[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
IMMEDIATE RELIEF FROM HIGH OIL PRICES: DEPLOYING THE STRATEGIC
PETROLEUM RESERVES
=======================================================================
HEARING
before the
SELECT COMMITTEE ON
ENERGY INDEPENDENCE
AND GLOBAL WARMING
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JULY 23, 2008
__________
Serial No. 110-44
Printed for the use of the Select Committee on
Energy Independence and Global Warming
globalwarming.house.gov
U.S. GOVERNMENT PRINTING OFFICE
61-954 WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, [email protected].
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
----------
Page
Hon. Edward J. Markey, a Representative in Congress from the
Commonwealth of Massachusetts, opening statement............... 1
Prepared statement........................................... 3
Hon. John Shadegg, a Representative in Congress from the State of
Arizona, opening statement..................................... 5
Prepared statement........................................... 6
Hon. Hilda Solis, a Representative in Congress from the State of
California, opening statement.................................. 7
Hon. Earl Blumenauer, a Representative in Congress from the State
of Oregon, opening statement................................... 7
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 8
Hon. Jay R. Inslee, a Representative in Congress from the State
of Washington, opening statement............................... 8
Hon. Jerry McNerney, a Representative in Congress from the State
of California, opening statement............................... 9
Hon. John Hall, a Representative in Congress from the State of
New York, opening statement.................................... 9
Witnesses
Mr. C. Kyle Simpson, Policy Director, Brownstein, Hyatt, Farber,
Schreck........................................................ 10
Prepared testimony........................................... 13
Dr. Joe Romm, Senior Fellow, Center for American Progress........ 21
Prepared testimony........................................... 23
James May, President and CEO, Air Transport Association of
America........................................................ 31
Prepared testimony........................................... 33
IMMEDIATE RELIEF FROM HIGH OIL PRICES: DEPLOYING THE STRATEGIC
PETROLEUM RESERVE
----------
WEDNESDAY, JULY 23, 2008
House of Representatives,
Select Committee on Energy Independence
and Global Warming,
Washington, DC.
The Committee met, pursuant to call, at 9:22 a.m., in room
210, Cannon House Office Building, Hon. Ed Markey (chairman of
the committee) presiding.
Present: Representatives Markey, Blumenauer, Inslee, Solis,
Cleaver, Hall, McNerney, Sensenbrenner, Shadegg, and Blackburn.
Staff Present: Morgan Gray.
The Chairman [presiding]. Good morning, and welcome
everyone to the Select Committee on Energy Independence and
Global Warming.
Today we have a very important hearing because American
families are facing $4 a gallon gasoline, skyrocketing energy
bills at home, and an impending home heating crisis this
winter. We are in an energy emergency. Gas prices have nearly
tripled since President Bush took office and American consumers
are being pummeled at the pump as a result of the
administration's energy policy.
At current prices, the average consumer is now spending
$2,375 every year filling up. That means that the poorest 20
percent of American families are now spending nearly 12 percent
of their pre-tax income just on gas. The average consumer at
the median income level is spending nearly 5 percent of their
income just at the pump. That doesn't even count insurance,
maintenance or the cost of the car. American families are in
desperate need of help this summer.
Today, we will begin the first in a series of three
hearings that the select committee will conduct over the next 2
weeks to examine the Democratic new direction energy plan that
will not only provide consumers with immediate relief from
skyrocketing energy prices, but also provide long-term
solutions that will reduce our energy dependence and help our
economy.
The Bush administration continues to oppose Democratic
proposals that will provide consumers with relief right now and
put us on a path to a renewable energy future in the long run.
Our nation's Strategic Petroleum Reserve currently contains
more than 706 million barrels of oil and is filled to over 97
percent of its capacity--the highest level in its history.
More than 2 weeks ago, Speaker Pelosi called on President
Bush to take action to immediately lower oil prices by
deploying oil from this reserve. Each day that passes without
the Bush administration taking action is another day that
American families and our economy fall deeper into crisis. We
cannot afford to wait any longer.
Deploying oil from the strategic petroleum reserve has
driven down prices when it has been used in the past. In 1991,
when President Bush's father deployed oil from the reserve, oil
prices fell 33.4 percent. In 2000, President Clinton conducted
a time exchange of oil from the SPR and prices again
immediately dropped by 18.7 percent.
And in 2005, when President Bush himself released oil
following Hurricane Katrina, prices fell 9.1 percent. That is
an average drop in the price of oil of 19.2 percent. If we
experienced a similar impact now, it would mean a $25 reduction
in the price of oil. But President Bush and Republican leaders
in Congress continue to oppose releasing oil to help consumers.
Instead, President Bush proposes giving away our nation's
beaches and wilderness areas to big oil. The Bush
administration's own Energy Department has stated that drilling
off our coasts and in the Arctic National Wildlife Refuge will
not produce any oil for 10 years and will have an insignificant
impact on prices 20 years from now.
So all that President Bush, Vice President Cheney, and
other Republican leaders in Washington have to offer to
consumers who are being shaken down at the pump on a daily
basis are the same tired drilling schemes that won't provide
any relief whatsoever for 10 or 20 years. That is the agenda of
the American Petroleum Institute, not the American people. In
contrast, Democrats in Congress want to provide American
families with help in the next 10 to 20 days by deploying our
nation's oil reserve.
While President Bush is willing to deploy our National
Guard reserves to protect oil fields abroad, he continues to
refuse to deploy our strategic petroleum reserve to protect
American consumers here at home. The strategic petroleum
reserve is a powerful weapon that the American people have
against big oil, OPEC, and the speculators and manipulators
that are driving up prices and it is time for President Bush to
use it.
Let me now stop and turn to recognize the gentleman from
Arizona, Mr. Shadegg, for an opening statement.
[The prepared statement of Mr. Markey follows:]
[GRAPHIC] [TIFF OMITTED] T1954A.001
[GRAPHIC] [TIFF OMITTED] T1954A.002
Mr. Shadegg. Thank you, Mr. Chairman.
I will insert my opening statement in the record. However,
I will make a couple of quick comments.
First of all, I want to welcome our witnesses. I
particularly want to welcome Mr. May who I know is working
aggressively to help the airline industry. My home town is the
base of an important airline in this nation. I know that the
airlines have been crushed by the sudden spike in fuel prices.
I really hadn't intended to get partisan in this
discussion. However, listening to you, Mr. Chairman, I feel
somewhat compelled to do so. Certainly, I believe the SPR is
one possible avenue. I voted for not putting any more oil into
it earlier this year. I think acknowledging that either not
putting more oil in to the strategic petroleum reserve or
taking some oil out of the strategic petroleum reserve is an
intellectual acknowledgement that increasing supply will have
an effect on prices, indeed that there is a link between supply
and prices.
You say the president is not willing to release oil from
the SPR and therefore that is damaging. I would turn the tables
on you and say regrettably your party is unwilling to do
anything about supply other than the SPR. I would note that in
the testimony of one of our witnesses, when the president
earlier last week, I believe on Monday or Tuesday, announced
that he was going to open the outer continental shelf, which we
have put off-limits, and we put off-limits back when gasoline
prices were $1.30 or $1.40 a gallon.
We continue to keep it off-limits from any further
production or exploration now that gasoline is $4.12 a gallon.
But when the president lifted the executive branch limit
restriction on outer continental shelf drilling, there was a
drop of $6.48 in the price of a barrel of oil on the very next
day, the single largest drop in the price of oil in any one day
since 1991.
I don't think this is an issue on which we ought to be
partisan. I think this is an issue on which we need to be very
concerned about American consumers, particularly about those
consumers who are in the worst financial position, the people
who drive the oldest cars because they can't afford newer, more
efficient cars; the people who live the furthest from work
because they can't afford to live near where they work; and
quite frankly, we need to be deeply concerned about the
American economy.
It does not serve this nation for us as politicians to be
throwing partisan shots back and forth at each other while
American businesses, for example the American airline business,
are suffering when they have to compete with foreign
competitors. The weak dollar is an issue in this debate. Some
people believe speculation is an issue in this debate. I think
anybody with any rationality understands that the tight
situation between supply and demand is a part of this problem.
If we don't address every at least every conceivable aspect
of this issue and do everything we can, we are not serving the
American people well.
For that reason, I do commend you, Mr. Chairman, for
holding this hearing and I look forward to the testimony of our
witnesses.
[The prepared statement of Mr. Shadegg follows:]
[GRAPHIC] [TIFF OMITTED] T1954A.003
The Chairman. Great. The gentleman's time has expired.
The chair recognizes the gentlelady from California, Ms.
Solis.
Ms. Solis. Thank you, Mr. Chairman, for having this
hearing.
And I thank the witnesses for being here.
I recall that the other day while I was being interviewed
by Fox News, the anchor person asked me if there was really a
crisis going on and if we should really be dipping into the
SPR. I said, when is it not a crisis when our people have to
pay $4.60 or more a gallon, and people are losing their
businesses, and I am talking about people from a district like
mine where we have seen prices as high as $4 for the last 8
months.
We see no relief, and we find that a good proportion of
constituents are spending about 12 percent of their income just
on transportation, many who are transit-dependent and also many
who are driving older cars. This crisis did not come upon us
because of Democrats taking over the House a year ago. This
came about because of our lack of investment in renewable
energies.
Yesterday, I had the opportunity to hear Mr. T. Boone
Pickens talk about renewable sources. I was quite surprised to
hear what he had to say, very enlightened in fact. These are
other issues that we need to be focusing in on. It can't just
be about oil dependency. I think the public and even people
from districts like mine get it. They know that we have to
change our course. We are large consumers of fossil fuels, and
we need to change that.
