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




                                                           S. Hrg. 110-

OIL BUBBLE OR NEW REALITY: HOW WILL SKYROCKETING OIL PRICES AFFECT THE 
                             U.S. ECONOMY?

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

                                HEARING

                               BEFORE THE

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 25, 2008

                               __________

          Printed for the use of the Joint Economic Committee


                  U.S. GOVERNMENT PRINTING OFFICE
44-802                    WASHINGTON : 2008
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001








                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
               SENATE                     HOUSE OF REPRESENTATIVES
Charles E. Schumer, New York,        Carolyn B. Maloney, New York, Vice 
    Chairman                             Chair
Edward M. Kennedy, Massachusetts     Maurice D. Hinchey, New York
Jeff Bingaman, New Mexico            Baron P. Hill, Indiana
Amy Klobuchar, Minnesota             Loretta Sanchez, California
Robert P. Casey, Jr., Pennsylvania   Elijah E. Cummings, Texas
Jim Webb, Virginia                   Lloyd Doggett, Texas
Sam Brownback, Kansas                Jim Saxton, New Jersey, Ranking 
John E. Sununu, New Hampshire            Minority
Jim DeMint, South Carolina           Kevin Brady, Texas
Robert F. Bennett, Utah              Phil English, Pennsylvania
                                     Ron Paul, Texas, Texas
                  Michael Laskawy, Executive Director
            Christopher J. Frenze, Republican Staff Director








                            C O N T E N T S

                              ----------                              
                                                                   Page

                      Opening Statement of Members

Statement of Hon. Charles E. Schumer, Chairman, a U.S. Senator 
  from New York..................................................     1
Statement of Hon. Kevin Brady, a U.S. Representative from Texas..     4
Statement of Hon. Carolyn B. Maloney, Vice Chair, a U.S. 
  Representative from New York...................................     6
Statement of Hon. Sam Brownback, a U.S. Senator from Kansas......     7
Statement of Hon. Amy Klobuchar, a U.S. Senator from Minnesota...     9
Statement of Hon. Robert F. Bennett, a U.S. Senator from Utah....    10

                               Witnesses

Statement of Dr. Daniel Yergin, Co-founder and Chairman of 
  Cambridge Energy Research Associates, Washington, DC...........    13
Statement of Dr. Frederick Joutz, Professor of Economics, George 
  Washington University, Washington, DC..........................    16
Statement of Mr. John ``Skip'' Laitner, Director, Economic 
  Analysis, American Council for an Energy-Efficient Economy 
  (ACEEE), Washington, DC........................................    18

                       Submissions for the Record

Chart entitled ``Americans Are Spending Double on Gasoline Now 
  Than They Spent in 2001........................................    40
Prepared statement of Senator Charles E. Schumer, Chairman.......    41
Prepared statement of Representative Carolyn B. Maloney, Vice 
  Chair..........................................................    44
Prepared statement of Senator Sam Brownback......................    46
Prepared statement of Dr. Daniel Yergin..........................    49
Prepared statement of Dr. Frederick Joutz........................    64
Chart entitled ``Crude Oil's Share of GDP Has Doubled''..........    86
Prepared statement of Mr. John ``Skip'' Laitner..................    87

 
OIL BUBBLE OR NEW REALITY: HOW WILL SKYROCKETING OIL PRICES AFFECT THE 
                             U.S. ECONOMY?

                              ----------                              


                        WEDNESDAY, JUNE 25, 2008

                     Congress of the United States,
                                  Joint Economic Committee,
                                                    Washington, DC.
    The committee met at 9:30 a.m. in room 106 of the Dirksen 
Senate Office Building, The Honorable Charles E. Schumer, 
Chairman, presiding.
    Senators present: Klobuchar, Brownback, and Bennett.
    Representatives present: Maloney, Cummings and Brady.
    Staff present: Christina Baumgardner, Heather Boushey, 
Tamara Fucile, Nan Gibson, Colleen Healy, Aaron Kabaker, 
Michael Laskawy, Ted Boll, Chris Frenze, Jim Gilroy, Rachel 
Greszler, Jeff Schlagenhauf and Jeff Wrase.

