    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

                        OIL SHOCK: POTENTIAL FOR CRISIS

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

                                    HEARING

                                   before the
                              SELECT COMMITTEE ON
                              ENERGY INDEPENDENCE
                               AND GLOBAL WARMING
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                NOVEMBER 7, 2007

                                   __________

                               Serial No. 110-19

                 Printed for the use of the Select Committee on
                     Energy Independence and Global Warming

                            globalwarming.house.gov

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                    SELECT COMMITTEE ON ENERGY INDEPENDENCE
                               AND GLOBAL WARMING

                   EDWARD J. MARKEY, Massachusetts, Chairman
    EARL BLUMENAUER, Oregon              F. JAMES SENSENBRENNER, Jr.,
    JAY INSLEE, Washington                   Wisconsin
    JOHN B. LARSON, Connecticut            Ranking Member
    HILDA L. SOLIS, California           JOHN B. SHADEGG, Arizona
    STEPHANIE HERSETH SANDLIN,           GREG WALDEN, Oregon
      South Dakota                       CANDICE S. MILLER, Michigan
    EMANUEL CLEAVER, Missouri            JOHN SULLIVAN, Oklahoma
    JOHN J. HALL, New York               MARSHA BLACKBURN, Tennessee
    JERRY McNERNEY, California
                                     ------

                               Professional Staff

                         David Moulton, Staff Director
                           Aliya Brodsky, Chief Clerk
                     Thomas Weimer, Minority Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Edward J. Markey, a Representative in Congress from the
      Commonwealth of Massachusetts, opening statement...............     1
        Prepared statement...........................................     3
    Hon. F. James Sensenbrenner, Jr., a Representative in Congress
      from the State of Wisconsin, opening statement.................     6
    Hon. Earl Blumenauer, a Representative in Congress from the State
      of Oregon, opening statement...................................     6
    Hon. Emanuel Cleaver II, a Representative in Congress from the
      State of Missouri, opening statement...........................     7

                                   Witnesses

    Ms. Carol P. Browner, former Administrator of the Environmental
      Protection Agency and current Principal of the Albright Group,
      LLC............................................................     9
        Prepared Statement...........................................    12
        Answers to submitted questions...............................    38
    Admiral Dennis Blair, United States Navy (Ret.), former Commander
      in Chief, U.S. Pacific Command.................................    14
        Prepared Statement...........................................    17
        Answers to submitted questions...............................    42

                         OIL SHOCK POTENTIAL FOR CRISIS

                                  ----------

                          WEDNESDAY, NOVEMBER 7, 2007

                      House of Representatives,
                Select Committee on Energy Independence
                                            and Global Warming,
                                                        Washington, DC.

        The committee met, pursuant to call, at 9:05 a.m. in room
    2172, Rayburn House Office Building, Hon. Edward J. Markey
    (chairman of the committee) presiding.
        Present: Representatives Markey, Blumenauer, Larson, Solis,
    Cleaver, Hall, Sensenbrenner, Shadegg and Blackburn.
        Staff present: Michal Freedhoff.
        The Chairman. Good morning. This hearing is called to
    order.
        Forty-five percent of the world's oil is located in Iraq,
    Iran, and Saudi Arabia; and almost two-thirds of known oil
    reserves are in the Middle East. Events in that part of the
    world have a dramatic impact on oil prices and on our national
    security.
        In the late 1970s, the oil embargo, Iranian revolution, and
    Iran/Iraq war sent the price of oil skyrocketing. Yesterday oil
    surged to a new record of $97 a barrel, amid government
    predictions of tightening domestic inventories, bombings in
    Afghanistan and an attack on a Yemeni pipeline that took
    155,000 barrels of oil off the markets. And with al Qaeda
    threatening to attack Saudi Arabia's oil, with our continuing
    struggles in Iraq, and with yesterday's announcement that Iran
    now has 3,000 operating centrifuges for enriching uranium, each
    day carries with it the possibility of major oil supply
    disruptions, leading to economic recession and political or
    military unrest.
        The United States currently imports more than 60 percent of
    its oil. Oil has gone up more than $70 a barrel in the last 6
    years, from $26 a barrel in 2001. Each minute, the United
    States sends $500,000 abroad to pay for foreign oil imports.
    That is $30 million per hour, $5 billion per week.
        This analysis only considers oil prices through August.
    With the record prices of late, these figures will surely grow
    by year's end.
        Much of these funds end up in the pockets of Arab princes
    and potentates who then funnel the money to al Qaeda,
    Hezbollah, Hamas and other terrorist groups. With that kind of
    money at stake, it is no coincidence that we have 165,000 young
    men and women in Iraq right now, and it is no surprise that
    much of our foreign policy capital also happens to be spent in
    the Middle East.
        Our energy policy has compromised our economic freedom, and
    the American people want action because they know that the
    price has become much too high.
        Last week, a group of energy and military experts converged
    in Washington to conduct an energy security war game. But the
    truth is the scenario that unfolded didn't really seem at all
    fictitious. Like today, the scenario began when oil prices had
    gone up to trade consistently in the $95 per barrel range. Like
    yesterday's attack on the Yemeni pipeline, the first event
    leading to crisis involved an attack on the Baku pipeline. And
    also like today, Iran's nuclear ambitions and U.S. efforts to
    contain them prove to be a complicated endeavor that requires
    us to maximize all of our diplomatic military and economic
    leverage.
        The problem is, with oil, we have almost no leverage. The
    United States is home to less than 3 percent of the world's oil
    reserves. Sixty percent of the oil that we use each day comes
    from overseas. Global oil production levels are at about 85
    million barrels per day, with excess production capacity at
    only about 1.65 million barrels per day. Hurricane Katrina
    alone removed as much as 1.4 million barrels per day from
    supplies.
        The Strategic Petroleum Reserve has just over a month's
    worth of oil in it. The reality is is that there are no good
    short-term options to help us deal with oil addiction.
        We have, however, at the same time, a piece of legislation
    which is now pending between the House and the Senate which has
    the potential to raise the fuel economy standard to 35 miles
    per gallon, would have 15 percent of our electricity produced
    from renewable electricity sources, and it would also use
    cellulosic fuels to substitute for oil which we could import.
    That bill should be finished if we can work hard on it between
    the House and the Senate over the next 4 weeks.
        I look forward to learning more about Oil Shockwave from
    our witnesses as well as their views about what Congress can do
    to address our energy security challenges.
        I now turn to recognize the ranking member of the select
    committee, the gentleman from Wisconsin, Mr. Sensenbrenner.
        [The prepared statement of Mr. Markey follows:]

