[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




                        U.S. POLICY TOWARD OPEC

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                        INTERNATIONAL RELATIONS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                        WEDNESDAY, MARCH 1, 2000

                               __________

                           Serial No. 106-132

                               __________

    Printed for the use of the Committee on International Relations


 Available via the World Wide Web: http://www.house.gov/international 
                               relations

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
66-052 CC                   WASHINGTON : 2000




                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVE CHABOT, Ohio                   EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     BRAD SHERMAN, California
    Carolina                         ROBERT WEXLER, Florida
MATT SALMON, Arizona                 STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York               JIM DAVIS, Florida
TOM CAMPBELL, California             EARL POMEROY, North Dakota
JOHN M. McHUGH, New York             WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina         BARBARA LEE, California
PAUL E. GILLMOR, Ohio                JOSEPH CROWLEY, New York
GEORGE RADANOVICH, California        JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    Richard J. Garon, Chief of Staff
          Kathleen Bertelsen Moazed, Democratic Chief of Staff
          Francis C. Record, Senior Professional Staff Member
                    Marilyn C. Owen, Staff Associate
                            C O N T E N T S

                              ----------                              

                               WITNESSES

                                                                   Page

The Honorable Bill Richardson, Secretary, Department of Energy...    16

                                APPENDIX

Prepared Members' Statements:

The Honorable Benjamin A. Gilman, a Representative in Congress 
  from New York and Chairman, Committee on International 
  Relations......................................................    46
The Honorable Sam Gejdenson, a Representative in Congress from 
  Connecticut....................................................    49
The Honorable Paul Gillmor, a Representative in Congress from 
  Ohio...........................................................    52

Prepared Witness Statements:

The Honorable Bill Richardson, Secretary of Energy...............    54

Additional statements and materials submitted for the record:

Joint Statement between Venezuela's Minister of Energy and Mines, 
  Ali Rodriguez, and U.S. Secretary of Energy Bill Richardson 
  dated February 29, 2000........................................    58
Joint Statement of the Kingdom of Saudi Arabia's Minister of 
  Petroleum and Mineral Resources, Ali Al-Naimi, and U.S. 
  Secretary of Energy Bill Richardson............................    59
Communique between the Minister of Oil of the State of Kuwait and 
  the Secretary of Energy of the United States of America dated 
  February 24, 2000..............................................    60
Joint statement between Norwegian Minister of Petroleum and 
  Energy, Marit Arnstad, and U.S. Secretary of Energy Bill 
  Richardson dated February 27, 2000.............................    61

Inserts for the record:

Insert A, concerning steps Department of Energy has taken to spur 
  domestic oil and gas production................................    62
Insert B, concerning capacity figures as rough estimates by EIA..    64