OPENING STATEMENT OF HON. CHARLES E. SCHUMER, CHAIRMAN, A U.S. SENATOR 
                             FROM NEW YORK

    Chairman Schumer. The hearing will come to order. I want to 
thank everybody for being here. I apologize for being a bit 
late.
    Today, we're talking about the skyrocketing price of oil, 
and we want to explore whether the high price of oil is a 
bubble or a permanent, painful reality, or some of both; how it 
will affect our economy and what we can do to reduce prices and 
break our dependence on foreign oil.
    We know that gas prices and the high price of oil and oil 
products is the number one issue in America. Everywhere we go--
Legion halls, parades, weddings--this is one of the very first 
things that people bring up.
    I wouldn't even say ``one of the very first things;'' this 
is the very first thing almost everyone brings up. It's no 
wonder that Congress has held about 40 hearings on oil and 
energy policy this year, 11 this month alone.
    Now, we're all looking to find answers to some pressing and 
important questions, so we can shape the right economic and 
energy policies, going forward. I'm hopeful we'll have some 
luck answering those questions today from our very 
distinguished panel, including Dr. Dan Yergin, a Pulitzer 
Prize-winning author of ``The Prize,'' and one of the world's 
foremost experts on oil and energy.
    We eagerly look forward to hearing from him, and from Dr. 
Frederick Joutz and Skip Laitner, shortly, and I thank all 
three of you for coming and for going out of your way to be 
here.
    I think that everyone would like to believe that high oil 
prices are a bubble; that you burst the bubble and the price 
will come down and stay down. We all hope that's the case, but 
it may not be so.
    Many would like to believe that there's a silver bullet 
that could pop the bubble, but if there's an oil bubble or 
prices temporarily decline and we put off doing the necessary 
things we have to do, like conservation or investing more in 
alternative fuels incentives, we'll be even further behind than 
we are now, from breaking our foreign oil dependence.
    One thing is clear: Demand is on the rise, especially in 
rapidly-developing large countries like China and India, and, 
in this global economy, they can compete for oil that's 
produced here or overseas as well as anybody else, and the high 
price wins.
    I heard the other day, that there will be as many new cars 
in the developing world as there are total cars in the U.S. 
over the next ten to 15 years. In other words, if every 
Chinese, Indian, Brazilian who never had a car buys one, that 
will be equal to the number of cars we now drive here.
    In fact, the Energy Information Administration is 
projecting that oil prices will have increased by almost 70 
percent from 2007 to 2008, gasoline will have increased by 35 
percent, and diesel prices will have increased by 50 percent.
    The question everyone asks is, if demand has not gone up by 
70 percent, why do prices go up by 70 percent, and that's the 
question we want to answer here, because that leads to the 
belief that there is a bubble.
    I also think it's interesting that the big oil companies 
and OPEC are blaming speculators for out-of-control prices, 
when they may be much more of the cause. They're sort of 
diverting attention.
    It isn't as cut and dry, at least to me. Speculation may be 
exacerbating the demand problem, but if we guess wrong on the 
cause, we're going to put off the right solutions.
    There are some things that can be done to curtail the 
impact of speculation, like raising margin requirements and 
strengthening regulations, and I believe some of these may do 
some good. I'm for them.
    But they may not solve the problem in the long run, 
particularly if we think these are the only things that should 
be done. The reality is that we need to look beyond quick fixes 
that will do little for consumers as they pay record prices at 
the pump.
    Now, we have some charts up here. Many consumers are 
experiencing stagnant wages, sending a much bigger slice of 
their paychecks into their gas tanks.
    Americans are spending twice as much on gasoline today than 
they spent in 2001. Across the nation, families are being 
shaken down for about five percent of their take-home pay, just 
to pay the gas man.
    Here is the chart that shows the percentage of disposable 
income that a family pays. It's doubled.
    [The chart entitled ``Americans Are Spending Double on 
Gasoline Now Than They Spent in 2001'' appears in the 
Submissions for the Record on page 40.]
    Low- and middle-income families are particularly hard hit. 
The recent data from 2006, when gas prices were only $2.50 a 
gallon, shows that the lowest 20 percent income level, spent 
ten percent of their paychecks on gasoline, and that's a scary 
figure for people who are trying to scrape by every day and 