        [GRAPHIC] [TIFF OMITTED] 58246A.001

        [GRAPHIC] [TIFF OMITTED] 58246A.002

        [GRAPHIC] [TIFF OMITTED] 58246A.003

        Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
        Everyone who stops to fill up at the pump, and that is most
    people in this country, know firsthand how the United States'
    dependence on foreign oil affects them. They feel it in their
    wallet, pennies at a time, as the price of gas creeps up.
        And most Americans understand that the price of oil is
    often influenced by events around the world. I doubt the
    results of the Oil Shockwave simulations would surprise many
    Americans. But I bet many Americans don't realize just how vast
    the energy supplies are in the United States.
        Beneath this great Nation there are enough energy reserves
    to propel us towards energy security; and surely we have the
    intellectual and scientific capacity to give us the energy
    security that all of us, Democrats and Republicans, desire.
        According to the Interior Department, there are potentially
    120 billion--that is with a ``b''--barrels of untapped oil in
    the United States, including offshore reserves in Alaska, the
    Pacific and Gulf of Mexico. Add to that the potential of 635
    trillion--with a ``t''--cubic feet of natural gas remains
    untapped, and we have got what we need to start weaning
    ourselves off the oil supplies from foreign countries that are
    hostile to the United States.
        But that is just the start. It is estimated that there are
    250 billion tons of recoverable coal reserves, which is nearly
    six times the combined U.S. oil and natural gas reserves. In
    fact, it is believed that our coal supplies are larger than any
    single energy source of any single nation, including Saudi
    Arabia oil. The U.S. coal supply is equivalent to nearly 800
    billion barrels of oil, more than three times the energy
    equivalent of Saudi Arabia's oil.
        I will bet many Americans don't know that coal can be
    converted into a fuel that is comparable to gasoline and can
    power any automobile. If we use coal to its fullest potential,
    we can turn our back on the Middle East and never look back.
        Right now, the type of scenario laid out in the Oil
    Shockwave simulation is possible, and this scenario could cause
    major disruptions to our economy. But there are some
    indications that it might not have the same impact as that of
    the 1970s oil crises. For every unit of economic output, the
    U.S. now uses half the energy it did in 1980. Let me repeat.
    That for every unit of economic output, the U.S. now uses half
    the energy it did in 1980. Energy costs are a smaller
    percentage of household budgets now than they were then, even
    though some people would find that hard to believe.
        Assessing our own natural energy reserves probably couldn't
    happen as quickly as an Oil Shockwave. We should work to change
    that. Through research and development of new technologies, we
    can prepare for the worst.
        We have the energy supplies. All we really need is the
    intellectual energy and the political will to put them to work.
    And I thank the chairman.
        The Chairman. Now we turn and recognize the gentleman from
    Oregon, Mr. Blumenauer.
        Mr. Blumenauer. Thank you.
        I, too, appreciate our witnesses spending time with us this
    morning and sharing their experience.
        I have been following the exercises for some time and have
    been intrigued by the power to be able to demonstrate how
    perilous we are balanced today on our petroleum dependence. In
    my community, we had, over a year ago, the city government
    forming a task force to explore these other entities, and 12
    distinguished citizens came back with things that wouldn't
    surprise our participants, but I think it was an important part
    in sort of driving where we are going.
        I appreciate the comments of the distinguished ranking
    member, but one of the downsides of what he is describing is
    that there are no technologies now available that don't make
    the other part of our charge as a committee fighting against
    global warming and greenhouse gasses, it will that make it
    worse.
        The simple fact is that we are the largest consumer of
    petroleum. We have--we are consuming it at a rate 10 times what
    our share of the world's proven supplies are, and we are
    depleting our own reserves right now at a very rapid rate. And
    given our security concerns for the future, those ought to be
    the last areas that we try and pump as fast as we can, rather
    than the first or, in the case of the Arctic, the next.
        Mr. Chairman, one of the things that I would hope that you
    would consider, the work that we have done has encouraged us to
    look far afield, and we all have good ideas about where we
    should go for a committee hearing and who we turn to next. I
    know it is a very wide and rich field, and I think you have
    done a great job of balancing it. But one of the things that
    might be interesting would be for our committee to spend the
    better part of a day experiencing the simulation.
        Having dealt with the people who've designed it, having
    watch it from afar, I think that it might shake some of us out
    of our lethargy if we actually stopped pontificating and
    actually go through a simulation where we have to make some of
    these real-life decisions that we, as a Congress, have failed
    to mitigate.
        And if our committee might set the tone, Mr. Chairman, I
    think it might be--there might be other people on both sides of
    the aisle who would go through it. And if we could get even 10
    percent of the Members of Congress to have to go through this,
    devoting only half a day, I think it would be a sort of a
    homework that might put some realism into what too often around
    here is, I think, rather hallow rhetoric. Because I think all
    of us ought to have the sense of urgency for the very reasons
    you said in our opening statement, and I would hope we might
    consider it because it is too good a model for us to at least
    not test.
        Thank you.
        The Chairman. That is a great idea. I think we will try to
    do that. We will try to set something up that can give each one
    of the Members that experience.
        The Chair recognizes the gentleman from Missouri, Mr.
    Cleaver.
        Mr. Cleaver. Thank you, Mr. Chairman.
        It is difficult to follow up a powerful sermon like the one
    that was just delivered by Mr. Blumenauer, which I would say
    ``amen'' to what he just said.
        As I read this morning a number of newspapers, including
    Financial Times, about what is going on in Pakistan, I became
    alarmed. Not because Pakistan is a supplier of oil but because,
    if things go further awry, it could completely destabilize the
    Middle East in ways that Iraq never could. And thinking about
    what is going on in Iran and hopefully dealing with this
    concern internally, I could not help to think that conflict in
    Pakistan, if it ends up in some kind of civil war and if the
    tribal areas get weapons, there is no telling--or get more
    weapons, U.S. weapons, there is no telling what could happen.
        But it occurred to me that, even in the midst of all of
    these developments in the Middle East, that we are not, even
    after the Al Gore film and all of the discussions, we are not
    retreating from our appetite for oil.
        In 1980, the United States imported 27 percent of the oil
    it uses each day; and today we are importing 60 percent of the
    oil we use each day. So it is not like all of the awareness is
    creating some reaction.
        It is what Mr. Blumenauer said. You know, we talk about it,
    and then we just continue to go ahead. We continue to splurge.
    This is chilling.
        And so I am looking forward to hearing your comments and
    then engaging dialogically, because I am also frustrated that
    we are not moving, and maybe something will happen after
    November from next year.
        Thank you, Mr. Chairman.
        The Chairman. The gentleman's time has expired.
        The Chair recognizes the gentlelady from California, Ms.
    Solis.
        Ms. Solis. Thank you, Mr. Chairman. I want to welcome our
    witnesses and look forward to your testimony. I will submit my
    statement for the record.
        The Chairman. Great.
        The Chairman. The gentlelady's time has expired, and we
    will move to our witnesses.
        Our first witness is Admiral Dennis Blair, who served as
    Commander in Chief of the U.S. Pacific Command, the largest of
    the combatant commands. Admiral Blair is a Rhodes scholar; and
    he currently is a member of the Energy Security Leadership
    Council, a group of U.S. military and business leaders united
    to address America's energy and national security crisis.
        Whenever you are ready, please begin.
        Admiral Blair. Ms. Browner was an actual participant in the
    shockwave process. As a member of the Energy Security Council,
    I will follow up.
        The Chairman. I would be glad to follow your lead.
        Carol Browner, we will begin with you. She was the head of
    the Environmental Protection Agency. She previously had served
    as the Secretary of State of Florida's Department of
    Environmental Regulations. Before that, she was Legislative
    Director for U.S. Senator Al Gore. She is, without question,
    one of the leading experts in the world on environmental and
    energy issues.
        We welcome you. Ms. Browner, whenever you are ready, please
    begin.

      STATEMENT OF CAROL P. BROWNER, FORMER ADMINISTRATOR OF THE
     ENVIRONMENTAL PROTECTION AGENCY AND CURRENT PRINCIPAL OF THE
                             ALBRIGHT GROUP