 
                        U.S. POLICY TOWARD OPEC

                              ----------                              


                        Wednesday, March 1, 2000

                  House of Representatives,
              Committee on International Relations,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:10 a.m., in 
room 2128, Rayburn House Office Building, Hon. Benjamin A. 
Gilman (Chairman of the Committee) presiding.
    Chairman Gilman. The Committee will come to order. I am 
very pleased to convene this hearing on our United States 
policy toward the Organization of Petroleum Exporting 
Countries, OPEC, and want to extend a hearty welcome to our 
witness, Energy Secretary Bill Richardson, whose long, 
distinguished track record of public service in both the 
legislative branch and the executive branch is to be commended.
    We understand that Secretary Richardson has been 
particularly heavily traveled over the past few weeks, with 
numerous meetings with the oil-producing nations and non-OPEC 
energy officials. In light of his arrival late last night, we 
are particularly pleased that he could be with us this morning 
to share his observations and his conclusions on his most 
recent round of energy diplomacy.
    We are fully aware of the challenges facing this Secretary 
and the Clinton Administration, and they will not be readily 
overcome. Thousands of households and businesses across New 
York State and New England and elsewhere are facing sky-high 
fuel bills that they can't afford to pay in many instances, and 
many of our citizens on fixed income are choosing between 
eating and staying warm. It is impacting our economy.
    Today we are trying to find some answers for our 
constituents and for the millions of Americans who are 
demanding to know why the Administration sat idly by as the 
nations of OPEC and its major oil-exporting allies raised 
prices from $11 a barrel in December 1998 to a high of $30 a 
barrel today. Over a year transpired.
    A hearing on OPEC and the Northeast energy crisis on 
February 10th before this Committee clearly demonstrated that 
OPEC's goal of reducing its oil stocks was the major reason 
behind large-scale price increases for heating oil and diesel 
oil stocks. They have manipulated the oil price in our Nation.
    The transportation infrastructure of our Nation is under 
severe stress, as tens of thousands of small and medium-size 
trucking firms throughout the Northeast and throughout other 
areas in our Nation are on the verge of bankruptcy because of a 
$2-per-gallon diesel oil price, absorbing 20 percent or more of 
the entire operating budget of each of these firms.
    Oil prices today are higher than at any time since the 
Iraqi invasion of Kuwait a decade ago. Earlier this week it was 
reported that average gasoline prices across our Nation have 
risen 6 cents over the past 2-week period, the largest such 
increase since the 1990 period. We are up to prices per gallon 
of over close to $1.50 in my region alone.
    Production cutbacks decreed by the producer cartel, the 
Organization of Petroleum Exporting Countries, OPEC, has caused 
worldwide stocks, including those of our own Nation, to be 
drawn down to severely low levels. This imbalance has resulted 
in the sharp climb in heating oil and diesel prices over this 
past year.
    As our dependency on foreign oil has increased over the 
past decade, the Administration has fallen short thus far in 
its efforts to persuade OPEC and non-OPEC nations alike to 
moderate their aggressive policies designed to punish oil-
importing countries like our own.
    Several key oil-producing nations relied on our country's 
military for their protection in 1990 and 1991, and those 
nations in the Persian Gulf still depend on us for their 
security, but in the view of this Member, a continuation of 
those present policies put in place at the meetings of OPEC 
ministers in March and September of last year threatens our 
relationship, a relationship that many of the OPEC nations 
presently enjoy with our Nation.
    Over the past several weeks, my offices in New York State 
and here in Washington have received numerous calls and letters 
asking us how it could be that the very nations we helped in 
their hour of peril are repaying us with this sky-high energy 
bill and shocks to our economy that are still being felt 
throughout the Northeast and the rest of our Nation.
    Last month I received one such impassioned letter from two 
of my retirees, William and Mary Nickels of Warwick, New York, 
who are trying to make ends meet on a fixed income. They are, 
like many Americans, tired of our excuses and expecting answers 
from all of us, and I quote from their letter:
    ``Similar to the 1970's, when OPEC held us hostage to their 
demands, our local fuel supplier has raised the price of home 
fuel to exorbitant levels. True, we realize . . . harsh weather 
has struck the Northeast; but what caused this to go unnoticed 
by our government? Wall Street is booming, but retired 
individuals such as ourselves must make harsh decisions daily 
relative to the spiraling cost of . . . home heating oil and 
gasoline. If there is a real shortage of home fuel oil, why 
hasn't our President or Congress released some of the country's 
reserve supply to counteract this tyranny? . . . Now this aging 
veteran is calling upon you to take the initiative and solicit 
Congress to do the right thing, namely, to bring home fuel oil 
prices down to a reasonable market level.''
    Later today I will be introducing legislation entitled the 
Oil Price Reduction Act, which will begin to respond to the 
kind of questions and concerns that I see from the Nickels 
family in Warwick and from millions of other Americans across 
the Nation. I am inviting my colleagues to join with me in 
cosponsoring this legislation requiring the President to cutoff 
assistance, cutoff arms sales to those members of OPEC and 
other major net oil exporting countries which are determined to 
be engaged in oil price fixing to the detriment of our Nation's 
economy.
    Specifically, my bill requires the President, not later 
than 30 days after enactment, to send the Congress a report 
containing a description of our security relationship with each 
OPEC member and any other major net oil exporter, together with 
information about our assistance programs and government-
supported arms sales provided to those nations.
    That report would also include a determination by the 
President to the extent that any of these countries is engaged 
in oil price fixing, and would further require the President to 
subsequently reduce or terminate or suspend any assistance or 
arms sales to that nation determined to be fixing oil prices to 
the detriment of our economy.
    It further requires continued diplomatic efforts by our 
Nation to convince all major net oil exporting nations that 
current price levels are unsustainable and will cause 
widespread economic harm in oil-consuming and developing 
nations.
    This bill is straightforward in its objectives, and should 
give the Administration and our Secretary ample time in its 
ongoing energy diplomacy, and also enable OPEC member states to 
take decisive actions in turning on the spigot, increasing 
production levels sufficiently to bring prices down to 
sustainable market levels.
    Before turning to my colleagues for their opening 
statements, I would like to ask unanimous consent that the 
record remain open for a period of 5 days for incorporating any 
additional relevant materials and statements related to the 
ongoing energy crisis. I am pleased to recognize the Ranking 
Member of our Committee, Mr. Gejdenson.
    Mr. Gejdenson. Thank you, Mr. Chairman.
    Mr. Secretary, good to see you again. You probably wish you 
were back at the U.N. these days, with this little tussle in 
front of us.
    When you were a House Member, you used to go around 
rescuing Americans who were held hostage. Today you might say 
we are all being held hostage, and I think the situation here 
gives you an opportunity to provide a rescue for the general 
public. I know there is nobody in government service who has a 
better sense of how to deal with these issues.
    I am glad to see that, in today's Wall Street Journal, 
apparently we are now looking at opening up SPRO, the Strategic 
Petroleum Reserve, but I have to tell you I think we should 
have done it a long time ago. While a poker game may not always 
be the best analogy of life, if we don't ante up, there is 
really no incentive here for these other countries to increase 
production.
    All of us, I think, can tell you the kind of devastation it 
is bringing to individuals. From the individuals on Main Street 
even to Mr. Greenspan, they recognize this poses an important 
and dangerous threat to our economy. We have got, thanks to 
this Administration in very large part, the longest sustained 
economic growth I think in the history of the country, 
certainly in the history of keeping records on these things. If 
you look at the impact of previous oil embargoes, you know the 
kind of economic disruption that occurs there.
    Now, with heating oil there is a particular problem. No 
Energy Secretary or State regulator would allow an electric 
utility or a natural gas utility to get in a position where 
homeowners were put in danger.
    But what happens with heating oil, which is how 65 percent 
of my constituents heat their homes, is if there is a cold 
snap, the natural gas pipeline turns off a lot of their 
commercial customers who have interruptible service. So just as 
we were sitting there with the shortest supply ever, just as we 
were sitting there with cold weather increasing demand, the 
impact on another energy system, natural gas, forced commercial 
customers to increase the demand on heating oil.
    Now, we have introduced legislation that would establish a 
Northeast Reserve. I think that makes sense. I think we ought 
to look at demanding that wholesalers have an adequate supply 
and reserve, as well. These people profit in our region. It 
makes sense not to leave us in the kind of situation we were in 
this year, where even an average winter would have left our 
homeowners in deep trouble.
    Now, if you look at what we have done in the past, when we 
had the Gulf War and there was a sudden rise in crude oil 
prices, we got the Administration then to go into the Strategic 
Petroleum Reserve. We had a significant, $10-a-barrel drop 
almost overnight, just by the fact that they said they would do 
it, in the price of crude oil. What we have seen up to date now 
in heating oil is going to be replayed in gasoline.
    Again, if you are the OPEC nations, you are sitting there 
looking at working less hours in a sense and making more money. 
Why would they change that policy?
    Now, I think the Chairman's proposal is an intriguing one. 
I think it doesn't work unless we make it multilateral, and 
clearly the impact is not just on the United States. All of our 
Western allies are in the same situation, all the developed 
nations.
    I want to take one moment to say that Congress is partly at 
fault here. When this Administration, time after time, has 
tried to increase the efficiency of our automobile fleet; when 
this Administration, with your and the President's leadership, 
has tried to take initiatives on energy conservation, this 
Congress has stood in the way. As a matter of fact, it is my 
understanding that in congressional legislation they prohibited 
you from even looking at ways to make the American automobile 
fleet more efficient. Now, that is a mistake that this present 
Congress has made, and they ought to be called to task for it.
    As a friend and somebody I have great respect for, I am 
trying to get this message across as gently as I can, but your 
actions are needed here. I think you would be a lot more 
effective in talking to the OPEC members if you had your hand 
on that spigot and you were in the process of turning it on, 
because nothing will get their attention like dumping some of 
this crude.
    Now, the average cost of the crude that you have in the 
Strategic Petroleum Reserve is about $3 a barrel less than what 
the market price for crude is right now. I know this would be a 
shocking thing, but if you sold some of it, you would actually 
be making a profit for the government; and if you drove the 
price down, you would be able to buy it back at a lower price, 
thereby increasing profits for the U.S. Government, which 
wouldn't be a bad thing, either.
    Sixty-five percent of the country is dependent on truckers 
that use diesel fuel to bring them their products. When you 
look at the price of gasoline, which is already starting to 
increase markedly across the Nation even before the summer 
driving situation, we have really got to act here. I think at 
the beginning of the heating oil crisis the response was that 
it takes too long for this stuff to get in the pipeline. I 
think the leveraging effect of saying we are going to start 
dumping crude into the marketplace will do a lot more to get 
the Saudis' and the Kuwaitis' attention than almost anything 
else we can do.
    As I said at the beginning of my statement, you did an 
awfully nice job rescuing Americans who were held captive in 
unfriendly nations during your time in Congress. We want to see 
you as effective in the executive, rescuing the American 
economy and the people from this crunch that we have been put 
under by the OPEC nations. It is great to have you here.
    Chairman Gilman. Thank you, Mr. Gejdenson.
    Any other Members seeking recognition? Mr. Rohrabacher.
    Mr. Rohrabacher. Thank you very much, and welcome back, 
Bill.
    Only my good friend Mr. Gejdenson could do the stretch, the 
great stretch in his analysis that would end up blaming the 
Republican Congress for this dramatic increase by our not 
stressing conservation. Now, just a note, Mr. Gejdenson: This 
isn't a problem of demand. What we have got is a manipulation 
of supply.
    Mr. Gejdenson. Will the gentleman yield?
    Mr. Rohrabacher. I certainly will.
    Mr. Gejdenson. I think you are right. There is no question 
that the fundamental issue is supply, but if we had less 
demand, it would have the same impact on the imbalance. I think 
you would probably be on my side on this and agree with me that 
Congress has prohibited the Administration from looking at ways 
to increase the CAFE standards for automobiles.
    Mr. Rohrabacher. Reclaiming my time, actually I don't agree 
with you on that, but I would say that it would be--I would 
expect that, if Congress wasn't controlled by the Republicans, 
that you might not be blaming the Republicans at this time in 
order to deflect the fact that we have an Administration that 
has had policies that have put us in jeopardy, and have 
resulted in hundreds of dollars being sucked out of the pockets 
of the American people.
    From this perspective, from where I sit, it looks like we 
have rising oil prices because of, No. 1, a manipulation of 
supply by a conspiracy, by a price-fixing conspiracy, an 
international oil cartel, and also by--and I am sorry, and I 
will be happy to talk to my old friend and am waiting for your 
statement on this--but the incompetency of this Administration 
in terms of the way it has dealt with certain foreign policy 
issues that have made us vulnerable.
    First of all--and, by the way, in California when the price 
of gas--we really take our driving seriously out in California, 
and when the price of gas goes up, yes, we are unhappy. But if 
the price of gas goes up because of market factors, we 
understand that, but that is not the reason the price of gas 
has been going up. The price of gas has gone up because we have 
an oil cartel that is involved with an international price-
fixing conspiracy aimed especially at the United States, but 
other oil-consuming countries as well.
    What makes this even worse is that two of the biggest 
players in the cartel are countries in which we have American 
troops stationed for their protection. Saudi Arabia and Kuwait 
are two countries in which we have American troops stationed 
there for their protection.
    Now, I want to know whether this Administration, and I hope 
Secretary Richardson will tell us this, has used this leverage 
and our commitment of blood and treasure to protect these 
countries, have we used that as leverage to prevent those two 
countries from engaging in a conspiracy? Saudi Arabia has 
maximum leverage on this, But they are involved in a conspiracy 
to suck money out of the pockets of the American people, their 
very protectors. I want to know what we have done to use that 
leverage, the protection we afford Saudi Arabia and Kuwait, to 
end this price-fixing cartel.
    Second of all, and again the Members of this Committee have 
heard this before. I know Secretary Richardson and I may have a 
disagreement on this, because you have been personally involved 
in this particular area.
    I believe that the policies of this Administration have led 
to a continuing instability in Afghanistan. The instability in 
Afghanistan with the Taliban in control there not only have led 
to these gross violations of human rights and the terrorism 
that we know of, but it has also prevented a pipeline from 
being built over these last 8 years through Afghanistan that 
would have brought Central Asian oil onto the market. That 
Central Asian oil would have made it impossible for this cartel 
to control this huge supply of oil, and would have meant that 
there wouldn't have been this manipulation of the supply of 
gasoline and oil into the system that has resulted in this 
massive increase in price.
    I am very interested to hear what Mr. Richardson has to say 
about our policies in Afghanistan that has led to the isolation 
of Central Asian oil. Again, we are talking about the 
competence of not only those who are handling the policy but 
actually the legitimacy and how good that policy is to begin 
with.
    So, Bill, welcome back to Congress. We miss you on this 
side, but you are on that side now, so we have got to ask you 
some tough questions.
    Thank you very much, Mr. Chairman.
    Chairman Gilman. Thank you, Mr. Rohrabacher.
    Mr. Lantos?
    Mr. Lantos. Thank you, Mr. Chairman.
    Let me first welcome our distinguished Secretary of Energy. 
His diplomatic skills were obvious when he served as a 
distinguished Member of my Committee throughout the 1980's when 
we dealt with the European Community, and we were delighted to 
see your diplomatic bravura performances in saving the lives of 
American citizens. I personally want to commend you on your 
most recent swing through the oil-producing countries, which I 
can only describe as a major diplomatic achievement on your 
part, and I want to congratulate you.
    I want my friend from California to pay close attention, 
because his criticism of the Administration I think needs to be 
put in somewhat of a perspective. Yesterday John McCain in 
Bakersfield, for the first time, to my knowledge, came out with 
a statement that many of us of course have made, not now but 9 
years ago, that had the previous Administration terminated the 
tenure of Saddam Hussein at the end of the Persian Gulf War, we 
would not be in this predicament.
    I presume that some of my friends on the other side may 
agree with that, but I am very happy to see that one of the two 
Republican Presidential hopefuls at long last has come clean on 
this issue and recognized that the failure of the Bush 
Administration to finish the job in Iraq is at the core of this 
particular difficulty, as indeed many other difficulties in the 
whole region.
    I think it is extremely important to underscore and I am 
sure, knowing your candor, you did, that the Emir of Kuwait and 
the King of Saudi Arabia would be living in villas on the 
French Riviera, had it not been for our very effective conduct 
of the Persian Gulf War by evicting Saddam Hussein from Kuwait. 
I think these people need to be reminded, time and time again, 
that they are now in office because of the decision and the 
determination and the courage of the American people and the 
American military and our allies, and we expect far more 
cooperation from them than we have had over the years, and this 
is really the moment when they have to come through in a major 
way.
    As you know, Mr. Secretary, as a professional economist in 
the early 1980's I held hearings on the Strategic Petroleum 
Reserve, and I do agree that we need to open the Strategic 
Petroleum Reserve now. I think there is no justification for 
further delay, and I strongly urge you and the President to 
proceed without delay to open the Strategic Petroleum Reserve. 
This will be not only good economically, I think it will be 
good politically, I think it will stabilize the international 
situation, and it will certainly bring tremendous relief to 
tens of millions of American consumers.
    I do want to say a word about conservation and efficiency 
standards. Those of us who have been in the forefront of trying 
to gain some recognition of this issue on the part of the 
automobile industry unfortunately find this new period yet 
another moment when we perhaps can make our case.
    It is simply absurd to have gas-guzzling, gigantic sport 
utility vehicles used for going down three blocks on Rodeo 
Drive in Beverly Hills to buy some cosmetics. This is not the 
way to deal with the energy crisis in the Year 2000, and I hope 
that we will be able to look at CAFE standards, conservation 
standards, fuel efficiency standards, and our friends on the 
other side this time around will come along with us and support 
these long-overdue measures.
    I want to commend you, Mr. Secretary, for this past week. I 
studied carefully your schedule, and from Saudi Arabia to 
Norway to Kuwait to Venezuela, you have turned in another 
Richardson performance of extraordinary energy, and I look 
forward to your testimony.
    Chairman Gilman. Thank you, Mr. Lantos.
    Mr. Manzullo?
    Mr. Manzullo. Thank you, Mr. Chairman.
    Mr. Secretary, we look forward to your testimony. I 
represent an area of Illinois that is highly agricultural and 
has a lot of manufacturing, and I am pretty disappointed in the 
fact that the United States has used no muscle whatsoever in 
order to bring relief to the farmers who are paying $1.30, 
$1.40 a gallon for diesel fuel; to bring relief to the truckers 
who are paying that type of money for diesel fuel. All that 
gets added back to the consumer, not only in the price that the 
consumer is paying at the gas station but also in terms of the 
amount that consumers are paying.
    There is an avenue, I think. I am not sure if I agree 
wholeheartedly with what the Chairman wants to do, but we give 
these countries an enormous amount of foreign aid. Russia, for 
example, receives in excess of $170 to $180 million a year in 
foreign aid. The American people are very much interested as to 
why these people are entered into what I consider to be a 
criminal conspiracy. If these were American producers that got 
together to do something like this, there would not only be a 
civil conspiracy action, there would be criminal conspiracy and 
they would be jailed for doing that.
    But why should the American people have to give foreign aid 
to people who get together in a little room, use the word 
``production,'' tie up production, and then to say that it is 
simply the free market and the law of supply and demand taking 
place. The law of supply and demand is not taking place? That 
law never kicks in, whenever there is a cartel that determines 
the amount of production that is taking place.
    I would suggest that this Administration should get very, 
very tough, and I agree with Mr. Rohrabacher, especially 
concerning those nations on whose soil we landed troops to 
protect them during the Gulf War. This is the thanks that we 
get from Saudi Arabia and Kuwait, when they turn right around 
and stiff the American people who are paying, I heard, 
somewhere in California over $2 a gallon now for gasoline.
    I think it is time for the Clinton Administration to step 
up, to take very dramatic action, to do something on behalf of 
the American people and break the cartel, break OPEC, break it 
open and say any nation that belongs to OPEC is not going to 
get our foreign aid. Maybe that is a way to entice them to 