have to take their cars to work, oftentimes.
    For all the talk about how American families have 
benefitted from the President's tax cuts and for all the 
emphasis that Senator McCain is placing on making those tax 
cuts permanent, the simple, undeniable--you can look it up--no-
spin truth is that the average American family is paying far 
more in higher gasoline prices this year, than they received in 
the Bush tax cuts.
    So a lot of Americans are wondering what Washington can do 
to bring down oil prices and reduce our dependence on oil.
    First, let me tell you what Washington didn't do: With 
seven years under the belt of this Administration, the White 
House has taken zero proactive steps to reduce our dependence 
on foreign oil--zero.
    If it wasn't for the recent Democratic Congress passing 
long overdue modest increases in fuel efficiency standards for 
cars, President Bush would have left the White House with a 
spotless record, committing no sins against big oil or OPEC.
    Now, with almost 70 percent of the oil we consume, going 
into our gas tanks, it's a crime against our future, that since 
1995, so many here in the Congress, and, of course, in the 
White House, opposed increasing fuel economy standards for so 
long.
    Even now, in the midst of $140 a barrel oil and $4 gasoline 
prices, the only solution some of my friends on the other side 
of the aisle are familiar with, is drilling in the Arctic 
Refuge. By 2018, ten years from now, ANWR might produce enough 
oil--and this is not my estimate; this is the Department of 
Energy--to decrease gas prices by one to four cents a gallon in 
2018.
    The only short-term way to increase supplies right now, 
leads directly to the sands of Saudi Arabia. As we see here, 
OPEC is producing well under its capacity, despite record oil 
prices.
    Saudi Arabia is about the only country that has extra 
capacity right now. It's the 800-pound gorilla of oil 
production, and even after modestly increasing production this 
weekend, they still have excess capacity.
    Most experts believe they could produce another million 
barrels of oil, which would have an immediate impact on price. 
Today, Saudi Arabia is still producing this year, below its 
2005 production level, and that's not because of lack of 
maintenance or wells running dry, as it is in, say, Russia or 
Venezuela or Mexico.
    But, having said that, in the long term, we must address 
the demand side of the oil equation. That is the only answer, 
in my judgment.
    One good thing that came out of the oil shock in the '70s, 
was the push for dramatic energy conservation. Jimmy Carter is 
not regarded as a very successful President, but a lot of the 
things he did had positive effects on oil prices for a decade 
or more later.
    Why don't we do more of it now? It would reduce prices at 
the pump and be the easiest thing to accomplish legislatively. 
And we'll hear about this from Mr. Laitner, but California--
people forget this--California made herculean efforts under 
Governor Jerry Brown, over 20 years ago, during his 
Administration, to reduce consumption.
    They put into effect all kinds of conservation measures--
for buildings, utilities, appliances--and now California, the 
car capital of the country, is well below the national average 
in energy use and consumption.
    As one environmentalist said, alternative fuels are the 
sizzle, but conservation is the steak. Even as someone who 
supported targeted drilling in the East Gulf--I was one of the 
few Democrats who voted for it. I said, let's drill in the East 
Gulf. I didn't see much environmental damage, and we should do 
more drilling in the East Gulf.
    That's closest to the refineries; it probably has the 
greatest known capacity of untapped oil and gas.
    You still can't drill your way out of the problem. If you 
don't do conservation, if you don't do alternative energy, and 
you don't tell the big oil companies they can no longer run 
energy policy in America, we won't succeed, plain and simple.
    So there are two main things, in my mind, that set our 
nation way off track on energy prices: First, because there 
were low prices--and that is good--we were complacent. We 
didn't prepare for the future as the handwriting was on the 
wall.
    Second is the power of the oil, utility, and car companies, 
which for years and years and years, prevented us from enacting 
real alternative energy programs.
    So there are a lot of questions. I'm sure that not all of 
my colleagues will agree with everything or even most of what 
I've said, but I think we ought to have a debate on this very 
important issue, and look at the causes, before we look at how 
we're going to solve the problems.
    So, with that, let me call on Congressman Brady for his 
opening statement.
    [The prepared statement of the Honorable Charles E. Schumer 
follows appears in the Submissions for the Record on page 41.]