We do care about our planet and the climate changes that
are going on. We see a hurricane that is going to hit right now
in Mexico and Texas. It is further going to, I think, erode our
ability to obtain more fossil fuel there. That is why I think
we need to be looking at investing in other alternatives, and
that is what the new direction Congress is looking at.
I thank our witnesses and look forward to hearing from you.
Thank you.
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 appreciate the opportunity for us to explore with our
witnesses the implications of deploying the strategic petroleum
reserve now. Given in the course of the last year, they have
essentially doubled the price of a barrel of oil on the world
market, there has been--what?--a 2 percent increase in world
demand. There is something else going on here.
I seriously doubt that the prospect of some oil supply 20
years from now on the outer shelf or someplace else in the
United States was responsible for a reduction of $6 a barrel. I
think the fact that we have been having serious discussion with
Speaker Pelosi and others, including yourself, Mr. Chairman,
about the wisdom of the redeployment of a small amount of this
oil, to signal where we are going, and the fact that over the
course of the next 2 or 3 months there could be a deployment of
a small amount of that reserve, but disrupting some of the
strategies of people who would manipulate the market, I think
is very, very important.
I appreciate your leadership and that of the speaker
zeroing in on this. I look forward to exploring further with
our witnesses. I think this is part of a multi-faceted approach
in the short term to try and squeeze the speculative bubble
because there is clearly, whether it is $10 a barrel or it is
$70 a barrel--I don't know. The witnesses we have heard before
this committee and others have not been in agreement, but it is
clear that that is part of the issue, put in place with a
comprehensive approach to energy, broadening our sources
wherever they are, and not being reliant on a fossil fuel,
petroleum-based economy.
I welcome the call from the former vice president about
setting our sights high. It is something you and the speaker
have been doing. I look forward to exploring these elements
with our witnesses in a few moments.
Thank you very much.
The Chairman. I thank the gentleman.
The chair recognizes the gentlelady from Tennessee, Mrs.
Blackburn.
Mrs. Blackburn. Well, is this on? Yes, it is on. Okay. The
little button is not working.
Thank you, Mr. Chairman, and I thank you for the hearing.
And our witnesses, I thank you very much for being with us
today. We are looking forward to visiting with you and hearing
what you have to say on the issue on the release of the portion
of the strategic petroleum reserve, should that be undertaken.
I will tell you, that is an action that I do not support. I
don't think that oil should be taken out of the SPR unless
there is a genuine emergency where supplies have been cut off.
I think the situation that we face with instability in the
Middle East shows us that an SPR release would not be the
wisest move that we could make at this point. I think this
issue is very different than when Congress passed the bill,
with my support, to stop filling the SPR. This brought more oil
supply to the market. It did not significantly affect our
emergency supply and it provided temporary immediate relief to
the American consumer.
But what really is behind this initiative is, I think, the
failure of the majority's leadership to have a comprehensive or
a rational energy policy. They are not listening to what my
constituents, and certainly what most Americans are saying, and
what they are demanding of us when it comes to energy policy.
They want us--the American people want us to get to work on
this and to do something that is going to affect long term.
They want us to drill here, drill now. They want to end up
paying less.
So I am looking forward to hearing what you have to say
today, and appreciate the fact that we are having the hearing
to approach the issue.
I yield back.
The Chairman. Great. The gentlelady's time has expired.
The chair recognizes the gentleman from Washington State,
Mr. Inslee.
Mr. Inslee. I would just like to say I think a small
release from the SPR is entirely appropriate. But I want to
respond to this sort of continuing canard that somehow
Democrats aren't for increasing supply of energy. In fact, we
are for an increase in supply of energy as proposed by famous
Republican T. Boone Pickens, who addressed our caucus yesterday
and said we have got enormous amounts of energy blowing in the
wind. The fellow just invested $4 billion in building the
world's largest wind turbine farm in Texas.
What Democrats are for is to really expand our sources of
energy, but not just in oil. We are seeing the DOE that has
told us we can have 20 percent of our electricity from--
electricity that can power our cars. And this is the great
vision that Democrats have of powering our cars with
electricity either through the use of lithium ion batteries or
through, as T. Boone Pickens has suggested, displacing it and
use natural gas and use natural gas for cars rather than
residential.
You can argue about which one is going to win the race--
natural gas or lithium ion batteries--but Democrats are
providing a vision for more energy. We know there is not enough
energy off of our coastline to make an appreciable difference
in the price of fuel, because it is less than 1/2 percent of
world oil supplies. But we also know that we are blessed with
enormous supplies of energy in wind, in our water, in our
sunshine, in our engineered geothermal, and these are the
sources of energy that finally can break the slavery that we
now are suffering under to oil.
The only way to break slavery and the chains of this
addiction is to provide new sources of energy that are not oil.
We are for increasing supply in the places where we can really
make a difference, and we are going to get that job done.
Thanks.
The Chairman. Great. The gentleman's time has expired.
The chair recognizes the gentleman from California, Mr.
McNerney.
Mr. McNerney. Thank you, Mr. Chairman.
Today's hearing is both timely and important. I believe
that the strategic petroleum reserve is the exact right tool to
go after speculators and to make sure that the market is being
controlled in a strategic way. We don't need to use very much
of the strategic petroleum reserve. Small amounts, five million
barrels once a week or once a month should discourage
speculation. But I want to hear it from the experts to
understand what you think is possible and how you think that
will affect the market, and if you think that that will
discourage speculation, and if so, how? And if not, what can we
do to make sure it does?
So I welcome your testimony. In my district, we have seen
some of the highest prices of gasoline in the nation. People
are definitely hurting. In fact, I have to drive over a very
large district, so I feel the pain from the high price of
gasoline. So we all want to find a solution. I don't think it
enhances the problem by pointing fingers at each other, but it
does enhance it by discussing rationally what the future will
look like, how we can use the strategic petroleum reserve, and
what other long-term objectives we need to go after.
So thank you, Mr. Chairman.
The Chairman. Great. The gentleman's time has expired.
The chair recognizes the gentleman from New York, Mr. Hall.
Mr. Hall. Thank you, Mr. Chairman.
I would echo Mr. Inslee's remarks and say I personally am--
I don't own any drilling equipment, but I am not stopping
anybody from drilling. In fact, I would be very happy if the
oil companies would drill on the 68 million acres they have
already leased and permitted in the lower 48 and adjacent
offshore plots. But that can't be and won't be the long-term
solution because we just don't have, and in fact the world will
not have enough oil to last forever.
In New York this morning, gas prices are averaging $4.27,
and in some places $4.50. Like the rest of the country, they
have been high for weeks. In the last week as the price of
crude fell, the price of gasoline at the pump continued to
climb, once again showing the disconnect that I think should be
looked into by the Consumer Products Trading Commission.
In an area like ours, where commuting is not so much a
lifestyle choice as it is a necessity, this is an economic
squeeze for families that are already being squeezed by higher
consumer costs. We didn't dig our way into this hole overnight,
and we need to keep pushing the visionary new solutions that
this committee and this Congress have tried to advance.
President Bush has often alluded to the fact that he can't
simply wave a magic wand to make gas prices go down. But in
fact, he does have a magic wand to give us some slack
immediately, the SPR. A release of oil from the SPR is a
tested, proven, secure and effective method of calming markets
and lowering prices. The last three presidents have
successfully used SPR oil to head off serious economic damage
and dangerous record spikes.
I would also note that the oil in the SPR has been put
there through the royalty in-kind program for exploration of
public lands, meaning that the oil in the SPR is the American
people's oil and the administration should use it to help them
now.
Today, I look forward to hearing from our panelists about
what is the best way to do just that, and I yield back.
The Chairman. Great. The gentleman's time has expired.
All time for opening statements has been completed.
We will now turn to our first witness, Mr. Kyle Simpson,
who is currently the policy director for Brownstein, Hyatt,
Farber and Schreck. Mr. Simpson has formerly served in a number
of positions at the Department of Energy, including associate
deputy secretary of energy and senior policy adviser to the
secretary. In those roles, Mr. Simpson's responsibilities
included policy development and direction for the strategic
petroleum reserve.
We thank you for being here today, Mr. Simpson. Whenever
you are ready, please begin.
STATEMENTS OF MR. C. KYLE SIMPSON, POLICY DIRECTOR, BROWNSTEIN,
HYATT, FARBER, SCHRECK, WASHINGTON, D.C.; MR. JOE ROMM, SENIOR
FELLOW, CENTER FOR AMERICAN PROGRESS, WASHINGTON, D.C.; MR.
JAMES C. MAY, PRESIDENT AND CEO, AIR TRANSPORT ASSOCIATION,
WASHINGTON, D.C.
STATEMENT OF KYLE SIMPSON
Mr. Simpson. Thank you, Mr. Chairman. Good morning to the
members of the committee and thank you for asking me to appear
here today.
The history of market reactions to releases of crude oil
from the reserve shows that strategically deploying oil from
the SPR is good public policy and can have an immediate
beneficial impact on crude oil, gasoline and other petroleum
product prices. SPR experience also shows that the downturn of
gasoline and other prices is apt to occur with the mere
announcement or anticipation of an announcement of a release.
I will focus on some of the details of the results of the
actions taken by the reserve, including the release of oil
before the first Gulf War, the announcement of the sale in
1996, the 2000 exchange of oil, and the announcement of a
release after Hurricane Katrina in 2005.
