[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
PUMPING UP PRICES: THE STRATEGIC PETROLEUM RESERVE AND RECORD GAS
PRICES
=======================================================================
HEARING
before the
SELECT COMMITTEE ON
ENERGY INDEPENDENCE
AND GLOBAL WARMING
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
APRIL 24, 2008
__________
Serial No. 110-34
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, Ranking Member
JOHN B. LARSON, Connecticut JOHN B. SHADEGG, Arizona
HILDA L. SOLIS, California GREG WALDEN, Oregon
STEPHANIE HERSETH SANDLIN, CANDICE S. MILLER, Michigan
South Dakota JOHN SULLIVAN, Oklahoma
EMANUEL CLEAVER, Missouri MARSHA BLACKBURN, Tennessee
JOHN J. HALL, New York
JERRY McNERNEY, California
------
Professional Staff
Gerard J. Waldron, Staff Director
Aliya Brodsky, Chief Clerk
Thomas Weimer, Minority Staff Director
C O N T E N T S
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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................. 5
Hon. John Hall, a Representative in Congress from the State of
New York, opening statement.................................... 5
Hon. John Shadegg, a Representative in Congress from the State of
Arizona, opening statement..................................... 6
Hon. Jerry McNerney, a Representative in Congress from the State
of California, opening statement............................... 7
Hon. Jay Inslee, a Representative in Congress from the State of
Washington, opening statement.................................. 7
Hon. John Larson, a Representative in Congress from the State of
Connecticut, opening statement................................. 8
Hon. Stephanie Herseth Sandlin, a Representative in Congress from
the State of South Dakota, opening statement................... 9
Hon. Earl Blumenauer, a Representative in Congress from the State
of Oregon, opening statement................................... 9
Hon. Emanuel Cleaver II, a Representative in Congress from the
State of Missouri, prepared statement.......................... 11
Witnesses
Ms. Melanie Kenderdine, Associate Director, Strategic Planning,
MIT Energy Initiative.......................................... 12
Prepared statement........................................... 15
Mr. Mark Cooper, Director of Research, Consumer Federation of
America........................................................ 24
Prepared statement........................................... 26
Mr. Dave Berry, Vice President, Swift Transportation Company,
Inc., Chairman, Energy and Environment Policy Committee,
American Trucking Association.................................. 41
Prepared statement........................................... 43
Answers to submitted questions............................... 95
Mr. Kevin Book, Senior Vice President, Senior Analyst, Energy
Policy, Oil & Alternative Energy, Friedman, Billings, Ramsey &
Company, Inc................................................... 51
Prepared statement........................................... 54
Answers to submitted questions............................... 104
Dr. Frank Rusco, Acting Director, Natural Resources and
Environment, GAO............................................... 64
Prepared statement........................................... 66
Answers to submitted questions............................... 110
PUMPING UP PRICES: THE STRATEGIC PETROLEUM RESERVE AND RECORD GAS
PRICES
----------
THURSDAY, APRIL 24, 2008
House of Representatives,
Select Committee on Energy Independence
and Global Warming,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in room
2212, Rayburn House Office Building, Hon. Edward Markey
(chairman of the Committee) presiding.
Present: Representatives Markey, Blumenauer, Inslee,
Larson, Herseth Sandlin, Hall, Sensenbrenner and Shadegg.
Staff present: Morgan Gray.
The Chairman. Good morning, and welcome to this hearing by
the Select Committee on Energy Independence and Global Warming
on the subject of Pumping Up Prices: The Strategic Petroleum
Reserve and Record Gas Prices.
This summer families all across America will pile into
their cars to take their vacations. Unfortunately, as a result
of nearly eight years of the Bush administration's energy
policy, they will face gas and oil prices that are skyrocketing
out of control with no end in sight.
Earlier this week oil reached yet another all-time high,
trading above $119 per barrel. The price of oil has risen by
$100 a barrel since President Bush took office. American
consumers are paying the price at the pump for this
administration's failed energy policy. They are being tipped
upside down by the big oil companies. They are being tipped
upside down by OPEC, with money being shaken out of their
pockets at the pump every day across America.
Gas prices have more than tripled over the last six years.
The price of a gallon of gas jumped 12 cents in just the last
week alone, and more than a quarter in the past month. American
families are now paying $3.53 per gallon every time they fill
up, and the Department of Energy projects that gas may reach $4
a gallon by this summer.
And what has been the Administration's response to this
energy crisis? Well, earlier this week, Energy Secretary Bodman
said, ``I have done everything I know how to do with OPEC.''
Rather than taking action to help consumers, it seems that the
Bush administration's response is to throw up its hands and to
say that there is nothing to be done.
Well, there are things that can be done. Earlier this year,
the House passed legislation that would redirect $18 billion in
tax breaks for big oil to promote renewable fuels and clean
energy. However, the Bush administration continues to oppose
this legislation that would move us away from a fossil fuel
future and help provide consumers with long-term relief from
high oil and gas prices.
Democrats in the House have passed four bills this Congress
to address high prices and break our dependence on oil. This
administration has answered with tax breaks for big oil and
tough breaks for American consumers. The Bush administration is
ignoring actions that would provide consumers with relief right
now.
The United States currently purchases 70,000 barrels of oil
every day to fill the Strategic Petroleum Reserve, which
already contains over 700 million barrels and is roughly 97
percent full. By law, the Strategic Petroleum Reserve must be
filled ``as expeditiously as possible without incurring
excessive cost or appreciably affecting the price of petroleum
products to consumers.''
With the price of oil at $119, removing 70,000 barrels of
oil a day from the market to build the Reserve is both
incurring excessive cost for the Federal Government and
affecting, in a negative way, runaway oil and gas prices. Based
on projections by the Bush administration's own Department of
Energy, ending the fill of the Reserve could reduce prices by
about $2 per barrel of oil and 5 cents per gallon of gas.
Not only should the Bush administration stop filling the
Reserve, it should also release oil onto the world market as a
weapon to end escalating prices. These two actions would send a
strong signal to speculators and to OPEC that Americans won't
be held hostage by high prices.
Earlier this month, the number two executive at Exxon Mobil
testified before this Committee that speculation, along with
geopolitical instability and a weakening dollar, was
responsible for half of current oil prices. That based only on
oil supply and demand, the price of a barrel of oil should be
only $50 to $55 a barrel.
However, President Bush continues to refuse to use the
Strategic Petroleum Reserve to pop the speculative bubble. The
Bush administration is willing to deploy our National Guard
Reserves in Iraq, but it refuses to deploy our oil reserves to
protect consumers and our economy.
If President Bush were to announce his intention to release
oil from the Strategic Petroleum Reserve today, it would put an
immediate end to the speculative feeding frenzy that is driving
up prices. Releasing oil from the Reserve is something that can
be done to help American families this summer. It is high time
that the Bush administration does it.
Now I would like to turn to recognize the Ranking Member of
the Select Committee, the gentleman from the State of
Wisconsin, Mr. Sensenbrenner.
[The prepared statement of Mr. Markey follows:]
[GRAPHIC] [TIFF OMITTED] 61637A.001
[GRAPHIC] [TIFF OMITTED] 61637A.002
Mr. Sensenbrenner. Thank you very much, Mr. Chairman. I am
not going to make a partisan rant this morning, because this is
a serious problem and it should rise above partisanship.
Sometimes administrations have tapped the Strategic
Petroleum Reserve effectively. Sometimes they haven't done it
and there have been consequences. Sometimes they have done it
and it has been ineffective. Sometimes they haven't done it and
it has been effective. And I don't know whether tapping the
Strategic Petroleum Reserve or not is going to help or have no
effect on the cost of high gas prices here in America.
What I will say is that the problem that we face is one of
lack of supply. And the Chairman referred to the hearing that
we had earlier this month where either the CEOs or their
representatives of the five major domestic oil companies came
to testify. And in my five minutes of questioning, I asked them
point blank, what would be the single most important thing that
Congress can do to lower prices of gas at the pump? And every
one of them said ``increase domestic production.''
Now, what has this Congress done? We have voted down every
effort to increase domestic production. We have taxed or taken
away tax credits for domestic production, which was referred to
by the Chairman, which means it is cheaper to buy oil from
OPEC, because we have taxed domestic production so high.
Now, it seems to me that the time has come to quit the
partisan shots and to start going back to Economics 101. We do
need to increase the supply of petroleum. Tapping the domestic
petroleum reserve, or not filling it any further, is going to
be literally a drop in the bucket compared to the huge amount
of oil that is used both in the United States and worldwide.
But I think that we ought to start looking at serious
issues relative to this, rather than trying to get sound bites
on the network news. And I hope this hearing will allow us to
get serious.
I yield back the balance of my time.
The Chairman. Great. The gentleman's time has expired.
The chair recognizes the gentleman from New York State, Mr.
Hall.
Mr. Hall. Thank you, Mr. Chairman. I was recalling a
hearing myself, and it was interesting to hear the CEOs of the
five top oil companies, as the Ranking Member said. Their main
recommendation was to increase domestic production. It just
happens to be production of the product that they make profits
on, in fact record profits in the history of all industries in
recorded time.
We are, in fact, working on increasing domestic production
of many other kinds of fuels to try to phase out the oil
dependency, not just foreign but oil dependency in general,
that is damaging the environment, damaging our balance of trade
deficit, damaging our health, damaging the climate, damaging
our standing in the world and our involvement--very costly
involvement, I might say--in military conflicts in unstable
parts of the world to secure those oil supplies.