become responsible.
    I look forward to your testimony.
    Chairman Gilman. Thank you, Mr. Manzullo.
    Mr. Menendez?
    Mr. Menendez. Thank you, Mr. Chairman. I want to thank you 
and Mr. Gejdenson for continually holding hearings on this 
issue that I really think is of national importance. I know 
those of us in the Northeast feel particularly pressed by it, 
but we believe it is of national importance. I want to welcome 
our good friend, the Secretary, before the Committee.
    Home heating oil prices for my constituents have jumped to 
nearly double, to about $2 a gallon, in just a matter of weeks. 
As a result, a typical household will pay $400 or more in a 
very short period of time, and most families that I represent 
simply cannot afford such a large fluctuation in their budgets.
    Now, I am pleased to see that the President now appears to 
be considering tapping into the Strategic Petroleum Reserve. 
However, by the time his decision comes, it may just simply be 
too little, too late. Prices are higher now than during the 
Gulf War when we released from the Reserve.
    Consumers, truckers--I have the Port of Elizabeth and 
Newark, which is part of the Port of New York and New Jersey. 
We are being strangulated, with independent truckers who 
simply--many of them have taken their trucks off the road 
because they cannot sustain their families. They cannot sustain 
their costs.
    This is the economic lifeline for the distribution of 
products to the greatest consumer base in the Nation. All of 
the Administration's trade efforts ultimately, when they come 
to port, which is how we move products through, whether we are 
exporting our products or importing others, are ultimately 
clogged when we don't have these truckers moving. They in fact 
have some incredible, incredible increases in costs. Some of 
them have simply taken their trucks off the road because they 
can't afford to operate them.
    If the President is going to act, he must, he must act now. 
We can't afford, I believe, to wait until OPEC's meeting on 
March 27th. Winter weather doesn't wait for government 
decisions, and our constituents in the Northeast cannot afford 
to wait any longer for a solution.
    Now, I want to commend Secretary Richardson for his 
whirlwind OPEC tour, his aggressive efforts, his diplomatic 
skills, in addition to his knowledge of the energy questions. I 
believe hopefully they will produce some long-term benefits, 
because this is an issue that continues to plague us in the 
future. But we need some short-term responses.
    I do believe the United States should leverage its good 
relationship with many of these countries to ask that they work 
with OPEC in the short and long term to ensure market stability 
and close the balance between supply and demand. But many of us 
on this Committee are increasingly wondering what is the 
relationship between us and some of these countries, the 
relationship in which we have used the national resources of 
the United States and men and women in the safety of these 
countries, and now find ourselves in a set of circumstances 
where they in essence undermine the economic security of the 
United States. Those are very serious public policy, foreign 
policy questions that are continuously raised by the actions of 
the OPEC countries.
    Last, I think we need to seriously look at how we can 
protect ourselves in the future from monopolistic OPEC 
practices. You have heard some of the suggestions here. We must 
look at the possibility of creating a home heating oil reserve 
and other measures that cushion future spikes in oil prices. It 
in untenable for the U.S. economy and U.S. consumers to be held 
hostage to OPEC, now or in the future. We need to act now to 
protect our short-term and long-term interests.
    Mr. Secretary, I know you have been out there trying to 
help us, but we need some immediate help in this process. We 
are enjoying, from the weather forecast this week, some 
relatively mild weather, but the winter isn't over and the oil 
prices have already hit and consumers and families have already 
paid. Notwithstanding LIHEAP and all that, many families simply 
do not qualify for that, and yet they are certainly, by no 
stretch of the imagination, families that are economically well 
off.
    We need help. We need it now. We look forward to your 
leadership in helping us achieve some of those results now.
    Chairman Gilman. Thank you, Mr. Menendez.
    Mr. Chabot?
    Mr. Chabot. Thank you, Mr. Chairman. I will be brief, 
because some of my colleagues on both sides of the aisle have 
already, in a very articulate manner, stated some of my 
concerns, and I know that we all want to get to the Secretary's 
testimony here briefly.
    But I just have to say that the thing that is particularly 
outrageous about this whole situation which has been 
orchestrated by OPEC, is that these are the countries that we 
have gone to bat for, that America has gone to bat for, that we 
have had American citizens put their lives on the line for, 
most particularly in the instance of Kuwait, and Saudi Arabia 
as well, because there is no question I think in most of our 
minds that had Saddam Hussein not been stopped in Kuwait, he 
would have gone right into Saudi Arabia next.
    So these are these same countries that are now essentially 
slapping the United States and the rest of the world right in 
the face. These countries are cavalierly jeopardizing not only 
the U.S. economy but the economies of nations all across the 
globe. We should look at every weapon in our arsenal, whether 
it is the Strategic Petroleum Reserve, whether it is weapons 
sales, whether it is any type of other foreign aid, as Mr. 
Manzullo indicated very strongly. This is a critical situation, 
and any leverage that we have, any leverage at our disposal 
should be exercised.
    Again, I think it is just outrageous, particularly in the 
instance of Kuwait and Saudi Arabia, what is going on here, and 
I don't think the United States should stand for it, and we are 
looking for leadership from the Administration. I think it has 
been slow. I don't want to be too critical because I think the 
Congress and the Administration ought to work together on this 
one, but we hope that we are going to see some strong 
leadership as quickly as possible.
    I want to again thank the Committee Chairman, Mr. Gilman, 
for proposing legislation. I think it is the right thing to do, 
and let's move forward with it.
    Chairman Gilman. Thank you, Mr. Chabot.
    Mr. Hastings?
    Mr. Hastings. Thank you very much, Mr. Chairman.
    Mr. Secretary, thank you very much for being with us, and I 
join my colleagues and associate myself with their remarks, 
offering the accolades so rightly deserved for the work that 
you did here in Congress as well as the work that you do now.
    I introduced legislation yesterday that, if passed, will 
suspend for one year the 24.4 cent Federal tax on diesel fuel. 
While this will assist businesses that rely on diesel fuel, and 
consumers will benefit indirectly, the average American is 
directly and painfully affected by this oil crisis when they go 
to fill their gasoline tanks in their automobiles.
    I guess ultimately we would be asking you what are your 
suggestions for us here in Congress and what we can do, as I am 
sure you are as interested and probably have more information 
than most of us as to what we may be able to do to help the 
American consumer. More importantly, is there an avenue that we 
are overlooking, and doubtless you may be able to provide us 
with that information.
    While it is easy for us, it appears to me, to talk in terms 
of what to do with the Strategic Petroleum Reserve that we have 
in this country, many of us are not even mindful that the 
authorization for the Strategic Petroleum Reserve expires at 
the end of this month.
    One of the things that is not being factored into this 
discussion and doubtless will not be today, is that today the 
President's responsibility to Congress is to assert those 
countries that are certified or decertified as it pertains to 
their cooperation in the drug enforcement arena, and some of 
those countries, for example, Mexico, Nigeria, Venezuela, are 
countries with whom we have relations as it pertains to oil.
    Additionally, the ultimate question I would like to at some 
point put to you, Mr. Secretary, is what tools do we have at 
our disposal to pressure the major oil-producing nations to 
increase the international supply of oil? I heard what the 
Chairman said, but I could suggest to the Chairman that if his 
legislation became law and if we were to withdraw military 
sales, as rightly we should do whether there is an oil crisis 
or not, if we were to withdraw military sales, other countries 
would offer the same military materiel that we are offering, 
and the oil-producing countries would have more money to buy it 
with if we didn't do something.
    The other thing is, we don't have any relations with Libya 
and Iran, and we have strained relations with other members of 
OPEC. Therefore we need to be guided by caution in this matter, 
and I do not believe that it is wise of us to try and determine 
which Administration did or did not do what others perceive 
should be done. What the American public wants us to do, is to 
do something and to do it now to eliminate the potential for 
degradation in this economy.
    Thank you, Mr. Chairman. Thank you, Mr. Secretary.
    Chairman Gilman. Thank you, Mr. Hastings.
    Mr. Burr?
    Mr. Burr. Thank you, Mr. Chairman. Welcome, Mr. Secretary.
    I guess I feel a little bit deficient. I haven't introduced 
anything, but I guess it is because I didn't think I had to. I 
always thought that the policy of this country would be a 
policy that always protected the American people, and I think 
we have failed as it relates to this crisis.
    I have listened to a number of my colleagues give opening 
statements, and I have got to admit that I wondered whether 
their opening statements really dealt with the crisis at hand 
or whether it was a much larger political statement. I think it 
is time for all of us to focus on what the problem is and who 
that problem affects. It affects people in every community 
across this Nation. It affects truckers, it affects farmers. It 
affects individuals who make a choice between drugs or heat.
    I guess the question that I have got today is twofold: What 
took so long to open SPRO? Why was going there conditional upon 
the decision to open SPRO? Selling SPRO has been a part of this 
Administration's annual budget to raise revenues and balance 
the budget they sent to Congress practically every year, some 
proposal, so I don't see anything sacred.
    I would tell you today that the question that we are here 
to determine is, where has the Administration been for 12 
months on this? If we have had a plan, share it with us, Bill. 
If we haven't, tell us where it is that we will go from your 
trip. I commend you for your willingness to do that. Share with 
us why it took so long, and what is the Administration's plan 
to respond to this today.
    I thank you once again, look forward to seeing you next 
week, hopefully, in the Energy and Power Subcommittee hearing, 
as well. With that, I yield back.
    Chairman Gilman. Thank you, Mr. Burr.
    Mr. Rothman?
    Mr. Rothman. Thank you, Mr. Chairman. Mr. Chairman, Ranking 
Member Gejdenson, thank you for calling this meeting.
    Mr. Secretary, it is always a pleasure to be with you. I am 
in my second term in Congress, so I did not get a chance to 
serve with you in this body, but I have had wonderful 
experiences with you and your staff when you were Ambassador to 
the United Nations, and I know that you are doing a wonderful 
job in trying to help this country through this very difficult 
situation and others in your present capacity as Secretary of 
Energy. I, too, want to lend my commendations and high praise 
for your aggressive and highly skillful tour of the OPEC 
countries in order to get relief for American consumers.
    Two things: One, I want to also say thank you to the 
Administration for releasing the emergency funds to support 
LIHEAP, the Low Income Heating Oil Assistance Program. I come 
from northern New Jersey. We do not have a high household 
income, relatively speaking, compared to some others, but 
nonetheless the LIHEAP program will not help the majority of 
people in my district, the Ninth Congressional District. So, 
while it is good that you released those and it will have an 
effect on those regions of the country with the poorest of the 
poor of our citizens, it will not have a benefit to working 
people, let alone middle class people, who are suffering.
    I also want to commend your reestablishing the Energy 
Emergency Office at the Energy Department, and then I want to 
get to the area where I think we have had some disagreement but 
I think we are coming to consensus, ``we'' meaning Members of 
the Congress and the Administration, and that is releasing 
reserves from the Strategic Petroleum Reserve, and I am hopeful 
that you will be commenting about that and we will have good 
news.
    As you know, the prices of a gallon of home heating oil 
have doubled in the past year. They are more than 40 percent 
higher than during the height of the Persian Gulf War. Mr. 
Secretary, we have an Administration who, if not wholly 
responsible for the largest economic expansion in the history 
of the United States, certainly it is an Administration that 
has handled the economics of the country, of our country, 
extraordinarily and I think history will give credit where 
credit is due. So I have, as a general matter, confidence that 
you have a strong handle on what it takes to keep the American 
economy and the American consumer prosperous, moving forward 
and growing. I am hopeful that you will take the steps in the 
short run, for short-term relief, as well as long-term relief 
on this home heating oil and the price of gasoline situation.
    One other remark, which would be, I too join my colleagues 
who have suggested that we have leverage, considerable 
leverage, not total but considerable leverage through military 
sales and assistance and economic assistance to those OPEC 
members who, while they perhaps were trying to restore some of 
the profits they felt they lost when gas prices were 
extraordinarily and historically low for a long period of time, 
they have taken their profits.
    Now it is time to face reality and face their obligation to 
their consumers, as well as to the friends in America who 
bailed them out and saved their lives by putting the lives of 
our soldiers, our young men and women, at stake to defend them. 
That is what we did. Now is the time for them to remember, and 
if they don't remember that and know what it means to be a 
friend, we will remember that for the future, and we ought to 
also in the short term deny them the considerable benefits of 
our relationship with them that they are now enjoying.
    Thank you, Mr. Secretary.
    Chairman Gilman. Thank you, Mr. Rothman.
    Mr. Houghton? Dr. Cooksey?
    Mr. Cooksey. Thank you, Mr. Chairman.
    Mr. Secretary, I think the most fascinating information 
that could come out of this meeting would be if we could know 
what your thoughts are about us. As you hear all these 
politicians on this side of the table, tell us what you think, 
because I can tell you are taking it in very seriously. You 
were on this side one time. I really expect you to divulge what 
you think about us.
    But let me just run through some things that I hope you 
will cover. Home heating oil: home heating oil got up to $58 a 
barrel 20 years ago. I'm sorry, crude oil was $58 a barrel, 
home heating oil was $1.30 a gallon. Today, crude is $30 a 
barrel, home heating oil is $2.10 a gallon; theoretically, it 
ought to be 75 cents. Can you blame that on OPEC, or is it the 
wholesalers or the refiners?
    Second question: To my friends in the Northeast, we have 
bountiful amounts of natural gas in my home State of Louisiana. 
Right now we are producing oil in the deep water off the 
Continental Shelf, because now we have the technology to 
produce in 2,000 feet of water instead of 200 feet of water. I 
know of two pipelines that come in near the Loop, that bring in 
300,000 barrels a day. So I would encourage my friends in the 
Northeast to switch to natural gas, and we will ship you all 
the natural gas you want. Environmentally, it is the best thing 
out there, and then you won't be at the beck and call or the 
whims of a group of people in OPEC.
    Another major reason that costs of production, costs of 
home heating oil are up right now, is because of a bunch of 
politicians and regulators and bureaucrats. The costs of 
production in this country are greater than they are elsewhere, 
but I think it is good that we have taken all these measures to 
make it cleaner and safer. We don't have many accidents, or 
major accidents, in our offshore production.
    Last summer on my birthday we were in a boat and we went 
right through the Loop. Have you flown over the Loop or been to 
the Loop, Mr. Secretary? We went right through it. I don't 
think we were supposed to go through. But we went out and 
caught blackfin tuna and we caught speckled trout all around 
there, and the waters were wonderful. The oil rigs make great 
manmade reefs.
    I think if we really want to do something about bringing 
the price of oil down, the most effective way to do it is 
market forces, and market forces will ultimately discipline 
these people in OPEC much more effectively than a group of 
wimpy politicians who may not have all the facts right. I think 
that they need to be disciplined.
    But right now our largest source of oil is Mexico and 
Venezuela, if I am not mistaken, and yet in 1973 we were 
producing, according to this document, nine million barrels a 
day in the States. Now we are producing two million. In 1980, 
Saudi Arabia was producing nine billion.
    So it can be done, but we need to still depend on market 
forces rather than all of us who are pontificating from up on 
high. I am anxious to hear your testimony. Generally I think 
you have done a good job at Energy, and hopefully we can make 
the right decisions together.
    Thank you, Mr. Chairman.
    Chairman Gilman. Thank you, Dr. Cooksey.
    We are joined today by a nonmember of our Committee who has 
a very intense interest in this issue, Mr. Watkins.
    Mr. Watkins. Thank you, Mr. Chairman and Members of the 
Committee. I thank you.
    Mr. Secretary, it is good seeing you. I saw you in Oklahoma 
when the oil prices dropped from $20 or $21 per barrel down to 
$8. This is the point I would like to make, Mr. Chairman. No 
one screamed then. What I am hearing today is the fact that it 
has peaked up to $30. In the oil patch of this country, what we 
would like to have is a stable price, $20, $22, somewhere in 
that neighborhood.
    Mr. Secretary, I recorded that message back in Oklahoma. I 
have been concerned about some of the things I have been 
hearing from the Administration, exactly some of the things 
that were not said back then. But the point I would like to 
make to the Committee is what I have tried to say for several 
years: We need a national energy policy for the national 
economic security of our country. When the price dropped from 
$20 a barrel down to $8, we lost 75,000 oil field workers in 
America. Where was the voice? I tried, I talked, but they 
turned a deaf ear.
    I came and asked the Chairman to let me attend because now 
the crisis is reversed, and maybe, just maybe, we will listen. 
We do not control the destiny of our country. We have become 
dependent, totally dependent. Yes, we shifted a little bit from 
some of the OPEC countries and the Arab nations to Venezuela 
and others, but ladies and gentlemen, don't forget that three 
or four years ago we wouldn't even let the now-President of 
Venezuela into this country. We would not give him a visa 
because he was trying to overthrow that country, and he is a 
very close ally to Castro and others.
    So I am pleading this day, Mr. Chairman, and thanking you 
for letting me come, but at this time of crisis, when people 
say let's open SPRO, why did we set up SPRO? I guess being 
around here a little while gives us a little historical 
perspective. Mr. Chairman, you and I have been here. But SPRO 
was set up after the Arab oil embargo. If we had another war, 
for national security, we probably wouldn't have more than two 
months of oil there available to carry out a war. Let's don't 
be too hasty about starting to say we are going to pull 
everything out of there at this time.
    But I think the Administration, Mr. Secretary, and I have 
great respect for you, Mr. Chairman and Members from the 
Northeast, but it behooves us to set up, a national energy 
policy to have some kind of stabilization for the national 
economic security of our country. Sanctions will not work in a 
world of surplus because there is a black market.
    We had the U.S. Navy board Russian tankers less than three 
weeks ago, causing some tension, because they were shipping 
illegal Iraqi oil. The oil for food program, they are using 
that to help buildup their weapons. In Iraq today, Saddam 
Hussein is putting millions upon millions of dollars in his 
pocket.
    Under Secretary Tom Pickering says, let's be more liberal, 
let them produce more, because the Iraqi people will have 
better feeling for the United States. My colleagues, there is 
one person who sits between us, between the Iraqi people and 
the United States, and that person is Saddam Hussein. He gets 
all the credit. If our policy is to cause him discomfort so we 
can overthrow him, we have got the wrong policy in Iraq.
    You are the Committee that will have to address that, but I 
ask you to join me as I have talked to the Speaker about having 
a bipartisan commission to try to create a national energy 
policy for the national economic security of our country. Thank 
you, Mr. Chairman, for letting me attend.
    Chairman Gilman. Thank you, Mr. Watkins. Mr. Delahunt, and 
I know the Secretary's time is limited.
    Mr. Delahunt. I just want to make some very brief 
observations and I want to pick up on what Mr. Menendez said. I 
respect the gentleman from Oklahoma when he talks about a long-
term policy and crafting a vision that takes into account 
future crises, and what Mr. Menendez said about time being of 
the essence. We have got to address in the short term what 
clearly is a crisis.
    We have seen the impact in terms of home heating oil and 
what it has done to our constituents. We have heard it loud and 
clear from folks in the Northeast and in the northern section. 
Clearly the price of gas is going up. We heard the gentleman 
from California talk about what it means in that part of the 
country.
    But really I think we have got to understand, too, that the 
prosperity that many have worked so hard to achieve over the 
course of the past nine years is at risk unless it is 
addressed. While there has been a reluctance to execute or to 
draw down on the reserve, historically the best evidence is 
that when that occurs it has an immediate impact on the 
marketplace itself. I think Mr. Gejdenson referenced what 
occurred during the Gulf War, when it went down overnight some 
$10.
    So I am anxious to hear from you in terms of the result of 
your tour and your consultations with these area ministers. I 
would suggest that unless you are convinced that they are going 
to take action in the immediate future which will reduce this 
crisis, that it is time now to draw down on the Strategic 
Petroleum Reserve.
    I yield back.
    Chairman Gilman. Thank you, Mr. Delahunt, and now we are 
pleased to call on our witness. Mr. Richardson is one witness 
who needs little if any introduction to his many friends and 
colleagues who are here with us today. Sworn in as the ninth 
Energy Secretary in August 1998, he served ably as our 
Permanent Representative to the United Nations, and was 
previously a seven-term Member of the House from the State of 
New Mexico.
    We look forward to hearing Secretary Richardson's insights 
as to how we got into this energy crisis and his specific plans 
on how we can prevent such crises in the future, and what we 
are doing to resolve the crisis at the present time. Mr. 
Richardson.