Each of these releases from the reserve are good examples
of the implications that can be the result of a release. They
provide insights into the results of actions by the reserve in
response to real, anticipated or perceived oil, and in some
cases product supply shortages, or to send message to overly
heated markets that the U.S. government is prepared to use the
reserve to protect consumers.
The sale of oil from the SPR in concert with the first Gulf
War was announced on January 16, 1991 in anticipation of the
impending conflict. The disruption on which the finding was
based had not actually occurred. In the fact of impending
military conflict, the administration utilized the SPR's
anticipatory authorities for the drawdown. On January 17, the
price of oil fell from $32.25 to $21.48 and stabilized.
In the Omnibus Appropriations Act for 1996, the Congress
directed DOE to sell $227 million worth of oil to achieve the
overall budget target for the year. At that time, retail
gasoline prices were climbing. Shortly after the law was
enacted, President Clinton implemented the sale of
approximately 12 million barrels from the SPR. The decision to
sell the oil immediately resulted in a downturn in gasoline
prices on April 29 and 30 that continued through the first week
of October of that year.
The principal impact of the announced sale was
psychological, temporarily halting the bullish pressures in the
market, and led to a reversal in both crude and product prices.
Selling oil is not the only way the SPR can be used to help
alleviate price problems.
In 2000, home heating oil inventories were extremely low,
and President Clinton gave then-Secretary Bill Richardson the
authority to exchange 30 million barrels from the SPR to the
market. As a result, as the chairman pointed out in his opening
statement, oil prices dropped 34 percent by the end of the
year, going from $30.94 to $20.38 per barrel.
After Hurricane Katrina, prices began to rise very
dramatically because of disruptions in production capacity in
the gulf. On September 2, 2005, President George W. Bush issued
a finding of severe energy supply interruption and directed the
secretary to withdraw and sell oil from the reserve. The
announcement--after the announcement, and in each of these
cases it is the announcement that causes the price to change.
The actual movement of oil occurs weeks later. The price
dropped from $69.50 to $66.91 the next day and continued a
steady decline for several months. The price did not exceed the
peak until April of 2006. At that point, the refilling of the
reserve was suspended for another year.
It is difficult to know the exact impact of a release, but
as these releases indicate, the psychological impact and the
fact that more oil is going into the market has caused the
price to go down for extended periods of time. It has to be a
substantial amount of a release in order to have that effect,
but I think some of the proposals that are being considered
today by the Congress would be substantial.
I also want to point out that you have a unique opportunity
to utilize the SPR to address the current energy crisis in a
way that can add to significant funding for new alternative
clean energy for the future. If you took the GAO's advice to
release oil, light oil from the reserve, which is all it
contains right now, in contrast to the some-40 percent heavy
oil that our refining industry uses today, and did an exchange
over time, and allowed the department to make decisions as to
when that oil would be released and when it would be brought
back, the price differential that GAO has estimated is about
$12 a barrel between light and heavy oil.
If you monetized that differential over the 70 million
barrels, you could bring in more than $800 million into the
government that is not anticipated under the current budget,
and use that for many purposes, but one that I would suggest
would be as a down payment on the next generation of clean
domestic energy resources.
I see that I am about to run out of--have run out of time--
so I would just want to point that out and make those
suggestions. I hope the history of the reserve has been
helpful, and I thank you for asking me to come today.
[The statement of Mr. Simpson follows:]
[GRAPHIC] [TIFF OMITTED] T1954A.004
[GRAPHIC] [TIFF OMITTED] T1954A.005
[GRAPHIC] [TIFF OMITTED] T1954A.006
[GRAPHIC] [TIFF OMITTED] T1954A.007
[GRAPHIC] [TIFF OMITTED] T1954A.008
[GRAPHIC] [TIFF OMITTED] T1954A.009
[GRAPHIC] [TIFF OMITTED] T1954A.010
[GRAPHIC] [TIFF OMITTED] T1954A.011
The Chairman. Thank you, Mr. Simpson, very much.
Our next witness is Dr. Joe Romm, who is a senior fellow at
the Center for American Progress. He also served in the
Department of Energy in a number of capacities, including
acting assistant secretary and principal deputy assistant
secretary for energy efficiency and renewable energy. He has
written extensively on the strategic petroleum reserve.
We welcome you, Dr. Romm.
STATEMENT OF JOE ROMM
Mr. Romm. Thank you, Mr. Chairman and members of the
committee.
I have three main points. First, we tried offshore drilling
in 2006 and oil prices doubled. Second, the only plausible
remaining strategy for reducing oil prices quickly is opening
up the strategic petroleum reserve, while making a major push
for oil conservation. Third, I think we are going to sell off
the strategic reserve by mid-century anyway, so why not do it
now when consumers need the relief and we can use the money to
help end our oil addiction.
We must be honest with the public. Oil prices are headed
much higher over the next 5 to 10 years unless we jumpstart the
transition to low-cost alternative fuels, something even oilman
T. Boone Pickens has said. Some insist that more offshore
drilling will lower prices, but that is the one strategy we
know has failed. We tried opening up most of the Gulf of Mexico
to offshore drilling 2 years ago, but oil prices have doubled
since then.
Ending the moratorium on coastal drilling, where there is
maybe one-fifth the oil already available for drilling in the
gulf, offers no realistic hope for reducing oil prices. Indeed,
the Bush administration's own energy experts have made the same
point. But selling a relatively modest amount of crude oil from
the strategic reserve, while promoting oil conservation, could
pop the speculative bubble and lower oil prices.
It worked very well when President Bush's father did it
during Desert Storm, as you heard from Kyle, and as my chart in
the testimony shows--hopefully someone will flip that chart
over there. As Kyle said, we only--the president merely
announced that he would sell 34 million barrels. As you can
see, oil that had started to spike up in price immediately
collapsed, and it was about a one-third drop over the course of
a day or two.
So imagine what would happen if the current President Bush
announced today he was going to sell three times as much oil,
90 million barrels, over the next 6 months at the rate of
500,000 barrels a day. I advocate combining that sale with a
strong push for oil conservation. This president, or more
realistically the next president, should use his bully pulpit
to launch a national oil conservation education campaign,
urging consumers and businesses to take a variety of steps to
reduce gasoline use. That could easily double the oil provided
by the strategic reserve.
Now, if oil prices did drop as a result of these actions,
as I expect, then obviously that would vindicate this strategy.
But if oil prices did not drop, that would merely demonstrate
how useless the strategic reserve was in the first place. You
know, I try to make this point in my testimony. The strategic
reserve is not strategic. It was created at a time when people
worried that countries could withhold oil from us. But now we
have a global market, so that isn't possible.
We have replaced the possibility of oil shortages with the
reality of rising prices. So if we don't use the strategic
reserve to deal with our current price spike, when would we
ever use it? Indeed, I ask people all the time: name me a
scenario in which we would use the strategic reserve, any
significant fraction of it? After all, in the entire 3-decade
history of the strategic reserve, a mere 32 million barrels
were sold during crises, and we now have 700 million barrels.
So we are not--and I think we are not going to keep this
relatively useless reserve for many more decades. As you know
better than anyone, Mr. Chairman, we need to be almost
completely off of oil by mid-century to avoid catastrophic
global warming. So sometime soon we are going to sell off the
SPR's oil because I can't imagine the taxpayers and their
representatives are going to seriously sit on $100 billion
sitting under the mattress forever. It is just not going to
happen.
We are going to sell it off, so why not do it now when we
can use the price relief and we could generate tens of billions
of dollars this year and in coming years. Some of that could
help low-income families deal with high energy bills and some
could jumpstart the transition to a clean energy economy and
end our oil addiction.
Gasoline prices are headed much, much higher unless we
begin an aggressive switch to the only domestic alternative
fuel that is both abundant and much cheaper than gasoline,
namely electricity. We need to start building billions of
dollars accelerating the deployment of plug-in hybrids, energy
efficiencies, recycled energy, wind power, solar,
photovoltaics, and solar baseload.
In conclusion, some argue that oil prices will drop if we
end the federal moratorium on coastal drilling, even though
that would only deliver maybe 100,000 barrels of oil a day
sometime after 2020. I just don't understand how anyone can
believe in more coastal drilling and oppose releasing 500,000
barrels of oil a day starting now. Of course, the first
strategy would benefit oil companies, and the second strategy
would benefit the American people, so that may explain who
supports what.
Thank you.
[The statement of Mr. Romm follows:]
[GRAPHIC] [TIFF OMITTED] T1954A.012
[GRAPHIC] [TIFF OMITTED] T1954A.013
[GRAPHIC] [TIFF OMITTED] T1954A.014
[GRAPHIC] [TIFF OMITTED] T1954A.015
[GRAPHIC] [TIFF OMITTED] T1954A.016
[GRAPHIC] [TIFF OMITTED] T1954A.017
[GRAPHIC] [TIFF OMITTED] T1954A.018
[GRAPHIC] [TIFF OMITTED] T1954A.019
The Chairman. Thank you, Mr. Romm.
Our final witness is Mr. Jim May. Mr. May is the president
and CEO of the Air Transport Association, the nation's oldest
and largest airline trade association. Mr. May has been with
ATA since 2003.
We welcome you, sir. Whenever you are ready, please begin.
STATEMENT OF JAMES MAY
Mr. May. Thank you, Mr. Chairman. I would note that one of
the first things I did within 2 weeks of joining ATA in 2003
was to ask for a release from the SPR publicly before the
Senate Energy Committee. So there is a little bit of precedent
to our position.