But everybody here knows that oil and gasoline has gone
through the roof, already exceeding $4 in some parts of the
country. We didn't get into this hole overnight, and there is
no silver bullet that will get us out of it immediately. I am
proud that Congress has acted to pass sweeping legislation to
raise fuel economy, provide tax incentives for green energy
development, and to establish a green collar workforce, so that
we can get back to being a leader, being the leader in the
world in energy and economic policy on the right track, rather
than giving other countries a 20- or 30-year head start on such
things as hybrid vehicles.
People in my district talked to me, my constituents in the
19th District of New York, talked to me about how much they
want to do and what they can do. From the students--high school
students at Arlington High School in Dutchess County, New York,
who recently put together plans for a solar system on the roof
of their high school, and got half the money from New York
State and I was able to secure the other half of the money in a
private grant for them, to a local company that is making
ethanol gas that they can spin a turbine with and make
electricity, and also hydrogen that they can fuel hydrogen fuel
cells from from municipal solid waste.
There is such a wide range, not just solar and wind and all
of the geothermal and the ones everybody talks about, but there
are a lot of new sources of energy that are coming to play, and
that with the proper subsidies and the proper investments and
research and development dollars will come to play.
So I would hope that that's the direction that we will go
in, and I encourage what the Chairman is suggesting--that for
now in this crisis situation we stop purchasing oil for the
Strategic Reserve.
And I yield back.
The Chairman. The gentleman's time has expired.
The chair recognizes the gentleman from Arizona, Mr.
Shadegg.
Mr. Shadegg. Thank you, Mr. Chairman, and I would like to
commend you for calling this hearing on gas prices and, more
specifically, on what is pumping them up and what we can do
about it.
I want to begin by welcoming a fellow Arizonan and a
personal friend, Dave Berry, Vice President of Swift
Transportation. I believe you will find him to be very
knowledgeable about the impact of high fuel prices on our
entire economy, and I think--I know I am looking forward to his
testimony, and I think it will be helpful to the Committee.
High gas prices are an extremely serious problem for all
Americans, American consumers and American businesses. And,
therefore, it is important that we identify the reason for
those high prices and, more important, that we do what we can
to alleviate them.
I think in this Committee I have repeatedly said they are a
unique problem for those of us out West who drive great
distances, both in commuting back and forth to work or in
taking summer vacations. In many instances, much more travel,
much more driving time, and much more mileage than those who
live in the East.
I would suggest that gas prices are most appropriately
addressed by looking at the relationship between supply and
demand. During the last 25 years, world energy demand has
increased by 60 percent. The Energy Information Administration
predicts that demand in the United States alone will grow by 19
percent through 2030.
I wholeheartedly agree, as the Chairman knows, with his
sentiment that we have to find alternative forms of energy. But
every single expert that has been before this Committee, and
that I have talked to, has said that at least in the short run
we are looking at an oil-based economy. At least for today. We
are talking about the price spike in gasoline over the last 60
to 90 days, or, at most, over the last 12 months, which has
been stunning and has had a dramatic impact on our
constituents.
I don't think that alternative forms of energy are going to
go at that issue, and so we are looking at whether or not
speculation has driven up the demand. One issue here today is:
could we deal with that speculation by addressing the SPRO and
perhaps releasing some fuel from it?
I would suggest that a much greater signal in the wrong
direction has been sent to speculators by all of the potential
sources of oil that we have locked up in this country and made
unavailable, on the outer continental shelf and the inner
mountain west, in coal-to-shale or shale-to-oil programs, and
that we have sent, at least in the short run in this Congress,
by refusing to adopt policies that would open up our domestic
supply, even where it can be done in a very rational and safe
way, the wrong signals, which have driven up the cost of
gasoline for our consumers dramatically in the short run.
Thank you, Mr. Chairman.
The Chairman. Okay. The gentleman's time has expired.
The chair recognizes the gentleman from California, Mr.
McNerney.
Mr. McNerney. Thank you, Mr. Chairman. I want to thank the
witnesses for agreeing to testify here today. Many of the
issues that we consider in Congress are topics that the average
person may not--may only rarely consider in their daily lives.
But I can tell you, the issue we are discussing today, people
are watching, they are interested in.
You can ask any commuter in my district or around the
country how much it cost for them to fill their tank with gas
the last time, and they will tell you the exact number. And
they will tell you how much more it was than they paid the week
before. So this is an issue that is affecting everybody's lives
in this country.
And in our current economy, oil and gas do drive progress.
And whether you are just going to the beach or you are driving
to work on a Thursday, high gas prices are a constant
consideration. Given the recent increases in prices, and the
prospect for this continuing, I am hopeful that the panel today
can shed some light on the importance of the Strategic
Petroleum Reserve, how we might be able to lower the price of
gasoline by manipulating what goes in and what does go in the
SPR. And I am looking forward to your testimony to help us
understand that.
And with that, I yield back.
The Chairman. Great. The gentleman's time has expired.
The chair recognizes the gentleman from Washington State,
Mr. Inslee.
Mr. Inslee. Thank you. I think there are four things we can
do about energy prices, three short-term and one long-term. The
administration has done zero out of those four, and we are here
to talk about them. I just want to outline them.
First, we can do something with the SPRO to send a signal
to the speculators, which are a significant part of the reason
for the runup in these prices. We heard Exxon Vice President
Simon tell us that speculation was a significant part for the
reason for these extraordinary volatile prices. What we can do
is send a message to the speculators that we are going to stop
at least increasing the capacity of the SPRO, and the reason is
is when your house is on fire it is more important to get the
hose than an additional policy of insurance.
And that is the situation right now. We need some water. We
need less insurance. At the moment, that is clearly something
we should do. That is the first thing. The administration has
refused to do it.
Second, we should clearly bring in the over-the-counter
market for oil futures into the jurisdiction of the Commodities
Future Trading Commission. We have these markets transparent
and open and regulated in oranges, soybeans, wheat, sorghum,
but not oil and gas. It is insane to have such a fundamental
part of our economy open for the wild west speculation that is
going on right now and driving up these prices. That is number
two. The administration has refused to help us.
Third, Senator Cantwell and I have called for the formation
of a task force in the Justice Department to send a signal
again to the markets of the seriousness to follow the law and
have transparency in these markets. That is the third thing the
administration has failed to do.
The fourth thing is the long-term, and what the American
people understand, that all of the things we are going to talk
about today are short-term. They are not permanent fixes to
this problem. The permanent fix to this problem is found in
groups like a couple of people I met in my office yesterday.
They are the leaders of the Phoenix Motor Car Company, who are
going to bring an all-electric car to market in June from
Ontario, California, that you can drive on all electricity for
120 miles for $3 for 120 miles. That is the solution. The
administration refused to help us move in that direction.
We have got to do all four. Thank you, Mr. Chair.
The Chairman. Great. The gentleman's time has expired.
The chair recognizes the gentleman from Connecticut, Mr.
Larson.
Mr. Larson. I want to thank the Chairman and thank the
witnesses for being here this afternoon. Let me follow on with
the reasoning of my esteemed colleague from Washington State.
At a previous hearing, we have heard from a number of
executives in the oil and gas business around this whole issue
of speculation.
The independent Connecticut Petroleum Dealers Association
tells heart-rendering story after story of citizens who receive
their Social Security checks turning around and handing them
over to them. They say that the rules of supply and demand no
longer apply with respect to this issue. That, in fact, it is
speculation and greed that is driving the cost up at the pump,
and clearly in the area of home heating oil.
These rock-rib Republicans from my district have said that
what needs to be done is that what we need to do is focus on
this speculation and require that unless, in fact, you are the
recipient of the commodity you would not--you shouldn't ought
to be able to use the declining dollar as a way to transfer
paper or continue to speculate in such a manner that it raises
the cost of gas at the pump or home heating oil that is
distributed to your home.
I am interested in hearing from all of you, and concur with
my other colleagues' outlining of the issues that confront us.
The Chairman. Great. The gentleman's time has expired.
The chair recognizes the gentlelady from South Dakota, Ms.
Herseth Sandlin.
Ms. Herseth Sandlin. Thank you, Mr. Chairman. Thank you for
having this important hearing, and I thank our witnesses for
testifying.
To reiterate some of the important points made by some of
my colleagues, I represent the entire State of South Dakota, a
very rural State, and so you can imagine the impact that record
gas prices are having on families and businesses across the
State.
While we have been one of the leaders in biofuels
production, that it has had a moderating influence on the gas--
price of gas, upwards of 15 percent as we have seen in some
analysis that we explored with oil companies--company
executives that generally agreed, although they didn't think
that it was upwards of at least 15 percent that ethanol has
been able to, again, moderate the price that we would see
otherwise if we didn't have ethanol production today.
But I do think it is important, as we explore with our
witnesses today the other impacts--I have long advocated in
times of record gas prices, whether it was last year, the year
before, or now, that we not continue to add oil to the
Strategic Petroleum Reserve to help alleviate some of the
market pressures.
But I would also like to explore with the witnesses today
the impact of our domestic refining capacity, as well as how we
develop a plan for the SPR in light of the projected effects of
last year's energy bill and the standards that we put in and
what that is projected to save us in terms of imported oil over
time.
So, again, I thank the Chairman and the witnesses, and look
forward to their testimony.
The Chairman. Great. The gentlelady's time has expired.
The chair recognizes the gentleman from Oregon, Mr.
Blumenauer.
Mr. Blumenauer. Thank you, Mr. Chairman. I, too, welcome
our witnesses, look forward to some thoughtful interaction.
It is important that we focus on three things, in my
judgment. One is making sure that we have a transparent and
fair market, look forward to exploring that. Second is being
sensible about what the Federal Government itself does. It is
not just the Strategic Petroleum Reserve, but how we, as the
largest consumer of petroleum in the world, for our military
and other actions, do the best possible job of stretching that
resource.