  STATEMENT OF HON. BILL RICHARDSON, SECRETARY, DEPARTMENT OF 
                             ENERGY

    Secretary Richardson. Mr. Chairman, thank you, and I 
appreciate the sincerity of the statements of all the Members. 
Mr. Chairman, thank you for giving me the opportunity to 
address the current situation in oil markets, to report also on 
my recent discussions with the energy ministers of key oil-
producing countries, and to describe for the Committee the 
Administration's short- and long-term strategies to address the 
extreme oil market volatility we have seen over the last year.
    First, let me briefly describe today's oil markets. To do 
so, we have to go back to 1996 and 1997, when OPEC leaders met 
and decided to substantially increase oil production. 
Unfortunately, at the time production was increasing, demand 
started decreasing. Asia was headed into recession, and the 
world experienced extremely mild winters for two years in a 
row.
    The result was disastrous. Overproduction resulted in a two 
million barrel per day oil overhang, driving oil prices to some 
of their lowest levels in history. This was devastating to the 
national economies of oil exporters, as well as to the economic 
health of our domestic oil industry, as Congressman Watkins 
mentioned. The nations of the Middle East lost $50 billion of 
investment revenue in Asia, at the same time oil revenues to 
run their governments plummeted.
    In Venezuela, for example, 70 percent of annual Federal 
revenue was at risk. At home in the oil patch, and I used to 
represent New Mexico, which has considerable oil and gas 
interests, exploration virtually shut down and wells were shut 
in.
    Today's story is dramatically different. In March 1998, 
OPEC and non-OPEC producing countries instituted three 
production cuts. At the same time oil-exporting nations were 
carrying out these production cuts, world demand for oil was 
shooting up. Both crude and product stocks are now well below 
1996 levels. In other words, inventories are dangerously low.
    Extremely tight markets have driven prices up and caused 
refiners to draw down stocks worldwide. Each day the world is 
consuming around two million barrels more than it is producing. 
The exact statistics are, it is consuming 75 million and it is 
producing 73. We cannot sustain this imbalance between supply 
and demand without risking serious repercussions for the world 
economy.
    A review of the last several years is important, and this 
is why I think we have to give it a context in the historical 
perspective. It is important because it illustrates extreme oil 
price volatility, boom and bust cycles for both producing and 
consuming nations.
    When oil prices were $10 per barrel, I said they were too 
low, and I said this on the record several times. In fact I 
think, Congressman Watkins, I said it in Oklahoma, too. When 
they approached $30, I said they were too high, and they are 
too high, and here is why.
    Very low prices discourage investment in production, put 
producers out of business, and increase our reliance on 
imports. Profit margins for refiners become so small there is 
little incentive to maintain inventories of heating oil, diesel 
fuel, and other products. Cheap energy encourages inefficient 
energy use. High prices, on the other hand, lead to inflation 
and slow economic growth throughout the world. They stimulate 
overproduction, which will eventually lead to a collapse in 
prices down the road, and then the cycle repeats itself.
    Volatile markets overall--and we have volatility right now, 
the roller coaster ride of high prices to low, low prices to 
high--create a climate of uncertainty for investors and energy 
producers who can expect neither long-term price stability nor 
plan for rational investment of capital.
    So how, then, can we stop or minimize the impacts of this 
cycle and introduce some stability into the markets? I think 
our objective should be, as a Congress and as an 
Administration, to stabilize the market, to bring stability to 
oil markets.
    First, an observation: The extreme volatility we are 
witnessing today is testament to the folly of artificial 
production quotas. Markets, not cartels, should set the price 
of oil. This bipartisan view has been expressed again and again 
over the last 20 years, as the Congress systematically removed 
or severely limited the Federal Government's authority to set 
oil prices or allocate supply.
    Several of you praised this Administration's economic 
policy, and deservedly so. One of the reasons has been that we 
have not, as an Administration, intervened in markets, or we 
have done so very sparingly, and that has produced some very 
positive results. Both the Congress and the Administration have 
taken the government out of the oil equation and committed us 
to the free market principles of supply and demand.
    Having said this, we are confronted today with the reality 
that OPEC and other major oil-producing nations are setting 
production levels, and that today these levels threaten to 
encourage inflation and discourage world economic growth. This 
is unacceptable, and this is why I just returned from my 
discussions with key energy ministers and key leaders from 
Saudi Arabia, Kuwait, Mexico, Norway, and Venezuela.
    I said we as a government cannot force nations to increase 
production. Instead, the purpose of my trip was to explain how 
continued artificial restrictions of supply could hurt the 
United States and global economies. By the way, we are joined 
by other international economies in our view. Developing 
nations, for example, members of the International Energy 
Agency, and members of the European Community, share our view.
    I went there to convince but not to coerce. We presented 
them with the very latest data from the Energy Information 
Administration. We shared our documents and our latest 
information, which showed that global oil and crude stocks are 
at extremely low levels. We explained our immediate and 
anticipated domestic problems from low stocks: high home 
heating oil and diesel prices, public and government anxiety 
over the reliability of our oil supply, high gasoline prices 
for the summer.
    We urged the ministers to increase production levels, to 
address global stock level statistics and to understand their 
manifestations, that is, global economic slowdown, increased 
inflation, a bad investment environment and, over time, a loss 
of market share as other producing nations start competing for 
business from reliable partners.
    I believe that my trip has met with a significant measure 
of success. Before our mission, say some 30 days ago, many 
energy producing nations believed there was no problem in the 
oil market, that stock levels were adequate, that prices were 
fine, that the world economy was not suffering. We are 
returning today with four joint communiques that I would like 
to insert for the record, Mr. Chairman, that reflect the common 
understanding of the following:
    Chairman Gilman. Without objection, the statements will be 
made part of the record.
    [The information referred appears in the appendix.]
    Secretary Richardson. Number one, that volatility in oil 
markets is not desirable, that it is damaging. Stability in oil 
markets is a shared and desirable goal for both consuming and 
producing nations. While the communiques varied in substance 
from country to country, the single point on which all 
producing countries--Kuwait, Saudi Arabia, Norway and 
Venezuela--agreed was to reevaluate data on current oil market 
conditions to help avoid market volatility and preserve world 
economic growth.
    I just recently read that Mexico, a few moments ago, just 
made a statement in Paris, the oil minister of Mexico, that 
they would be prepared now to increase production.
    In other words, their upcoming decisions on production 
levels will not be arbitrary. They will take into account the 
implications of current production levels on the world economy. 
We believe that this analysis will lead to only one conclusion 
as the ministers meet on March 27th. I think what is also key, 
Mr. Chairman, is a meeting tomorrow in London between Mexico, 
Venezuela, and Saudi Arabia, and today Mexico and Norway meet 
in Paris, two key producing countries. We believe this analysis 
will lead to only one conclusion as the ministers meet on March 
27th, that there should be substantial and timely increases in 
production.
    Finally, what else have we done, and where should we go 
from here. I think that is a vital question that many Members 
of this Committee have asked.
    First, the Administration has sought to address the short-
term problems of high home heating oil prices by softening the 
impact on those who can least afford it. The President 
authorized the release of almost a third of a billion dollars 
in funds for low income individuals to pay their skyrocketing 
heating bills, $300 million. I think almost all of your states 
got some relief.
    The President also urged States to address some of the 
problems that I believe Congressman Rothman mentioned, and that 
is to deal with the eligibility requirement so that middle-
income people that have also been hurt can more adequately tap 
into these resources.
    The President also has asked for $600 million more in Low 
Income Housing Energy Assistance funds; he is asking for a 
supplemental to replenish the funds that we have already used, 
$600 million in energy assistance funds. He is also seeking an 
additional $19 million from the Congress for low-income home 
weatherization.
    Second, we have addressed the issue of supply through a 
variety of measures, including increased Coast Guard support 
for tankers; SBA loans for heating oil distributors and other 
small businesses, such as truckers and loggers, impacted by 
high prices; and also by encouraging refiners to produce as 
much heating oil as safely as possible.
    We are also reestablishing an Office of Energy Emergencies 
at the Energy Department, to coordinate with the States and 
other Federal agencies not only on heating oil problems but 
power outages and other energy-related crises, as well.
    Mr. Chairman, I have met extensively with heating oil 
operators, with truckers. I have been to the four states in the 
Northeast. We have talked to consumers, we have talked to some 
of the energy people, we have talked to State regulators, we 
have met with Governors, and we are trying jointly to address 
this problem. I must say that some in the industry have been, 
such as refiners and home heating oil operators and truckers, 
have been cooperating in taking the steps that we believe are 
necessary to address this crisis.
    Third, the President has directed me to study the longer 
term issue of heating oil supply shortages and price spikes by 
examining possible ways to reduce regional reliance on heating 
oil, mainly through the increased use of natural gas. We are 
also examining the impacts of interruptible contracts on 
heating oil supply.
    Mr. Chairman, specifically what the President has asked me 
to do is to study, a 60-day study of the possibility of having 
additional natural gas, to look at alternatives of natural gas 
to home heating oil in the Northeast. This would mean the 
possibility of what Congressman Cooksey said, gas pipelines. 
Natural gas is a clean fuel, and the President is prepared, if 
such a study determines that this makes sense, to come to the 
Congress again and deal with the issue of providing the 
necessary request for infrastructure if this is where the 
policy is heading. We are also examining the impacts of 
interruptible contracts on heating oil supply.
    Finally, we are tackling head-on the underlying reason for 
high heating oil, diesel and gasoline prices here in the United 
States, namely the high price of crude oil, and the boom and 
bust cycles that are results of artificial production levels. 
To do, we have utilized one of the few tools the government has 
at its disposal, and one that I thin this Committee understands 
the best because you are all active in international issues, 
and that is international energy diplomacy.
    I have described for you the immediate results of my 
efforts in this regard, but we need to do more. This trip began 
an intensive consultative process among nations. I expect this 
process to continue. I think, as many of you mentioned, each of 
these nations--Saudi Arabia, Kuwait, Mexico, Venezuela, and 
Norway--they are our friends. We share many common objectives 
and national security issues together.
    We now share a common interest in stable and secure energy 
markets and world economic growth, but ongoing, frequent, 
intense and frank communications is clearly essential between 
consuming and producing nations, and I have had extensive 
telephone conversations in the last year and visits with each 
of these energy ministers, so we have not just addressed the 
problem recently. We have raised some of these concerns a year 
ago with these energy ministers, and warned them of the 
potential effects of what might happen.
    Also, at each stop on my trip, the accuracy and timeliness 
of data on oil markets, production and stock levels, reserve, 
was at issue. We are confident that our Energy Information 
Administration data is the best available, but everyone agreed 
we should do more and do it better. Just last month the 
Department of Energy convened a meeting in Houston of 
significant oil market analysts to examine oil data, their 
adequacy and transparency.
    So we would hope the Congress can help us to ensure that, 
at least in the international community, everybody is working 
together on the same inventory level data. We intend to push 
this issue forward, to develop global data regimes to give 
producing and consuming nations an early warning system when 
supplies and production levels get out of whack with demand and 
consumption needs, not to manipulate but to inform.
    Finally, we are also seeking to stop the declines in 
domestic production of oil, increase energy efficiency, and 
develop alternative sources of energy, and we have had some 
positive measures to spur domestic production and we are 
considering additional others. But it is clear that we need the 
support of the Congress for funding to develop alternative 
energy sources and increase our energy efficiency. Our research 
and development investments reflect these goals, and our fiscal 
year 2000 budget request amplifies the Administration's 
commitment.
    Also, later this month the White House will authorize the 
release of the Commerce Department's so-called 232 Report which 
examines the implications of oil imports on national security. 
It is my hope that a National Economic Council-led process will 
result in a greater commitment to incentives for increased 
domestic production.
    Mr. Chairman, I appreciate the spirit and the positiveness 
of you and Members of this Committee to address this crisis 
jointly. I think we are moving in the right direction. I 
believe that my trip has been successful. I believe we have a 
successful dual-track strategy of dealing with some of the 
crisis domestically. We are moving ahead with initiatives 
regardless of what OPEC does on March 27th.
    I believe that what is needed is a cooperative effort, not 
to use precipitous action but to move ahead with some of the 
policies that we are considering, and working with you on 
others. I believe we can reach our mutual objectives of 
bringing long-term financial stability to the markets and 
relief to many of our constituents, your constituents in the 
Northeast and Midwest and throughout the country.
    Chairman Gilman. Thank you, Secretary Richardson, and we 
appreciate the efforts you have been undertaking. However, it 
has been a year now while the oil-producing nations and their 
monopolistic control have affected our marketplace.
    We all agree that $30-a-barrel oil is causing problems for 
our economy in general, Northeast in particular. But I am 
troubled by the fact that the main oil-exporting nations, 
including the Saudis and Venezuela, appear to be resisting any 
increases in oil production despite the fact that OPEC has more 
than 4 million barrels of oil held off the market by these and 
other countries, and you have stated that they are 2 million 
barrels short from demand compared to supply, and that they are 
not ready to adjust that.
    I look at the statement from the Public Affairs Office of 
the Embassy of Kuwait, and they say ``The two ministers,'' in 
reference to the Scudit Kuwaiti oil ministers, ``discussed the 
current situation and agreed that stability is a common goal. 
The two ministers agree that price volatility in the oil 
markets is detrimental to both the producing and consuming 
nations. They agree that adequate oil supplies at reasonable 
prices is of crucial importance for sustaining world economic 
growth, prosperity, and investment in the energy sector.''
    Yes, they agree to all of that, but what are they doing 
about it? They are talking now about a further meeting coming 
up at the end of March, and maybe by June or July they might 
agree to open up the spigot a little bit. That does not help 
our Nation. Would you care to comment on that?
    Secretary Richardson. Mr. Chairman, let me say that prior 
to my visit to Kuwait, the Kuwaiti energy minister and other 
officials there had said that they felt that production cuts 
might continue. They felt that there was no reason for OPEC to 
change policy.
    We engaged the Kuwaitis extensively. They, as I said, are 
our friends. I met with the Kuwaiti oil minister several times 
on my trip.
    Chairman Gilman. What was the last date of your meeting, 
Mr. Secretary?
    Secretary Richardson. About three days ago, Mr. Chairman.
    Chairman Gilman. I am reading from their statement of 
February 24th that I just quoted from.
    Secretary Richardson. I think that statement is consistent 
with what we achieved. What the Kuwaitis said that they would 
do, along with the Saudis, along with the Venezuelans, which I 
think is key and very significant, is that they would review 
production levels. In other words, they are not quite saying 