First, thank you and the other members of Congress and the
committee for your leadership in assuring that we do not
continue to fill the SPR at these extraordinary prices. I don't
have to convince you that high oil prices are smothering our
nation's families, taking an especially heavy toll on aviation,
but also trucking and agriculture and hospitality industry and
other key sectors that help drive the U.S. economy.
This morning, oil was trading at about $126 and change,
versus $75 a year ago. That is well over $4 a barrel for
American families. I would also note for you that due to
limited refining capacity and global demand, jet fuel--Jet A,
which we burn--costs as much as $30 a barrel more than
gasoline, so we have been paying upwards of $170 a barrel,
which is significantly greater than in 2007. In fact, we are
going to spend $62 billion as an industry domestically this
year on fuel. That is about $20 billion more and accounts for
the $10 billion we are projected to lose in this calendar year.
To give you a perspective on a per-consumer basis, we are
spending today about seven cents per mile for each of the
passengers that we carry. That is a fuel bill of about $420 per
person. When you consider that our average round-trip ticket
across all classes and all distances is probably in the range
of $400 to $500, you begin to get an appreciation for how
difficult an equation we are trying to deal with.
And deal with it, we are, but not in happy ways. We have
cut 32,000 jobs. Over 100 communities have lost service or will
lose service. It is having a devastating effect on the economy.
There are a lot of reasons. We have talked about them this
morning--the weak dollar, increasing demand in developing
economies, insufficient exploration and refining capacity,
geopolitical instability and all of those things.
I would suggest to you that there are also a number of
solutions, in no particular order: increasing domestic supply,
conservation, alternative fuels are critical to the future.
Reining in unchecked speculation, a subject that we have become
well known for talking about for some period of time, is
critical. And I think a third component, the third leg of that
stool, if you will, is a release from the strategic reserve.
Now, increasing our domestic supplies will reduce our
dependence on foreign oil and help lower prices. I think a
release from the SPR is a good first step. We have 706 million
barrels. It is over 97 percent full. We suggest, as the speaker
has, that a 10 percent release, which is roughly 70 million
barrels, would make a very marked increase. You heard the
testimony this morning about pricing. When President Bush did
it back during Desert Storm, it was about a 38 percent drop.
I would suggest a framework for that release. One, if it is
going to be released, don't let people know in advance. Don't
let the markets know in advance. Just do it on a timed basis.
Two, make sure it is light, sweet crude, not sour, that is
being released. Three, restore U.S. commercial inventories.
They are down about 58 to 60 million barrels, and that roughly
equates to the 70 million/10 percent that we are suggesting.
And finally, two things: dedicate the revenue, as has been
suggested this morning, to development of alternative fuels. We
are working on biofuels projects for aviation use, for example,
and set up a framework for continuing to do this as conditions
dictate--triggers, targets, something of that sort that would
be worthwhile.
As I said, we think the speaker's proposal on a 10 percent
release would be appropriate and positive. I would also note
that there is another reserve, it is the New England heating
oil reserve, which could be worthy of consideration for a
release, and then a refill before the winter comes.
And finally, Mr. Chairman, let me reiterate what I started
with. We think this is a three-legged stool. We think that
rather than engaging in an exercise in who is to blame for high
fuel prices, Congress ought to immediately embark on a program
of how we can share credit for solving the high fuel prices. We
need more supply. The Republicans introduced a package
yesterday that many in the majority party won't like, but I
think it is absolutely worth consideration.
Two, I think, as I have said before, the speaker's plan on
releasing from the SPW. And three, Mr. Stupak's PUMP Act, which
I think does a terrific job of trying to attack rampant
speculation in the marketplace. We need all three and any other
solutions. We have thousands of people out of work, more
coming, more communities are going to lose service, and we need
the Congress to address this before the August recess if at all
possible.
Thank you.
[The statement of Mr. May follows:]
[GRAPHIC] [TIFF OMITTED] T1954A.020
[GRAPHIC] [TIFF OMITTED] T1954A.021
[GRAPHIC] [TIFF OMITTED] T1954A.022
The Chairman. Thank you, Mr. May, very much.
And now we will turn to questions from the committee of
members.
Mr. May, one of the arguments that is made about the
deployment of the strategic petroleum reserve is that we are
not in an emergency. What does the airline industry have as a
response to that assertion?
Mr. May. Mr. Chairman, I think there are least 32,000
families who have had a breadwinner that has lost a job in my
industry that would suggest this is absolutely an emergency. I
would suggest all of those communities that are losing service,
the people who can't move as efficiently and rapidly around the
country, would suggest this is an emergency.
I support the continued use of the SPR. I think from a
strategic tactical perspective, it is important. But I think
there are also times when it ought to be used to address the
economic emergency that exists in this country. So I would
suggest to you there is ample reason to have a controlled
release.
The Chairman. Mr. Romm, Mr. Simpson, you both worked at the
Department of Energy. Does the economic condition that we are
now being confronted with qualify under the law as a situation
where the president could deploy the strategic petroleum
reserve?
Mr. Simpson.
Mr. Simpson. Under the law, the definition is really
somewhat vague. It can be interpreted in many different ways.
There is a strong reluctance to use economic concerns. But the
definition of an emergency as a result of inadequate supplies
can be fairly broad. The flexibility that the secretary has to
do emergency or test draw-downs, test sales, different types of
things, is fairly discretionary.
So if Mr. May's definition of an emergency is people losing
jobs, I think that could be part of the definition.
The Chairman. Do you agree with that, Mr. Romm?
Mr. Romm. Absolutely. I would also add that if you had
described current conditions today to us in the Clinton
Administration and said, would your release the SPR now, I
think everybody absolutely would have. I mean, we debated it
under a situation that was far more mild than it is today.
The Chairman. Mr. Simpson, what are the, if any,
operational obstacles to the deployment of the strategic
petroleum reserve in the short run?
Mr. Simpson. I don't think there are any operational
obstacles to releasing it. The implications of an exchange that
I talked about would be actually positive in the long term for
the reserve because we would begin to make the capacity of oil
in the reserve more reflect the 40 percent of the refining
industry's use of heavy oil. I think we have--we are in
jeopardy here. We have a hurricane coming in down in Texas. If
it had turned south and gone into Mexico and disrupted some of
the heavy oil production down there, we wouldn't have a way to
replace that heavy oil using the strategic petroleum reserve.
The Chairman. So you are saying, releasing light crude now
and replacing it with heavy crude is something which is
consistent with industry practices and needs?
Mr. Simpson. Very much so.
The Chairman. Okay. Thank you.
And Mr. Romm, we have already seen a disruption of heavy
oil imports from Latin America under Hugo Chavez's regime in
2002. Both GAO and the Department of Energy have concluded that
including some amount of heavy oil in the SPR would be wise.
Do you agree with that conclusion, Mr. May, that Mr.
Simpson just reached?
Mr. May. I am not sure I followed the question, Mr.
Chairman. Do I agree with which statement?
The Chairman. The statement that Mr. Simpson just made,
that having more heavy crude would actually be something that
could----
Mr. May. Yes. I am not an expert on heavy versus light. I
can tell you this, that to the extent you are releasing light,
you are making it available to all of the refineries in the
United States. There are a number of refineries that cannot
process heavy sour. So replacing that with heavy sour is a
perfectly sound strategy, and releasing light sweet will have
the most immediate impact on the refineries all being able to
use it, and for the consumer to get gasoline, jet-A diesel
fuel, et cetera.
The Chairman. Now, let me just conclude by asking this
question of each of you quickly. If we did pass legislation
which said to the president, deploy 10 percent of the strategic
petroleum reserve over the next 5 or 6 months, without telling
him which day of the week to do it, but if there was something
happening in Iran or Nigeria or other parts of the world, he
could deploy one million barrels of oil a couple of days before
or after that incident, and maybe not deploy anything for a
week or so after that.
Would that have, in your opinion, a downward pressure on
the price of oil, if the president had that authority and had
to deploy 70 million barrels over a 5- or 6-month period? Mr.
Simpson?
Mr. Simpson. I believe it would. In looking at the history,
I think that is the case. If you add the government as a
player, and there are people who advocate both sides, but if
you put the government in as a player, it makes it more
difficult to accurately predict, as the speculators would like
to do, what the oil price would be in the future.
The Chairman. Dr. Romm.
Mr. Romm. I would agree with that. I mean, obviously it
assumes that the president would make use of that authority.
But if the president were willing to make use of the authority,
I don't think it would have any question that it would have a
downward pressure on prices.
The Chairman. Mr. May.
Mr. May. It would have a downward pressure.
The Chairman. Okay. Thank you. My time has expired.
The chair recognizes the gentleman from Arizona, Mr.
Shadegg.
Mr. Shadegg. Thank you, Mr. Chairman.
Mr. Simpson, I want to begin with you. I have some
questions about your knowledge of prior draw-downs. In your
testimony, how many draw-downs did you cover in your analysis?
Mr. Simpson. Four.
Mr. Shadegg. Four. And in each of those instances, prices
fell?
Mr. Simpson. Yes.
Mr. Shadegg. Can you tell me what the percentage reduction
was each time of the overall SPR--5 percent, 30 percent, 50
percent?
Mr. Simpson. It was not--I would have to go back and look
at the math--but it was in the range let's say they offered 34
million barrels in 1991 and we had about, I think about nearly
600 million barrels in the reserve at that time. So it would
have been a 5 percent reduction.