And, finally, with the work of this Committee, look
comprehensively at how we are going to deal with rebuilding and
renewing this country to provide more choices to people, so
they are not sentenced to buy--if they want to buy a gallon of
milk that they have to burn a gallon of gas, because of how we
organize our communities, the limited transportation choices
that people have, and how we have failed in terms of promoting
more technology.
Mr. Chairman, I appreciate what you have done with this
Committee, looking at the big picture, not just as we are today
with one piece of it, but how all of them fit together. And I
look forward to our progress in looking at that bigger picture
as we go on.
Thank you.
The Chairman. I thank you. I thank the gentleman from
Oregon. That completes the time for opening statements for the
members of the Select Committee.
[The prepared statement of Mr. Cleaver follows:]
[GRAPHIC] [TIFF OMITTED] 61637A.003
Mr. Chairman. I note that we have a guest, Mr. Welch from
Vermont, who is sitting in today, and we welcome you, sir, to
the hearing.
Let me now turn to our first witness. Our first witness is
Ms. Melanie Kenderdine. She is the Associate Director of
Strategic Planning for the MIT Energy Initiative. She has had a
long career as well at the Department of Energy before that.
We welcome you. Whenever you are comfortable, please begin.
STATEMENTS OF MS. MELANIE KENDERDINE, ASSOCIATE DIRECTOR,
STRATEGIC PLANNING, MIT ENERGY INITIATIVE; DR. MARK COOPER,
DIRECTOR OF RESEARCH, CONSUMER FEDERATION OF AMERICA; MR. DAVE
BERRY, VICE PRESIDENT, CHAIRMAN, SWIFT TRANSPORTATION COMPANY,
INC., AMERICAN TRUCKING ASSOCIATION; MR. KEVIN BOOK, SENIOR
VICE PRESIDENT AND SENIOR ANALYST, ENERGY POLICY, OIL, AND
ALTERNATIVE ENERGY, FRIEDMAN, BILLINGS, RAMSEY AND COMPANY,
INC.; AND DR. FRANK RUSCO, ACTING DIRECTOR, NATURAL RESOURCES
AND ENVIRONMENT, GAO
STATEMENT OF MELANIE KENDERDINE
Ms. Kenderdine. Thank you, Mr. Chairman. Mr. Chairman, Mr.
Sensenbrenner, members of the Committee, thank you for giving
me the opportunity to testify today.
While the SPR is our primary line of defense in the event
of an emergency oil supply disruption, each day the current RIK
program pulls 70,000 barrels of oil off tight markets, at a
time of record high prices and volatile geopolitics. Attention
to market conditions and the willingness to act in a more
flexible and creative manner could achieve the same result but
enable lower cost options for filling the SPR, as well as help
address other key energy priorities.
The purposes in implementation of the original RIK program
in 1999 provides an example of such creativity. In late 1998,
oil prices hit historic lows. While moderate oil prices are
good for consumers, extremely low prices, shut-in wells,
decimate the workforce, particularly in the oil-producing
regions of the country, and destroy the technical
infrastructure of the industry--impacts that lead to lower
supplies and higher prices in the future.
To help mitigate these adverse impacts, the Clinton
administration established the RIK program. This provided a
market outlet for domestic oil in a glutted market and enabled
DOE, without the need for new appropriations, to replace 28
million barrels of oil in the SPR that had been sold two years
earlier, largely at the direction of Congress, simply to
generate revenues.
The current RIK program is operating under market
conditions that are precisely the opposite of those that the
original program was established to exploit. In fact, two
energy secretaries, in both Democratic and Republican
administrations, elected to pursue the path of do no harm with
the RIK program. Secretary Richardson in 2000 and Secretary
Abraham in 2003 deferred deliveries under the RIK program for
fear that removing even small amounts of oil from the market
would increase prices to consumers.
Another authority where creativity and flexibility can and
should be employed is exchanging oil to acquire oil. We first
used this in a significant way to establish a home heating oil
reserve in the Northeast in 2000. Chairman Markey was a major
supporter of that effort. The rapid stand-up of this reserve,
absent appropriations to do so, was accomplished by using this
authority and cost us no money.
We also conducted a time exchange of oil in September of
2000 when heating oil inventories in New England were 72
percent lower than in the previous winter. On September 22nd
that year, the President directed the Secretary to conduct a
time exchange of SPR oil, in effect loaning the market 30
million barrels of oil.
The results were immediate. Spot prices dropped by almost
20 percent. By the end of the year, actual oil prices had
decreased by 34 percent, and there was adequate heating oil
supplies for the winter. Importantly, this exchange of 30
million barrels of oil ultimately returned over 35 to the
Reserve, or a 17 percent interest payment on that loan. At
today's prices, this equates to an additional half billion
dollars of oil in the Reserve at no cost to the taxpayer.
The energy bill passed last December established the
foundation for alternative energy security pathways.
Conservative estimates are that by 2022 provisions in that law
will reduce net oil imports by well over two million barrels
per day, in effect increasing the insurance value of the SPR
without adding any additional oil to the Reserve.
Between now and then, however, we have to meet what I call
the 80/80/40 challenge--replacing current--the current 80
percent fossil fuel consumption with 80 percent carbon-free or
carbon light energy, renewable energy, and sequestration, to
avoid the doubling of CO2 emissions in approximately
40 years. That 40 years also roughly equates to the time it
will take us to turn over the energy infrastructure.
Replacement cost of that infrastructure is estimated to be
$12 trillion. To do this, we will need to find new ways to
finance key energy technologies and research. Total energy R&D
investment in both the U.S.--in the U.S., both public and
private, is estimated to be around $5 to $6 billion a year.
And, according to GAO, DOE's total budget authority for energy
R&D has dropped by over 85 percent since 1978.
I offer, without advocating, three options for your
consideration. First, an outright sale of 40 million barrels of
oil from the SPR would generate around $4.5 billion in new
revenues. That could help pay, for example, Congressman
Inslee's Apollo project.
This would have the added benefit of lowering prices to
consumers. Notwithstanding attacks that this would diminish our
energy security, I note that this would reduce the amount of
oil in the SPR to around 660 million barrels, roughly 60
million barrels more than was in the Reserve when we went to
war in Iraq. Presumably, that was deemed sufficient to go to
war in the Middle East.
Or, second, temporarily suspend the current RIK program,
and forcing the sale of that oil into the open market could
provide at least a billion new dollars to fund key energy
research programs.
And, finally, exchanging 50 million barrels of sweet crude
in the Reserve for heavy oil in the open market, if done
correctly, could net roughly $500 million without reducing the
overall volume of the Reserve by a single barrel.
This, combined with the roughly $590 million currently in
the SPR account, would also provide an additional billion
dollars for energy research at no cost to the taxpayer.
The Chairman. If you could please summarize.
Ms. Kenderdine. Yes. In closing, sir, the current policy of
taking royalty oil in a continuous flow, regardless of market
signals, ignores many of these lessons. It is a waste of
taxpayer dollars to put oil in the Reserve at today's prices
when futures markets offer the same oil at a lower price 12
months from now.
Thank you very much.
[The prepared statement of Ms. Kenderdine follows:]
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The Chairman. Thank you. We very much appreciate that.
Our next witness, Dr. Mark Cooper, is the Director of
Research at the Consumer Federation of America, and has
testified many times on these subjects before Congress.
Welcome, Dr. Cooper.
STATEMENT OF MARK COOPER
Mr. Cooper. Thank you, Mr. Chairman. I appreciate the
opportunity to testify on this important issue.
We estimate that over the past six years household
expenditures on gasoline and motor oil have more than doubled,
rising by over $1,200. In a recent national poll earlier this
month, we found that 73 percent of respondents are greatly
concerned about rising gasoline prices, and 60 percent are
greatly concerned about Mideast imports. Thus, the pocketbook
and national security implications of our oil addiction, which
are the subject of this hearing, are top of mind for consumers.
Our research shows that current high gasoline and oil
prices are the result of a long-term combination of an
international crude oil cartel and a tight domestic refining
oligopoly, both of which have systematically underinvested in
production capacity. By failing to expand production capacity
to meet demand and provide a reasonable reserve in an industry
with very low elasticities of supply and demand, and that is
prone to accidents and disruptions, they have created tight and
volatile markets from which they profit.
While crude oil is the largest component of gasoline costs,
there have been months over the past five years when the
domestic spread, the amount that domestic refiners and
marketers take at the pump, has been over $1 per gallon. That
is domestic $1.
Moreover, the tug of war between OPEC and the domestic
refining industry over the extraction of consumer surplus has
pushed up prices. The U.S. gasoline market accounts for about
one-quarter of all the gasoline consumed in the world and is by
far the largest single product market in the oil sector. As
U.S. refining margins increase, OPEC receives the signal that
the market will support higher prices, and, as a rent-seeking
cartel, pushes crude prices up, so that they get their share of
the available rents. So crude oil pushes gasoline prices up,
and U.S. gasoline prices pull crude oil up in a vicious anti-
consumer spiral.
Speculation has also played an increasing role in driving
up the price of crude oil and gasoline, as huge influxes of
money increase volume, volatility, and risk in those financial
markets. A couple of years ago, the Senate Committee on
Oversight Investigations concluded that speculation accounted
for one-third of the oil price. That is something like $38, not
too far off what the oil executives told you a few weeks ago.
In a well-functioning market, steadily growing demand,
which we have had in the world, does not cause this powerful
surge of prices or this huge increase in volatility. It is the
failure on the supply side to invest, the concentration we
allow to afflict the domestic refining industry, and barriers
to entry that have allowed the cartel and the oligopoly to
profit at the expense of the public with speculators driving
the process forward.