 OPENING STATEMENT OF HON. KEVIN BRADY, A U.S. REPRESENTATIVE 
                           FROM TEXAS

    Mr. Brady. Thank you, Mr. Chairman. It's a pleasure to join 
in welcoming the panel of distinguished witnesses before us 
today. The topic, not just of current oil prices, but future 
oil prices and gas prices, is a concern of all Americans, and 
they want Congress to take action now to address this problem.
    Earlier this year, Congress took great pride in announcing 
and passing legislation providing economic stimulus checks to 
America, but data released last week, shows that the historic 
rise in gas prices, has wiped out the economic impact of those 
stimulus checks.
    Average families in America are paying $535 more this year 
than last, so those $600 rebate checks, economic stimulus 
checks, are not going to buy a family's computer or new washer 
and dryer, but is being poured down our gas tanks and having an 
effect, unfortunately, on our economy.
    As witnesses will testify about today, higher oil and gas 
prices are largely due to the fact that global demand is rising 
faster than global supply.
    In recent years, rapid economic growth in China, India, and 
elsewhere, have raised living standards, but also resulted in 
rising demand for oil, gas, and other commodities. Gasoline 
price controls and subsidies in many countries, have also 
contributed to demand pressures.
    Meanwhile, supply is growing at a much slower pace, and 
we're not producing as much as we need. Instead, we're relying 
on unstable countries to fuel America.
    For example, recent instability in Nigeria, has led to a 
drop in production there, and other producers have tightened 
their supplies, as well. We can no longer afford to rely on 
unstable countries for our energy needs.
    And while Congress is eager to place the blame elsewhere, 
whether it's OPEC or big oil or big autos, the fact of the 
matter is, we ought to take a square look in the mirror. We 
need more American-made energy, and this Congress has resisted 
it. We need more supply.
    Three decades ago, during Jimmy Carter's energy crisis, 
this country imported just one-third of energy and produced the 
rest ourselves. Today, it is almost exactly the opposite; we 
import two-thirds of our energy and take responsibility for 
only one-third.
    Our goal should be to take responsibility for two-thirds 
once again. It seems to me, reading Dr. Yergin's testimony, 
where he talks about the either/or phenomenon, this Congress 
has been eager to offer a false choice to the American public: 
Either renewable energy or traditional energy.
    The truth of the matter is, for us to have both stable 
energy prices and to transition to a more balanced portfolio, 
we need both.
    This Congress is committed to conservation through fuel 
standard increases. We've committed to renewable energies by 
extending the Republican tax credits on wind, solar, hybrids, 
and a number of other alternative sources.
    What we've refused to do, is commit to creating more 
traditional energy here in America. We must thoughtfully 
explore the potential of our own resources, open up closed 
areas to exploration and development.
    Beneath America's land and seas, lie an estimated 100 
billion barrels of oil and 650 trillion cubic feet of natural 
gas. Unfortunately, this Congress has failed to act in an 
effective and meaningful manner to open up those thoughtful 
resources.
    Democrat leaders have offered no solutions, only gimmicks, 
from suing OPEC to windfall profits taxes, to the latest use-
it-or-lose-it approach, which has been universally derided by 
every geologic scientist in the country.
    I hope that we can work together to craft responsible 
energy solutions that America needs and wants; more American-
made energy supply, more renewables, more conservation, so we 
can again take more control of our own daily energy needs.
    With that, I would yield back.

  OPENING STATEMENT OF HON. CAROLYN B. MALONEY, VICE CHAIR, A 
               U.S. REPRESENTATIVE FROM NEW YORK

    Vice Chair Maloney [presiding]. I'm Congresswoman Maloney, 
and I, first of all, would like to welcome all of the 
panelists. We look forward to your testimony, and I would like 
to thank Chairman Schumer for his very timely and important 
hearing.
    Just a few months ago, it was shocking to see oil rise 
above $100 a barrel. Now it's trading at record highs above 
$138 per barrel, double the price it was last year.
    Consumers are feeling the pinch in their pocketbooks, and 
whether it's paying over $4 a gallon at the pump, or seeing 
higher grocery bills as a result of rising fuel costs, the 
question on the minds of all Americans, is, are high oil and 
gas prices here to stay?
    Many energy analysts believe that a large part of the 
recent rise in oil prices, has been caused by increased demand 
by developing countries such as China and India.
    Oil prices are expected to rise alongside the expansion of 
these countries over the long term. In the short term, the 
economic downturn here in the United States and the weak 
dollar, have also contributed to rising oil prices.
    The Federal Reserve has lowered its target rate to two 
percent, which has led to a fall in the Dollar relative to 
other currencies. Instead of seeking the safe haven of U.S. 
Treasury Bills, investors have been looking to commodities, 
including oil, as a hedge against inflation, thereby driving up 
the prices.
    As our witness, Daniel Yergin, puts it, oil has become 
``the new gold.'' Financial markets and oil markets have become 
intertwined as never before, as the amount of non-commercial 
trading of oil has increased.
    Congress must scrutinize how much of the run-up in oil 
prices is due to speculative manipulation. One potential way to 
deter speculators from driving up the prices, is in several 
bills before Congress.
    It would prohibit anyone without the ability to actually 
accept delivery of crude oil, from buying it as a futures 
contract. There are others for disclosure and increasing the 
margin requirements.
    Americans are paying a hefty price for the Bush 
Administration's failure to pursue a sensible energy strategy 
over the past seven years. Meeting the energy needs of our 
nation, will soon require achieving greater efficiency, 
conservation, and investing more in renewable fuels.
    We cannot drill our way out of this problem, as the 
Administration would have us believe. The U.S. has less than 
two percent of the world's oil supply, but we currently use 24 
percent.
    Drilling in the Arctic National Wildlife Refuge would not 
yield oil for ten years, and at its peak production in 22 
years, it would only save consumers about two cents a gallon on 
gas.
    Oil companies already have 68 million acres of federal oil 
reserves leased for development, and the House will soon take 
up legislation, H.R. 6251, that will require oil companies to 
use those leases or lose them.
    We are building on steps that the Democratic-led Congress 
has already taken to lower oil prices and reduce our dependency 
on oil, by expanding tax incentives for renewable energy and 
creating green jobs to spur American innovation and business 
investment.
    The energy bill signed into law in December, included 
provisions to combat oil market manipulation and increase 
vehicle fuel efficiency to 35 miles per gallon in 2020, the 
first Congressional increase in more than three decades for 
fuel efficiency.
    This Spring, we suspended the Strategic Petroleum Reserve, 
which will put more oil on the market and help drive down 
gasoline prices. We have overridden the President's veto of the 
new Farm Bill, which makes an historic commitment to more 
affordable, homegrown, American biofuels and increases 
Commodity Futures Trading Commission authority to detect and 
prevent manipulation of energy prices.
    Congress continues the fight to bring down the price of gas 
and make America more energy independent. Our nation's 
continued prosperity depends on meeting the challenge of our 
energy needs and bringing relief to American families.
    Again, Mr. Chairman, we thank you for holding this hearing 
and we look forward to the testimony.
    [The prepared statement of the Honorable Carolyn B. Maloney 
appears in the Submission for the Record on page 44.]
    Chairman Schumer [presiding]. Thank you, Vice Chair 
Maloney. Senator Brownback.