        Ms. Browner. Thank you, Mr. Chairman.
        You would think I would remember how to do that. I did
    spend a few years testifying before Congress.
        It is a pleasure to be here with all of you today and to
    share with you the experience we had in Oil Shockwave 2007.
        But let me first congratulate you, Mr. Chairman, and all
    members of the committee for all of the work you are doing on
    this committee. It is incredibly important, as you all know, to
    the people of this country. There are very tough issues to be
    addressed, and I personally appreciate the time and energy you
    are bringing to bear.
        As you heard from the Admiral, I appear today as a
    participant in the recent Oil Shockwave--Executive Oil Crisis
    Simulation. It is the second time I have done this. There was
    one several years earlier that I also participated in, and I
    think--let me just set the stage for how this scenario unfolds.
        First of all, the event was sponsored by Securing America's
    Future Energy, SAFE, and the Bipartisan Policy Center; and it
    was designed to show the possible consequences of U.S. oil
    dependency and the ability of government officials to respond
    in the event of a global oil crisis.
        It is extremely important that you understand this was not
    a partisan effort. It was bipartisan in every way. The
    participants were divided between Democrats and Republicans,
    and the whole point is just, to the best of our ability, to
    demonstrate to the American people how a problem unfolds and
    how members of the President's Council and senior staff might
    respond to that problem.
        It provides, I think, a number of important lessons for the
    Congress as you look at the issues in front of you.
        In the scenario that we did most recently last week, three
    different things happened over a 3-month period. The year is
    2009. It is post the election. There is no assumption in the
    scenario whether a Democrat or a Republican has won the
    election for President. It is unclear in the conversations, but
    over a 3-month period, from May to August of 2009, the first
    thing that happens is that a pipeline in Azerbaijan is
    temporarily put out of service. The result of that is a loss of
    one million barrels of oil to the world's market per day, and
    very quickly there is an upturn in prices.
        While this crisis is resolved in the course of the
    scenario, over the next 3 months, Nigeria takes 400,000 barrels
    a day off the market; and, in August, Iran and Venezuela cut
    their combined oil production by 700,000 barrels per day. So by
    the end of the simulation, the 3-month period, 1.1 million
    barrels of oil have been taken off the world market; and the
    price per barrel has shot up to over $160.
        Again, it was a simulation, but I don't think any of this
    is farfetched. Maybe not these precise things but certainly
    things like this could happen virtually any day.
        As is common in scenarios, each of us play a role. The role
    that I was assigned was Secretary of Energy, and in this
    position I was supposed to suggest a series of short-term steps
    that could be taken by the American public to reduce oil use.
        For example, I raised with my Cabinet in the simulation,
    which was chaired by Bob Rubin, that we could impose a 55-mile
    per hour speed limit, which would save 134,000 to approximately
    250,000 barrels of oil a day. We could implement year-round
    daylight savings time, which would save approximately 3,000
    barrels per day. We could institute a Sunday driving ban, which
    would save about 475,000 barrels of oil per day.
        Suffice it to say, my colleagues in this event, other
    Cabinet members, rejected these ideas. They did not think they
    would be acceptable to the American people.
        That turned the discussion to whether or not we should
    access the Strategic Petroleum Reserve, which, as you know, is
    under the auspices of the Secretary of Energy; and very quickly
    a debate ensued over two issues with respect to the SPRO.
        The first was, what is the appropriate use of the SPRO? Can
    you use it to manage price spikes or can you only use it for
    security matters? And, as Mr. Sensenbrenner pointed out, there
    are significant barrels there, but the truth of the matter not
    so significant that if this crisis had played out over a longer
    term that you could really answer the problem.
        The second debate that unfolded under the SPRO went to
    whose oil is it. And several of the individuals participating
    in the scenario representing various--I think the Department of
    State, the Department of Defense raised the issue as to whether
    or not does the military get first call, as opposed to the
    American people. And the concern they were focused on was, with
    growing unrest in the world in this scenario, would they have
    to deploy additional troops and therefore be in need of
    additional oil and should they get a first call on it?
        I think the real lesson of oil shock and one that we seem,
    unfortunately, hard-pressed to learn is the need to think
    ahead, to make real and lasting commitments to a new approach,
    rather than wait to respond once we are in the thick of it.
        Short-term energy conservation is frequently difficult,
    painful, and I think that was in part why the other
    participants in the scenario did not want to recommend to the
    fictional President that we take some of these steps.
        As I look at the scenario and move into the issues that
    confront you as a committee today and the House and the Senate
    at large, I think the single most important thing would be to
    embrace CAFE. If there had been a CAFE standards such as being
    considered and passed by the Senate in effect during this
    scenario we would not have experienced the kind of problems,
    potentially could--would not have experienced the kind of
    problems that were unfolding in the scenario.
        The Senate CAFE proposal, if adopted this year, would
    result in an oil savings of 1.2 million barrels per day by
    2020. If you take into account the Senate renewable fuel
    mandates, the estimated number of barrels of oil saved each day
    from the Senate passed biofuel expansions would be 1 million.
    It brings you to a total of 2.2 million. That would be more
    than twice of the reduction that was needed by the end of Oil
    Shockwave.
        In closing, let me again note this is the second time I
    have participated in this scenario. I think I was the only
    person that participated both times, and the lesson was the
    same. We need to get going. There are things we can be doing
    today to try and reduce our dependence. CAFE is certainly not
    the only thing, but I personally think it is an incredibly
    important thing.
        The other thing I would just note to Mr. Blumenauer's
    point, the scenario did not take into account global warming.
    As the Secretary of Energy, I tried to insert it into the
    discussion, but the focus, because it was such an immediate
    concern, always turned back to where do we get more oil
    quickly, what do we need to do to solve the problem?
        I think certainly as we think about these issues it is
    absolutely essential that we think about what some of the
    alternatives may mean in terms of greenhouse gas emissions, in
    terms of our carbon footprint, in terms of how much more
    difficult do we make the task of reducing greenhouse gas
    emissions and carbon emissions.
        So I thank you for the opportunity to share with you what I
    thought was a really tremendous scenario and I think a very
    enlightening one.
        Thank you very much.
        The Chairman. Thank you, Ms. Browner.
        [The statement of Ms. Browner follows:]

        [GRAPHIC] [TIFF OMITTED] 58246A.004

        [GRAPHIC] [TIFF OMITTED] 58246A.005

        The Chairman. Admiral Blair, whenever you are ready, please
    begin.

    STATEMENT OF ADMIRAL DENNIS BLAIR, USN (RET.), FORMER COMMANDER
                     IN CHIEF, U.S. PACIFIC COMMAND

        Admiral Blair. Yes, sir, Mr. Chairman.
        First, let me, on behalf of the Securing America's Future
    Energy Project, accept what I think was a request that we
    conduct an oil shock simulation, making it available to members
    of the committee. I think that is wonderful. We will do it. We
    will bring it here. We can do it somewhere else.
        And I think it is just a wonderful thing. Because when you
    talk to people like Carol Browner who have been in it, they are
    not the same after they have done it from what they were
    before. It just brings in an immediacy to this rather
    theoretical discussion that I think gives you the burn to do
    something about it. And we will gladly set that up in any way
    that is convenient for you.
        And I see from the opening statements what I am doing is
    just pouring gasoline on a flame that already exists in terms
    of the understanding of the issue and the immediacy for it. But
    let me do that. Because I spent more than three decades in the
    Armed Forces in the Navy and in joint commands, and I think
    back over my career, so many times when we sent our young men
    and women into combat, it was because we hadn't taken prudent
    smaller action earlier, and we paid later with our treasure and
    their blood for things that should have been done long before.
        And I think this is really what impels those of us who are
    retired senior military officers who serve on this Energy
    Security Leadership Council, is that we want to advocate
    actions which are--they are not easy, but they are doable now
    in order not to be reduced to the sorts of desperate measures
    that we saw in the Oil Shockwave.
        In fact, the steady militarizing of many volatile and
    underdeveloped areas of the world that has gone on over the
    time that I have been in the Armed Forces from the days that we
    used to handle the Middle East with a couple of ships and a
    one-star Admiral to now we have an entire unified command, a
    Central Command. We have hundreds of thousands of troops that
    are there all the time in an area that is halfway round the
    world that takes three ships to support every ship that is over
    there, that take three Marines to support every Marine that is
    over there--one who is there, one who is traveling, one who is
    back home cleaning up getting ready to go back again.
        So the burn that those of us who are on the Council who
    served on the Armed Forces is, let us do the smart things now
    to avoid having to do the dangerous, bloody, expensive things
    later.
        Ms. Browner reviewed the essence of the shockwave
    simulation that we did last week. Let me just review some of
    the lessons that I observed from watching it and having been
    involved in the week of the Council.
        As you saw there, we could have oil that is a hundred
    barrels today, in the simulation that was over 160, with just--
    with a couple of relatively small things affecting 1 percent of
    the world oil supply, and these were the lessons I drew from
    it.
        The first is there is really no such thing as foreign oil.
    Oil is fungible. A change in supply or demand anywhere will
    affect prices everywhere. So distant places mean real things to
    Americans.
        I sometimes think the Good Lord is laughing looking down at
    us in the places that he put them in the world. He put them in
    these faraway places with these very unstable and difficult,
    volatile situations; and a little tremor there affects all of
    us at the pump.
        And the second is that, because of the tight supply
    situation now, the oil markets are precariously balanced. Even
    small disruptions have dramatic effects because of the lack of
    the buffer. I think we talked about it earlier, that what used
    to be a $4 million a day Saudi buffer is down. It might be 1.65
    million, as you say, Mr. Chairman. It could be less. Hard to
    tell with the lack of transparency there. But we are just on
    a--we are on a hair trigger here.
        Second, when we have gotten to the point that the supply
    disruption occurs, there just aren't many short-term options.
    When I watched Ms. Browner and people like Secretary Rubin,
    Secretary Armitage, General Abizaid wrestling with questions,
    there weren't any good short-term options. It was all really
    ugly, and all of them thought if we had just done something 10
    years ago or 5 years ago, we wouldn't have to be doing it. And
    don't we owe our successors 5, 10 years down the road some
    efforts now so that they are not put in this terrible position?
        The next one is that this Strategic Petroleum Reserve is
    not the final answer. It doesn't solve the problems. As you
    saw, real decision--experienced decisionmakers are wrestling
    with it. Ms. Browner was certainly an advocate for using it.
    The kind of objections around the table with various people
    with a series of responsibilities made you realize that this is
    not a magic wand that we can wave. So we have got to do--we
    have got to do more.
        And, finally, although we didn't explore quite as much as
    we should have, this is an international problem. We have got
    to be talking with the Saudi Arabias, the Chinas, the Indias,
    the suppliers on the one hand, the great consumers on the other
    hand. And China and India now are not members of the IEA. They
    are not part of a team that coordinates strategic petroleum and
    reserve action. They would be affected by it, as would
    everyone.
        And we have--this just drives us to get international
    groupings together, thinking now, taking prudent American
    actions so that we are not put in this position.
        And it really brings us back to what all of us have thought
    in this area, is that we need both greater conservation and
    increased production, both of the petroleum substitutes like
    coal, of more drilling of the petroleum that we do have, also
    development of smart synthetic alternatives.
        There is not a magic bullet for this thing. We can't have a
    technological breakthrough out of it through the next term that
    is going to solve it. We have to do something that is going to
    affect everything, supply/demand alternatives.
        And so there are a lot of lessons from 9/11. One of them
    is, unless we take action early to put national security on our
    terms rather than allowing vulnerabilities that other people
    can do it to us, we really fail in our duties and we really
    have to have a long-term strategy for reducing America's oil
    dependence.
        It is a grave national and economic security. It demands a
    bipartisan approach, and it goes beyond the Congress to the
    administration to the American people who I think are ready to
    support action on this as long as it is done in a way that has
    everybody taking the action, that spreads the sacrifices and is
    clearly directed towards the national interests.
        As Ms. Browner said, there is a bill out of the Senate--I
    testified before the Senate Congress committee earlier this
    year that works on an important part of the problem--setting
    the auto efficiency standards goals to increase every year.
        I would emphasize that it is a--because it is an attribute-
    based system, it is a big improvement over the system we put in
    the 1970s, the one that was in part responsible for the gains
    that Mr. Sensenbrenner mentioned in which we have our oil
    intensity of the economy, but this is--this compares like model
    to like models. So it does not put the Detroit Big Three at a
    disadvantage.
        I am absolutely convinced that smart American engineering
    and ingenuity and good American workers can, under this
    proposal, knock the socks off any foreign competitors, sell
    cars, lots of good cars that will not only be safe and the
    right performance but will be much less thirsty for oil.
        And in addition to that, we need to go on to the other
    parts of program, smart alternatives, the results of R&D
    investments in order to bring them on, whether it is cellulosic
    methanol to complement the ethanol that we are getting from
    corn, whether it is an energy efficient and environmentally
    safe use of the coal conversion or the oil sands that already
    exist.
        We have got to continue with this three-part program if we
    are to avoid the sorts of things that we saw in this shockwave
    and if we are to do the right thing by our children, our
    grandchildren and by the men in uniform, men and women in
    uniform who will have to pay the price someday unless we act
    now.
        Thank you.
        The Chairman. Thank you, Admiral, very much.
        [The statement of Admiral Blair follows:]