that production increases are going to happen, and I am not 
going to predict what they are going to do, but I can say to 
you that I believe the odds are good for production increases 
to take place.
    Now, this final decision is made on March the 27th, and I 
believe that by these nations, the Saudis, the Mexicans, the 
Venezuelans, the Kuwaitis, they basically agreed on five points 
that we were stressing, and the five points is that price 
volatility hurts producers and consumers; that adequate oil 
supplies at reasonable levels is of crucial importance to the 
world economy; third, that we need greater equilibrium between 
production levels and consumption; fourth, that serious review 
of production levels and economic data is needed; and, last, 
that we need better and more timely information about oil 
markets.
    Chairman Gilman. Have they promised you, Mr. Secretary, 
that as of that March 27th meeting they are going to increase 
production?
    Secretary Richardson. No. Mr. Chairman, they act in 
consensus. They try, until they meet, to develop a consensus. 
My objective in my trip was to present our views, present them 
forcefully, so that that consensus that takes place at their 
meeting would happen.
    Now, as I said, we have moved regardless of what they are 
going to do. But, again, a key meeting will also take place 
tomorrow between Mexico, which is not a member of OPEC but is a 
major international producer; Venezuela, which is a member of 
OPEC; and Saudi Arabia. My talks with the Venezuelans, with the 
Mexicans, with the Kuwaitis, with the Saudis, were extremely 
positive.
    Chairman Gilman. Have they made promises, these Saudis and 
Mexicans and Venezuelans, that they will increase production?
    Secretary Richardson. As I mentioned, I just saw a 
statement that Mexico made that they would; that they think 
OPEC should. Now, Mr. Chairman, I have to be very careful about 
making predictions. Now, I have made a prediction. I believe 
that production will increase, based on my discussions. But, 
again, March 27th is the date when they all meet, the 10 
members of OPEC. They will make their collective decision. But 
I think the signs are good, they are positive. That is good for 
us.
    Now, the next issue is going to be how much production and 
the timeliness of that production. That is something that we 
are also working with them, also.
    Chairman Gilman. Two questions: What if they don't raise 
production? What specifically will you do or what can you do to 
move this forward?
    Secretary Richardson. Mr. Chairman, I don't want to 
speculate here because I do believe that production will be 
increased. There were a lot of questions by many Members of 
this Committee about the Strategic Petroleum Reserve, what is 
our current thinking on it.
    The President yesterday said that the issue of the oil swap 
is being looked at, and that release from the Strategic 
Petroleum Reserve is still on the table. What I have said in 
response to questions in the past is that under the statutes, 
the Strategic Petroleum Reserve can be drawn only for reasons 
of a national energy shortage due to severe interruption in the 
supply of oil.
    I have not recommended that we sell from the Strategic 
Petroleum Reserve. The SPRO is on the table but, as the 
President said, he is not ruling out any contingency. While I 
have the authority to take these steps, he gives me the 
direction. I think it is important that we be prudent, that we 
not overreact, that we see the trends in the next few days and 
what OPEC does, that we work together on this.
    As I said, I stepped off a plane last night, and you are 
the first group I am seeing----
    Chairman Gilman. Which we appreciate.
    Secretary Richardson. I will see the President later this 
evening and I will discuss the results of my trip, but I did 
want to share with you our latest information, and our latest 
information is I think we have to be prudent. We have to play 
it smart. I think we are taking adequate steps domestically and 
internationally. We have a long-term strategy, and it is 
important that we work together.
    Chairman Gilman. Mr. Secretary, what long-term policies are 
you putting in place to ensure that we will never again find 
ourselves in this crisis?
    Secretary Richardson. First, on the international side, Mr. 
Chairman, continued energy diplomacy engagement. OPEC is most 
likely going to continue. There are several producer nations 
outside of OPEC that we work very closely with, like Mexico, 
like Norway. We will continue engaging Norway, talking to them 
about the importance of free markets and financial stability.
    On the domestic front, I mentioned several initiatives: 
spurring domestic production, and we need the Congress' help in 
getting us additional Low Income Energy Assistance, 
weatherization funds. We are looking at the future, in the 
Northeast, of the possibility of gas pipelines there. We are 
studying, although I cannot endorse it at this time, the 
reserve in the Northeast that Congressman Gejdenson mentioned. 
We are studying that. I will say to you that our data 2 years 
ago showed that it might not be cost-effective, but we are 
studying it. We are looking at ways perhaps that States might 
take control over some of these LIHEAP funds, give the States 
more flexibility, but again, this requires study that we are 
doing right now.
    Chairman Gilman. Mr. Secretary, I just want to remind you 
that my sanctions bill is intended to give you some leverage 
with your friends in the event they are not going to be 
cooperative.
    Mr. Gejdenson?
    Mr. Gejdenson. Thank you, Mr. Chairman.
    There are other cartels out there. There is a coffee 
cartel. They get together sometimes. They can set prices. But 
obviously the impact on the economy is very limited because it 
doesn't affect everything we do.
    In the same sense, de Beers controls the price of diamonds, 
but there is an easy solution here. You buy less diamonds. For 
industrial uses you may shift to other abrasives or cutting 
tools.
    When it comes to oil, it is so central to our economy that 
I think, frankly, we must have a more significant response. If 
the value of the American dollar had dropped or risen by 300 
percent, as has happened to the price of oil, you can bet your 
life that the government would either be buying or selling 
dollars, trying to mitigate that steep rise or fall because of 
the obviously devastating impact on our ability in 
international sales and purchases. So if we saw a rapid rise in 
the dollar, we would go into the marketplace and sell some 
dollars; if we saw too big a drop in the dollar, we would come 
back and buy some dollars.
    So I really don't understand, Mr. Secretary, your hesitance 
while we are having these very nice discussions with these 
other countries. We are very hopeful that your persuasive ways, 
and they have always been persuasive, are effective here; but 
your kind words would be that much more effective if you had 
your hand on the spigot and it was open.
    You can turn to them and say, ``Look, we've got these bad 
guys in Congress who are unreasonable. They don't want to give 
you the time to respond, so in order to prevent them from doing 
worse, we are opening the spigot a little.'' We have seen that 
work in the past. You certainly have the authority. We did it 
during the Gulf War. As a matter of fact, Congress mandated you 
sell some oil to help balance the budget in 1996, so we have 
been in SPRO before.
    The other thing we ought to do is look at a broader energy 
policy, which we frankly haven't had since the Reagan 
Administration came to town in 1980. It seems to me that you 
ought to do two things: you ought to open this reserve and 
establish a home heating oil reserve; and you ought to come up 
and give it to Congress for not focusing on energy 
conservation.
    I hope my friend from California is paying attention. There 
are two parts to this equation. Part of this is what the oil-
producing nations make available to us and how we use SPRO to 
balance that. I think, frankly, we have been too slow in 
responding to the shortage they created. I think we should have 
opened SPRO.
    The other part of the problem, though, is that Congress has 
stood in the way of energy conservation, alternative fuels, and 
increasing the efficiency of American automobiles. You ought to 
be up here hammering us to demand that in this crisis, before 
our short-term memory wanes. If prices level out, we will 
forget the need to deal with energy efficiency.
    Anybody who reads the paper can see that the American 
automobile producers are capable of making cars that get 80 and 
90 miles to a gallon today with some of these combined fuel 
systems, not dream cars of the future but cars that can be 
here. We ought to press this Congress, House and Senate, to 
come forward with energy conservation measures.
    I have got one question: Why on God's green earth would you 
not add to your leverage by just opening that spigot a little, 
and come here--SPRO's legislative authority runs out at the end 
of March--come back here and ask us for the authority to buy 
when it is cheap. We didn't buy enough when it was $10 a 
barrel, and we ought to sell when it is high.
    You say it is not an emergency, but we are never going to 
have enough LIHEAP funds to reach the average citizen. We are 
not going to be able to somehow fudge what this does to the 
rest of the economy. Open the spigot. Keep talking. I think it 
gets their attention.
    As they used to say about the farmer and the donkey; he had 
the carrot and the baseball bat. They said, ``What's the bat 
for?'' ``First I've got to get his attention, and then I give 
him the carrot.'' We need a little bit of the baseball bat with 
our friends to get their attention. Why don't you open up SPRO?
    Secretary Richardson. Congressman, let me just say one 
thing. We do have an energy policy. It is also in writing, and 
it is a good energy policy, and we have been following it.
    We have had a successful economic program under this 
Administration. One of the tenets has been that every time the 
government intervenes in price areas, it doesn't work. Now, 
with the SPRO, with the SPRO you are intervening and you are 
manipulating markets.
    Now, I am going to stress to you, the President has not 
taken this off the table, but it is used for national supply 
disruptions. Now, the swap issue is something that is also 
being considered, so we do have tools. Now, what I believe 
makes sense is to let the results of our energy diplomacy work, 
and so far the signs are good.
    Now, we do have a policy. I can't agree with you more about 
alternative sources of energy. We have not gotten the support 
from the Congress we deserve. The weatherization funds have 
been cut. We want to improve the efficiency of the energy 
system. We have a comprehensive electricity deregulation bill 
before the Congress that would improve the reliability of our 
electric system. I have been to your State, where there were 
some blackouts. We need that reliability in our system. We have 
to expand future energy choices.
    We have taken a number of steps to spur domestic 
production. I would like to put them on the record, because 
they involve----
    [The response in detail to this appears in the appendix, on 
page ??, as insert A.]
    Mr. Gejdenson. Let me let you put that on on somebody 
else's time. I hate to interrupt you, but I think you have been 
here long enough that you have probably interrupted a Secretary 
or two.
    I would agree with you if this were the normal marketplace, 
possibly. This isn't the marketplace working. This is an 
organized manipulation of supply. So, some guys walk along, 
they are lucky, they think they have got a good policy. We were 
lucky for a while in energy.
    Now we are at a point where OPEC is testing its muscle 
again, and the question for us is, if this were the free market 
working I would say yes, it will work out. But if you increase 
production here at these prices and OPEC sees this really works 
well, they will just drop production a little more, and so they 
can play this in the short term.
    The only defense we have in the energy area is your hand on 
that spigot, and I think you ought to at least appear to be 
more ready to use it. When those guys meet at the end of March 
it will be helpful, and I think the article in the Wall Street 
Journal today is helpful in that area. But, think about the 
Treasury for a moment. If some other country were trying to 
manipulate the value of the dollar for their trade advantage, 
you can be darn sure if there was a 300 percent change in the 
value of the dollar compared to the Euro or the yen, we would 
be out there trying to make sure there wasn't as erratic a 
movement because of the damage to our economy.
    It is the same thing here. This isn't marketplace forces. 
This is manipulation. We have got to be ready to defend 
ourselves. It is a great pleasure to see you again.
    Chairman Gilman. Thank you, Mr. Gejdenson. Again, that is 
why sanctions are so important.
    Mr. Rohrabacher?
    Mr. Rohrabacher. First of all, I would like to commend the 
Chairman for being the only one that seems to have put forward 
a real policy, an alternative to the policies that have brought 
on this crisis. So thank you very much, Mr. Chairman, for 
holding this hearing.
    I commend our good friend, Bill Richardson, for coming here 
today. The fact is, as he said, this is his first meeting after 
getting off the plane from his trip to the oil-producing 
regions. Bill, we know you are very tired, and I think it is 
very gracious of you and speaks very well of you that you have 
come here to talk to us.
    With that said, I am sorry that I have to be a little 
pointed in some of the questions that I am going to be asking. 
But, quite frankly, the fact that you have been on top of this 
for a year, and we have ended up in this situation, does not 
speak well of your or the Administration's ability to do your 
job. You have said you have just spoken to these oil producers 
and you got a commitment for them to review production levels. 
I mean, that is pathetic. It is pathetic.
    Look, these are people who we have troops stationed in 
their countries in order to defend. It was just a few weeks ago 
we had a service here in Washington, D.C. in memory of the 260 
Americans who died during the Gulf War. The Kuwaiti Ambassador, 
who is a friend of ours, a friend of yours, a friend of mine, a 
very fine man, was at that memorial service.
    How can we remember the 260 American lives that were lost, 
how can we still have our troops there protecting these people, 
while they are engaged in a conspiracy, in an international 
price-fixing conspiracy to shaft the people of the United 
States. We didn't even use that as leverage, and from what you 
said, we haven't used that as leverage to get them to change 
their ways. Now, what is it? Have we at all used our leverage 
in this area of their national security to protect the 
interests of the American people, or haven't we.
    Secretary Richardson. Congressman, let me say that in my 
talks with these energy ministers, these countries that are our 
friends, we are very frank.
    Mr. Rohrabacher. Yes.
    Secretary Richardson. Now, I am not going to divulge 
internal conversations, but I think that these nations value 
their relationship with the United States. They know that 
international problems have been created from the production 
cuts.
    Now, all I am saying is, they will be meeting on March 
27th. They have not made any decisions. I believe they are 
leaning forward on increasing production and recognizing that 
volatility is extensive, that world economies are being 
damaged, including our own.
    I do think that the Chairman's bill--we would oppose it. We 
don't think that sanctions----
    Mr. Rohrabacher. Bill, let me just be very fair with you; 
this reflects not only on you but on the Administration's 
policies. These people are tough people. They are rugged. They 
know what is in the interest of their people, and they are 
aggressively pursuing those interests. The fact is that when we 
are not aggressive and we do not make demands, we get run over.
    What is happening here today to our people throughout this 
country, whether it is the Northeast or whether it is our 
people out in California paying $2 a gallon for gasoline, they 
are getting run over, and by people who we have ended up 
defending, we spent our blood and our treasure defending. It is 
a sin against our own people to not be aggressive and champion 
those interests.
    Let me say your analysis, your statement, talks about a 
cycle, repeatedly talking about the cycle. It is not a cycle 
that has resulted in higher prices. It is a conspiracy that has 
resulted in higher prices, a price-fixing conspiracy by a 
cartel.
    My good friend, Mr. Gejdenson, I will not take this 
opportunity to blame the American people because they want a 
little bit bigger car or a sports utility vehicle, in the face 
of a conspiracy by an oil cartel that is aimed at damaging the 
well-being of the American people. It is not the time to 
chastise the American people for wanting to buy a car that is a 
little bit more comfortable.
    The fact is, we are being screwed by people that we have 
defended, and we have got troops there defending them right 
now. Who is watching out for the interests of the American 
people?
    One last thing--and I am sorry, Mr. Gejdenson--there is one 
last thing I wanted to get into. Bill, you were very active on 
this Afghan front, whether it was your policy or whether it was 
the policy of this Administration and you were just being a 
good soldier.
    The fact is, the Taliban are still in power, and the 
instability that the Taliban have brought with their support 
for terrorism and their fascist policies toward women, is the 
reason that we don't have an oil pipeline that has brought the 
Central Asian oil into the world market. It permits these oil 
producers like Saudi Arabia, who bankrolls the Taliban, it 
permits the Saudi Arabians to keep the prices high.
    Frankly, again, it shows a lack of professionality or a 
lack of competency on the part of this Administration to permit 