 OPENING STATEMENT OF HON. SAM BROWNBACK, A U.S. SENATOR FROM 
                             KANSAS

    Senator Brownback. Thank you very much, Mr. Chairman. It's 
always a pleasure to join you, even if your statements 
sometimes can be a bit one-sided. I guess that's why we have 
two sides up here.
    I am reminded that on the price-setting equation that I 
learned in basic economics, that there are two factors that go 
into price. I don't think they changed this formula much over 
all the research over all the years. This one seems to be 
pretty well set.
    You have a supply curve and you have a demand curve, and 
where those intersect at a point called price, and that those 
are the two pieces to setting the fundamental price. If the 
panel disagrees with that, I hope, later on, that you'll 
correct me and correct the economics for the world.
    But you have two pieces to this. I think, clearly, what you 
have to do to work on both sides of the equation. You've got to 
work on the supply side of the equation and you've got to work 
on the demand side of the equation, if you're going to be able 
to try to bring price down. You want less demand, you want more 
supply, if you are to be able to bring that price point down.
    We can work, I guess, against fundamental economics; we can 
try to jimmy-rig something, but at the end of the day, this is 
what's going to happen globally.
    We've been pretty good, the United States has, on demand 
side. If you look at our gasoline growth curve, it's been 
fairly flat, pretty stable. It's gone up a little bit, not a 
lot.
    You look at the world demand for gasoline, and it's 
skyrocketed. We all know that; we all know that we can control 
a certain piece of the demand side of the equation within our 
own country, or have at least impact on that, but we can't on 
the world situation.
    We also know we can have more impact on our supply here at 
home and that those two pieces go together. Now, the Democrat 
response, and they've had one, windfall profits tax, more 
regulation, no nuclear energy, those go at driving price up. 
They don't get you more supply in the system.
    I guess they could reduce demand by increasing the price, 
artificially, with more taxes, and that could get at your 
demand in the U.S. It doesn't get at your global demand point 
at all, on global prices, because we can't put those taxes on 
global--people around the world.
    That's not going to get the issue there. Nothing done on 
production. We've certainly done a lot of expansion on ethanol 
production, on biofuels. I don't know anybody that's opposed 
to--I guess some people are opposed to expansion of biofuels.
    We're certainly looking at cellulosic ethanol. We're 
getting long, strong support for that. Hopefully, on biodiesel, 
we'll be able to go forward.
    Wind, we're going to be able to go forward. We all support 
that.
    At the end of the day, you still have a gasoline-based 
system at the present time and into the near future, and you're 
going to need more oil production and more oil supply. And if 
you're saying we're going to hold out of production, major 
tracts that have the highest potential for production, that's 
going to reduce your overall supply equation in this country.
    I want to read a quick quote here that was said by a 
gentleman I think most people are familiar with. It says: 
``America must get to work producing more energy. The 
Republican program for solving economic problems, is based on 
growth and productivity. Large amounts of oil and natural gas 
lay beneath our land and off our shores, untouched, because the 
present Congressional majority--saying that in parentheses--
seems to believe that the American people would rather see more 
regulation, more taxes, and more controls, than more energy. It 
must not be thwarted by a tiny minority opposed to economic 
growth, which often finds friendly ears in regulatory agencies 
for its obstructionist campaigns. Make no mistakes, we will not 
permit the safety of our people or environmental heritage, to 
be jeopardized, but we are going to reaffirm that the economic 
prosperity of our people, is a fundamental part of our 
environment.''
    Now, I'd like to take credit for that original thought, but 
it's paraphrased slightly, spoken 28 years ago by Ronald Reagan 
when he accepted the nomination to be the Republican nominee 
for President, when he was nominated that year.
    We have got to work on the supply side of this. We've got 
places we can agree on, a number of these issues, but until you 
get at that fundamental of supply as my colleague to the right, 
Senator Bennett noted, when his dad was a Senator, they started 
talking about the oil shale region in Utah and its 
availability, and more oil there than in Saudi Arabia, and yet 
it has been held out of production.
    It has not been allowed to be explored. It is past time, 
and we can do it in an environmentally sensitive fashion. We 
need to do that; we need more flex-fuel vehicles. We're going 
to have a bipartisan bill to require that half of our fleet be 
in vehicles sold that have flex-fuel chips.
    But we've got to get at both sides of this equation. We'll 
work with you on the demand side. We agree on most of that. The 
supply side is one we cannot ignore; we must address it. Thank 
you, Mr. Chairman.
    [The prepared statement of the Honorable Sam Brownback 
appears in the Submission for the Record on page 46.]
    Chairman Schumer. Senator Klobuchar.