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        The Chairman. Let me turn and recognize for an opening
    round of questions, the gentleman from Oregon, Mr. Blumenauer.
        Mr. Blumenauer. Thank you very much, Mr. Chairman.
        Admiral, I appreciate your willingness to inflict the
    simulation on us, and I appreciate the chairman's interest in
    perhaps exploring that as a committee hearing.
        We actually did one of these versions in my community a
    year ago involving campus-based activities. We actually fell
    short in trying to structure for our governor and some of our
    community leaders. But, for the committee, could you outline
    what it would entail? We didn't really get the details in terms
    of the number, the duration, the roles that were played. Just
    how would that work for the committee if we were to follow up
    on your generous offer?
        Ms. Browner. Maybe we can do it together.
        In both of the national simulations that have been done, it
    is approximately 10 people who participate. You have usually
    the President's Chief of Staff, who sort of runs the
    conversation. You have everybody from the Secretary of the
    Energy Department, Secretary of State, Secretary of Defense,
    National Security Advisor, sort of a Joints Chiefs of Staff. So
    there are roles that are assigned and you are, to the best of
    your ability, asked to play the role and so you are given facts
    that might be particular to the role that you are playing. You
    can bring in, you know, sort of personal information or
    experiences, but you do have to stay within your role.
        Bob Rubin, who was sort of the master of ceremonies, if you
    will, the Chief of Staff for this particular exercise, was
    very, very good at making sure all of the points--as he was
    when he served in the last administration--making sure all of
    the points were put on the table.
        You then have briefers who come into the Cabinet room, the
    simulated Cabinet room or situation room, and start changing
    the scenario on you. And sometimes they use reports. There is
    like a CNN-style TV show that has been manufactured that is
    providing new information or there are simply briefers who are
    considered to be experts who are adding new facts.
        It took us about two and a half hours to do it, and then we
    had sort of 30 minutes of reflection. We stepped out of our
    individual roles and sort of reflected from our experiences
    either in that role or previous.
        When I was in the prior administration, this is something
    that Cabinet members do. In fact, the last simulation that I
    participated in as a member of President Clinton's Cabinet was
    in an anthrax scare. I think it was shortly before the 2000
    election. Most of us couldn't pronounce the word ``anthrax''
    when we showed up for the simulation. Most of the Americans are
    now too familiar with it.
        But whether it was in the government or in this one, the
    value of these is really quite significant because, as the
    Admiral said, what you quickly figure out is, even with all of
    this power behind you, I mean, the Secretary of Energy had huge
    amounts of power in this simulation, your choices in terms of
    immediate action are very, very narrow and even those choices
    immediately bump up with somebody else's view of the world.
        For example, I said, yes, we should access the SPRO. That
    got complicated in a hurry, because I think it was the
    Secretary of Defense said, well, you know, that is the Navy's.
    And I actually didn't know this about the history of the SPRO.
    It actually originates back to the Navy. So suddenly we
    couldn't find common ground on whether or not to take advantage
    of this Strategic Petroleum Reserve.
        I think for that reason it is worth doing. Things that you
    think may be sort of automatic and easily done you find out are
    not so automatic and easily done.
        Mr. Blumenauer. So in terms of--with the technical help
    that you folks have developed over the years, there would be a
    role potentially for every member of the committee and could be
    conducted in the framework essentially of what a significant
    hearing would be?
        Ms. Browner. It would be a large Cabinet.
        Admiral Blair. Exactly. The time commitment, Mr.
    Blumenauer, is probably 2 hours, sometimes a day or 2 ahead of
    time just to be given some basic data and be told how the game
    works; and we start at 10 o'clock in the morning. You know, Mr.
    Markey might be playing the National Security Advisor, you
    might be playing Secretary of Defense, Mr. Sensenbrenner might
    be playing the Secretary of Energy; and in comes a card that
    says the President wants a recommendation in 2 hours as to what
    he is supposed to do because these things have happened.
        And then the National Security Advisor and maybe the
    chairman of the National Economic Committee, as they are, says,
    okay, what do we think? What are we going to tell the
    President?
        And so you bat that around. It drives you. The time element
    drives you to have to sharpen your thinking. You can't just do
    nothing, because time is ticking away. And then you make that
    recommendation and then say fast forward a week. Now these
    other things happen. Now what are you going to do, big guy? And
    the President wants some better options.
        And we also had the President's press secretary, and he was
    wonderful because he said, you are going to have the President
    do what?
        So it is part of that immediacy and responsible people
    doing tough jobs that live with you, and we would have you all
    in the role. It would take, as I say, 2 hours ahead of time to
    be ready and 4 hours on the day.
        The Chairman. The gentleman's time has expired.
        The Chair recognizes the gentleman from Wisconsin, the
    Secretary of Energy, Mr. Sensenbrenner.
        Mr. Sensenbrenner. First of all, I shiver to think of the
    Chair as National Security Advisor. Put him in another role,
    please, and I think we will all be happier, in looking at, you
    know, how we war game the strategy and what we can do ahead of
    time.
        The one question I have is, what is the role of Canadian
    oil resources and oil shale in the West? I know that you can't
    turn that spigot on as quickly as we would like, but if we are
    looking at ways to prevent an oil shock from being extremely
    severe, that seems to be the most convenient and secure way to
    get increased oil or replacement oil.
        Admiral Blair. The position that the Council took in the
    report that we released almost a year ago was that the Canadian
    tar sand resources would be a big part of the problem as soon
    as they could be done in an energy efficient and
    environmentally acceptable way.
        So we saw that as part of the solution, but our
    understanding was the technology was not quite there on those
    two criteria. So we couldn't count on that and that--but that
    the R&D should be put in to see if it is a viable alternative
    as an alternative source.
        Similarly, R&D should be put into other synthetic fuels in
    order to make them part of the solution.
        So it didn't seem to us, looking across that alternative,
    as well as ours, that there was one that you say had all of the
    right attributes to solve the problem. More work was needed.
        Ms. Browner. An oil shock scenario did not deal with could
    you explore and find other resources. Because it was a real
    time. You had to solve the problem that day, that week.
        I think SAFE has taken a position on whether or not some of
    the thoughts you have are viable in the short term, and I share
    their concerns that in the short term they are probably not.
        They may also bring with them some other challenges. For
    example, we need to understand--this is me personally speaking,
    as someone who is very concerned about greenhouse gas and
    global warming--what are the repercussions? Are we adding to
    our global warming footprint? Are we diminishing it? That is
    still something that still needs to be better understood.
        I think part of the issue is what and where are the
    technologies that we may end up using, because that may have
    some bearing on what are the emissions.
        Mr. Sensenbrenner. I yield back the balance of my time.
        The Chairman. The gentleman's time has expired.
        The Chair recognizes the gentleman from Missouri, Mr.
    Cleaver.
        Mr. Cleaver. Thank you, Mr. Chairman.
        One of the problems we have, I think, is that we live in a
    time in our country where everything is politicized. I am
    frustrated over how we have politicized global warming, how we
    politicized even the oil crisis. And so it is difficult for us
    to coalesce and move towards a solution. Because what we say
    and think reverberates across the land, and if you listen to
    radio and television talk shows, you can see what has happened.
    It is ugly out there. And rather than turn down the volume, we
    continue to turn it up. So this issue has already become muddy
    because of the way we have--because of the way it is
    politicized.
        Do you have any suggestions on how we might be able to
    depoliticize the oil dependence issue or independence? Is there
    something you--some way you can suggest, say, can we write a
    song? Could we get Mr. Hall to write a hit song? I mean, what
    do we need to do?
        Admiral Blair. An Admiral giving advice on politics is like
    a politician giving advice on maneuvering ships.
        Mr. Blumenauer. What is your point?
        Admiral Blair. But what those of us in the Council thought
    was that what is required here is a compromise between those
    who have opposed fuel efficiency standards on the grounds that
    it is interfering with business and those who have opposed
    further exploration and development of alternatives on the
    grounds that it runs environmental risks and it is not pretty
    to have an oil rig out the back door.
        What we strongly recommended a year ago was that in order
    to provide the political cover for everybody to do what
    everybody recognizes is in the national interest, is both sides
    have to give, and it has got to be a comprehensive package so
    that it is recognized that all participants are doing the right
    thing for the country. And even though they can be accused of
    making a compromise with something that they pushed in the