that going on. So please feel free to answer this. Thank you.
    Secretary Richardson. Mr. Chairman, I have had a lot of 
conversations with Congressman Rohrabacher on Afghanistan, and 
he knows the area well. You are accurate, the Taliban is 
impossible to deal with. They repress women, they practice 
terrorism, they harbor individuals like Osama bin Ladin. They 
have not moderated their policies, and it is very hard to talk 
to them about any pipelines.
    We have pursued, as you know, the Bakujahan pipeline that 
goes through Turkey, an ally, that involves Azerbaijan and 
involves Georgia, Turkmenistan, and the Trans-Caspian Gas. Our 
policy is firmly rooted in finding routes in that area that are 
pro-Western, multiple pipelines, and I believe this policy is 
working. I was there with the President in Istanbul when we 
signed some agreements.
    But I think to work with the Taliban right now on some of 
these pipelines, given, as you mentioned, their very, very 
difficult attitudes toward anybody in the world--their hostile 
attitude--it would be a big problem.
    Chairman Gilman. Thank you very much.
    Mr. Hastings is gone. Mr. Rothman? Mr. Delahunt?
    Mr. Delahunt. Yes, thank you, Mr. Chairman.
    I think I can read between the lines, Mr. Secretary, that 
you have some optimism in terms of action by the OPEC nations 
on March 27th. I also have to agree, however, with others, 
particularly Mr. Gejdenson, who I think has stated so well that 
we are running out of time. What I guess I would suggest or 
what I would ask is, if you can, give us a measurement of your 
level of optimism.
    Secretary Richardson. Congressman, I am guardedly 
optimistic that OPEC will increase production.
    Mr. Delahunt. How guarded are you, Mr. Secretary? On a 
scale of 100?
    Secretary Richardson. How about from one to ten?
    Mr. Delahunt. One to ten.
    Secretary Richardson. I would be guardedly optimistic, nine 
out of that ten.
    Mr. Delahunt. Those are pretty good numbers, Mr. Secretary.
    Secretary Richardson. In other words, I am reasonably 
optimistic. The reason for this, Congressman, is I think the 
Administration's energy diplomacy. The President has been 
active on this issue, the Administration has been active, we 
have explained our position. I think using sanctions would be--
--
    Mr. Delahunt. I am not talking about sanctions. In fact, I 
had a colloquy here with Mr. Gejdenson and the Chairman 
regarding the amount of aid, and I think it is important 
because it has been stated here. The amount of nonmilitary aid 
that this country provides to OPEC nations I dare say is 
minimal. We shouldn't delude ourselves, that there is very 
little leverage in terms of the level of nonmilitary foreign 
assistance that we give to these nations.
    I have been handed from staff, via the Chairman, 
information that out of the eleven countries that comprise 
OPEC, only four receive some aid and it is primarily military. 
I would agree with the Chairman about cutting off arms sales. I 
think we should do it anyhow. I think it makes a lot of sense. 
But, as Mr. Gejdenson points out, you would have to have 
multilateral agreement to achieve that.
    Chairman Gilman. If the gentleman will yield to the Chair, 
what we failed to put on that list we gave to you is the amount 
of trade, we have with them. Most of them have a significant 
amount of trade with us, to their benefit. We want to give the 
Secretary of Energy some leverage while he goes and tries to 
talk with them and reason with them. He can blame the Congress 
for feeling a little more bitter about all of this than he 
does. Thank you.
    Mr. Delahunt. I tend to agree with the Secretary. I don't 
think sanctions would work. But I think what would work, and I 
would hope that if your guarded optimism fails to materialize, 
that you will draw down on the SPRO. I think that is absolutely 
critical and absolutely important to do, because I think that 
will pierce the bubble of speculation that is going on now, and 
I think we would see a rerun of what occurred when President 
Bush drew down during the Gulf crisis.
    I yield back. Would you care to make a comment, Mr. 
Secretary?
    Secretary Richardson. Congressman, I am going to repeat 
what President Clinton told the Nation's Governors yesterday, 
and that is, the oil swap and drawdown, the sale of SPRO, is on 
the table and he is reviewing those options. I have told you 
that on this drawdown I have reservations, because I think it 
should only be used in a national supply emergency.
    I am also interested in what OPEC will do in March, and 
what in fact some of the key nations will do tomorrow. These 
are signals that we are watching. If they make a decision on 
March 27th that is detrimental to America's interests, then I 
think the President has a number of options. But I am not 
threatening them. I just explained our position. We were very 
forthright and clear about what is in our interests. In fact, 
Congressman, I know that many of you care about developing 
nations and the European Community. They share our view, too, 
so it is not as if we are alone.
    Mr. Rohrabacher. [Presiding] Mr. Manzullo?
    Mr. Manzullo. Thank you. I appreciate your taking the time 
to come, Mr. Secretary. I just want to say that I have looked 
at these joint statements between you and the heads of energy 
from four different countries, and in all candor, what it says, 
Minister Rodriguez of Venezuela reiterated his country's 
``commitment to continue to analyze.'' I mean, this is nothing. 
I mean, you went to them, you did the best you could, and you 
know what you are telling the American people? Is that the 
American people have to step up to the plate to do several 
things.
    Number one, the first thing that is going to happen is when 
inflation gets spiked, Greenspan is going to increase the 
interest rate, and the American consumer is going to pay more 
in interest to borrow because of the international criminal 
conspiracy on the part of the oil-producing nations.
    The second thing is, the President is going to come to us 
and ask for a supplemental, which presumably will be off 
budget. The American people are going to have to step to the 
bat, not only will we pay more in gasoline prices, we will pay 
more in interest prices, and then a supplemental means it will 
probably go off budget, more money being eaten out of the 
budget surplus that is due.
    The third thing is this: Why not use these tools? Saudi 
Arabia is an applicant for WTO. Algeria is an applicant for 
WTO. Why don't we tell these countries, ``If you want to get 
into WTO, you cannot engage in an international criminal 
conspiracy to fix the world oil prices.'' I mean, why don't we 
use that as a tool?
    Why don't we use this as a tool? Why don't we say, ``If you 
want the IMF to come in and bail you out,'' such as we did with 
Russia and Mexico and, I believe, Venezuela, why don't we use 
some tools on that? We go around the world bailing people out 
everywhere, and you know who catches it on the chin? The 
American taxpayer. Always, it is always us, not them. It is 
always us.
    When you refer to Mexico and Venezuela and Norway and Saudi 
Arabia and Kuwait as our friends, if they are our friends and 
our friends stick it to the American consumer to double the 
price of gasoline, to pay more interest on loans, to have a 
supplemental take money out of our surplus, then what do our 
enemies do to us?
    I think the answer is very simple here. I mean, again, 
Indonesia, a member of OPEC, an oil-producing nation, what do 
we do? IMF money goes in there and bails them out. I think the 
American people are sick and tired of bailing these people out.
    What about the issue of foreign aid? Can't you go to 
Russia, though not a member of OPEC but certainly part of that 
cozy group of people, and say, ``Look, here we give you 
hundreds of millions of dollars in foreign aid''--and I am not 
talking about Nunn-Lugar money to dismantle their rockets, I am 
talking about money that we give many of these nations in terms 
of foreign aid--and say, ``Look, we are going to cut you off. 
You cutoff the production of oil, and we will cutoff the 
foreign aid going from the American taxpayers to you.''
    These are four tools that I have presented that we could 
use. You went there, Bill, with no tools. You went there to use 
diplomatic language, and you know what you got? Analyze this. 
Saudi Arabia will continue to review the oil supply and demand 
levels. Kuwait reaffirmed its intention to enhance mutual 
cooperation. Norway, the two ministers discussed energy 
cooperation and science and technology cooperation.
    Bill, you came back with nothing. All of your hard work--
and you were a good and honest and hardworking Member, and it 
has been my pleasure to serve with you for four years in the 
House. No one works harder than you. But you went there with no 
tools and no ammunition. Could you comment on some of the 
suggestions that I have given to you?
    Secretary Richardson. Congressman, I came back with quite a 
bit. You didn't read the rest of the statements. With 
Venezuela, which was my last meeting, I believe that we had the 
language that we sought out, review of production levels, 
volatility, that what we need to have is, high prices are bad, 
low prices are bad.
    They have their own processes. OPEC operates in a 
consensus. They are meeting in March, at the end of March. I 
believe by the presence of the Energy Secretary, representing 
the President of the United States, taking the case of the 
American people and the Congress to these countries, I think 
the message is strong enough.
    Now, did I threaten? No. Did I coerce? No. I think that our 
arguments were convincing. All I can tell you, Congressman, is 
30 days ago I think your staff could provide you with what 
these nations were saying. OPEC was saying that production cuts 
were probably going to continue. They were saying that in the 
second quarter, demand was going to lower, and that therefore 
no changes were needed. Now we have the key members of OPEC, 
including its leaders, saying that they are going to look at 
production levels.
    Mr. Manzullo. But you have no promise, you have no 
incentive. They may or may not do that. What is the plan of the 
Administration to end OPEC, to end the criminal conspiracy that 
controls the production of oil? Is there any plan to end it, to 
dismantle it?
    Secretary Richardson. That would be a problem, Congressman. 
You know that.
    Mr. Manzullo. Why would it be a problem, when we are giving 
these people money, when we are bailing them out on a day-to-
day basis?
    Secretary Richardson. I think, just for the record, because 
this has come up a lot, in terms of assistance to OPEC nations, 
what we are talking about, total American assistance to all 
countries, and this Committee has these statistics, is $23 
billion. When we are talking about aid to OPEC, we are talking 
about less than $300 million in economic, military and 
agricultural assistance.
    Now, we do have military relations, arms supply 
relationships, and there is no question, I will also say, 
Congressman, that I felt when I talked to the Saudis, when I 
talked to the Mexicans, to the Kuwaitis, the Venezuelans, the 
Norwegians, they felt very strongly that it was important to 
have a strong relationship with the United States. I think 
that----
    Mr. Manzullo. Then you should have just said, ``If you want 
to be strong with us, get out of your international criminal 
conspiracy,'' so you could meet on fair ground.
    Secretary Richardson. March 27th is an important date. They 
will all convene, and I am optimistic, guardedly optimistic 
that they will increase production. The key will be the level 
and the timing of that increase.
    Mr. Rohrabacher. Thank you very much. Thank you, Mr. 
Manzullo, and thank you very much, Mr. Secretary.
    Ms. Lee?
    Ms. Lee. Thank you very much, Mr. Chairman.
    Thank you, Mr. Secretary, for your presentation and really 
for your very bold leadership. Let me just mention a couple of 
things with regard to the cost of gasoline in California.
    According to the California State Automobile Association, 
Northern California gasoline prices have shot up by 
approximately 12 to 17 cents per gallon in just the past two 
weeks. The average price of a gallon of regular unleaded gas at 
self-service pumps soared 12 cents to $1.71 in San Francisco, 
just four cents shy of the record $1.75 reached last August. 
Northern California, I believe, has some of the highest prices 
of gasoline in the country.
    Now, this past weekend was very interesting. I saw lines of 
cars at gas stations where the prices were a bit less, and 
people are getting very angry. I sense frustration. The 
American public, especially in Northern California, doesn't 
really understand why the cost of gasoline is so high.
    I wanted to ask you, how do you think we need to present 
this to the American public in layperson's terms so they can 
really understand why the cost of gasoline is so high, so that 
their frustration level can either be minimized or so they can 
really kind of understand what is going on?
    Then, second, I just wanted to ask you a question about 
Nigeria. Given the fact that they could increase their output, 
and of course Nigeria is going through now some very, I think, 
positive changes in terms of their government, but there is 
still some civil unrest and there are still some difficulties, 
what should our policy be toward Nigeria as it relates to what 
we can do in terms of our assistance to help them produce more 
oil?
    Thank you very much.
    Secretary Richardson. Congresswoman, you have been very 
constructive in your two questions. Here is how I would answer 
your constituents.
    I would say to them, the high price of gasoline or the high 
price of home heating oil was caused for three reasons: one, 
the high price of crude oil; second, an unexpectedly cold 
winter, especially in the month of January; and, third, 
transportation problems in delivering some of the home heating 
oil. I would also say to them that low inventories in U.S. 
stocks have caused increases in gasoline.
    I would also say to them that your Administration, our 
Administration, is addressing the short term and long term on 
the international front with energy diplomacy, explaining 
forcefully the importance of free markets, of price stability, 
of having increases in production based on the need for 
financial stability in the markets. I would also explain that 
we are taking steps with refiners, with home heating oil 
operators. We have got to get refiners to pump more crude. We 
have got to find ways to postpone maintenance that refiners are 
making, so that they don't spend their time on maintenance and 
home heating oil can be delivered.
    We believe that in California your market is a unique 
gasoline market. You have very strict environmental regulations 
and limited supply options, but the underlying problem for you 
is the high cost of oil. If we get increases in production, we 
believe that costs will recede.
    Now, I am conscious of the increases in the price of 
gasoline. We expect that when our Energy Information Agency 
releases its report sometime soon, that in the short term there 
may be some further increases, but we expect if OPEC increases 
production, that prices will stabilize. Nobody wants high 
gasoline prices. The price of diesel, I think the President has 
also talked about, with the Members of Congress that met with 
him on issues relating to the diesel fuel tax. That is being 
considered, although that presents some problems, the Highway 
Trust Fund and other factors. But I would explain to your 
constituents that we are aggressively addressing the problem.
    The second question, which is an excellent one, we are very 
excited about what is happening in Nigeria. It is a democratic 
government. They are bringing their energy--they are a huge 
energy resource, especially in oil--they are cleaning up some 
of the problems there, corruption and others. They are taking 
aggressive steps to privatize. They are bringing their oil into 
the market. Early indications are that Nigeria would be 
cooperative with us on increasing production.
    They are a member of OPEC. The OPEC Secretary General, Mr. 
Rilwan Lukman, is from Nigeria, and the contact we have had 
with Nigeria on this issue so far, and I am going to have 
further contact, has been very positive. So we are very excited 
about what is happening in Nigeria.
    Mr. Rohrabacher. You are welcome, because Mr. Manzullo took 
a couple extra minutes, if you would like another question.
    Ms. Lee. Thank you very much, Mr. Chairman. Let me just 
respond with regard to Nigeria.
    Do you see any efforts that we need to mount in the 
Congress to assist the Administration, given the enormous 
crisis really that we are in, in terms of our energy crisis 
now? Or is this an effort that you think the Administration and 
yourself can actually work out?
    Secretary Richardson. I would ask the Congress to adopt our 
numbers for alternative energy, for climate change, our budget 
numbers. Help us promote energy efficiency, more efficient fuel 
vehicles. Give us the money we need on weatherization; the 
Congress cut us in half on weatherization.
    Give us the supplemental for Low Income Energy Assistance. 
The President has three times tapped the Low Income Energy 
Assistance, more than any other President, and we are asking 
for $600 million more. This is money that helps poor people. 
There are poor people. I have met with them in the Northeast. I 
have been in Maine, I have been in New Jersey, I have been in 
Boston. I plan to go to Rhode Island and Connecticut. We had a 
summit in Boston, of Governors, of local officials, of 
consumers, to try to address the problem, and I do see 
progress.
    Mr. Rohrabacher. Thank you very much, Mr. Secretary.
    Mr. Cooksey?
    Mr. Cooksey. Thank you. Mr. Secretary, I have gone from 
saying I thought you were doing a relatively good job at DOE to 
thinking you are doing a great job at DOE, after your 
testimony, as long as you adhere to the principle of market 