    OPENING STATEMENT OF AMY KLOBUCHAR, A U.S. SENATOR FROM 
                           MINNESOTA

    Senator Klobuchar. Thank you very much, Mr. Chairman. Thank 
you for holding this hearing, thank you to our witnesses.
    I was home this weekend in Minnesota, and probably half the 
people, when they brought up an issue, it was about gas prices. 
I think that out on the prairie lands and in the Midwest, where 
people have longer ways to drive, there's not as much public 
transportation, it hits people harder.
    There are a lot of people not going up to their cabins, not 
going up to the lakes and other places, just because they 
simply can't afford to fill their car up with gas.
    I would agree with what's been said, that in the long term, 
that the long-term solution is a combination of things. We are 
right next door to North Dakota, we know there's some more 
domestic drilling we can do, but the bottom line, is, we just 
have three percent of the world's oil reserves and that we're 
going to have to look for other alternatives.
    We're very excited about biofuels in the Midwest. We know 
we need to go beyond corn ethanol to cellulosic prairie grass, 
to switchgrass, to LG to whatever else, and we actually believe 
that this can be done, because we've seen how it's revitalized 
the rural areas of our state.
    But what I'm most curious about today, is this topic of 
speculation. I think there's a lot of reasons you might have 
seen this immediate jacking up of prices and this short-term 
issue.
    Some of it, of course, is the demand that we've talked 
about with China, but the demand in the United States has gone 
down. Some of it is the weak Dollar, and this idea that I think 
people have talked about, with people pushing their money into 
commodities, not just oil, but also food and taking it out of 
things like hedge funds.
    But even all of that, I believe, doesn't really account for 
this price differential. We had the CEOs of some of the major 
oil companies testify before Congress a few months ago, and say 
that oil shouldn't be trading at over $100 a barrel; that it 
should be trading somewhere around $55 to $60 a barrel.
    So the question that I want you to think about, as our 
witnesses, is, if that's true, do all of these things with just 
the people pushing their money in and the weak Dollar, account 
for that vast price differential?
    We had a top-ranked energy analyst who called the oil 
markets, the world's largest gambling hall. It's said it's open 
24/7, it's totally unregulated, and this is like a highway with 
no cops and no speed limit, and everybody's going 120 miles per 
hour.
    So I'm not one to think this is all about speculation, but 
when you've seen this frenzy of unregulated market speculation, 
and you think and you think about these people who are spending 
their hard-earned money on gas, if you think you can do 
something about it, that doesn't hurt in the long term, that's 
going to make some difference in the short term, you want to 
take action.
    And, obviously, the things that we've been looking at, is 
building on the work that was done in the Farm Bill, which 
partially closed the Enron loophole, to see if there's more 
needed to be done with the so-called London loophole, with 
trying to do something about regulating some of the overseas 
offshore trading that's being done, to look at what we can do 
about the margin requirements, which we know are very low for 
oil, when you compare them to other stocks and things like 
that; to look at the regulatory powers that we can give to 
these agencies.
    We had a joint Agriculture Appropriations hearing on this 
with the acting Chairman, and we kept asking, what other tools 
do you need? Clearly, they need more cops on the beat. There's 
been a huge reduction in their budget, and in the number of 
people looking at these markets, but the issue other than that, 
is, I believe, just looking at this as a former prosecutor, 
that you want to have the tools.
    Maybe you won't use them, but if you've got a situation 
where you used to have the burden on those that you regulate, 
and now you have the burden, as the agency, to try to prove 
things, that's harder to prove them.
    So, I think that, looking at what tools we can give to 
these agencies, to better look at price gauging and better look 
at market manipulation, is a good thing to do, because any 
prosecutor will tell you that laws are good, but if you don't 
have the cops on the beat that are looking for the violations 
and you don't have the prosecutors to get the work done, it's 
not really going to make a difference.
    So, the way I look at this, it's not all about speculation, 
but I believe that this has been a major factor in some of the 
short-term jacking up of prices, and I'd like to hear what the 
three of you have to say about that, and also about some of the 
ideas that we've been talking about, to resolve it. Thank you 
very much.
    Chairman Schumer. Thank you, Senator Klobuchar. Our last 
opening statement, even if new people come in, is going to be 
Senator Bennett.