    past, it is in the common good.
        And that is really--it is naive. It is kind of civics 101.
    I am not a politician, but I think it is sort of a time that we
    have to give a little to do the right thing for everybody.
        So my answer to your question would be to, you know, both
    sides of that center chair need to give a little bit and let us
    do more conservation, let us do more domestic production, let
    us do more alternatives.
        We have taken polling data within the country, and the
    people recognize it. But it is getting that popular support
    shredded through the filter of individual interests into a
    bill, which you all know better than I do, is a hard part of
    this.
        But it seems at the end of the day, if it is comprehensive
    and the people will have felt that their elected
    representatives, whether they are in the executive branch or on
    the legislative side, have done the right things for the
    country--so that is kind of a naive answer, Mr. Cleaver, but
    that is one I would give.
        Ms. Browner. I think the simulation actually would be a way
    in which you might find some common ground.
        In the simulation we did, there were--three of us were
    noted Democrats. Everyone knew we were Democrats. There were
    three that were well-known Republicans. You would recognize
    them immediately as Republicans. And then there were some
    former military brass, and we are never sure what they are.
    They are very good about that.
        But what happened is we were unanimous in our takeaway from
    the experience. So it didn't matter what our political
    persuasion was when we came to the scenario. Our experience of
    the scenario was a shared one, and what we thought needed to be
    done was remarkably similar across the party lines when we
    stepped out at the end and resumed our regular identities.
        So I think it could go a long ways to perhaps bridging some
    of the gaps that inevitably exist as you all wrestle with
    important legislation.
        And if that doesn't work, I agree, Mr. Hall should write a
    song.
        The Chairman. The gentleman's time has expired.
        The Chair recognizes the gentleman from Arizona, Mr.
    Shadegg.
        Mr. Shadegg. I want to thank our witnesses.
        I want to apologize for being late. I want to thank you for
    holding this hearing.
        I appreciate the work you are doing in this area; and I
    share your comments, Ms. Browner, about, you know, you set
    aside the policy, the partisanship, and we need to be working
    on the problem.
        In that regard, I noticed in your testimony that you
    applaud the renewable electricity standard in the House energy
    bill. I do as well, except I have some concern.
        Both of you, Admiral Blair and yourself, have talked about
    the importance of conserving, using less; and, obviously, the
    more we can rely on renewable fuels, the better off we are.
        One of the concerns that I have is that there is this
    ongoing struggle, unfortunately, I believe, somewhat partisan
    in nature, over what to value achievements in efficiency. In my
    State of Arizona, we have some renewables we can use. My
    friends from the Deep South look at me and say, don't impose
    renewable standards on us. We can't do it.
        In both instances, I hear from the industry that efficiency
    gains, at least in the short term, hold great potential. I
    know, for example, that I pay the Shadegg family electricity
    bill, and I found myself out on the stepladder pulling out the
    incandescent bulbs and putting in the fluorescent ones
    everywhere I can, and I am happy to save myself money.
        Do you think that legislation strikes the right balance, or
    do you think we should go further in rewarding, at least in the
    short term--and maybe it is just in the short term--to educate
    Americans and incentivize them to use more efficient
    appliances, lighting, consumption of energy in every way?
        You talked about CAFE standards. Obviously, that is a big
    and a critical one, particularly in the fuel and in the oil
    area where, for transportation purposes, oil is where we are
    excessively dependent now.
        But just my question is how about, I guess, do you think we
    have struck the right balance on rewarding efficiency saving in
    the renewable legislation that we passed?
        Ms. Browner. I think it is absolutely essential that the
    country gets on to making a commitment to a national standard.
    The States are doing it. They are figuring out how to make it
    happen. We have got 20 States now that have embraced some sort
    of renewable electricity standards. Obviously, electricity is
    different than oil.
        One thing, in terms of the right balance, I will just be
    pragmatic. It is the right balance if you can pass it. We are
    down to sort of it is time to get this passed. I mean, it is
    unfortunate that we haven't been able to do it thus far, and I
    understand everyone is working hard, but it is time to get it
    done.
        One thing that I have become increasingly interested in is
    how do you reward utilities for efficiency. You know, right
    now, if I am running a utility, I make money when I sell
    electricity. It is that simple. Now a few States--California
    has looked at something called decoupling, but people like Jim
    Rogers, who runs one of the biggest east coast utilities, is
    talking to the North Carolina PUC about allowing him to make
    money when his utility conserves, rewarding conservation by the
    utility.
        And that may be a way of getting at what you are
    suggesting. How you get at it on an individual consumer,
    obviously, there are tax credits that could be brought to bear.
        But, you know, I am not wedded to one particular answer.
    What I am wedded to is let us get a real standard. Let us send
    the message to the marketplace that people who make appliances,
    the people who use large amounts of utility are going to have
    to start thinking differently about what they are doing.
        One of the things I learned in 8 years as a regulator is
    that once you set that standard, whatever it is, whether it is
    a pollution standard, air, water, allowing some flexibility so
    that businesses can find the most common-sense, cost-effective
    way to get there inevitably gets you a better answer than
    government sort of trying to dictate each sort of tiny piece of
    the puzzle. Sometimes we need to dictate some of those, because
    not everyone is going to follow the path.
        But in most instances, if you were to figure out a way, I
    think, reward utilities for efficiency, you would be very, very
    pleased with the response you would get.
        Mr. Shadegg. There are two major public utilities in the
    Phoenix metropolitan area. One is an investor owned, and one is
    public owned. The public ones have come to see me, and they
    have very innovative programs. And they are arguing, yeah, we
    have renewable resources we can use here in Arizona, but we
    would also like to get rewarded for efficiency. Because they
    understand the system incentivizes them to sell.
        Admiral Blair, your comments on that point.
        Admiral Blair. Yes, sir. I haven't looked at the entire
    interconnected energy picture. I am really most concerned about
    the amount of petroleum from unstable places, which brings me
    to the transportation sector, which brings me to production of
    the petroleum and petroleum substitutes and imports.
        Mr. Shadegg. I just ran out of time.
        The Chairman. The gentleman's time has expired.
        The Chair recognizes the gentlelady from California, Ms.
    Solis.
        Ms. Solis. Thank you. And, again, welcome to our witnesses.
        In your scenario, Shockwave, I know you mentioned that you
    really didn't have time to do long-term planning. But given
    diplomatic or lack of diplomatic efforts, could you shed some
    light on that? Because you mentioned in the scenario that Iran
    and Venezuela could cut off supplies. What, in your opinion,
    can we do to help maybe prepare for these kinds of disasters
    that may occur and what steps can we take? Was there anyone
    talking about that at all in this role playing?
        Ms. Browner. Yeah. At the end--remember, we are doing
    ``presented with facts''. We don't necessarily have an
    explanation for why the particular fact has unfolded. It is
    just presented as a fact. We are given the fact that Iran and
    Venezuela were doing X, and we had to then quickly respond so
    the President could respond to the American people.
        When we stepped out of our roles, I think a number of
    people from sort of the military side talked about the fact
    that how we build relationships, how we maintain relationships
    with various regions of the world with various leaders is
    absolutely essential. There is no--again, not a single problem
    we confronted in this scenario had a perfect answer or a single
    answer. All of it was about things you do over a period of
    time--in some instances, a very long period of time.
        Admiral Blair. I think, Ms. Solis, I draw a contrast
    between the way we deal with countries that really don't have
    our economic interests in their hand and those who do. And when
    I was a commander in the Pacific, we could deal with countries
    in southeast Asia, Indonesia, Malaysia, some other problem
    countries, and we weren't completely dependent on them for oil
    supplies, so we could be a little sophisticated in our dealing
    with them. We didn't have to turn to big, expensive, hair-
    trigger military options right off the bat.
        By way of contrast, when we are dealing with countries who
    are controlling important parts of the world oil supply, we
    are--we militarize our policy almost by default.
        What we feel, if we can drop the oil intensity of the
    United States economy, that is the amount of oil to produce
    every dollar of GDP and, as Mr. Sensenbrenner said, we dropped
    that between--after the first oil problems in the 1970s and the
    1980s, but then it leveled out, and we are as dependent, as we
    all know, now.
        If we can do a combination of conservation and domestic
    alternatives, get that down again, then we are not as subject
    to being jacked around by these events and by these countries.
        So it really is a case of lowering our dependence on this