forces. I have a lot more confidence in market forces than I do 
politicians. I think that cartels will always collapse in the 
face of market forces, in spite of what the politicians will 
do.
    My other problem is with politicians. I notice that 13 
Members or 15 Members of this Committee are from the Northeast, 
and they are good friends of mine. Mr. Gejdenson is a great 
friend. We have a lot of fun riding each other about certain 
things or teasing each other about things. But they are wrong 
in trying to come in and do some of the things that they are 
proposing. I feel that this is a tendency that politicians have 
where they are playing to their home media, and it is just not, 
the facts.
    But I would assure my friends from Connecticut and New York 
and from the Northeast that spring will be here soon. When 
spring is here, the demands on petroleum and the home heating 
oil prices will come down, and we won't have to draw anything 
out of the Strategic Petroleum Reserve, which is in my State. I 
understand it has 570 million barrels in it. It is there for a 
reason and I think it should stay there. So basically my 
message to you is, keep the faith in the face of all the 
criticism by my colleagues on this side and the ones on the 
other side.
    I would point out, I made one misstatement earlier. The 
United States is producing six million barrels of oil a day in 
2000; we were producing nine in 1973. But that two or three 
million barrels a day is about the deficit that we have in this 
country.
    I would also point out that if you adjusted gasoline for 
inflation from 1979 or 1981, we should be paying $2.50 a gallon 
today instead of $1.50 or $1.60 a gallon.
    The bad news for the politicians in the OPEC countries, is 
that there are more poor people in their countries than there 
are in ours, because democracy and market forces still will 
prevail over dictatorships and cartels. The thing that disturbs 
me today is that some of my colleagues are trying to make us a 
cartel, are trying to make us a bully, and it will not work in 
the face of market forces.
    Secretary Richardson. Congressman, your words are music to 
my ears. I hope that doesn't hurt----
    Mr. Cooksey. Did you say music or amusing?
    Secretary Richardson. Music.
    Mr. Cooksey. A lot of my colleagues think they are amusing.
    Secretary Richardson. Our policy is that market forces in 
energy and oil should dictate prices, and I believe again that 
the success of this Administration's economic policy is, we 
have applied that across the board.
    Now, on the Strategic Petroleum Reserve, which is in your 
State and in Texas, we made a wise decision a year ago. We 
replenished it through what is called the RIC sale, exchange 
with the Department of the Interior. We have 10 million barrels 
more there because of this policy of proceeding when the price 
was low, and it is replenished. It is being managed very well, 
especially in your State and in Texas.
    Now, let me just say something. We are concerned about high 
gasoline prices. While inflation-adjusted numbers suggest 
gasoline prices are not that much higher than in the 1970's, we 
still need to work to get them down. The best way to do that is 
by lowering crude oil prices, and that is what we are trying to 
do.
    Congressman, I will also say to you, I would like to just 
mention for those from energy-producing States, we have taken 
steps with the Federal royalty payment, less paperwork, 
increased technology in drilling, so that our drillers, through 
the Department of Energy programs, can drill more effectively, 
efficiently, with the latest technology.
    We are aggressively pursuing that, and we will try to take 
additional steps to help our domestic production--I think that 
is one of the messages from this problem--at the same time that 
we also properly fund alternative sources of energy, solar, 
wind, biomass, natural gas. This is the time to invest in those 
energy sources, and we are trying to do that through our 
electricity restructuring, deregulation bill, by having a 
renewable mandate of 7.5 percent, our funding for many of these 
energy conservation efforts, our joint projects with the Big 
Three in Detroit to produce a more energy-efficient vehicle. We 
have had some breakthroughs in that area.
    We need the Congress' support, especially in Low Income 
Energy Assistance, weatherization. These are programs that help 
poor people, and what we need to do is have the States and the 
Federal Government raise the eligibility requirement so that 
more middle class and more average people can be helped, too.
    Mr. Cooksey. Can I make one closing statement, Mr. 
Chairman? The red light just went on.
    As a physician, I have to deal in the facts more so than a 
politician does, and I hope these facts are correct. I have 
been told that the largest retailer in this country today is 
Citgo, and I was also told that the controlling stock in Citgo 
is in the hands of the government of Venezuela. It is also my 
understanding that my colleague was correct about Chavez, who 
tried to overthrow the democracy in Venezuela a few years ago. 
Now he has been elected in the democratic process. But also he 
was in China last week doing deals with the Chinese and the 
Cubans, for whatever it is worth.
    Thank you, Mr. Chairman. Thank you for being here. It has 
been a good session.
    Mr. Rohrabacher. Thank you very much, Mr. Cooksey.
    Mr. Payne?
    Mr. Payne. Thank you very much, Mr. Secretary. It is good 
to see you, and the fact you came right off the plane and came 
right here, you are certainly in the right business. You are 
the Secretary of Energy, and so you have to have a lot of 
energy, I guess, so we compliment you for being here.
    I know you are important but I didn't know that we need to 
blame you for treatment of women in Afghanistan. Maybe you are 
responsible for the North Irish talks falling off, too. I mean, 
you are more important, evidently, all of a sudden, than I ever 
thought you were. I always thought you were important, but I 
hear all the world problems are because of you--my Chairman 
here.
    But I think that you hit on the issues. One, we need to 
really become more fuel-efficient. We need to have some subsidy 
to build natural gas lines to the Northeast. The Northeast, 
where I live, is where we are hurting from the high cost of 
home heating fuel, and that is because there have never been 
pipelines to the Northeast for natural gas. So I would like to 
see the Administration look into that so that we could avoid 
these problems in the future.
    In addition to that, I think that when the prices are low, 
for example, the airlines have increased their fares because 
they say, prices went up to $30, went up from $10 to $30, but 
when they were $10, they didn't reduce their fares. I don't 
know how, what is good for the goose is supposed to be good for 
the gander. If the prices are low, it would appear to me that 
that savings should be passed on to the consumer. When the 
prices go high, they then roll it back to the consumer. I can't 
blame you for that, either, but maybe I should.
    I think that the only answer to this problem is that we 
come up with alternative fuels, that we do research, that we 
have cars, as you have mentioned--Japan is putting out a car 
that can do 70 miles per gallon. We need to be able to do the 
same kind of thing.
    I think, just in conclusion, I probably really don't have a 
question, but I didn't get a chance to make an opening 
statement either, and the fact is that the cartels are going to 
do the same thing, whether it is next year or the following 
year. I don't care if we have got 25,000 troops or no troops in 
Saudi Arabia or Kuwait, or if Norway drops out of the European 
Union, cartels are going to come around and they are going to 
say, ``Let's hold up'' or ``Let's pump up.''
    We don't grow wheat, and everybody buys our wheat for bread 
around the world, we don't grow twice as much wheat as we 
could. We could double the production of wheat and, therefore, 
that should drop the price of bread. But we don't. We just do 
enough wheat to keep prices of bread where they are. Bread 
prices haven't gone down, although we have turned the technique 
around, of being able to produce more. We have got new strains 
of seeds. But we don't see a doubling of the production of 
wheat. We don't see the price of beef going down, although we 
shoot them up with hormones and everything, they get twice the 
size in half the time.
    So I think that the economic forces of the world are really 
going to be what is going to be, and the people that pump oil 
and gas, they are going to slow up when they want to slow up, 
they are going to pump it up when they want to pump it up. It 
is no different in that industry. It just hurts us more, and it 
hurts me tremendously up in the Northeast. I wish it wasn't 
that way, but that is the way the world is. They are not going 
to grow any more sugar than they are growing, because sugar 
could come down 50 percent of what the cost is.
    So I think we are really asking, because it impacts on us 
negatively and I wish it wouldn't happen, I think we are 
looking for miracles, but that is really not the way the world 
works. You have got a product you want; you want to keep 
guzzling. My friend said we should have bigger cars, Americans 
should have the right to have these big old gas guzzlers, and 
that is true, if they want to pay for it and they want to buy 
them. But you can't tell the guy who has got the oil in his 
country that he should reduce his costs so that Americans can 
have gas guzzlers cheaper.
    It doesn't make sense. I mean, it would be great if we had 
a magic wand and the world worked that way. I know this is the 
greatest country in the world, but we can't make the world just 
make everything so convenient, so if we decide we want bigger, 
more gas-consuming cars, they should therefore drop the price 
so we could do it.
    So I am on your side. I think you are doing the right 
thing. I think the Administration is doing the right thing. I 
wish, though, that we would put more money really in serious 
research and technology so that we can make cars more fuel-
efficient, so that we can get natural gas up to our places. We 
can even help countries like Nigeria, that flares the natural 
gas, even assist them to contain the natural gas, build 
pipelines, so that that natural gas could be used as an 
alternative for home heating fuel.
    I just want to compliment you on the fine job you are 
doing, and ask that you keep the talks going. As long as people 
are talking, that is positive. I want you to go back, talk some 
more to them. I listened to what you said. I really don't know 
what you accomplished, but I want you to keep the talks going, 
because as long as that is happening, I think that we are on 
the right track.
    Mr. Pomeroy. Will the gentleman yield?
    Mr. Payne. Yes, I yield.
    Mr. Pomeroy. I have to run to the Floor, but I did want to 
make the point specifically relative to the incredible hit this 
will have on farmers, and so your talks and your efforts to 
leverage progress are extraordinarily important. North Dakota 
State University estimates this will increase production costs 
significantly, adding literally thousands of dollars to 
farmers' costs at a time when prices are so low we have a 
crisis in agriculture. So I will send you more information, Mr. 
Secretary. I just wanted to get that point in before I had to 
run to the Floor. Thank you.
    Secretary Richardson. Congressman, I want to thank you for 
your statement. You mentioned at the beginning the importance 
of natural gas, and I think before you came I mentioned that 
the President has asked the Energy Department to do a 60-day 
study of diversifying energy supplies in the Northeast, 
including converting factories and other major users from oil 
to other fuels such as natural gas, in order to free up oil 
supplies for use in heating homes.
    We also have a request to Congress to develop new 
technologies that would protect against market failures, 
promote reliability through more efficient technology, 
especially in natural gas distribution, transmission and 
distribution technology. So we are looking forward, and I 
appreciate you have a lot of diplomatic experience yourself. 
You know that you have to be careful, many times, in that the 
United States is the world's only superpower, that you use your 
leverage carefully and guardedly. This is what we are trying to 
do.
    But we will keep these conversations going. As I said, I 
think my talks were successful. I am guardedly optimistic that 
there will be an increase in production. We will know on March 
27th. But we have a strategy regardless, and we have made 
considerable progress since 30 days ago, so I think we are 
moving forward, and I thank you for your comments.
    Mr. Leach. [Presiding] Thank you, Mr. Payne.
    First, Bill, let me also welcome you back to the Hill. You 
have many friends up here. But I would like to comment about 
these talks, and in a sense it is positive always to be 
talking, but there is something that isn't very strong about 
the United States of America discussing with a cartel concerns 
about pricing and supply issues, when we are being bamboozled 
by that cartel, and I would like to talk to you for a second 
about law.
    It is my understanding, and I apologize for being late in 
coming, that there was earlier discussion that under domestic 
law a cartel of this nature would clearly be illegal. I would 
like to make it very clear, from a congressional perspective, 
under United States law today this kind of cartel is illegal.
    We have an act passed a generation ago called the Foreign 
Sovereign Immunities Act. What that act very precisely suggests 
is that when a government acts as a corporation, it comes under 
United States corporate law, which means United States 
antitrust law. Very interestingly, although until recent years 
it wasn't extensively applied, the Common Market has comparable 
antitrust laws as the United States. Articles 85 through 90 of 
the Treaty of Rome are every bit as strong as the Clayton and 
Sherman Acts.
    I would like to suggest that it is clear-cut that if 
matters are not in a timely fashion brought into line, the 
option of the United States is to bring an antitrust action, 
and that type of action is of towering significance. It is the 
rule of law, it isn't the rule of anything else. In fact, one 
might argue that not to bring an antitrust action would be for 
an Administration to not uphold the rule of law. So I would 
like to just suggest to you that when you talk with other 
countries, that this is an option that is being urged upon you 
by Capitol Hill and thoughtful purveyors of concern on this 
issue.
    Now, I don't personally think that this is something that 
necessarily should elicit comment, because I think comment can 
be very unhelpful, but I will tell you that this is in the 
arsenal of the United States. It is in the arsenal of our 
Common Market partners. It is something that, when you talk 
about discussions, ought to be in the discussion framework with 
our allies as well as with the oil-producing countries.
    Now, having said that, because I am not eager for a 
response that would either be dismissive or too alacritous in 
support, I want to raise one other issue that I think the 
Administration has not been as quite on top of as I would like 
them to be, but they have not also been totally opposed. But 
when you look at alternative energy sources, we don't just have 
wind and solar. We have a renewable source that derives from 
the earth, and it is called gasohol, which is at the moment 
largely a corn-based product.
    Coming from the Midwest, I would hope that this would be an 
understood kind of concern, and it relates to issues the 
Administration is going to be making policy decisions on in the 
not too distant future, relating to EPA and California. I would 
hope the Department of Energy would be in a position to weigh 
in on the side of the development of this alternative market as 
a national interest issue. Would you care to comment on that?
    Secretary Richardson. Mr. Chairman, let me say that I have 
visited your State. We have noted, in the bio energy area, this 
is a great potential in your State and the Midwest. On ethanol, 
the Administration I think has a strong policy. We support the 
tax credits provided to ethanol, so we have a strong 
alternative fuels program at the Department.
    Before you got here I was trying to say, to the Committee 
and to the Congress, please fund these, because we get big cuts 
in them at the end of the year. We are requesting a 45 percent 
increase in funding for gasohol, biomass, bio fuels for the 
year 2001. What we want to do is develop cost producing 
technologies in this area. The technology that is happening in 
this area is very exciting.
    So we hope that you can support us in this effort on 
research and new technology, but we share that view, especially 
in the area of bio energy. We are very bullish about this, and 
we ask for your help.
    Mr. Leach. I appreciate that, but let me make it very 
clear. I am asking for your help, and I want to be very 
specific, Mr. Secretary. The EPA in the very near future is 
going to be making significant decisions, seminal decisions, 
relating to an application from the State of California, on 
whether California is obligated to use more ethanol. Will the 
Department of Energy be weighing in on that decision?
    Secretary Richardson. Yes, we will be weighing in.
    Mr. Leach. Thank you.
    I have a list of other Members, and in the order of 
appearance I am told Mr. Crowley is next, but I am willing to 
go by whatever order the Minority prefers in this. Mr. Crowley 
is recognized.
    Mr. Crowley. Thank you, Mr. Chairman.
    First of all, Mr. Secretary, let me thank you for staying 
here. I know you have a busy schedule, and I know you once sat 
in these shoes that I now have, and I appreciate your sticking 
around for a question from a freshman Member of the House.
    I represent a district that takes in parts of Queens in New 
York City and the Bronx. The average annual income in my 