  OPENING STATEMENT OF ROBERT F. BENNETT, A U.S. SENATOR FROM 
                              UTAH

    Senator Bennett. Thank you very much, Mr. Chairman. The 
advantage of going last, is that you get to make notes and 
respond to some of the things that have been said.
    I agree absolutely with your statement when you said that 
some of us would not agree with you.
    [Laughter.]
    Senator Bennett. You made reference to ANWR and said it 
will take ten years, and to quote that great economist, Jay 
Leno, that's what the Democrats were saying ten years ago when 
they refused to agree to open ANWR. The Congress passed 
authorization for ANWR, President Clinton vetoed it, and if, 
indeed, we had proceeded at the time Congress passed it, we 
would now be receiving from ANWR, a million barrels a day.
    There's a disconnect between the statement that a million 
barrels a day, if it were brought onboard by the Saudis right 
now, would solve a lot of our problems and the statement that 
if we had drilled in ANWR, we would only have a few cents.
    If a million barrels a day from Saudi Arabia would solve 
our problems, or at least alleviate them, a million barrels a 
day from ANWR would do it.
    And I just want to make this one quick comment: I've been 
to Alaska, I've seen ANWR. I've also seen the Naval Petroleum 
Reserve, which is at the top of Alaska.
    There's more wildlife in the Petroleum Reserve, than there 
is in the Wildlife Refuge, and there's more oil in the Wildlife 
Refuge, than there is in the Petroleum Reserve. It shows that 
labels--maybe the thing we ought to do, is just switch the 
labels, so we call the Wildlife Refuge, the Petroleum Reserve 
and the Petroleum Reserve, the Wildlife Refuge, and then we'd 
feel better about drilling up there.
    There are comments about big oil runs the policy in 
America. The fact is, we do not have an American oil market, we 
have a world oil market, and investor-owned companies like 
ExxonMobil and Chevron, constitute six percent of the world's 
oil companies. The other 94 percent are controlled by 
governments.
    The largest oil company, of course, is Saudi Arabia; the 
second one is Iran, then you have Russia, you have Venezuela, 
and investor-owned oil companies are the only ones who use 
their profits to prospect for new oil.
    The others use their profits, in the case of Hugo Chavez, 
in order to make trouble in South America. Use it or lose it, 
with respect to drilling on public lands and leases, I would 
point out to everyone, coming from a public lands state where 
the Federal Government owns two-thirds of the state, a lease on 
public land now expires in ten years and reverts back to the 
Government, if oil is not found and is not being produced 
there. Use it or lose it, is the present law.
    The reason there are so many leases that are not producing 
oil, is because the oil isn't there. You get the lease, not by 
making any seismic tests; you get the lease by looking at it, 
physically.
    Yeah, you're allowed to fly over it with a helicopter, and 
then you make a bet and say, I think there may be some oil 
there. You get the lease. That only gives you the privilege of 
paying rent to the Federal Government on those lands while you 
explore them.
    So, you think there's some oil there, you lease it, you pay 
rent on it, you do the seismic testing, and if you discover 
from the seismic testing, that your original guess was wrong, 
you still pay the rent, and, naturally, you don't produce any 
oil.
    And if you do not produce oil within ten years, you turn 
the lease back to the Federal Government. Use it or lose it is 
a strawman, because it's already the law.
    Oil shale, it is true that they started talking about oil 
shale as long ago as when my father was in the Senate. There 
are several problems with it, some of them technical, most of 
them financial.
    But this Congress has established a moratorium on even 
filling out the forms that would let you start on oil shale. 
There is more oil in eastern Utah, western Colorado, and 
southern Wyoming, than there is in Saudi Arabia, by a very 