At best, our strategic petroleum policy does us little
good. At worst, the failure to have a comprehensive policy
makes matters worse. We refused to fill the Reserve in the
1990s when oil was $10 a barrel, and we refuse to stop filling
it when oil is $110 a barrel. That adds insult to injury.
I don't believe that SPR fill or drawdown will have a
significant impact on prices in the long term. However, in the
short term, under certain circumstances, fill and drawdown can
in fact affect the speculative bubbles or short-term
disruptions.
Unfortunately, at its current size, the SPR is not a very
credible source to execute those policies. We don't have enough
to credibly threaten the markets over a significant period of
time. Size matters when it comes to the strategic stockpiles.
Since 1990, our stocks of crude oil have declined by 40
percent from 200 days of net imports to 100 days. On a
percentage basis, our gasoline inventories have declined even
more than that. Does anyone in this room believe that the world
oil market has become 40 percent more secure in the last two
decades? Not at all. Moreover, we do not have strategic
refineries or a strategic product reserve when in fact refinery
capacity and extremely tight gasoline inventories have been
important causes of price increases over the past six years.
The long-term solution to our oil addiction lies in
reducing our consumption and increasing the supply of
alternative transportation fuels. Congress took a big step in
that direction with the Energy Independence and Security Act of
2007. But even if every goal in that Act is achieved, in 2022
we will still be consuming over 20 million barrels and
importing over 10 million barrels. We will still have a major
national oil security problem and need a more effective
strategic policy.
Strategic petroleum policy needs to be dramatically
improved in three areas. Expand the crude reserve so we can use
it as an economic weapon. It is too small. We treat it as a
pure military strategy reserve. Second of all, we should create
a refinery reserve, because the oil companies have made it
clear they will not build enough capacity in the U.S. to meet
our needs. And, third, we need to build product reserves
through a mix of public stockpiles and mandatory private
reserves, which many European nations have.
Thank you.
[The prepared statement of Mr. Cooper follows:]
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The Chairman. Thank you. Thank you, Dr. Cooper, very much.
Our next witness is Mr. Dave Berry. He is the Vice
President of Swift Transportation, Incorporated, the nation's
largest truckload carrier. Mr. Berry is also the Chairman of
the American Trucking Association's Environmental and Energy
Policy Committee. The American Trucking Association represents
over 37,000 American truck carriers.
We welcome you, sir. Whenever you are ready, please begin.
STATEMENT OF DAVE BERRY
Mr. Berry. Thank you, Mr. Chairman, and members of the
Committee. My name is Dave Berry. I am the Vice President of
Swift Transportation, a truck carrier headquartered in Phoenix,
Arizona. Swift operates more than 18,000 trucks and employs
more than 21,500 hardworking, safe individuals. As a trucking
company, Swift is dependent on a plentiful supply of diesel
fuel. In fact, Swift purchases about 650,000 gallons of diesel
fuel daily to ensure that our trucks are able to deliver
freight on time to our customers.
Last year, during the first quarter, Swift spent about
$2.37 per gallon for diesel fuel. In this year, first quarter,
we spent about $3.37 per gallon. This dramatic, 42 percent,
year-over-year increase in the cost of diesel fuel is harmful
to Swift and to the U.S. economy. I must add that earlier this
week the national average price for diesel fuel was $4.14.
Today, I appear before you representing not just Swift but
the entire U.S. trucking industry. You have heard about ATA.
The trucking industry is the backbone of this nation's economy,
accounting for more than 80 percent of the nation's freight
bill, and employing more than 8.5 million hardworking
Americans.
The trucking industry delivers virtually all of the
consumer goods in the United States. We are an extremely
competitive industry comprised largely of small businesses.
Roughly 96 percent of all interstate motor carriers operate 20
or fewer trucks.
Diesel fuel is the lifeblood of the trucking industry. Each
year the trucking industry consumes over 39 billion gallons of
diesel fuel. This means that a one-cent increase in the average
price of diesel costs the trucking industry an estimated $391
million in fuel expenses annually. And every penny increase in
both gasoline and diesel costs all U.S. consumers nearly $2
billion.
The average national price of diesel fuel is now $4.14 per
gallon, nearly double what it cost in 2004. Based on current
Department of Energy forecasts, the trucking industry will be
forced to spend an incredible $141 billion on fuel this year.
This is $29 billion more than in 2007, and more than double the
amount we spent four years ago.
Today it costs approximately $1,200 just to fill up a
truck. As a result of this dramatic increase in the price of
diesel, which has coincided with the down turn in the economy
and a softening of demand for freight transportation services,
many trucking companies are struggling to survive.
Against this backdrop, we greatly appreciate the
opportunity to discuss the Strategic Petroleum Reserve and
other initiatives that could help address the speculative
bubble that has materialized in the petroleum market.
The remainder of my statement highlights actions we believe
Congress can take to help restore balance to the petroleum
market, increase supplies of petroleum, and lower the demand
for petroleum. We are confident that these initiatives will
help reduce the price of diesel fuel, which has been damaging
the trucking industry and the economy.
ATA has previously asked the Federal Government to
temporarily stop filling the Strategic Petroleum Reserve and
consider releasing oil from the SPRO to address this crisis.
The SPRO currently stores just over 700 million barrels of
crude oil, which is the equivalent of a 58-day supply of
imported oil for our nation to--for our nation or a nine-day
supply of the oil consumed globally.
The U.S. currently deposits 70,000 barrels of crude oil
into the SPRO each day. To suspend filling of the SPRO will
reduce the global demand for oil and could help lower its
price. There are undoubtedly many factors contributing to the
runup in fuel prices, but in a recent article in Investor's
Business Daily, an economist with the Institute of
International Economics suggested that one of those factors was
the SPR's renewed purchases of oil on the open market.
ATA has also asked the administration to release oil from
the SPR. While we know the SPR does not contain enough oil to
permanently alter the supply of crude oil in the marketplace,
we believe that strategic releases from the SPR could
temporarily increase the supply of crude oil, and hopefully
help restore rational behavior to the petroleum markets. This
type of government intervention could drive speculators out of
the market and help ensure that petroleum prices are once again
driven by supply and demand.
We acknowledge that the rules governing the management of
the SPR are the subject of an international agreement with
other developed nations. This agreement limits our ability to
use SPRO to address market irregularities and may be an issue
that Congress should further investigate.
We believe that temporarily halting the filling of the SPR
and releasing oil from the SPR could have a positive impact on
the speculative nature of today's petroleum prices. We
recognize, however, that this step, in and of itself, will not
address the long-term petroleum pricing issues.
I have put comments--additional comments on the record. I
would just summarize by saying that other things to consider
would be increasing domestic oil exploration, increasing
domestic petroleum refining capacity, eliminating the tax
subsidies for exported biodiesel, and enacting a national fuel
standard for diesel.
Thank you.
[The prepared statement of Mr. Berry follows:]
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The Chairman. Thank you, Mr. Berry, very much.
Our next witness is Mr. Kevin Book. He is the Senior Vice
President and Analyst for Energy Policy, Oil, and Alternative
Energy at Friedman, Billings, Ramsey and Company. In those
senior roles, he evaluates the impact of legislative actions on
investment opportunities within the energy sector.
Welcome, sir. Whenever you are ready, please begin.
STATEMENT OF KEVIN BOOK
Mr. Book. Mr. Chairman, did you intend for me to go next or
for----
The Chairman. Yes.
Mr. Book. Okay. Great, thank you. Chairman Markey, thank
you very much. Thank you, distinguished members of the
Committee, for the privilege of contributing to your discussion
today. The opinions I express this morning are my own and do
not necessarily reflect the viewpoint of my employer.
To summarize my remarks, as my testimony is----
The Chairman. And by the way, a graduate of Tufts and
Fletcher School of Diplomacy in my district, so a very well
educated----
Mr. Book. You were my Congressman for six years, sir, yes.
And I enjoyed you very much. Thank you.
The Chairman. Thank you. [Laughter.]
Mr. Book. In my view, fundamental scarcity and geopolitical
risk form the backdrop to today's discussion. Each day the
world consumes just shy of 86 million barrels of petroleum and
refined petroleum products. The infrastructure that supplies
this oil took nearly a century and a half and multiple
trillions of dollars to evolve.
In just the last five years, however, demand patterns have
shifted dramatically. Since 2003, developed world oil
consumption has remained essentially flat, while non-OECD
demand has risen by approximately 18 percent. Simply put, the
world's emerging economies have entered into their energy-
hungry adolescence.
I don't need to enumerate them here, but an unfortunate
confluence of geopolitical risks threats the stability of
existing supply. This year's WTI futures prices averaged
slightly more than $100 per barrel. As has been mentioned
repeatedly, this is a significant premium to most fair
estimates of extraction costs in the Gulf of Mexico and the
Canadian tar sands. The dollar's decline against the Euro and
other currencies may be partly to blame. Producers may charge
higher prices to compensate for value erosion.
Increased speculative activity may play a small role as
well, although speculators may also have more of an effect on
the velocity of oil prices than their absolute levels.
Speculators aren't the whole story. Commercial refiners of
crude oil cannot operate their businesses without stable
supply. They must bid up for oil at times of greatest perceived
supply risk. In many commodity markets, this behavior can
accelerate at capacity utilization levels above 90 percent.
Three million barrels of global spare capacity and 86
million barrels of daily demand puts the global oil system at
about 96 percent of capacity. And yet one well-conceived U.S.
energy policy keeps refiners from engaging in bidding wars and
hoarding oil--the Strategic Petroleum Reserve. The SPR
primarily does ensure against the risk of a catastrophic supply
interruption. It provides other value, too.