Mr. Shadegg. Do you recall if any of them were more than
the 10 percent which Mr. May has expressed support for?
Mr. Simpson. No, they have not been.
Mr. Shadegg. Okay.
You said that the current law is vague, and if vagueness
goes to the issue of whether it is supposed to be used for a
military emergency, I take it, versus an economic situation
like we face now, is that right?
Mr. Simpson. Actually, it is usually viewed as a supply
disruption. It has been used--in 1991, it was military; in
2005, it was a hurricane.
Mr. Shadegg. Mr. Romm testified that he could see no
circumstance under which our supply of foreign oil could be cut
off, apparently not the closing of the Straits of Hormuz nor a
war with Iraq nor a war with whoever in the Middle East, that
under no circumstances because we have a world market, that our
supply would be either cut off or dramatically reduced. At
least that is what I understood him to say. I will ask him in
just a moment. Would you agree with that?
Mr. Simpson. There are circumstances where the global
supply could be diminished. A circumstance where U.S. supply
could be cut off, I don't think exists.
Mr. Shadegg. Right. It could be reduced, but not cut off.
Mr. Simpson. Right.
Mr. Shadegg. Presumably.
Is there a safe, in your mind, or an unsafe level of draw-
down that we could do--10 percent would be safe, given what
might happen to us that we don't anticipate, versus 90 percent
might be unsafe? Or do you think it doesn't matter?
Mr. Simpson. I think the way the reserve is put together
that if you talk about a 10 percent reduction, and if some of
the proposals I have heard, we would never actually be 10
percent short. If you look at the reserve, and let's just pick
West Hackberry or Bryan Mount, they are comprised of many
different caverns. So you could draw one cavern down, draw
another one down, and then begin to replenish it as market
conditions played.
Mr. Shadegg. Fair enough. I need to get to Mr. Romm.
Mr. Romm, did I misstate your position? I thought I heard
you say, and as a matter of fact I took notes, that there just
is no circumstance under which we would need to draw it greater
than now. I presume that means even war or even a cutting off
of the Straits of Hormuz.
Mr. Romm. Well, what I tried to say was I ask people to
describe me the scenario. I have never heard a plausible
scenario. I mean, if you shut down the Straits of Hormuz, I
mean I guess it would depend on the circumstances, but
obviously the price of oil would skyrocket immediately, and I
am not certain the strategic petroleum reserve would have any
impact.
But in 30 years, we have never released more than 30
million barrels, so it is very hard to say sometime in the near
future we are going to need 500 million barrels to release.
There just is no historical evidence that any circumstance like
that would ever happen.
Mr. Shadegg. Mr. May, as I understand your testimony, it is
essentially all of the above--at least a three-legged stool. We
need to be doing everything we can.
Mr. May. Mr. Chairman, that is correct. We support the
continued existence of the SPR, but we think a 10 percent draw-
down would be positive economic news. We think that supply-side
has to be part of the equation. You and I have talked about
that many times in the past. And we think that there has to be
a strong, credible, no-nonsense approach to speculation in the
marketplace, and think that Mr. Stupak's bill does a terrific
job of addressing that.
Mr. Shadegg. Two quick points, and then I want to have a
follow-up question, Mr. May.
You did note that the price of oil dropped $16, roughly,
following the president's announcement----
Mr. May. Yes, sir. It is all due to ATA's efforts on
speculation.
Mr. Shadegg. Congratulations. I appreciate that. I don't
really care. I am with you. I don't care what the cause is. I
just want to----
Mr. May. I don't either. And I want to give everybody
credit. I don't want any for us. I just want to get the prices
down.
Mr. Shadegg. I like the idea.
Let me ask you for one more piece of advice. Let's say that
we pass legislation now directing, say, a 10 percent reduction
in the SPR. And we also pass the PUMP Act. Mr. Stupak had a
witness at his hearing who I believe has advised your industry,
who said that if the PUMP Act were to pass, his testimony was
the price of oil would drop by 50 percent in 30 days.
Mr. Stupak himself, being somewhat more humble and afraid
that that might not be true, on the floor last week said that
he believed that if the PUMP Act were to be passed and signed
into law--and for the purposes of my question let's assume it
is. So we do the SPR and we do the PUMP Act. Mr. Stupak said
the price of oil would drop by 30 percent in 30 days.
My question of you is, let's assume we do both of those
before the August break to help the American people. And let's
assume that--let's give Mr. Stupak and the SPR time to work.
Let's say 45 days from now, the price of oil is not down at
all. What would you then suggest we do?
Mr. May. Mr. Shadegg, at that point, first of all, I very
strongly believe that if you do both of those things, it will
have a huge impact, downward impact on prices. If God forbid it
doesn't, then I think you have got to go the supply side, even
though it may have as minimal short-term effect, and there is
going to be some short-term effect as well as long term. I am
not smart enough to know beyond that what else there is to do.
Mr. Shadegg. Do you buy the 30 to 50 percent figure?
Mr. May. I don't know that I buy 30 to 50 percent, but what
I do buy is most of the experts suggesting that the normalized
cost of production, which is the fancy term for what should oil
sell for today in a real-world market, supply and demand being
what it is--China, India, the dollar, et cetera--is probably
about $75 to $80 a barrel. If it is trading at $126 this
morning, then we have a long way to go to get there.
Mr. Shadegg. Thank you.
The Chairman. The gentleman's time has expired.
The chair recognizes the gentlelady from California, Ms.
Solis.
Ms. Solis. Thank you, Mr. Chairman.
My question is for Dr. Romm. When I go back to my district,
people say, why do we not have more supply available and why
are we not drilling? What would your response be to the average
person on the street about what that means? Clearly we have to
articulate that what you said earlier about drilling, that
those supplies won't be made available for another 20 years.
What are some good things that we could be telling our
constituents about the reality of what is really happening out
there?
Mr. Romm. Well, I think people need to understand that it
took us 2 or 3 decades to get into this mess. Certainly, many
of us have been urging for quite some time that we need a much
more aggressive strategy on fuel efficiency and alternative
fuels. I am not certain that is a lot of comfort to your
constituents.
I certainly would tell them that in 2006, Congress opened
up most of the Gulf of Mexico to drilling. And according to the
Energy Information Administration, the Bush administration's
own EIA, there is about 41 billion barrels there. And we have
found about seven billion in the last 2 years.
Now, the coastal drilling--I don't know what else to call
it, because I think the public is confused. They think we are
not drilling offshore. We are doing a lot of drilling and
exploring offshore. According to the EIA, there is about 18
billion barrels, which is a lot less than what is in the gulf.
And it should be pointed out that of the 18 billion that the
moratorium applies to, 10 billion is off of California. I think
if we left it up to the state of California, then probably we
wouldn't be doing any drilling.
So we are not talking about much oil, and I think the
notion that if we opened up 40 billion barrels in 2006 to be
drilled, and since then oil prices have doubled, the
possibility that if you ended the moratorium to a lot less oil,
anything that would happen to oil prices is absurd. I think it
is incumbent upon political leaders like yourself to just give
the public straight talk.
I understand that the higher oil prices are, the more
people believe, hey, we should drill more. We are drilling
flat-out. We have been--and I am sure you have the statistics.
The Congress, the White House has been opening up land, on-
shore and offshore, for drilling.
Ms. Solis. I wanted to change the subject a little bit. We
talk about gearing up for renewable energy, new technologies.
We had a bill signed into law by the president last year, our
energy bill that included green jobs, the Green Jobs Act. Can
you give me some insight there about how this plays into
getting our dependency off of fossil fuels and what that means.
Maybe Mr. May could also talk a little bit about that, too,
because of your industry and how you are driven, and how this
transition may impact your area. Very quickly.
Mr. Romm. Sure. Well, I think it is very clear. This year,
we are going to spend $700 billion, American consumers are
going to spend $700 billion overseas to purchase oil. And as T.
Boone has said, there is no prospect that that number is going
to be lower for the next 10 years. That is going to be $7
trillion. Obviously, it would make a great deal of sense to
spend money in this country on plug-in hybrids, wind power,
solar photovoltaics, energy efficiency, and keep the money in
America paying people to do installation, to build better cars,
et cetera, than to send trillions of dollars overseas.
Ms. Solis. The criticism we get, though, if I could just
quickly say, is that we are actually going to decrease the
number of jobs here at home. That is an argument that is being
used by the other side of the aisle against this now, that if
we reinvest, it is going to take away from those jobs that
currently exist.
Mr. Romm. Well, we are importing almost, you know, about
two-thirds of our oil. So $700 billion out of, let's say, $1
trillion we are going to spend on oil this year is just going
to go to Saudi Arabia. It is just going to go Venezuela. It is
going to go to Russia. It is going to create jobs in those
countries. I don't see how that $700 billion can do anything
for Americans.
If we could spend $2 trillion over the next 10 or 20 years,
invest in this country, and then reduce that from $700 billion
to $200 billion, we would be bringing back a half-trillion
dollars each year, keeping it in this country. I just think it
makes obvious sense that that is the way to economic health and
well being.
Ms. Solis. Mr. May, just quickly. I know my time has run
out.
Mr. May. I think that two quick points to make. Number one,
the aviation space, the aviation sector feels that being
environmentally sound is in its own best interest for one very
simple reason. We are totally carbon-intensive right now in
terms of our fuel, and so the less we burn, the more
environmentally friendly we are going to be, and we are
desperate to spend less money on fuel in whatever way we can--
next-generation air traffic control, you know, winglets. We can
go down a long list of things that we are working on.
