicted. The mismanagement of Iraq has contributed to this premium. (NYMEX data)

-- Experts estimate a Terror Premium of $5 to $10 per barrel. Experts estimate that the premium charged on a barrel of oil is $5 to $10 because of fears about terrorism and Iraq - with some estimates as high as $15:

-- "Terrorism fears have resulted in a so-called terrorism premium that has pushed up crude prices as much as $5 to $10 a barrel over what supply and demand would suggest, some experts say." (Wall Street Journal, 5/17/04)

-- Daniel Yergin, an expert in the oil markets, has estimated that the current price of oil is padded by what some have called a, "terror premium." The Washington Post reported, "Daniel Yergin, author of a Pulitzer Prize-winning book on oil and chairman of Cambridge Energy Research Associates, estimates that anxiety and geopolitical risk have contributed $6 to $8 to the current $40 price of a barrel of oil." (Washington Post, 5/23/04)

-- Wells Fargo's Chief Economist, Dr. Sung Won Sohn wrote, "The fear or war premium related to the Gulf region probably accounts for $10 to $15 of the $40 price tag. At the New York Mercantile Exchange, speculators hold four times more long- than short- positions, betting that geopolitical turbulence will keep prices moving upward." (Dr. Sung Won Sohn, Financial Market Strategies, 5/24/04)

-- "(Qatar Oil Minister Abdullah bin Hamad Al )Attiyah said current geopolitical uncertainties are adding about $8 a barrel to the price of crude." (Dow Jones News Wires, 5/17/04)

Iraq's Oil Minister Expects More Sabotage Events. The Iraqi oil minister does not expect disruption of Iraq's oil supply to end anytime soon. The Wall Street Journal reported, "'In general, I think our expectations are that these (sabotage) events will be on the increase in the next few weeks,' said Ibrahim Bahr al- Uloum, Iraq's oil minister." (Wall Street Journal, 5/24/04)

JOHN KERRY HAS A PLAN TO RESTORE CONFIDENCE AND CREDIBILITY IN THE WORLD. The failure of the Administration to internationalize the conflict in Iraq has lost us time, momentum, and credibility - and made America less safe and rattled the world oil markets. Our stubborn, unilateral policy in Iraq has steadily drifted - from tragedy to tragedy. John Kerry will restore the credibility of the United States with a sincere effort to reach out to our allies and with a plan to restore order in Iraq.

RISING GAS PRICES AND THE IMPACT ON WASHINGTON FAMILIES

The Bush Administration has failed to take action as gas prices have skyrocketed to record highs. Millions of Americans are being squeezed by higher prices as they prepare to go on Memorial Day holiday. These increased costs are also hurting our businesses, schools, and communities. The policies of the current Administration have only exacerbated the problem, and the Administration has no long term solution to reduce our dependence on foreign oil. John Kerry has a plan to offer short term relief to American families while setting this country on a course to energy independence, including a plan to make cars more energy efficient.

IMPACT OF RISING GAS PRICES IN WASHINGTON:

A 61 percent or $0.835 per Gallon Increase in Gas Prices: Since George Bush took office, gas prices in Washington have increased by $0.835 per gallon, an increase of 61 percent to $2.30 a gallon. (EIA Petroleum Marketing Monthly, May, 2001; AAA Fuel Gauge Report, 5/25/04)

$993 More per Household per Year: Households in Washington are paying $993 more per year for gasoline since George Bush took office, paying on average $2,458 per year. (Department of Energy, Household Vehicles Energy Consumption 1994, Table 5.2, August 1997)

$1,170 More Per Household with Children: Households with children in Washington are paying $1,170 more per year for gasoline since George Bush took office, paying on average $2,896 per year. (Department of Energy, Household Vehicles Energy Consumption 1994, Table 5.2, August 1997)

Independent Logging Truck Drivers Are Threatened by Higher Prices. The many independent truck drivers in Washington State are threatened by rising diesel prices. The Seattle Post- Intelligencer reported, "In addition to stagnant pay, 12- to 15- hour days and high injury rates, rising diesel prices are threatening the once-flourishing industry... " (Seattle Post- Intelligencer, 5/12/04)

Seattle Raised a 60-Cent Gas Surcharge for Taxi Cabs. The city of Seattle was forced to raise a 60-cent surcharge to help taxicab drivers who pay for their own gas. The Seattle Times reported, "In April, the city of Seattle authorized a 60-cent taxi surcharge to help drivers, who have to pay for their own gas. Robert (a driver) said no passenger has paid him the 60 cents, even though the city-issued surcharge placard is posted above the front passenger seat. Roberts said customers think the surcharge is a scam. Other drivers have complained that customers tip less because of the 60-cent charge." (Seattle Times, 5/12/04)