district is about $30,100 a year. My notes indicate to me that 
although 12 percent of American homes are heated by oil, in New 
York State it is nearly 40 percent of all homes that are heated 
by oil, and in my district it is actually 46 plus percent of 
the homes that are heated by oil, some 108,000 homes.
    A little math that I have done: the average bill was about 
$200 a month, it is now well over $400 a month. LIHEAP funding 
for New York is approximately $72 million. My district alone, 
per month, will see an increase, and these are conservative 
figures, of over $23 million in spending, just a little math I 
have done here, doubling it. You cost that over four to five 
months, and you are seeing over $1,000 that is coming out of 
the pockets of people who don't make much money, and probably 
multiply that a number of times over for congressional 
districts, depending on what state you are in.
    The question that is asked me a great deal when I have been 
out in town hall meetings is, didn't anyone see this coming? 
Did not anyone in the Department of Energy or anywhere in this 
Administration see what might possibly be happening? One of the 
solutions we have talked about is the creation of a separate 
home heating oil reserve, and also talking about opening SPRO.
    The concern I have is that while the President continues to 
study the option of doing that, we will be in spring. The 
crisis will have, for the most part, ended as it pertains to 
home heating oil, not necessarily as it pertains to the price 
of gas, and diesel fuel particularly, and what effect that will 
have on the cost of products that are being shipped across this 
country.
    Despite the comments of my good friend from Louisiana about 
switching to natural gas, of the many people in my district who 
represent the 46 percent, an overwhelming majority of those 
individuals are well over 65 years of age and I dare say are 
not interested at this point in making those types of changes 
to their home, and won't do that in the future, either.
    That is the crisis we are facing right now. Individuals who 
had a little extra money to maybe take care of some family 
members no longer have that. Before, I know another colleague 
mentioned people actually making decisions about paying their 
heating bills, or purchasing prescription drugs, purchasing 
proper food. These are realities in my district.
    My first question, did no one see this coming? I appreciate 
the work you have done. I have been following it, and I know 
the hard work you have been engaged in and the Administration 
is engaged in. But did someone in the Administration not see 
this coming and not react sooner?
    Secretary Richardson. Congressman, you know last year we 
had tremendous surpluses, inventory surpluses, and it wasn't 
until late last year that we started seeing very low stock 
levels. I was aware of this, and I was alerting the OPEC 
ministers, and they said, ``Well, we're going to be meeting. 
We'll deal with that.''
    The cold snap in January aggravated the markets, and we 
reacted immediately. I think as you said, we have dealt with 
LIHEAP. In your specific case, we found in New York there were 
serious transportation problems, and we worked with the Coast 
Guard to make sure that ships had priority, vessel traffic that 
would deliver some of this home heating oil to your specific 
part of New York.
    Let me just say on the natural gas issue, what we are 
suggesting is natural gas for large users, not necessarily for 
homes. What we would like to do is, with home heating oil 
operators, and you have many that are small business people who 
have real cash-flow problems, that we are helping. We started a 
new loan program, an emergency loan program with the Small 
Business Administration for truckers, for loggers, and they 
should try to get in on some of these problems.
    We have also gotten refiners to postpone some maintenance 
work so home heating oil supplies can be more rapid. We have 
also worked with several states for Clean Air Act waivers for 
several days, so that home heating oil can move more rapidly 
and efficiently in those areas. Several states requested that, 
including I believe New York, so what we would like to do is 
continue working with you.
    I think another thing, Congressman, that we need to do at 
the Federal and State level, is some of your constituents, 
because of income, may not be eligible for LIHEAP funds, for 
weatherization funds. We need to look at what constitutes the 
poverty level, the middle class. The President has urged that 
states that have the primary responsibility look at eligibility 
standards. So Low Income Energy Assistance, that the President 
has reduced three times, $300 million; your state has gotten, I 
think you said, $76 million.
    Mr. Crowley. Right. Mr. Secretary, if you add up four 
months at $23 million in my district alone, we have more than 
the LIHEAP for the entire State of New York. That is also part 
of the problem. There is not enough money in LIHEAP coming to 
New York.
    Secretary Richardson. Right. We have asked for $600 million 
more in a supplemental, and we hope that is taken up soon, and 
that will be to address some of the problems that you have. We 
are also worried about the summer, possibly excessive heat. We 
are concerned about outages, and we want to be sure that the 
reliability standards of our utilities are strong so that we 
don't have these problems also in the summer, and your 
constituents would be vulnerable then, too.
    Mr. Crowley. Mr. Chairman, just one final followup.
    I know you have been to several States in the Northeast. We 
would like to get you to New York and to Queens and the Bronx 
specifically at some point, if you can.
    Secretary Richardson. Sure.
    Mr. Crowley. A lot of people want to see you.
    Secretary Richardson. Sure. I didn't know I would be 
welcome.
    Mr. Crowley. You are very welcome. Thank you very much. 
Thank you, Mr. Chairman.
    Mr. Leach. Thank you very much, Mr. Crowley.
    Mr. Meeks?
    Mr. Meeks. Thank you, Mr. Secretary, for your testimony. I, 
too, want to compliment you on the job that you have been doing 
as Secretary of Energy.
    I just have a quick question. We talk about the marketplace 
and it controlling the economy and supply and demand, and most 
of the testimony that has been heard today and most of the 
questions are all focused primarily on the OPEC nations. I am 
wondering what--and I think dialogue, I agree with Mr. Payne 
that dialogue is tremendously important--I am wondering what 
dialogue have we had with the oil-producing nations who are not 
members of OPEC, about getting them to increase production and 
doing some certain things so that we can balance this thing out 
and give OPEC some level of competition so that they don't have 
the dominance that they have on the oil market right now.
    Secretary Richardson. Congressman, that is an excellent 
question. I have spent a lot of time talking to two countries 
that are not members of OPEC but have been tracking OPEC 
production and other levels, Mexico and Venezuela--I am sorry, 
Mexico and Norway. I have been to Norway twice in the last 
three weeks. They are a key producer. They are the second 
largest exporter of oil in the world, I believe.
    Mexico is possibly our number one producer. Mexico, 
Venezuela, Saudi Arabia, depending on shipping schedules, each 
one is number one every month, but Mexico has recognized that 
their economy is very tied to ours. They have been responsive 
on the production issue. I think just this morning the energy 
minister of Mexico said that Mexico felt that production needed 
to be increased. Norway is meeting Mexico, I believe tomorrow 
or today, to discuss possible additional production levels.
    So we have engaged nations outside of OPEC that are 
producers. There are also other nations within OPEC that we 
have been talking to, that I didn't mention. There are other 
Gulf states. Nigeria is a key member, Indonesia. The 
International Energy Agency, the IEA, is comprised of several 
nations. It is based in Paris. The member nations, I would like 
to submit for the record, have stated their concern about high 
oil prices, their need for increased production.
    The European Community, and many developing nations, I know 
you are very active on the developing world. Africa, there is 
great need for lower prices in Africa, several countries there. 
In fact, in Egypt, where I visited just a few days ago in North 
Africa, Egypt has associated themselves with our position for 
the need for more production, that prices are too high. So we 
have engaged other countries and we are going to continue doing 
that.
    Chairman Gilman. [Presiding] Mr. Sherman?
    Mr. Sherman. Thank you, Mr. Chairman.
    There has been discussion of OPEC collapsing. I don't think 
it is going to collapse. It is a conspiracy in restraint of 
trade. I should point out that the United States once used its 
governmental power to restrict or encourage a reduction in farm 
production for the purpose of increasing prices, but that was 
never with the goal of increasing world prices.
    You have talked about heating oil aid for the poor, Mr. 
Secretary. I would point out to you that there are poor people 
in warm places, and they are dependent upon gasoline to get to 
work. Public transportation is not a viable option for many 
poor people in states such as the one you represented and the 
one that I represent. I would hope that there would be equal 
attention to providing gasoline vouchers to the poor as to 
providing heating oil vouchers for the poor.
    I join you in hoping that later this month we are going to 
see increases in production, but I would hope that there is a 
back-up plan. Unfortunately, all the back-up plans I can think 
of, because using the Strategic Petroleum Reserve is a very 
short-term and limited thing that we could do, involve changing 
some of the foreign policy of the United States.
    I would hope that our friends in Indonesia know that we 
might choose to support independence movements in part of 
Indonesia, if they are waging war against American consumers. I 
would hope that Saudi Arabia and Kuwait would recognize that 
the American people are not going to be willing to continue to 
station ground troops in their area to continue to defend them 
from Saddam Hussein, if they are waging war against us; that 
our position on border disputes between the Emirates and Iran 
could be influenced by the fact that the Emirates continues to 
wage war against the American consumer.
    Up until now, American foreign policy, and I have said this 
before, is best described as saying, ``We would like the honor 
of defending other countries for free, and in return for that 
honor we will sacrifice our own economic position.'' I don't 
know if we can continue to ignore the fact that OPEC is waging 
war against the American consumer.
    Mr. Secretary, there are a few oil-producing countries that 
get aid from the United States in significant amounts. Now, it 
is interesting that our chart shows that Iraq is getting $7 
million of U.S. aid, which seems like a waste of $7 million, 
since whatever food goes to Iraq is under Saddam's control.
    But looking at more significant oil exporters, you have 
indicated that there are four that are receiving significant 
U.S. security aid, trade aid, or direct aid, or in Nigeria's 
case is eligible for debt relief aid, and those four are 
Nigeria, Mexico, Russia, and Indonesia. You have indicated that 
some of these countries have paid lip service to the idea that 
maybe oil production should be expanded.
    But I would like you to review, for each one of those four 
countries, Nigeria, Mexico, Russia, and Indonesia, whether 
those countries are currently producing oil as quickly as they 
can, given physical constraints, or whether there are 
governmental policies, either with the government acting as 
sovereign or the government acting in its proprietary capacity. 
Which of those four countries is producing oil as quickly as it 
can, and how many more barrels would be on the market today if 
all efforts of those four countries to restrict oil production 
were released and eliminated?
    Secretary Richardson. Congressman, very few countries in 
the world, OPEC or not, right now have sufficient excess 
capacity to supply American needs. I think we have to move very 
carefully as we seek to address production levels and supply at 
the same time that we encourage development in some areas.
    Let me go country-by-country. Nigeria is a member of OPEC, 
so they abide by the OPEC decisions. But they have, as you 
know, because of their internal situation, because of capacity 
problems, I don't think they have been able to produce at full 
capacity. They, in their statements and their discussions with 
us, have acted very responsibly, and I believe that on 
increased production, they would be sensitive to the needs of 
other nations in Africa and the United States.
    Mr. Sherman. But are they producing as much oil today as 
they could?
    Secretary Richardson. No, they are not, because you know 
they had a serious civil war there.
    Mr. Sherman. No, I want to say as they could. I mean, are 
they producing as much as they can, given their physical and 
political and security problems, or are they restricting oil 
production in order to help OPEC achieve its pricing 
objectives?
    Secretary Richardson. No, I think with them, they don't 
have the capacity, so what they are doing is consistent with 
their capacity to produce.
    Now, the others you mentioned, Mexico is not a member of 
OPEC but has been abiding with the OPEC pact. Mexico I believe 
has been extremely responsible, recognizing the need of 
international demands. I was in Mexico about 10 days ago, and 
the energy minister and I agreed that prices were too high. I 
believe earlier this morning Mexico made a statement saying 
that they would favor increased production, so that is very 
positive.
    Mr. Sherman. But they are not producing as much as they 
physically can at the present time?
    Secretary Richardson. The answer is yes with Mexico.
    Mr. Sherman. In adherence to OPEC's desire to wage war 
against the American consumer, the Mexican government is 
preventing oil production today from being as high as it 
otherwise would be?
    Secretary Richardson. Mexico is abiding by the OPEC pact. 
Mexico is not a member of OPEC, but it has agreed with the OPEC 
position. But of all the countries that I visited, because of 
the tie-in to the Mexican economy that we have and Mexico has, 
Mexico has been, I believe, quite responsive. But also they 
have had serious budget problems when prices were $10, and they 
are balancing their needs. But I would say Mexico has been 
responsive to the international economy and they are not----
    Mr. Sherman. Their rhetoric has been responsive but they 
have not increased production in the last few weeks in order 
to----
    Secretary Richardson. No, but Congressman, they can't. They 
can't until they formally meet as OPEC and non-OPEC members. 
This is why this is all very sensitive. They can't 
independently act of each other because they have----
    Mr. Sherman. Mexico is not a sovereign country? It doesn't 
have the right to change its government policy and increase oil 
production? Their loyalty to OPEC exceeds their loyalty to 
their NAFTA partner, and they feel bound to participate? Their 
rhetoric is good, but their practice is to participate with 
this OPEC squeeze?
    Secretary Richardson. I just look at what the energy 
minister has told me and what he said this morning, and I am 
encouraged that they say that OPEC and they would be ready to 
increase production.
    Russia, you mentioned Russia. Russian oil and gas 
infrastructure is in bad shape. They could deliver more, and we 
could benefit if we encouraged investments in Russian energy 
infrastructure upgrades. We have tried to get the Russians to 
have what are known as production-sharing agreements, where 
issues like transparency and other factors operate more 
efficiently for our investors. But, as you know, Russia has had 
difficulty in getting some of their economic problems 
straightened out.
    Congressman, you asked me another country?
    Mr. Sherman. Going back to Russia, I realize that they need 
a lot of investment, longer term, but today are they producing 
as much oil as they practically can with today's----
    Secretary Richardson. No.
    Mr. Sherman. Is their government preventing their 
enterprises from producing oil?
    Secretary Richardson. No, I think it is just a matter of 
their economic condition.
    Mr. Sherman. The final question was Indonesia. Are they 
underproducing as part of the OPEC effort?
    Secretary Richardson. Indonesia is a member of OPEC. I 
believe our information is that Indonesia first of all has been 
sensitive to our concern for increased production. Whether they 
are operating at full capacity because of their, as you 
mentioned, internal problems, the answer I will supply for the 
record. I do not believe so.
    [The response in detail to this appears in the appendix, on 
page ??, as insert B.]
    Chairman Gilman. Thank you, Mr. Sherman.
    Mr. Secretary, we want to thank you for your appearance 
today and your patience. I welcome the opportunity to meet 
further with you to discuss the legislation I am introducing 
today, that would reduce, would terminate and suspend 
assistance and arms sales to countries determined by the 
President to be fixing oil and gas prices to the detriment of 
our own economy. I think it could be to your benefit to have 
this measure before you as you go to discuss and negotiate with 
the oil-producing nations. You can blame it on these bad guys 
here in the Congress, but we think it is an important vehicle 
for you to make use of. I will send you a copy of our bill 
after we introduce it later today.
    We thank you once again, and we hope you will continue in 
your efforts to provide a better energy policy for our Nation. 
The meeting stands adjourned.
    [Whereupon, at 12:50 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                             March 1, 2000

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