Ms. Solis. I would love to hear more about what that cost
would mean, or investment that would be made.
Mr. May. We will be happy to provide that to you.
Ms. Solis. Thank you.
Thank you, Mr. Chairman.
The Chairman. The gentlelady's time has expired.
The chair recognizes the gentleman from California, Mr.
McNerney.
Mr. McNerney. Thank you, Mr. Chairman.
The Chairman. I am sorry. Excuse me. I would like to
recognize----
Mr. McNerney. Yes, I thought the gentleman from Oregon
had----
The Chairman. I am sorry. Excuse me.
The gentleman from Oregon, Mr. Blumenauer.
Excuse me.
Mr. Blumenauer. Thank you.
I wanted to follow up on Ms. Solis's point because it seems
to me that saving a quarter-trillion, half-trillion dollars,
reinvesting it here, helping the United States move from a
position where we waste more energy than any country in the
world, to being ready for the next generation of generation.
And I wanted to start, Mr. May, just if we were to have 10,
20, 30, 40 billion dollars over the course of the next 5 years
that we can accelerate investments in helping industries like
yours reduce your carbon footprint----
Mr. May. Sure.
Mr. Blumenauer [continuing]. What impact could that
potentially make, if there is an extra, say, $10 billion
available to subsidize a new generation of aircraft, retiring
the elements of the fleet that may not be necessary because of
changing configurations of the market. What----
Mr. May. Well, congressman, the reality is we are in an
economic crisis. We are going to lose $10 billion this year.
That is $10 billion we are not going to invest in new Boeing
aircraft, for instance or a number of other changes. So you
know, trying to figure out what sort of national investment
needs to be made I think should be a high priority. And it
ranges from more money going into the development of biofuels,
biomass--Boeing has a project they debuted at the Farnsborough
Air Show just this last week--to environmentally sensitive CTL,
to a whole range of different technologies.
Next-generation air traffic control can save us billions
and billions of dollars, and hundreds of millions of metric
tons of CO \2\.
Mr. Blumenauer. In the course of a plane, is the takeoff
and the landing the most energy-intensive part of the trip?
Mr. May. I am going to guess it is, Congressman Blumenauer,
but I am not sufficiently expert to answer that without doubt.
I can get an answer for you.
Mr. Blumenauer. I would appreciate your information, your
reference that it is costing seven cents per passenger mile for
fuel.
Mr. May. For fuel today.
Mr. Blumenauer. I am interested in how that varies in terms
of trip distance.
Mr. May. That figure is an average figure across all, but I
will get you the details.
Mr. Blumenauer. I understand. Great. Thank you very much.
I am interested in this notion about a sustained draw-down
for a while. If we don't need 706 million barrels of oil, and I
think I am not quite where you are yet, Dr. Romm, but I do
think there is strong evidence that we could get by with
hundreds of millions of barrels less, that that were
transitioned into the fuel supply system so that there is
something that is sustainable over the next 2 or 3 years, and
concurrently the revenue that is generated from that would be
available to help the transition of technologies, to bump this
up, that it would be sort of a double benefit.
I mean, I am still stunned that a 2 percent world increase
in demand has over the course of the last year, we have seen
prices double. There is something going on in terms of
speculation and market manipulation it seems to me without
question. But using the SPR and a significant amount of it for
reinvestment as a longer-term strategy so that we have a 3- to
5-year bridge, that we can make a difference.
I am wondering if you would care to comment on that notion.
Mr. Romm. Sure. Well, we could sell 500,000 barrels of oil
a day for 4 years and run through the entire SPR, so you can
sort of decide for yourself how much of the SPR you think we
need. It is hard for me to believe we need even half of the
current SPR. Again, if the SPR were half as big as it is now,
it would still be 10 times the size of the amount of oil we
have ever released during crises.
So you know, running a half-million barrels of oil a day
for 2 years obviously would have an impact on prices and would
generate a lot of revenue to, you know, jump start the clean
energy transition. But you can ask Kyle's opinion.
Mr. Simpson. I disagree somewhat with Joe. I do think we
need to have a strong robust strategic petroleum reserve. I do,
however, think we ought to use it. It seems silly to have an
investment of that magnitude in the ground and not be willing
to use it for things like helping to pay for the transition,
the R&D that we need for the next generation of clean energy
technology.
Mr. Blumenauer. But just, would you feel comfortable if we
were making a strategic allocation of 100 to 200 million
barrels over the next 2 to 5 years as we are trying to work
this through? Is that something that is within your comfort
level, absent some other development?
Mr. Simpson. I don't know that I would go that big. I like
the idea of this exchange.
Mr. Blumenauer. Okay.
Mr. May.
Mr. May. I think the exchange works. What we suggested in
testimony, congressman, is that you set up a framework for how
it would be used. You may set target prices--a fill below a
certain level, as Congress has already directed, release above
a certain price level. Use it as a safety mechanism to balance
out what is going on.
Mr. Blumenauer. Thank you very much.
Thank you, Mr. Chairman.
The Chairman. Great, great. The gentleman's time has
expired.
The chair recognizes the gentleman from California, Mr.
McNerney.
Mr. McNerney. Thank you, Mr. Chairman.
Mr. Romm, I was actually I won't say startled, but
surprised by your prediction that the SPR would be gone by mid-
century. My personal feeling I think lies more with Mr. Simpson
that we ought to keep that around for the kind of purpose that
we need it for today, to keep the market speculation in check.
And you have shown with your testimony that, jeez, that has
been done a couple of times in the past. It works, and why
don't we keep some of this stuff around just for that purpose
if nothing else.
But I believe that there is a sufficient supply of oil out
there today. I am not talking about 5 years from now or 10
years from now, but there is a sufficient supply of oil out
there today, and the SPR can be used to start a medium-term
drop in the oil prices.
Do you all agree with that, that the SPR can be used in
light of an adequate supply today to initiate a medium-term
drop in prices?
Mr. Simpson. I believe it can. I think that you can, if you
do it right, you can help also address the next problem, which
is we need to get off of oil. So if you use the strategic
petroleum reserve to help keep the prices in a reasonable band,
whatever that may be, and use the money that is generated to
help develop the technology to move us on to the next
generation, then it is serving the dual purpose.
Mr. Romm. Could I just say----
Mr. McNerney. Sure.
Mr. Romm [continuing]. Imagine what happens if we don't use
it now. That means we are sending a signal to the market that
there is never going to be a price or economic reason we will
ever release it. So that is just going to encourage the
speculators. Hey, they have got all this oil they are never
going to use. It is just crazy, really.
Mr. McNerney. Well, I see the strategic petroleum reserve
being used to decrease the price. I think that is going to
happen maybe in the next presidency. But what I don't want to
see is that since we are importing 60 to 70 percent of oil,
that we are still a very high risk for our economy, for our
future.
But fortunately, we have the technology coming out today,
with plug-in hybrids, with all-electric vehicles that if the
Fed does its job in encouraging the American consumers to
become efficient, within a decade or so we will see most new
vehicles being plug-in hybrids or all-electric, and the whole
oil price issue will be a non-issue like it is today. I think
that is perfectly within the realm of possibility. Do you agree
with that?
Mr. Romm. I agree with half of that.
Mr. McNerney. Okay.
Mr. Romm. I just think that what is happening in China and
India means that if we did make this aggressive switch to plug-
in hybrids, we would shield the American consumer from high oil
prices. But I don't know that we would lower oil prices,
because demand is just going to grow as you see the
urbanization and industrialization of the developing world.
My reason for advocating the transition to clean energy and
plug-in hybrids is that fuel is substantially cheaper than
gasoline. So if you own a plug-in hybrid, you don't care,
really, what the price of gasoline is. I would hope, if we
could get China and India to transition over to electric
vehicles and clean energy, then we might be able to bring the
price of oil down.
Mr. McNerney. Especially if we were manufacturing those
items and sending them over there. So I think we are pretty
much in agreement. If we get ahead of the efficiency curve,
then we are going to be insulated from the high prices that are
inevitably going to come.
One other question, the strategic petroleum reserve is
there. It is a resource for us. Is there specific legislation
that any one of you would recommend in terms of how we would
legislate using that in the future?
Mr. Simpson. There is a piece of legislation, H.R. 6067,
that was introduced by Congressman Lampson and cosponsored by
the chairman and others on the committee, that would create,
would cause an exchange, and then would reinvest any revenue
that was gained as a result of the price differential between
light and heavy crude, to be invested in energy R&D across the
board, that has been authorized by the Congress, but the money
has not been available to fully fund those programs.
Mr. McNerney. Thank you.
I am going to yield back.
The Chairman. The gentleman's time has expired.
The chair recognizes the gentleman from New York, Mr. Hall.
Mr. Hall. Thank you, Mr. Chairman.
Mr. May, it is good to see you again, sir.
Mr. May. It is a pleasure, Congressman.
Mr. Hall. I was interested to see that you, that ATA
considers this an emergency. My constituents consider this
current situation an emergency. In New York's 19th district, I
am hearing from people who can't afford the gas to drive to a
job interview. I am hearing from school districts who are
wondering how they are going to power their buses and whether
they will be able to, or whether they will be required to
reduce the number of bus runs by cramming kindergartners on the
same bus with high-schoolers to save on diesel fuel. I am
hearing from families that are having to choose between a third
meal in a day and gasoline.