Schools Spend $6 Billion on Energy Every Year. School districts across the country spend $6 billion on energy in a given year. This includes diesel and gasoline to run school buses and heating oil and natural gas to run schools. It is the second- largest expense for schools after personnel. (Department of Energy, "National School Boards Association Endorses Department of Energy Schools Program," 1/28/04)

BUSH ADMINISTRATION POLICIES DRIVE UP GAS PRICES:

Record Profits for Big Oil Companies While Consumers Are Gouged at the Pump: The higher overall gas prices have cost the American consumer a net of over $25 billion since George Bush took office. This money has gone directly from consumers pocketbooks into the hands of oil companies and oil producers, including OPEC. The big three oil companies in America have profited $33.6 billion over the past three years. (Based on EIA Monthly Energy Review; ExxonMobil, ChevronTexaco and ConocoPhillips Company Financial Reports)

The White House Promised Their Energy Plan - Developed in Secret - Would Reduce Pump Prices Yet Their Own Administration Said It Would Have Negligible Impact. Q: How will it lead to lower prices at the gas pump now? THE PRESIDENT: Because we recognize that we need more supply. And when you read the report, you'll see that we've laid out constructive ways to make sure that there are more supply available." But, the Bush Administration's own Energy Information Administration found that the effect of the proposal would be "negligible" with respect to production, consumption, imports, and energy prices. (Remarks by the President on National Energy Policy, 5/16/01; EIA, "Summary Impacts of Modeled Provisions of the 2003 Conference Energy Bill" 2/04)

JOHN KERRY'S PLAN TO LOWER GAS PRICES, IMPROVE EFFICIENCY, AND PUT AMERICA ON A PATH TO ENERGY INDEPENDENCE:

Manage the Strategic Petroleum Reserve to Protect our Security without Driving Up Prices. The U.S. Strategic Petroleum Reserve is the largest stockpile of government-owned emergency crude oil in the world. Established in the aftermath of the 1973-74 oil embargo, the SPR provides the President with a powerful response option should a disruption in commercial oil supplies threaten the U.S. economy. Unfortunately, the Bush Administration has put the SPR fill program on automatic pilot without regard to the short- term effect on the U.S. market. The program needs better management - diverting oil from the market to fill the Strategic Petroleum Reserve at a time of exceptional tightness in oil markets as the Bush Administration has done, and continues to do, does not make sense today. Kerry would temporarily suspend filling SPR until oil prices return to normal levels.

Use a Renewed American Position in the World to Stand Up to OPEC. A Kerry Administration would act immediately to exert pressure on OPEC to increase oil supplies. As President, John Kerry will engage in diplomacy to ensure that U.S. consumers are not held hostage to price fixing by OPEC. During the last year of the Clinton Administration, effective diplomatic pressure resulted in OPEC proactively reducing prices

MAKE AMERICA LESS DEPENDENT ON MIDDLE EAST OIL BY INVESTING IN THE CARS OF THE FUTURE: One way to help consumers at the pump is to develop the market for Advanced Technology Vehicles that can get more than double the miles per gallon as today's conventional cars. There are two things we need to do to stimulate this market: the first is to help our auto industry and auto suppliers convert so they can make these vehicles; and the second is to help consumers afford the higher costs for these vehicles. Kerry's plan addresses both these issues. In includes:

-- $10 Billion in New Incentives for the American Automobile Industry to Convert Manufacturing Facilities to Produce Advanced Vehicles. John Kerry believes that the American auto industry should lead the world in building and selling efficient vehicles. He believes that the nation should provide assistance to American manufacturers for the conversion of existing vehicle and parts plants to build more efficient advanced technology vehicles. The Kerry Administration will provide $1 billion annually for ten years on a competitive basis to plants and component manufacturers to pay for the conversion to build the automobiles of the future. This assistance will help manufacturers accelerate the pace of conversion of their factories, make efficient vehicles available sooner, reduce oil dependence faster, and protect jobs in communities across the country.

-- Up to $4,000 Tax Credit to help Americans Buy Advanced Technology Vehicles. While advanced vehicles are less expensive to operate, they can cost more to purchase initially. John Kerry believes that we must provide consumers with incentives to purchase advanced technology and alternative fuel vehicles - to lower the price gap between these cleaner and more efficient vehicles and conventionally-fueled vehicles of the same type. Kerry's approach will make the marketplace friendlier to these cleaner energy vehicles, which will include cars, SUVs, minivans, pickups, buses and trucks. Consumer tax credits will spur demand, stimulate the market, and enable manufacturers to increase production and lower costs. The tax credit would be larger for cars that used more fuel-efficient technology. It is a way to help move technologies off the drawing board, into production and onto the road.

Paid for by John Kerry for President, Inc.