Refiners assured of supply can operate at lower inventory
and working capital levels. Assurance of supply in the event of
an emergency can deter hoarding and gouging by market
participants. To quantify the safety value of the SPR, you can
talk in storage levels of barrels. But it might be better to
express it in terms of the days of import coverage provided--
that is, the number of barrels of storage divided by the number
of barrels the nation imports each day.
Import cover has fallen from the 100-day range in 1990 to
estimates, depending on how you count it, between 58, which I
think we heard, and as high as 70, depending on what you think
demand is. And there is a variety of reasons for this--deterred
investment at low prices, conventional basis is declining,
increased household wealth, transportation use rising as well.
The suggestion I would make is that basing any fill
decision on days of import cover, rather than absolute supply
level, and using a thorough and ongoing assessment of supply
risks might make it easier to determine fill rates and
quantities and also easier to communicate that message and the
importance of that message to the American people.
Now, my view is that markets can sometimes provide useful
predictions of future events, especially markets as big,
liquid, and broadly traded as the oil market. And one might
interpret $117, or even $100, oil as a risk premium that says
maybe supply is riskier than we think, and we should continue
to fill the SPRO.
I realize that is not a popular view at this point in time.
Suspending the fill may do little, however, to affect price as
long as the emerging world drives oil demand. There are
linkages worth noting. U.S. imports feed overseas manufacturing
chemicals and logistics demand for oil. The wealth exporters
aren't selling into the U.S. stokes demand at home. Subsidies
overseas make energy users less sensitive to price. Seventy-
thousand barrels per day might quickly be absorbed with little
or no price effect.
U.S. circumstances can affect demand and global price. A
serious recession--and hopefully this doesn't happen--here
could decrease demand by 300,000 to 400,000 barrels today, and
an echo overseas, in China alone, could account for another
250,000 barrels per day in decline.
Creating that surplus with a non-emergency drawdown could
affect price, particularly the first time it occurs and
especially if it happens with little or no fanfare and
surprises the market. On the other hand, the price effect might
be very small relative to the social cost of effectively
burning the nation's safety net in our gas tanks.
Moreover, the price effect might be temporary, could be
offset by demand growth, and OPEC cutbacks as well, and could
even set commodity market expectations so that traders view the
SPRO as just another upstream oil supplier. Now, you can't run
it full tilt for more than five months, as you know. And if you
do, you are out of your safety net, refiners have to buy more
oil, and OPEC has more market power.
So I think I would conclude by suggesting that there is
risk that demand may start to soften of its own accord. There
are also opportunities. One of these is that there is a real
call now to build on the good work you did last year--the
Energy Independence and Security Act--to add still greater
standards.
And when you make a cocktail, sometimes you marry two
things that are bitter to come up with something sweet. And it
has been suggested here today the notion that you can marry
increased domestic energy production, including biofuels, which
are a very big part of it, with increased conservation, I think
might be the drink that cools the summer driving season in
years to come.
Thank you very much. I look forward to your questions.
[The prepared statement of Mr. Book follows:]
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The Chairman. Thank you so much, and thank you for bringing
what you learned at Tufts about cocktails and energy policy----
[Laughter.]
The Chairman [continuing]. To this hearing. They are an
excellent metaphor.
And our final witness is Dr. Frank Rusco. He is the Acting
Director of Natural Resources and Environment for the Office of
the Government--the Government Accountability Office. He has
been with the GAO for 10 years and managed teams on wide ranges
of issues in the energy field.
We welcome you, sir. Whenever you are ready, please begin.
STATEMENT OF FRANK RUSCO
Dr. Rusco. Thank you. Mr. Chairman, Mr. Sensenbrenner, and
members of the Committee, I am pleased to be here today to
discuss how to reduce the cost of filling the Strategic
Petroleum Reserve, as well as reduce the effect that filling
the Reserve is currently having on oil prices.
The Reserve now contains just over 700 million barrels of
light oil and has about 27 million barrels of available
capacity that DOE is currently planning to fill in the near
term. DOE has also been directed to create and fill an addition
about 300 million barrels of capacity. With the price of light
oil recently hitting almost $120 per barrel, this expansion
could easily run into the tens of billions of dollars.
Taking barrels of oil off the market to put in the Reserve
puts upward pressure on prices. However, there is no consensus
on the magnitude of that effect, and GAO does not have a
position on that.
In my testimony, I will discuss things DOE can do to reduce
the cost of expanding the Reserve and to improve its
effectiveness during oil supply shocks. I will also suggest
something DOE could do in the near term to achieve both these
goals while reducing whatever upward pressure on light oil
prices it currently is putting.
First, DOE has not, but should, put heavier grades of oil
in the Reserve, because, (a) many U.S. refineries run most
efficiently using heavier oil than what is currently in the
Reserve, and (b) heavier oils are cheaper than light oils.
Second, DOE should put fewer barrels of oil into the
Reserve when oil prices are high and more when prices are low.
This would save a great deal of money, and with record oil
prices currently, there is no time like the present to act on
this.
DOE could achieve both of these goals by immediately
swapping some of the light oil in the SPR for heavier oils.
This would allow DOE to expand the size of the Reserve at lower
cost, because each barrel of light oil can be traded for more
than a barrel of heavier oil, and it would also improve the
SPR's effectiveness in the event of an oil supply disruption.
Finally, it would have a dampening effect on the price of
these light oils by putting them on the market now rather than
taking them off. To elaborate on these points, our work
indicates that about 40 percent of all crude oil used by U.S.
refineries is heavier than what is currently in the Reserve.
Many U.S. refineries run most efficiently using these
heavier oils, and, in practice, this means that during an oil
supply disruption many U.S. refineries would have to operate
below capacity if they used oil from the Reserve. This loss in
capacity would reduce supplies of gasoline and diesel and
exacerbate the economic effects of an oil supply disruption.
DOE should put fewer barrels into the Reserve when prices
are higher and more when prices are lower. One way to do this
is to buy a constant dollar amount of oil each month rather
than buying a constant number of barrels. This approach,
commonly referred to as dollar cost averaging, is very similar
to what many of us do when we put steady monthly contributions
into our 401(k) plans.
Going forward, our simulations show that because oil prices
are typically volatile, using a constant dollar approach would
save money as DOE adds to the Reserve, whether oil prices are
generally rising or falling.
DOE could get heavier oils into the Reserve by immediately
using the agency's existing authority to swap some of the
Reserve's light barrels for heavier barrels. DOE did a reverse
swap in 1998 when it traded the only heavy oil it had--about 11
million barrels--for eight million barrels of light oil.
If DOE swaps some light oil for heavy starting in the near
term, it would have three main effects. First, it would get
heavier barrels into the Reserve, which is itself a desirable
goal. Second, DOE could fill the remaining capacity at lower
cost because a barrel of light oil trades for more than a
barrel of heavy oil. And, third, swapping light for heavier
barrels would put more light oil on the market now when light
oil prices are as high as they have been in, well, recent
history.
To conclude, the Strategic Petroleum Reserve protects our
economy from oil supply shocks. It has been useful in the past,
such as in the aftermath of Hurricanes Katrina and Rita.
Currently, the Reserve holds about 56, 58 days of net oil
imports, but it will have to grow to maintain the same level of
protection, if demand for oil continues to rise.
However, we have a large reserve now that can protect the
economy from any but the most extreme supply disruptions. This
allows us some flexibility to be smarter about how we add oil
to the Reserve. Our work shows that several billion dollars
could be saved, and the Reserve made more efficient by putting
heavier oils into the Reserve as soon as possible and by buying
less when prices are higher and more when prices are lower.
Both of these goals could be achieved in the near term if
DOE used its authority to swap light for heavier barrels, and
this would take pressure off the record light oil prices we are
currently facing.
Thank you. This completes my oral statement. I will be
happy to answer any questions you may have.
[The prepared statement of Dr. Rusco follows:]
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The Chairman. Thank you, Dr. Rusco, very much.
The chair now turns to recognize himself for a round of
questions.
Right now, OPEC and Big Oil have a weapon aimed at the
heart of the American economy. We are seeing its effects in the
failure of airlines. We are seeing its effects in the impact on
truckers across our country. We are seeing its impact on the
dramatic rise in the price of fuel, and we are going to see its
effect on a continuing basis on the decline in the American
economy.
The Strategic Petroleum Reserve was constructed in order
for the President to use it as a counterweapon in order to say
to the world's oil market that we are serious about not
allowing Big Oil and OPEC to exploit a vulnerability in the
American economic structure.
Ms. Kenderdine, the Bush administration thus far has
refused to deploy this protective weapon which we have--the
Strategic Petroleum Reserve, meant to protect businesses and
consumers across our country. What, in your opinion, would be
the impact if we, as a country, under the President's
instructions, stopped filling the Strategic Petroleum Reserve,
so that we reduce the amount of oil being taken off the world
market and begin to deploy upwards of 40 million barrels of oil
in the Strategic Petroleum Reserve, and made that announcement
today?
Ms. Kenderdine. The other witnesses and I have indicated it
is difficult to quantify the precise amount of reduction in
price that you would see. I would go back to the SPR exchange
that we did in 2000. We put 30 million barrels of oil onto the
market, loaned it. It wasn't a sale. We put $30 million as a
loan.
And to put that in context, I think at that time the world
consumption in a year is about three billion, give or take, you
know, a couple hundred million barrels of oil a day--or a year.
Okay. So in a three billion barrel market, we put 30 million
barrels into the marketplace, and the price dropped almost $7 a
barrel. And the price drop was immediate.