So as badly as the gulf coast was hit during Katrina, and
not to diminish by any means the suffering that they are still
going through down there in the recovery, the attempted
recovery from Hurricanes Katrina and Rita, nonetheless the
impression we have in New York, in the 19th district anyway,
and that I hear from others around the country, is that as a
whole our economy is suffering more today than it was during
and after Hurricane Katrina.
The impact that is being had by the increase in gas prices
on the economy across the board, whether it is aircraft, cost
of goods that is being increased, difficulty in the tourism
industry or the trucking industry, or go on down the list, is
more widespread and more pervasive and more of a crisis than it
was when we were hit by those two hurricanes in a row.
So I would make the argument that this is a crisis and that
there should be a release. I am happy to hear all of you saying
that. I guess the question is, how much over what period of
time. I totally agree that using the benefit--we actually stand
to for the first time maybe ever, to have the taxpayer sell
something that it bought earlier and make a profit at it. Most
of the oil there I would guess we bought at less than $50 a
barrel.
Mr. Romm. About $30.
Mr. Hall. An average around $30, so if we sell it at $120
or $130, whatever it may be--it may come down a little bit once
this starts to be known--it will nonetheless be at least double
what we paid for it. It is, as Mr. Simpson has said, an
opportunity for us to use this profit, whether it is a swap or
an outright sale, to bring renewable fuels and alternative
fuels to market and start to get ourselves an alternative, a
competitor for oil.
Last night, T. Boone Pickens spoke to our caucus. I
understand he also spoke to the Republican caucus as well. And
he has a very interesting plan that he is heavily investing in
himself, which is to use the wind belt up the central part of
the country from Texas to the Dakotas, and somewhat to each
side and both coasts as well, to produce enough electricity
that we could replace the natural gas that is currently being
used for power generation, so that can be diverted to
transportation, and that much less liquid fuel used in our cars
and trucks will mean more that can be used by the aviation
industry, and so on.
I think that I see in my district, I mean, I helped to
build with work gloves and a hard hat on down in the trench,
helped to put in geothermal systems that will cut air
conditioning costs to practically zero and cut heating costs in
the winter in our latitude to about 50 percent of what they
currently are. I could go on and on. You know the story between
the air, the solar, the wind, the geothermal, the tidal power
and so on. So the alternatives are there.
The question, which will probably use up my time, is many
of my constituents are already locking in purchase agreements
for home heating oil for this coming winter and are
experiencing some serious sticker shock, looking at $5 heating
oil, whereas last year it was $2 and something. So how could a
release from the SPR best help to take the edge off of home
heating oil prices in addition to gasoline?
I would ask you, starting with Mr. Simpson, if you could
each answer that please.
Mr. Simpson. Well, I think you go back to the exchange that
occurred in 2000. It was precipitated by a concern about
heating oil. It was a physical shortage of heating oil that
they were concerned about at that time. But if you could
release oil, have it refined into heating oil, and it is the
price of the oil that is going to drive the cost of the heating
oil, so if you put enough into the market that it does stop
some of the speculation and allows the price to get back to
what many have suggested is a much lower price under the
fundamentals, there is time to do that before the winter
heating season.
Mr. Hall. Thank you.
Mr. Romm. Well, I would just say, you know, if we released
a half-million barrels of oil a day for let's say 6 months,
that should drop the price substantially and that would
obviously benefit people who drive cars, who fly planes, and
who have to heat their homes with oil. If it didn't reduce the
price of oil substantially, that would tell us something very
important, which is that we are in a very big long-term supply-
demand mismatch and we had better work really hard to do what
T. Boone says.
So I think we, you know, I just think that we should find
out how much speculation, how much froth there is in the market
versus how much the price is actual supply-demand trends, and
releasing a fair chunk of oil from the SPR would tell us that
very quickly.
Mr. Hall. Mr. May.
Mr. May. Mr. Hall, I noted at the outset of my testimony
that this is not an issue that simply affects airlines or
truckers or agriculture or retail or the hospitality industry,
but consumers everywhere. I think anything this Congress does,
and I have recommended three legs to that stool, anything you
do to bring prices down is going to have a sweeping effect
across the whole economy.
I think it will impact the constituents in Poughkeepsie,
who are worried about home heating oil for the winter, as it
would in Wisconsin or anyplace else where it is particularly
cold. It is going to make a difference for transportation. It
is going to make a difference for the hotel and lodging
industry that is having such a tough time because we are
cutting back on the number of flights going to a lot of these
different destinations.
So I think the sooner the better, the more widespread, the
more sweeping the relief that Congress can provide, the better.
Mr. Hall. Thank you.
I yield back.
Mr. Blumenauer [presiding]. Okay.
Mr. Sensenbrenner.
Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
Technology has failed with microphones on the Republican
side, I guess I should say, I am not surprised. [Laughter.]
But that being said, let me say that release of crude oil
from the SPR is going to be temporary at best. It will cool the
futures market. There is no question about that. But if Dr.
Romm's fear is right, that there is something more to this than
speculation and a bubble that has been created, it seems to me
that everybody's going to have to step back and look at what to
do.
We have heard an awful lot of opposition led by the speaker
of the House and the other side of the aisle against drilling
anywhere. I would hope that if there is a release from the SPR
and nothing happens relative to immediate relief that is
significant enough to make a dent in the economy for the
better, then it is my hope that my friends over on the other
side of the aisle will realize that drilling is at least a part
of the answer.
I think that we on our side of the aisle, most of us at
least--myself included--know that drilling is not the exclusive
answer, but we think it should be a part of the answer and they
don't. So the only observation that I would make is I think
that releasing oil from the SPR is worth a try, but if it
doesn't work, then we have to do something more fundamental and
we ought to do it in September before this Congress adjourns
sine die.
I yield back.
Mr. Blumenauer. Thank you.
Mr. Cleaver.
Mr. Cleaver. Thank you, Mr. Chairman.
Mr. Pickens, T. Boone Pickens, suggests that unless we
reduce our dependence on foreign oil that a barrel of oil could
rise to $300 a barrel. Is that an exaggeration? Or do any of
you see that as the next normal?
Mr. Romm. Well, let me say, I don't think there is any
question that if we don't get off of our current path on oil,
oil prices are headed much higher. The CIBC actually projects
$200 a barrel of oil in 2 years. So no, I don't think--whether
it is, you know, $200, $250, $300, it is hard to say.
Mr. Cleaver. Yes, over 10 years is what he said. I should
have----
Mr. Romm. Right. And over 10 years, I think that is
reasonable. I think it is absolutely reasonable because after
all, it looks like current prices of oil aren't destroying
demand or generating huge amounts of extra supply. And demand
is just going to keep going up because of China and India and
other countries.
So you know, at some point, the price has to rise until
demand is destroyed or there is a lot of more supply. One of
those two things has to happen or else prices just keep rising.
Mr. May. Congressman, I am going to take a somewhat
different view. I think that my colleague is correct here in
one respect. On the other hand, I think there has been great
joy and sport taken in predicting $150, $200-plus oil by a
whole lot of folks in the trading community who are delighted
to see the expectation of increasing prices become a very
profitable sideline.
And I am not at all happy with that byproduct of this
speculation that is assisting in the process of driving prices
up. I do think there is a speculative bubble, and I happen to
believe that the marginal cost of production for oil is
somewhere in the $65, $75, $85 range, and that it is realistic
to expect $100 oil just as easily as it is $200 oil. And that
is a somewhat different view.
Mr. Simpson. Mr. Cleaver, one thing, it is kind of hard to
argue with Boone Pickens with as much money as he has made and
the predictions that he has made. I think the price could go up
and the price could go down. But the one thing that we, we may
not have a lot of control over that, but we have got tools that
we can use to keep us from having to be in this situation.
There are many technological advances that are either out
there to be deployed or just over the horizon that if we can
get some pressure released by trying--and I thought Joe's point
was great. If we release oil from the reserve and it works to
drive prices down, great. It we release oil from the reserve
and it doesn't work, that is a wakeup call. We have got to get
out of this situation, and we have the tools to do that.
Mr. Cleaver. What would be a reasonable test period to see
whether or not the release of oil from the reserve is impactful
on the economy? I mean, is it for one quarter? Should we wait a
year? I mean, if it doesn't drop the prices at the pump, I
mean, do you think people are scared because of Freddie Mac and
Fannie Mae, I mean, that would generate I think a crisis in
this country.
I have changed. I used to think we had a transportation-
based economy. I think we now have a confidence-based economy.
You know, if the confidence of the public drops, we are in
trouble. So what period of time--I happen to support it, but I
am also at the same time frightened by the prospects of it not
dropping the prices of oil.
Mr. Romm. Could I just say that one of the reasons why no
one ever uses the SPR is that it is always argued in the
highest levels of the government that that will show that the
government is scared, and it is a crisis, and that is why they
are releasing the SPR, so they never release the SPR for that
reason. And so as I say, I personally think the SPR is
relatively useless.
I would say 3 to 6 months. If the president announced that
he is going to sell half-million barrels a day for 3 to 6
months, and he started doing it and nothing happened, then
people should panic because that means T. Boone is probably
right, and we are headed to $300 unless we really make a
concerted effort to end our addiction to oil. And that I think
would be worth knowing also.
Mr. Simpson. And I would say, I think 3 to 6 months,
history shows that if the announcement is made, you see the
reaction and then you begin to--it takes time to get into the
gasoline markets because it takes time to refine the product
that you have already got. But I would also make an observation
that I wouldn't say I am going to release 500,000 barrels a day
every day for the next 3 to 6 months.