    as an economy to give these people who are in these shockwave
    events a little more flexibility so that they can have time to
    round up international support, so that they can use other
    maneuvers.
        It is just getting them on that hair trigger by the
    increased demand and the increased dependence that makes it so
    brutal when you come to one of these crisis situations like a
    pipeline that pops. So it is really that dependence that we
    need to work on.
        Ms. Solis. I raise that issue because we see a lot of
    climatic changes in Latin America, and I want to talk
    specifically about Mexico because we do import a lot of
    petroleum from Mexico.
        There was a very bad flood that occurred in Tabasco where
    they have a really large refinery. And I am wondering, things
    like that that occur we may not feel immediately, but they will
    have an impact a couple of months down the line. And I just
    would hope that our leaders, our policymakers would start
    thinking about how we can start providing assistance to our
    friends, democratically elected governments, that we should be
    helping to nurture and doing things in a manner that conserves,
    is energy efficient, that has a less negative footprint on the
    environment. And I want to throw that out there.
        CAFE standards. I had a meeting with some folks from the
    Automobile Alliance, and they were trying to explain to me that
    really it is about the demand out there, the consumers' thirst
    for these pickup trucks. And I just wanted to ask if you could
    comment on that, Ms. Browner.
        Ms. Browner. I just wanted to remind everybody that the
    EPA, which I had the opportunity to run for 8 years, does not
    handle CAFE. So I am not familiar about the program from a
    regulator perspective but obviously have studied it. It is
    handled by the Department of Transportation.
        I think the Admiral, as he said earlier, what is important
    about a CAFE proposal is that it is car to car. It is not
    manufacturer to manufacturer. And so the opportunity for the
    American public to continue to look at the vehicles they want
    is preserved.
        Having said that, again, my experience as a regulator does
    tell me that you set the standard, and you know what, good old
    American innovation and ingenuity rises to the challenge.
        When Congress in 1990 banned chlorofluorocarbons, CFCs,
    widely used in refrigeration, people in this body and in the
    Senate said, oh, my God. What are we going to do? We are going
    to have to drive our cars without air-conditioning. We are not
    going to have sort of life as we know it.
        Well, guess what? Once Congress said on a date certain, a
    company saw an opportunity, brought a technology to the market
    for less money, faster than anyone envisioned.
        When I set the tailpipe emission standards for diesel
    engines--it was one of the last things I did when I was in
    office--one of the things we could require was not just clean
    sulfur fuel but also there be a catalytic converter put on big
    diesel trucks and diesel cars.
        Ms. Browner. It did not exist. The scientists and engineers
    were still figuring it out. Once they knew there was a
    guaranteed market on a date certain, they figured it out pretty
    darn quickly. So I never, ever want to underestimate American
    innovation and ingenuity. We have a long history of rising to
    the challenge.
        Ms. Solis. Good point. Thank you very much.
        The Chairman. Would you like to add to that, Admiral Blair?
        Admiral Blair. Yes, just one thing.
        I agree completely with Ms. Browner. I have heard these--I
    have talked to the same car companies, and they are saying that
    American people do not want more efficient cars; they want more
    powerful cars with more cup holders. Therefore, we have to give
    it to them. I think, as Ms. Browner says, they are
    underestimating what they can produce. I think they are way
    underestimating the American public, who understands that we
    all need to have cars that are more fuel efficient, even if we
    have to sacrifice that top-end performance that we have, but
    they need to be told let's all do it together. Let us set a
    standard that applies to everybody rather than to one that is
    uneven.
        I also, frankly, I do not have a lot of sympathy for these
    car companies, because the price of that oil that we are using
    does not reflect the full price of the American troops who are
    doing all of this business around the world. If you factored in
    the real price of that oil, it would be huge, and frankly, I am
    sorry. It is not up to the car companies to make that judgment.
    It is up to the leaders of the American people to make that
    judgment.
        The Chairman. Thank you.
        The gentlelady's time has expired.
        The Chair recognizes the gentlelady from Tennessee, Mrs.
    Blackburn.
        Mrs. Blackburn. Thank you, Mr. Chairman.
        I thank both of you for being here, and I am listening with
    interest to your comments about automobiles and the engineers
    who are bringing those forward. As you know, in my district in
    Tennessee, the 7th District of Tennessee, we have a good bit of
    auto manufacturing both within the district and on the fringes
    of the district. I have done a little car shopping lately, and
    I have been amazed at how safe cars have become and the safety
    features that are included in those cars. I agree with both of
    you, and I think that, when our auto engineers in this country,
    who are the best in the world, put their minds to it, they will
    be able to solve some of these efficiency problems.
        Admiral Blair, as you were saying, the market needs to
    tell--the American people need to say this is something that we
    are looking for and that we want. I remember the gas crisis of
    the 1970s and what we went through there. I was a new mom with
    a new baby, and I remember what we were dealing with with those
    gas lines. So let me ask each of you:
        How do you think the American public would respond to
    rationing if we were to go through an oil crisis? We are
    looking at back to the first of the year where we had $2.29 a
    gallon, and now the average price in the country, I think, was
    at $3.01 this morning. We have watched a barrel of oil since
    the first of the year go from $55 to this morning when, I
    think, the Asian markets opened at $98 a barrel. So you are
    looking at a 75 percent increase in the cost of a barrel. You
    are looking at a 34 percent increase at the pump.
        So, if we were to move to rationing, in your opinion, how
    do you think the American people would respond to that?
    Likewise, what do you think would happen with our domestic
    supplies if we only used our supplies and those of our close
    allies like Mexico and Canada, who are our two largest oil
    trading partners?
        Ms. Browner. Well, if you only use our supplies and
    Mexico's and Canada's, you would be in oil rationing. You would
    not have a choice. You would be there.
        Mrs. Blackburn. How do you think the American people would
    respond?
        Ms. Browner. I will be honest with you. I do not think, at
    this point in time, particularly well, and I think that is
    because, while individual families and Americans, in my
    experience, are always prepared to do their part to solve a
    problem, they want to know that the companies that make the
    products are also doing their part. You know, I think there is
    a frustration that the American people have that they cannot
    get more fuel-efficient cars.
        Having said that, several manufacturers are now bringing to
    market the clean diesel engines which can get in a mid to--I do
    not know how you size cars--but in a sedan, I mean, a sedan
    that seats comfortably four and five people. You can get 32 to
    38 miles per gallon in a sedan with a clean diesel fuel, and
    those are becoming more and more attractive to people. So, when
    offered a more efficient car within a class, people are looking
    at them and are starting--you know, they are expensive right
    now. They will come down. They are only in certain high-end
    cars, but I think Ford is going to bring one to market in the
    not too distant future.
        So, you know, my experience is that, as people become
    better educated and as there are more options, they will
    gravitate toward things that they think are good for their
    families, are good for their families' pocketbooks and for the
    environment of their communities.
        Mrs. Blackburn. Admiral Blair.
        Admiral Blair. Yes.
        I think the American people have two reactions to that
    scenario that you have sketched out.
        Number 1, they would be angry, frustrated and looking for
    what got them into that fix. Number 2, they would roll up their
    sleeves, and they would do what had to be done to make it
    better, to work their way out of it.
        I guess my feeling is, since we know that now, why don't we
    take the actions now to avoid that crisis because we know it
    would be so much harder on us if we brought it to that point.
        Mrs. Blackburn. You are right, and changed habits is a big
    part of that and looking at changed habits. Let me ask you
    something in regard to that changing of habits.
        You know, right now, we do a lot of transport by truck
    across our Nation's highways, and I was reading something the
    other day about the efficiencies of rail.
        Do you all see any--and I am about out of time, but I would
    love to hear what your thoughts are about moving more of our
    movement of goods and commodities to rail and taking it off the
    highways. Any thoughts there?
        Ms. Browner. I, certainly, think it is something that needs
    to be considered, and the rail industry has been out there
    promoting what they can do.
        The one note I would just add to it is, you know, again, we
    are thinking here today about sort of a short-term oil shock,
    but we should always be thinking about what else could happen.
    So, for example, in a shift from one form of transportation to
    another, what does that do in terms of greenhouse gas
    emissions? What does that do in terms of conventional
    pollutants? I am not suggesting that rail creates a problem. I
    do not know the answer. It would be something worth
    understanding.
        Admiral Blair. Part of our proposals were that fuel-