The price dropped before the oil moved into the marketplace
and stayed--it stayed down very--that $7 per barrel for about
three weeks. Then, the USS COLE was bombed in the Middle East
and the price went back up. But then, it fell back down again
when the markets calmed down.
The Chairman. So much of what goes on in the oil
marketplace is just speculation. It is panic. It is
exploitation of an out-of-control sense that the price is just
going to go up and up and up with no stop.
So to you, Mr. Berry, would the trucking industry, would
truckers across the country like to see our President stop
filling the Strategic Petroleum Reserve and send a signal to
OPEC that we are going to deploy the Strategic Petroleum
Reserve as a way of signaling that we are not going to stand
still and allow our economy to suffer this grievous injury that
will have negative effect on truckers, on consumers, and on
industries all across the country?
Mr. Berry. Yes.
The Chairman. You would like to see that.
Mr. Berry. Yes.
The Chairman. Expand.
Mr. Berry. Mr. Chairman, we have made that request of the
administration, that they stop filling the Strategic Petroleum
Reserve. We don't know precisely what that impact would be, but
I think even the mere threat of doing that may have an impact
on the speculators. And it just seems silly and ridiculous to
me at this time of high prices for us to be adding such a small
quantity.
And I see very little risk to our nation in stopping--to
stop filling. I mean, what is the worst that could happen?
Prices don't go up, so then you resume filling? I mean, I see
very little risk in the strategy to stop filling the Reserves.
The Chairman. So this environment in which we are living
right now is one where we are buying high, at the very peak of
the market. The American people, through the Bush
administration, are buying oil at $119 a barrel, and at the
same time that we should be selling our oil into the global
marketplace, to say to the OPEC countries, to say to the oil
companies, ``This is not going to last.''
And those speculators will in fact receive that message
very quickly, and, in my opinion, respond and the consumers
will start to see the benefit in the marketplace. Do you agree
with that, Mr. Berry?
Mr. Berry. Mr. Chairman, that is the hope, that that is
precisely what would happen.
The Chairman. Aren't we, Dr. Rusco, at the worst of both
worlds right now? We are wasting taxpayer money, and we are
raising prices to consumers at the pump simultaneously.
Dr. Rusco. Our findings are that you could reduce the cost
of filling the Reserve by adopting this practice of putting
heavier barrels in there. And if you did that right now with
swapping, whatever the effect on the price is, if you swap
light barrels out now for heavier barrels, and more of them
later, you would alleviate that immediate effect on the price.
We do not know what the actual magnitude of that would be.
The Chairman. Thank you, Dr. Rusco.
The chair recognizes the gentleman from Arizona, Mr.
Shadegg.
Mr. Shadegg. Thank you, Mr. Chairman. In the memo we have
from staff, it notes that the Department of Energy is currently
filling the SPRO at the rate of 70,000 barrels a day, and it
proposes to increase that in August--I find that timing
curious--to 76,000 barrels a day. Can anybody explain to me
why, at least during a portion of the high driving season, we
would increase the fill rate? Does anyone--I know there isn't a
DOE witness. Does that make sense to anybody? I will have to
ask DOE. Okay.
Mr. Berry. Mr. Shadegg, I would just add to that that not
only is that the peak driving season for people going on
vacation, students returning to school, but it is also when the
economic activity starts to rise. All of your Christmas, fall
shipments start going and the trucking activity is actually
picking up then. So any activity that would cause fuel prices
to rise during that time would not be good.
Mr. Shadegg. It is the peak trucking industry or trucking
time for the Christmas shopping.
Mr. Berry. It is the advent of the peak.
Mr. Shadegg. Well, that means we ought to put more oil in
right then. I guess I will have to ask DOE about that.
Dr. Rusco, I am fascinated by your proposal that by
swapping heavy--I guess it is swapping light for heavy we could
have a positive effect. Is it your testimony that that could
have an effect not just on--in terms of beneficially filling
the SPRO, but also in terms of the price of oil? And would it
have a consequent effect on the price of gasoline?
Dr. Rusco. Yes. We have advocated--long advocated--the
introduction of heavy oil into the SPR, because it would make
it more effective, you know, in the event of a supply
disruption. It has also been considerably less expensive. It
has--over the last five years, heavy oil has averaged over $12
a barrel less than light oil. So you could fill the Strategic
Reserve more cheaply by adding heavier oil and make it more
effective.
And, once again, if you did that with a swap where you
swapped light oil now for heavier oil in the future, you would
be selling essentially light oil out of existing caverns. When
they are empty, then you would go and buy heavy oil to fill it.
That would have an immediate effect on light oil prices
currently. And, again, I don't know the magnitude of that
effect.
Mr. Shadegg. I find the idea fascinating. The next question
is, so--you keep saying, ``We advocate this.'' Who is resisting
it? And why? And what are the reasons?
Dr. Rusco. Well, we have recommended that the DOE study the
maximum amount of heavy oil they could put in. They agree that
they should put heavy oil in in the amount of at least 10
percent. But so far, to our knowledge, they have no intention
of doing so until they expand beyond the current level.
Mr. Shadegg. I would be happy to join you and maybe talk
further. Maybe some of us in Congress need to talk to them and
get answers from them why they are not doing that.
Mr. Book, you mentioned that speculation can in fact be a
part of the current high gas prices. One of the issues at least
that Mr. Berry has raised and the trucking industry is
concerned about is that if we were to at least stop filling the
SPRO, or perhaps even release some oil from the SPRO, we could
drive down--we could drive out that speculation and maybe have
a consequent impact on the price of gasoline.
I have heard it said that the price of gasoline is 20 to 40
percent higher than it would be but for the speculation. First
question is: do you agree that there is a possibility that we
could have that effect? And, second, are we also driving
speculation by locking up a great deal of the supply that is
potentially available in the United States, in the inner
mountain west, on the outer continental shelf, in Alaska, and
elsewhere, and saying, ``Well, it is there, but we are never
ever going to go get it.'' Is that also driving speculation?
Mr. Book. Congressman, 70,000 barrels per day is a small
amount relative to the global market. It is possible it could
have an effect, but it is certainly not anything like the
effect of a sale that has been described, nor is it anything
like the effect--to your second question--that would be
immediately signaled if you were to open up some of the off-
limits areas, because we have the best oil production
technology in the world. We have the best information
management technology in the world.
We are really a very capable economy. I suspect the market
would take a look at our intent to produce some of our own
reserves and take it very seriously. On the other hand, to be
fair, the effect of that production hitting the market is 7 to
10 years away from the go decision.
Mr. Shadegg. But speculators are in fact speculating out
into the future. So that----
Mr. Book. There is contracts all the way out to 2016 right
now that would probably start to change shape on the basis of
that decision, yes.
Mr. Shadegg. Is there anything else--since I think every
member of this panel, Republican and Democrat alike, wants to
do what we can do to deal with the spike in gas prices right
now, is there anything else you would suggest?
Mr. Book. Well, the idea of tax holidays is a symbolic move
and a dangerous one. I think the hard part is swallowing the
bitter medicine and trying to encourage consumers to learn more
about ways they can save energy on a daily basis.
Mr. Shadegg. We are doing that. Thank you very much.
The Chairman. Okay. The gentleman's time has expired.
The chair recognizes the gentleman from California, Mr.
McNerney.
Mr. McNerney. Thank you, Mr. Chairman. We have heard a lot
about how the SPR manipulations can impact the market. But what
I would like to know is: are there computer models out there,
and how sophisticated they are, how much collaboration there
is, how much validation there is. In other words, when market
manipulations occur, are the models validated? Can anyone
answer that question? Mr. Book, you are probably in the best
position.
Mr. Book. Well, there are certainly very sophisticated oil
traders who use computer models to try to predict market
activity. In terms of my own models, my models as a Wall Street
analyst tend to be simple and, based on my current oil price
estimates, inadequate. So I would humbly say that it is very
tough to do any kind of simulation of that much activity with
that many players and that many variables, and any model, no
matter how sophisticated, may not be truly reliable.
Mr. McNerney. Do you have an opinion, Ms. Kenderdine.
Ms. Kenderdine. I am sorry.
Mr. McNerney. Do you have an opinion on that?
Ms. Kenderdine. MIT has no models that is looking at the
level--the granularity that you are talking about or would need
in that kind of a--to make that kind of a determination. It is
very difficult to do. I think Wall Street is the most
appropriate place. They are paying the most attention.
Mr. McNerney. Well, then, basically what we have heard is
all speculation. I mean, look at--the SPR would look like a
spring in a mechanical system. It can make it--it can smooth it
out, but it can also make it more unstable. So, I mean, it
seems to me that we ought to have a fairly sophisticated
market. Maybe someone in the University of Chicago or----
Ms. Kenderdine. Or MIT. [Laughter.]
But the activity and what we are seeing--and we do have
historical data about the use of the SPR. And the--I went
through and had a price graph, looked at when we went to war in
Iraq and we released oil into the market--first time, not
second time, because we didn't do it the second time.
Looked at when we put the SPR oil--the exchange we did in
2000 and Katrina, and you see an immediate decline in price on
that graph. So, historically, we do know of the impacts of
using the SPR.
You can also look at the graph and see prices go up when
OPEC takes certain actions. So we are informed by what we know
from the past, and certainly traders are looking at these
issues constantly. But it is not necessarily transparent what
OPEC countries are up to or, you know, it is meant to not be
transparent.
Mr. Book. Congressman, could I----
Mr. McNerney. Yes.