I would say we are going to release a set amount of oil,
and make it 70 million barrels or 90 million barrels, and then
let that uncertainty as to when that oil is going to come out
will further tamp down the markets. But if you--and they might
sell it all at once, but they might trickle it out and let it
go at different times.
Mr. Cleaver. I apologize for being late. I was over at the
House in another meeting, so you may have already dealt with
this. But do you have any dates and times--I probably should
know this--when we deployed the reserves previously? You may
have already talked about it.
Mr. Simpson. Sure. And in 1991, right before Desert Storm,
and I will expand a little bit on what I said earlier. The
president announced on January 16 that we were going to attack
Iraq, and that we were going to release 34 million barrels from
the strategic petroleum reserve. The next day, the price of oil
dropped by one-third, $10.
I want to point out that that was not the only thing that
caused that to happen. In October of the previous year after
the invasion of Kuwait had occurred, there was a test sale. The
secretary of energy said, you know, we haven't used the
strategic petroleum reserve in a while, not sure the companies
really are aware of how to interact with us on this, so we are
going to do a four million barrel test sale, which was a pretty
good forecast that the government was going to use it. That
actually helped to dampen prices a bit in the fall.
And then there was a coordinated effort with the
International Energy Agency, our allies going into the war,
that they released some oil. It was a coordinated effort. The
president made his announcement and the price just dropped, and
they actually didn't sell the 34 million barrels. They only
sold 17 million, but the markets stabilized.
And then there was 1996, when the Congress directed the
Department of Energy to sell 227 million barrels of oil to help
balance the budget. It was enacted into law, signed by the
president I think on April 26. Prices of gasoline were rising
dramatically, particularly in California where there had been a
refinery fire and some other things, a whole multitude of
things coming in place.
And President Clinton made an interesting decision. It is
smart to sell oil from the reserve. If you have to raise $227
million, why not sell the oil as fast as you can while the
prices are high and get value for the taxpayer back? It was a
very good move. Coincidentally, the price of gasoline dropped
the next day and continued to fall through October of that
year.
The heating oil exchange in 2000 is another example where
there was a shortage. The price dropped I think around 30
percent at that time. And then after Hurricane Katrina, even
though the problem after Hurricane Katrina was more of a
refining capacity problem, or at least equally a refining
capacity problem because the refineries got flooded out, as it
was a loss of production, the fact that they released oil from
the--announced the release of oil from the reserve caused the
price to drop fairly dramatically.
Mr. Cleaver. One more question.
I apologize, but when we have people with your expertise
here, I want to try to squeeze every drop from you. And this
is--I am asking you to be swamis almost I guess, but if the
U.S. released from the strategic petroleum reserve 200 barrels
or 300 barrels, whatever, a large number, and then Japan also
announced that they were going to release a couple of hundred
thousand barrels, and our friends around the world, if we have
any left, do you think that that would have even a greater
impact and success in dropping the price at the pump would be a
lot more significant if more than the U.S. announced a drop,
that they were going to release the strategic petroleum reserve
in large amount?
Mr. Simpson. Well, it has worked in the past, so I would
think the more oil you could put into the market, the better
the result would be.
Mr. Romm. Again, I think the other impact would be is it
would send a signal to the market that those reserves weren't
in fact just dollars, you know, money stuffed under a mattress
that was never going to be used, but in fact we would actually
use it for this very purpose. As long as the market thinks we
are never going to use it, then the speculative bubble is just
going to grow.
Mr. Cleaver. Thank you, Mr. Chairman.
Mr. Blumenauer. Mr. Hall.
Mr. Hall. Mr. Chairman, thank you.
I just wanted to ask one more question. And before I do, I
want to with all due respect refute the statement by the
ranking member that Democrats are against drilling. In fact,
last week I believe we voted for the Drill Act that attempted
to make oil companies drill on the 68 million acres in the
lower 48 and some of the 20 million acres that are available in
Alaska that they are sitting on and not drilling on.
Coincidentally that same day, the administration announced
the sale of 2.6 million acres, a lease sale of 2.6 million
acres in the NPRA in Alaska, which obviously they could have
done last week, last year, or 5 years ago, whenever. We were
not stopping them and we are absolutely for drilling on the
land that is already leased, and there is plenty of that.
But the question I have here goes to refining capacity. It
is my understanding that there was one application in the last
30 years in this country for a refinery. It was granted and
that refinery was never built. Is that accurate, to your
knowledge?
Mr. Simpson. There haven't been any refineries built in the
last 30 years. I think that is right.
Mr. Hall. But it is not because the applications are being
denied.
Mr. Simpson. It is not necessarily. It is a very
complicated, obviously, process to do a green-build of a
refinery. It is also not true that we have less refining
capacity. We have actually a lot more refining capacity than we
did 30 years ago. There has been expansions at existing
facilities.
Mr. Hall. Just quickly, because I am over time already, but
I just wanted to say, my understanding is that our refineries
today are running at just below 90 percent. Does that sound----
Mr. Simpson. That sounds about right.
Mr. Hall. About right. So to be clear, given the market-
calming impact and supply-increasing impact of a release from
the SPR, there should not be any credence to arguments that a
lack of refining capacity would mitigate the effect of an SPR
release.
Mr. Simpson. That is true, because you are releasing oil
into a global--even though that oil would stay in the United
States, it means that there is some oil that would not then
have to come in here that could go to other places and it would
have a global effect.
Mr. Hall. Thank you. Okay. I just wanted to clarify that
refining capacity doesn't stand in the way of a release in the
SPR having the desired effect.
I want to thank you all for your testimony.
I yield back.
Mr. Cleaver [presiding]. Thank you, Mr. Hall.
The acting chairman just departed here. There is a bill on
the floor, which makes me the acting chair and the ranking
member. I am all-powerful now. [Laughter.]
I have been waiting for this for years.
But if we can, you know, maybe close out this session by
looking--let's look at the other side of all of the things we
have been talking about. There are those who would suggest that
because oil is finite that we are foolish to release the
strategic petroleum reserve and think that we will drop the oil
prices and that everything is going to be fine, everybody is
going to be happy, divorces will be reduced, life is good
again.
And the truth of the matter is, we are dealing with a
finite substance and that the next generation will deal with
this problem unless we deal with it. There are some things
happening. Consumption has dropped. Americans are grudgingly
moving from the 12-cylinder calls. Amtrak ridership is up. In
my community, the area transportation authorities, buses, are
increasing their ridership. The big bus companies in the
country are riding--in fact, some of the Amtrak lines are sold
out of seats because of people making long-term plans for
Thanksgiving and Christmas. I mean, they are selling out on
Amtrak all the way into December.
Deaths--automobile deaths are down because people are not
driving. I mean, you look at a number of indicators and you
think, well, you know, maybe Americans need to face the reality
that prices at the pump, you know, are not going to go down and
our society would be better off if they didn't because we can
now start doing what we should have done.
Is that too tough a philosophy? You are not going to expect
any candidate to say that, but in reality, just in here where
nobody is listening----
Mr. Simpson. Do you want to take that on?
Mr. Romm. Well, let me--obviously, we have squandered the
last 2 or 3 decades. And all the analyses show is that, you
know, cars last 20 years and behavior patterns become very
ingrained. So yes, if you want to get off of our current path,
you have to work really hard for 10, 15 years, like T. Boone
Pickens or Vice President Gore have said.
Otherwise, the oil prices are headed up. I think the
American public has figured that out, which is why they are
buying different cars and changing their behavior. I don't view
that as an argument not to sell off the SPR. I mean, if--and I
would just repeat what I said in my testimony--one of two
things will happen. Either oil prices will drop or they won't.
If they drop, that is a good thing. The SPR has worked. If they
don't, then we have learned that we are in a very big problem
that in fact we are at peak oil, or near it, which I think is
actually the case. In which case, it will be incumbent on
Congress to take the very strong action that people have been
urging to finally end our addiction to oil.
So yes, I think the American consumers need to get used to
$4 oil and it will then be $5, $6, $7, unless their
representatives take pretty strong actions to reverse the
course.
Mr. Simpson. I would just add to that, a release from the
reserve is not going to be a permanent solution. It has not
been in history and it won't be again. But we are in an era now
where prices are higher. It is remarkable to me the number of
new energy technologies that are coming out and the pace at
which they are coming, and to see T. Boone Pickens come out and
propose what he proposes is fairly remarkable.
But I think we have been a high-price situation for a long
enough time now that we are beginning to see a transition in
the way American consumers think. They are buying smaller cars.
They are parking the Tahoes. They are taking mass transit. They
are improving the efficiency of their homes, which is a very
useful thing. But there is no reason to put them at the mercy
of those who would drive the price up higher than the market
fundamentals would be. The price is not going to fall back down
to a point where I think we are going to see just, oh gee, that
was a bad 6 months.
Mr. May. Congressman, at the risk of prolonging this, I
think the equation is real simple. The longer you debate this,
the longer you talk about it, the more people that are going to
lose their jobs, the more communities that are going to lose
service. It is time to have the Congress do something, and as
quickly as possible because it is a crisis.
Mr. Cleaver. Thank you. Thank you.
We appreciate you coming. Since I am the power here, we are
going to increase your honorarium for appearing before this
committee. We appreciate--I think all members will have time to
submit remarks to the chairman for the record.
We appreciate very much your time, and I appreciate your
talent. You are very informative, and I appreciate it very
much. Hopefully we will act quickly. That is one of the
positives we have gotten from this hearing today. Thank you
very much.
The meeting is adjourned.
[Whereupon, at 10:59 a.m., the committee was adjourned.]