    efficiency standards should be applied to trucks as well as to
    cars, and we should make the trucks that we have more efficient
    also by applying the same sort of technology to them as we do
    to cars, and we should raise the fuel efficiency standard of
    our trucks as well as to our cars.
        Mrs. Blackburn. Rail, do you see that as an option?
        Admiral Blair. I think then that the market would make the
    right adjustments, but I think we should work on the truck
    sector as well.
        Mrs. Blackburn. Thank you.
        I yield back.
        The Chairman. The gentlelady's time has expired.
        The Chair recognizes the gentleman from New York, Mr. Hall.
        Mr. Hall. Thank you, Mr. Chairman, and thank you for
    holding this hearing.
        Thank you to both of our excellent witnesses.
        I did, actually, write that song in 1978 that started out
    ``just give me the warm power of the sun; give me the restless
    power of the wind,'' et cetera.
        I also wish that we, as a country, had started doing those
    things, including conservation and all the renewables that were
    available then, and we would be in a much different position
    today.
        Admiral, you talked about being ``jacked around'' by
    countries that we used to have a freer hand to deal with. You
    know, it seems to me that our options diplomatically or
    economically had been limited in terms of how we deal, for
    instance, with Saudi Arabia on one hand and China on the other
    hand.
        Is that what you would call a ``loss of sovereignty''?
        Admiral Blair. Absolutely. The more you are constrained
    because of your dependence on another country, the more
    sovereignty you have lost.
        Mr. Hall. Yes. It seems to me like we are going down a road
    where residents of this country, where citizens of the United
    States, have never understood what it is like to be in a
    position like Brazil was in in the 1970s, for instance, where
    the world financial markets dictated to them certain things
    they had to do or else they would not get their next round of
    debt floated. So I think we need to be aware of that, that oil
    and our consumption of oil, is putting us in that position.
        Admiral Blair. I think that is absolutely right.
        Some of that came up in these simulations when the
    Secretary of State said in the simulation, ``Well, I went to
    country X, and asked them if they would increase their amount
    of oil, and country X said, `Yes, I can do that, but there are
    a couple of things I want from you, United States. I want you
    to lay off hitting me on this policy that I am doing. I want
    you to make this concession.' '' So it puts us in the position
    of having to spend some of our blue chips to get some of
    theirs, and we would just as soon not be there.
        Mr. Hall. Sir, my point is--and I think you are agreeing
    with me, and I am agreeing with both of you here--that what
    your simulation showed is, in fact, happening already,
    tangibly, that we are in a national security and sovereignty
    emergency, that we are only recognizing, unfortunately, the
    public end, you know, and that perhaps our political leaders
    are only starting to get a handle on how fragile our situation
    is.
        Admiral, you talked about oil being a fungible commodity.
    Would you agree that, to a large extent, conservation is also
    fungible but that saving energy anywhere frees up other energy
    somewhere else, I mean, understanding that liquid fuels are
    different from electricity to the extent that hybrids or plug-
    in hybrids or biofuels or the conservation of any of the above
    will free up more oil?
        Admiral Blair. It is not completely fungible. Turning down
    your thermostat does not mean you import less oil
    automatically.
        Mr. Hall. Unless you are burning oil at home.
        Admiral Blair. What we are mainly concerned about, as I
    say, is the oil sector, but it is headed in the same direction.
        Mr. Hall. Okay. Good.
        Regarding demand, my colleague from Tennessee was talking
    about demand, and her point is good. I just wanted to add to
    that my observations, from watching what little hours of
    television I have time to watch, that the advertising--and I
    have experience in the advertising industry as well. I have had
    songs used for advertisements, and I have always watched them,
    you know, with that sort of professional eye.
        It seems to me that Detroit is advertising power and speed
    and style and is not advertising efficiency. Take notes, and
    just make it a project one night to sit in front of the TV, and
    every time a car ad comes on, make a note of what kind of car
    is being advertised and whether they are touting efficiency and
    reliability or whether they are touting sexiness and speed and
    340 horsepower to leap out at the stop sign or at the merge
    ramp.
        I am driving by choice. Although I could have gone with an
    import and could have gotten 20 more miles per gallon, I am
    driving a--my own personal car is a Detroit-made, union-built
    hybrid, full-time, four-wheel drive SUV, which is rated at 33
    miles per gallon and would get better than that if you would
    drive it at 55 miles per gallon and stay in the right lane and
    let people whiz by you and take it easy going out from the stop
    signs or from the stoplights. If you step on it and drive
    angrily, you are getting into the 20's.
        So I just wanted to throw that in and say your suggestion
    of a possible national speed limit again is something that I
    believe, you know, we should be considering, but it is going to
    take--basically what you are talking about is leadership, I
    mean as I hear it, that everybody needs to feel that the
    sacrifice is shared, and the only way that that is likely to
    happen is to have it come from a strong statement of the
    leadership of our country that we are now all approaching this
    together and are sharing the burden.
        I am sorry to talk so much and ask so few questions.
        My time has expired. Mr. Chairman, I yield.
        The Chairman. The gentleman's time has expired.
        The Chair recognizes the gentleman from Connecticut, Mr.
    Larson.
        Mr. Larson. Thank you, Mr. Chairman.
        I want to thank both the Admiral and Ms. Browner for being
    here.
        Let me go on record as saying that I think that the
    scenarios can be very useful and instructive, but I want to
    acknowledge right from the outset that, because of his Martin
    Sheen-like qualities, I think Ed Markey should be cast as
    President of the United States as a role befitting the chairman
    of the committee. Now, some may say isn't that a patently
    suckup move? Yes, it is, and so I hope that my legislation will
    be considered in order when the day arrives.
        Admiral, you mentioned something very interesting in the
    scenarios as it was laid out and, as I understand it, with the
    consequences confronting you with the potential shutoff of
    supplies from Iran and Venezuela. Here is my question.
        In a situation such as that, you said that, by virtue of
    the fact that we are dealing with unfriendly States, that it
    almost becomes a de facto military situation. So the question
    is: In the scenario, where would the military deem to strike,
    if necessary, to recapture supplies--in this hemisphere or in
    the Middle East?
        Then bringing it to reality because, I think, that is what
    makes these useful, should Americans be concerned when we have,
    yet, another battle group doing maneuvers in the Persian Gulf?
        Admiral Blair. I think the connection between the military
    force and oil supplies is a little more subtle than that. We do
    not go in and take over oil fields and sort of run them with
    soldiers and with contractors. That is not really the point. I
    do not think we invaded Iraq to get their oil.
        What I am saying is the fact that that region supplies a
    commodity, which is so fundamentally important to the United
    States, means that the United States is intellectively involved
    in the affairs of that region and will have to have a much
    deeper involvement in them so that, when one State threatens
    another or invades another as Iraq invaded Kuwait back in 1991,
    an issue in which military force clearly has an application, we
    will do it; we will use military force there.
        The military situations that clearly call for a military
    response in that part of the world are threatening to and
    closing the Strait of Hormuz, the scenario that we had in the
    tanker wars in the mid-1980s when both Iraq and Iran were
    attacking oil tankers, and we ended up reflagging and escorting
    them.
        So it is not so much that, militarily, we go in and take
    over oil fields, which is not a very useful alternative. It is
    that we are in the region, and when military force is used, the
    United States has got to consider what we do with our forces,
    and we kind of get sucked into it the way that we have over
    time.
        What I think is going on here is that, if the United States
    has a very great vulnerability of short-term interruptions in
    countries like Venezuela and Iran, who are no friends of this
    country, they can sort of throttle back for a while. It does
    not hurt them very badly. It hurts us. It gives them advantages
    across the board in dealing with their interests as opposed to
    ours, which result in change.
        Mr. Larson. So these maneuvers in the Persian Gulf should
    be viewed as saber rattling to assist in diplomacy or are they
    concerns that Members of Congress in any scenario should be
    very much aware of?
        Admiral Blair. I took the uniform off 5 years ago. It was
    not my area, and we have got good people who took our places
    there, and I think you need to talk to them.
        Mr. Larson. And you said you were not a good politician.
        Ms. Browner. If I might just note, in this scenario, one of
    the things that did unfold from, I think it was, the Secretary
    of Defense was a question for the President.
        Should we change the Selective Service registration
    requirements to capture women? Secondly, should we begin
    thinking about some form of a draft? Because the concern in the
    scenario that he was bringing to the table is that the military
    is stretched very, very thin.
        I might also note that, in this scenario, the President is
    not in the room. There is sort of an Oz-esque figure behind a