Mr. Book. The historical comps are the best we have. They
are also a different world. Globalization was still in its late
childhood, pre-adolescence. We have had a lot of changes in the
currency relationships between the dollar and other currencies,
and it is hard, with the narrower head room in global capacity
and a different dollar, to take those as apples to apples. They
are a good place to start. I would start there, too.
Mr. McNerney. Should we be looking in the Congress at
commissioning a modeling of this phenomenon? Yes?
Mr. Cooper. The one thing we should do is--the lack of
transparency in OPEC is one thing. There is not a lot we can do
about that. The lack of transparency on our commodity markets
is something we can do about it. We made a huge mistake in 2002
when we modernized the Commodities Future Trading Commission--
Exchange Commission and failed to extend oversight to energy
markets. And so now we have a complete lack of transparency in
the trading of energy commodities and futures on the over-the-
counter markets.
We have had a series--a continuous series of cases brought
and settlements signed about abusive markets. And we are told
that the most sophisticated model that ever existed about these
markets was Enron's model. And, of course, Enron said, you
know, it is supply, it is this, it is that, the other thing,
and it was cheaters. And we have had plenty of court cases.
So if we want to learn about what is going on in these
markets, we--and Congress passed in the ag bill last year a law
that would have closed the Enron loophole. The President vetoed
it for all kinds of other reasons, and we are struggling to get
that back in. If you want transparency, you need to have the
Commodities Future Trading Commission overseeing these markets.
They told us they had enough power, and then we had the
effort to corner the gas market with AmerEn, and a whole series
of things they don't know. We simply don't know who trades what
in this most important commodity. That is the single most
important thing you could do to fix the financial speculation
problem.
The Chairman. Great. The gentleman's time has expired.
The chair recognizes the gentleman from Connecticut, Mr.
Larson.
Mr. Larson. Thank you, Mr. Chairman.
And thank you, Mr. Cooper. I couldn't agree more with what
you have to say. A colleague of ours, Bart Stupak, has a bill
as well called the PUMP Act that would do just that. I believe
the GAO, even in its recent study, came out and said the CFTC,
while it does have regulatory authority, doesn't seem to have
the broad exuberance needed or required to be able to look at
and peel away, especially when it comes to the over-the-counter
market, these unregulated activities.
Let me ask first, Dr. Book--excuse me, Dr. Rusco, and then
Mr. Book--whether or not you feel that that would better help
in terms of transparency the initiative that would be required,
as my grandfather Nolan would say--to trust everyone but cut
the cards?
Dr. Rusco. I am going to have to answer that for the
record. That was done in a team outside the energy group, and I
would hesitate to offer an opinion without first reviewing that
report.
Mr. Larson. Well, if you could get back to them, and, as
part of GAO, I would love to get that, Mr. Chairman, for the
record.
The Chairman. Without objection, it will be included.
Mr. Larson. It also brings up a point that--and I think
several--I think it was Mr.--the Chairman or Mr. Blumenauer
might have mentioned that the largest consumer of energy of
course is the Federal Government.
And that being the case, if the Federal Government were to
say, with regard to speculation, that the procurement of oil,
the procurement of petroleum for the entire federal system is
not subject to speculation, that you have to actually receive,
be a recipient, in order to be a trader in those areas, what
would that do to the price of oil? Would either of you care to
respond?
Mr. Book. I mean, Congressman, it sounds like that proposal
would take a substantial volume of oil off market and put it
into a time contract between the buyer and the seller. And by
reducing the available supply to the market, you might raise
the price with a proposal like that.
Mr. Larson. Well, it is in the market currently. If we are
purchasing X amount already, but it is subject to the prices
driven up by speculation, why, if you eliminated the
speculators, would it cost the Federal Government more? And if
it cost the Federal Government less, would we be able to,
therefore, release the Strategic Petroleum Reserve or purchase
more in a way that would be able to assist our truckers and
everybody else throughout the economy?
Mr. Book. I mean, the idea makes sense. The problem is
finding a seller who will tie a contract at a time of high
prices and say, ``Yes, I will tie it--lock this in'' with
uncertainty and volatility and scarcity on the horizon.
Mr. Larson. Yes. But if all we are hearing from our oil
executives is that the laws of supply and demand and
volatility, and yada, yada, yada, no longer apply, then what
does it leave policy decisionmakers with? And if we have
unregulated markets that have no transparency, and small
businesses and oil dealers saying that it is a fraud and a sham
and nothing more than, you know, a charade that is going on
that causes our prices to go up, while the people, as you
pointed out, were concerned on making the money on paper based
on a declining value of the dollar and other volatility or
other arguments that they may make, and call that the
marketplace. Isn't that----
Mr. Book. Well, increased transparency is always good for
markets. Also, cautious small moves are generally good for
markets, particularly when there is a lot of capital in
circulation. I would agree that any move you can make to try to
increase accountability, without increasing the transaction
cost--and that is sort of the flip side of it. The more you
regulate something the more expensive it becomes to trade on
that regulated exchange.
And this is a global world. Trade can go elsewhere. So you
have to balance the two.
Mr. Larson. Well, I am all in favor of balancing the two,
but perhaps Ms. Kenderdine could answer.
Ms. Kenderdine. Transparency is terrific for markets. The
only concern I have is that 80 to 90 percent of the world's oil
reserves are controlled by national oil companies or OPEC. And
so you can have transparency in U.S. markets and on our
producers. You are only going to have a very small picture of
what is actually going on in global oil markets.
So it is just a caution that I would put out there is that
there is not transparency in the rest of the world, and you
will only get a small slice of what is actually going on. And
we actually, when I was at DOE--there is also not transparency
on oil data in general, including demand data. And we launched
an effort to try and improve data worldwide, so that we could
have a better understanding from a government policy
perspective. Very difficult thing to do.
Mr. Larson. I see my time has expired, Mr. Chairman, but I
thank you.
The Chairman. The gentleman's time has expired.
The chair recognizes the gentlelady from South Dakota, Ms.
Herseth Sandlin.
Ms. Herseth Sandlin. Thank you, Mr. Chairman.
Dr. Rusco, I think in response to some of the questions of
Mr. Shadegg and the recommendations as it relates to more cost
effective ways of filling the SPR, he discussed with you the
whole issue of heavier versus lighter crude into the SPR. I
would like to ask you about the employment of the dollar cost
averaging that you discussed. Why isn't that recommendation
being employed?
Dr. Rusco. I don't know why. It clearly makes sense. We did
simulations that estimated the value of dollar cost averaging,
when prices were generally rising but volatile, generally
falling but volatile, or staying generally flat but volatile.
And as long as there is volatility in prices, you can, on a
month-to-month basis save money, and essentially fill the SPR
at the same rate that you want. You just have to pick the right
target for the number of dollars.
You would have to adjust that target periodically, because
you don't know where prices will be in the future. But there
are potentially billions of dollars to be saved as you expand
the SPR.
Ms. Herseth Sandlin. Are you aware of any specific
opposition to employing this method when making purchases?
Dr. Rusco. I think that the primary opposition is that the
DOE has essentially used royalty-in-kind oil only to fill the--
or almost exclusively to fill the SPR, and----
Ms. Herseth Sandlin. Since when, 1999? Later than----
Dr. Rusco. Yes. Since about 1999, yes. And the problem with
that is that there is no real coordination between DOE and DOI
in terms of how to do that. They could--you could still use
royalty-in-kind oil and adopt a dollar cost averaging approach.
You would just--DOI would deliver fewer barrels when prices are
high, and they would sell the remainder of the RIK barrels in
the market and deliver more barrels when the price is low. And
you could still do it, but it may be a lack of coordination or
a lack of imagination.
Ms. Herseth Sandlin. Most likely, I would think you are
right on that. We have seen a lot of lack of coordination
between agencies. And if we can save dollars, we appreciate
your insight today as we address these issues further.
Dr. Cooper, your written testimony notes on page 6 that
there is a ``disastrous shortfall in domestic refining
capacity, and the refinery shortfall has doubled to over 300
million barrels per day since the early 1990s.'' To what
factors do you attribute the increase in refining capacity
shortfall over that period of time, and what do you think would
be the optimal increase in domestic refining capacity over the
next five years?
Mr. Cooper. Well, the cause of the lack of capacity is
clear. The industry has not provided it. If you look back
through the early 1990s, the Clean Air Act amendments were
passed in 1990. They went into effect in 1995. And the industry
engaged in a series of strategic decisions about what to do,
and the central strategic decision was to reduce refinery
capacity.
The decision was made not to upgrade certain refineries to
meet the Clean Air Act. Decisions were made and mergers were
allowed to go forward, which dramatically slashed the number of
refiners. So we are down--and you know the names--Exxon Mobil,
Chevron, Texaco, BP, ARCO, Amoco, Conoco Phillips. All of those
companies once were separate, and now they are one.
And so clear decisions made throughout the 1990s about how
to tighten the market--there is a very good RAND study which
showed a complete change in behavior. They no longer compete
for market share on price. And over that time period, we have
seen the shortfall increase from about a million and a half
barrels a day to three million barrels a day.
Refinery profits have gone through the roof. So this is the
outcome of a policy of shorting the market--the strategic
underinvestment in domestic refining. And every price spike we
have had in the last six or seven years, except this most
recent one, was always triggered by some complaints about, oh,
we didn't have enough capacity. They couldn't even do spring
cleaning, switching over from winter fuels to summer fuels,
without it.
So the answer is--I believe Dingell and Stupak had a bill
in that started to talk about a domestic refinery reserve,
operating these refineries to meet military needs in normal
times, and diverting capacity to serve the market. The oil
industry will not build enough refineries in this country.
