[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 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (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.]