    curtain, so Mr. Markey would have to peek in occasionally, but
    you would be a great Secretary of Treasury.
        The Chairman. Well, I was thinking of letting him, Mr.
    Larson, be Vice President so then it could reflect the real
    power in the United States anyway.
        The gentleman's time has expired.
        So the Chair recognizes himself for a round of questions.
        Under your scenario, only 1 percent of the world's oil
    supply is taken off the market. It leads to $160-a-barrel oil.
    It leads to the collapse of the economy.
        What is it that has led to having the oil markets become so
    tight that they can have such a profound impact in such a short
    period of time?
        Ms. Browner. Well, I think, in that scenario, it is a
    combination of factors, but certainly, the failure of
    efficiency, the failure to drive down the amount of oil we use
    on a daily basis becomes pretty important because while the
    actual number--it ends up at about 1 billion barrels a day.
    That is not an amount that cannot be addressed through some
    prudent steps taken, you know, sooner rather than later.
        Admiral Blair. On that, I agree with you, Mr. Chairman.
    That was sort of a surprising effect. You would think, on a
    percentage basis, it would not be that big. The gameplay for
    that result was done by a highly-respected, Canadian energy
    consulting company that we fed the information to and then
    asked them ``Okay. What did that do to the price of barrels?''
    They ran their quantitative models, in their judgment.
        What I think was at play there was that, with the oil
    market so tight in the future primarily because of the
    increases in non-U.S. production, India and China are leading
    it. You find that non-U.S. oil demand goes up 38 percent over,
    maybe, the next 5 years; whereas, U.S. demand goes up about 24
    percent. That is just making the oil market so tight that the
    power of expectations comes to play, and even relatively small
    tremors make people worry about the future. Therefore, they
    want to ensure their own supplies, and they bid up prices. So
    you are just in this trigger in which a relatively small rock
    in the pond has pretty big ripples.
        The Chairman. So you talk in your testimony, Admiral, about
    our ever-growing military presence in the Middle East.
        Could you give us some sense of how you feel, for example,
    as to how this growing dependence upon oil affects our
    relationship with Saudi Arabia?
        Admiral Blair. I think it gives Saudi Arabia much greater
    leverage in its dealings with us, and it is no secret that
    there are a lot of aspects of Saudi Arabia in the future that
    we have real concerns about, and when you are that much--when a
    country with those sorts of challenges has that much of a thumb
    on you, it causes concern. So it is not a whole lot more
    complicated than that, Mr. Chairman.
        The Chairman. So the language that you both made reference
    to, the 35 miles per gallon by 2020, actually backs out the
    equivalent of all of the oil that we import from the Persian
    Gulf on a daily basis by 2020.
        How important is that, Admiral?
        Admiral Blair. I think that would just put us in a lot
    better position to be able to deal in a more balanced manner
    with Saudi Arabia. I think it would have made the position of
    those people in the shockwave much, much easier.
        The Chairman. Ms. Browner, can you talk to this issue of
    the 35-mile-per-gallon standard by 2020 and how important you
    think it is for the Congress to pass that this year?
        Ms. Browner. It is absolutely essential. We have got to get
    on with doing this. As I said in my opening statement, this is
    the second time I have participated in one of these. The last
    was several years ago. The message from both of them was
    identical, that taking steps sooner rather than later is key to
    these problems.
        In the case of CAFE and the proposal that the Senate has
    passed, it would have solved the problem that we were
    confronting. It was not as if this scenario was designed to
    then conclude, well, you should have passed CAFE. It was just
    the fact of, when you go back and look at how it unfolded, that
    is one of the easiest ways, actually, to have solved the
    problem.
        The Chairman. Admiral, are you convinced that we can
    improve the efficiency without compromising the safety of the
    American people in terms of the vehicles which they drive?
        Admiral Blair. Yes, sir, I am.
        I tell you the strongest technical support for that
    judgment was our updating of a study done back in 2002 by the
    National Academy of Sciences, which looked at existing--we, the
    Securing America's Future Energy Project asked the office to
    update it to about 2000, 2005.
        Are there available technologies which can influence and
    which can improve sufficiency without sacrificing safety? The
    answer from these technical experts was, unambiguously, yes, it
    could. That was even without considering hybrids and some
    other, more recent technologies. So I think the technical
    answer is, yes, it can be done, and it should be done.
        Another part of our proposal was that what if we are wrong?
    What if this is resulting in unsafe vehicles? We provided in
    our recommendations that the National Highway Traffic Safety
    Administration have the authority to be able to waive standards
    based on sound technical arguments having to do with safety and
    with the economy, but we think the burden of proof ought to be
    put on people saying why they cannot do it rather than why they
    can, which is sort of where it is now. What you hear from the
    auto companies, you know, is American consumers do not want it,
    you know, blah, blah, blah. So we think we ought to shift the
    burden in the other direction.
        The Chairman. Ms. Browner.
        Ms. Browner. You know, at the EPA, I, obviously, got the
    chance to regulate the automotive industry, and they always
    said no, no, no, no, no. Then they always turned around and did
    it. I think, you know, Mr. Chairman, with your leadership on
    CAFE and with your proposal on CAFE and with the Senate
    proposal, there is no doubt in my mind that they can do it.
    They will complain loudly, but they will end up being able to
    do it.
        The Chairman. So my time has expired.
        Let us do this. I apologize to you. President Sarkozy of
    France is about to address the House, and that is why the
    Members have been leaving, because he is going to come out onto
    the House floor in the next 15 to 20 minutes, so the Members
    have been leaving for that purpose, and we had to move the
    hearing up in order to accommodate that as well.
        So what I would like from each of you is if you could give
    us your take-away message, what it is that you want us to
    remember over these next 4 weeks, especially as we consider
    this energy bill, which is pending before the House and the
    Senate, as we have this opportunity to pass the largest and the
    most important energy bill in the last 30 years in the United
    States Congress and as the world convenes in Bali in 1 month to
    talk about the relationship between energy and climate, and as
    Al Gore also goes to receive the Nobel Peace Prize. The world
    is speaking to the United States in a lot of ways through that
    prize.
        Could you each give us your take-away message for the
    Congress as we reach this final 4 weeks?
        Admiral Blair.
        Admiral Blair. Yes, sir.
        My take-away message would be to pass this bill with
    conservation members, to pop your champagne, but please do not
    stop there. Go on to the other aspects of a comprehensive
    solution having to do with supply, having to do with
    alternatives, and keep on with steady pressure to have a
    comprehensive strategy, but nail down that first step, which is
    passing this bill which the Senate has passed.
        The Chairman. Okay. Ms. Browner.
        Ms. Browner. Please, I ask you to please pass the bill. You
    know, this is a great, important moment, I think, in our
    history. I agree with the Admiral. It is a first step. There
    will be other steps we need to take, but it is an absolutely
    essential step. We need to get started. We need to get started
    on more fuel-efficient cars. We need to get started on
    renewable electricity standards.
        Mr. Chairman, the leadership that you and the members of
    this committee have brought to this debate is remarkable, and I
    feel like we are just sort of sitting on the edge of something
    really great that is beginning. There will be a lot more to do.
    Obviously, greenhouse gas emissions and carbon are going to be
    important, but if we could get this done and if we could say to
    the American people, you know, our leaders want to do something
    and they want to work with you for a better future, it would be
    wonderful.
        The Chairman. Thank you, Ms. Browner.
        This issue really is reaching the point of decision.
    Speaker Pelosi, in January of this year, created this Select
    Committee on Energy Independence and Global Warming as her only
    select committee during the 2 years that she will be in her
    first term as Speaker.
        So, clearly, this is something that is very important to
    her. It is now, as each day goes by, becoming increasingly
    important to the American economy as well in addition to the
    security of our country and of the climate.
        On Monday of this week, we had 5,500 young people--young
    leaders--from across the country come to Washington. They were
    presidents of their senior class, the heads of their
    environmental movements on campus. We had that hearing in the
    Ways and Means main committee room. 700 young people were
    packing that room with thousands of others surrounding the
    Longworth Building as they were testifying about the
    responsibility that this generation has to their generation,
    the green generation, to solve this problem. So we need to play
    our part in passing this first step and in beginning the
    process of reversing this dependence upon imported oil and
    fossil fuels.
        We thank you both for your leadership on this issue.
        With that, this hearing is adjourned.
        [Whereupon, at 10:35 a.m., the committee was adjourned.]
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