Ms. Herseth Sandlin. My time is almost up. So in addition
to the Dingell-Stupak bill, just an optimal increase over the
next five years, what would you say? I mean, optimal.
Mr. Cooper. It would be wonderful. How are you going to
make them do it? The oil industry won't do it. You will haul
them up here, and they will tell you why they are not going to
build any more refineries. You cannot depend on the oil
industry to meet our refinery needs.
The Chairman. The gentlelady's time has expired.
The chair recognizes the gentleman from Washington State,
Mr. Inslee.
Mr. Inslee. Thank you. While listening to the testimony, I
was reminded of what we went through on Enron, which was a
learning experience. And I remember a time where we had a
Northwest delegation go meet with Vice President Dick Cheney to
beg the administration help us take some action in response to
what was going on with prices going up through the roof on
electricity.
And what we told the Vice President was that there was
obviously some ``imperfections in the market,'' some
manipulation going on, we didn't have adequate oversight over
speculation and manipulation. And we told him that one-third of
all the power was turned off, sort of similar to the refinery
situation Dr. Cooper talked about, at that time while prices
were going up 1,000 percent. He looked at us and he said, ``You
know what your problem is? You just don't understand
economics.''
And we did. I suggest that they did not. And we got
absolutely taken to the cleaners on the West Coast while the
administration sat on its hands and did nothing. And I think
that is reminiscent of what we are having here, listening to
this testimony, where there is an abject lack of action to
respond to this in any way.
And I just don't believe we are totally helpless in the
face of what is going on in the economy. There are these
underlying tensions, but there are things we can do, and,
frankly, we are not doing them because the administration will
not use tools at its disposal, nor help us to respond.
I want to talk about a longer term issue. We have talked
about the short-term issue. I want to talk about a longer term.
Ms. Kenderdine talked about the need for research and
development dollars to really develop a post-carbon based
economy. That might be my term rather than Ms. Kenderdine's,
but that is the way I think of it.
And I wonder if you can just go in a little greater depth
what you view as the shortfall in research and development to
develop non-carbon based fuel systems, fuels and fuel systems.
I alluded to these electric cars that are now starting to hit
the road.
Could you just tell us what you think is in the realm,
should be in the realm of the scope of our ambition in research
and development to wean ourselves off of being so oil and gas
dependent?
Ms. Kenderdine. The reason I used the numbers on the
challenge is because they--the magnitude of the need, the
magnitude of the requirements is--needs to be well understood.
And, you know, we are talking--we are not talking about
telephones, widgets, etcetera, in terms of innovation. We are
talking about a major commodity-based industry, has a 40-year--
its infrastructure has a 40-year life span.
And we are facing right now under business-as-usual carbon
emissions a catastrophic event by 2050, beyond the doubling of
CO2 emissions in the atmosphere, if we do not do
something and do something now. As I mentioned, the
infrastructure value that we are going to have to turn over in
the next 40 years is $12 trillion. We have significant
challenges. We have to go from 80 percent carbon-based fuels
to--and I agree with you, a carbon-free, carbon light.
I would say perhaps carbon light is kind of the interim
that we are going to have to support in order to get to those
goals. And by carbon light, I would say sequestration is going
to be critical in order for us to get there, as well as natural
gas, because it produces so much fewer greenhouse gas
emissions.
But the--and we have done modeling on this at MIT.
Incredible gains in reductions of CO2 emissions and
efficiency technologies, both--and that is in part a deployment
issue. But we need biofuels, obviously, we need alternative--we
need--quite frankly, we need nuclear in order to get there.
And so the R&D investments are--and I said we have $5 to $6
billion total investment, U.S. Government and industry in the
U.S., to turn over a $12 trillion infrastructure.
Mr. Inslee. And what should be our national goal as far as
R&D? What is a reasonable R&D figure we should be shooting at
in the next several years?
Ms. Kenderdine. Right now, the Department of Energy on its
applied energy R&D programs--and I set aside the Science
Office, because while it is doing basic research, energy
research, it is not strategic research, it is research for
research sake, for knowledge sake.
We are only spending maybe $3 billion a year in energy R&D.
I think a doubling of that is absolutely essential. I think
also a carbon price is essential, and I know that the Congress
is debating the carbon price. We can put a price on carbon. We
still don't have the technologies to produce affordable
renewable energy at this point, so we need the research.
So a combination of an increase in R&D, much more focused
R&D, I think we need to do it better than we have done in the
past. And a carbon price is, I believe, critical. And I would
double the R&D budget.
Mr. Inslee. Thank you.
The Chairman. The gentleman's time has expired.
The chair recognizes the gentleman from Oregon, Mr.
Blumenauer.
Mr. Blumenauer. Thank you. Thank you, Mr. Chairman.
I would just like to clarify. Do any of you feel that there
is any question but that we should regulate petroleum and
gasoline through the commodities future trading market? Any of
you disagree with that proposition?
Ms. Kenderdine. I am not sure I would use the word
``regulate.'' Certainly oversight on the part of the CFTC is--
--
Mr. Blumenauer. But they are included within the regime.
Ms. Kenderdine. Yes, yes, yes.
Mr. Blumenauer. Is there any reason to exclude them any
longer?
Dr. Rusco. Again, I cannot comment on that. I don't want my
silence to be viewed as----
Mr. Blumenauer. Okay. GAO exception noted. [Laughter.]
But----
Mr. Berry. I would just say that the trucking industry I
don't think has considered specifically that point. As one
member of the trucking industry, it seems reasonable to me--the
proposal.
Mr. Blumenauer. Mr. Berry, I appreciate that. Would it be
possible to check with your association about running it
through the trap line and see where they are? Because----
Mr. Berry. Yes.
Mr. Blumenauer [continuing]. They are a pretty big player
in this game.
Mr. Berry. Yes. We will get back to you.
Mr. Blumenauer. Thank you. I appreciate it. And I must say
that I do appreciate the comprehensive nature of your testimony
in particular. I have had the opportunity in recent days out
campaigning in Pennsylvania, maybe not to very good effect for
Senator Obama, but hearing very heart-rendering direct
reactions from people who can only afford to fill up a third of
the tank. And making it real I thought was very important.
And the notion that you have in terms of some specific
things in terms of reducing demand, which I welcomed from ATA--
the section that you had in your testimony--touching what some
feel is the third rail, like, you know, should we take a look
again at controlling speeds? Because we did move in that
direction 30 years ago to significant effect.
And even the notion of reducing--I mean, we have had
legislation. We have tried to fix this to be able to help,
what, APUs? So that we don't have the whole rig burning
expensive diesel. This is an example to me of simple, common
sense items that ought to be employed in a heartbeat, that make
sense, save money. Do you want to elaborate on that for a
moment?
Mr. Berry. I would be happy to. At great personal risk, I
will tell you that it is our association's position that there
should be a 65 mile an hour speed limit, and that that would
save a tremendous amount of fuel. And I would venture to say
that it would probably save as much as 10 percent of our annual
consumption, and that is a big number.
Our own company has reduced our speed in December from 65
to 64 miles an hour, and our trucks are governed so that we can
set it with a computer. And then, here three weeks ago in
response to the high price of fuel, we reduced our speed even
further to 62 miles an hour. Now, we did that at great risk
because there is a shortage of truck drivers, and we felt as
though we might be disarming unilaterally in the war to attract
truck drivers.
But our drivers all understood the need, they see the $4
price at the truck stops, and they willingly voluntarily reduce
the speed, and we have had wonderful compliance. They get it.
They know this is a huge problem, and they were on board with
it.
But anti-idling--Representative Inslee talked about
research and development. There are a lot of common sense
solutions coming from the users, and the users are left out of
all of these equations. And I think that the users need to be
included in the research and development.
There are trucking companies that are coming up with
fabulous ideas, common sense solutions, and those should be
incorporated. Anti-idling--we are looking at battery-powered.
We can't get the battery-powered to work, because the cabs need
to be better insulated. So we are all out there experimenting
with ways to better insulate the cabs.
EPA's Smart Way Program is a fabulous program that has
looked at different technologies, has put it out on the
internet, so truckers can see what works, what doesn't work,
and that has been a huge service. Those are all examples of
things that can be done.
Mr. Blumenauer. I appreciate that. I appreciate, as I say,
the comprehensive testimony that you have offered up. We are
working to try and fix that APU item. In the Ways and Means
Committee, we have got a little glitch. But I think in toto
this was extraordinarily helpful.
Mr. Chairman, I really appreciate your allowing us to come
together to analyze this.
The Chairman. I thank the gentleman from Oregon.
And I thank all of our witnesses. I think this has been an
extremely helpful hearing. I think it is clear from today's
testimony that President Bush must deploy the Strategic
Petroleum Reserve in order to send a signal to OPEC that we are
going to stop begging, to send a signal to the speculators that
we are going to begin to take action against them, and to send
a signal to those who are afraid of the impact on the trucking
industry, on the food industry, on the airline industry, and
all other industries of this dramatic rise in the price of
fuel, that we are not going to allow our competition here to
raise the price of oil to have such a dramatic impact upon our
economy.
Our poor people have to choose between fuel and food. This
is not something that America should allow to happen. This is
not something that President Bush should sit on the sidelines
and pretend he is powerless to do something about. If President
Bush can call up the Reserves over and over again to go to
Iraq, he can deploy the Strategic Petroleum Reserve as a weapon
against OPEC and Big Oil to protect the American consumer and
American industry here at home.
I think that is clear from the testimony that we heard here
today. We thank all of our witnesses for this testimony, and we
hope that President Bush hears the plea of the American people.
This hearing is adjourned.
[Whereupon, at 11:41 a.m., the Committee was adjourned.]
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