large margin, and 100 percent of that oil shale, is off limits 
for anyone, under the moratorium currently in place.
    There is oil shale activity going on in the State of Utah, 
and there are test wells--test procedures that look as if they 
will start producing in fairly significant test amounts this 
year.
    Why is that going forward? Because those test activities 
are on state lands, rather than federal lands, and the State of 
Utah is allowing them to go forward. It's time the Federal 
Government allowed them to go forward, because, repeating 
again, more oil in Utah, Colorado, and Wyoming, than there is 
in Saudi Arabia.
    Those who say, oh, it's environmentally difficult, because 
it takes a lot of water, it takes a tiny fraction of the amount 
of water to produce a barrel of oil from oil shale, as it does 
to produce a barrel of oil from ethanol.
    Chairman Schumer. Thank you, Senator Bennett. I think I'll 
take the prerogative of the Chair and just mention two quick 
points, before we get to our witnesses:
    One, the difference between Saudi Arabia and Alaska, is 
that the Saudi Arabian oil is available now and the Alaskan oil 
won't be available until ten years from now.
    We can all go back and say, you didn't do drilling, you 
didn't do automobile raising of mileage standards. Nobody's 
blameless here, no matter what your perspective is, and a lot 
of mistakes were made in the past. What do you do now?
    One other point: I despise Chavez and the head of Iran. 
ExxonMobil, last year, spent 60 percent of its profits buying 
back its stock. That will not produce one type of new energy, 
whether it's alternative energy, when the head of ExxonMobil 
told us he didn't believe in alternative energy, or oil and 
gas.
    With that, I'm using the prerogative of the Chair to get in 
the last word. I don't do that much, but I couldn't resist it. 
[Laughter.]
    Do you want to say something? You can get the last word, 
Senator Bennett.
    Senator Bennett. Not at all, Mr. Chairman. We can go 
discuss this privately.
    Chairman Schumer. Okay, good.
    [Laughter.]
    Senator Bennett. We won't take the time of the witnesses.
    Chairman Schumer. Thank you. Okay, let me introduce our 
witnesses. I think this dialogue is a good dialogue, and all I 
would say, is, I do hope--I don't think the answer is either 
exclusive demand-side or exclusive supply-side, and I would 
hope we could come together with some compromise.
    Ten years ago, I went to Senator Murkowski and suggested 
that if he could get ten Republicans to raise the car 
standards, I could get ten Democrats to vote for Alaskan oil, 
and it couldn't get done.
    Anyway, let me introduce Daniel Yergin. Daniel Yergin is 
Chairman of Cambridge Energy Research Associates, one of the 
world's leading energy consulting and research firms.
    He's the author of numerous books on energy and economics, 
including ``The Prize,'' for which he was awarded the Pulitzer 
Prize. He chaired the U.S. Department of Energy's Task Force on 
Strategic Energy Research and Development and was the recipient 
of the United States Energy Award for Lifelong Achievements.
    He's a member of the Board of the United States Energy 
Association; a member of the U.S. National Petroleum Council, 
and regarded as one of the foremost voices on energy issues.
    Frederick Joutz is Professor in the Department of Economics 
at George Washington University, and Director of Research 
Programs on Forecasting. Dr. Joutz has served as a consultant 
and technical expert to several Federal Government agencies and 
private corporations, including doing extensive work consulting 
for the Office of Energy Markets and End Use at the U.S. Energy 
Information Administration.
    And Skip Laitner is Director of Economic Analysis for the 
American Council for an Energy-Efficient Economy. Prior to 
joining ACEEE, he spent almost ten years as a Senior Economist 
for Technology Policy for the U.S. Environmental Protection 
Agency. He's been working in the energy policy arena for more 
than 35 years.
    Gentlemen, your entire statements will be read into the 
record. Proceed as you wish, and thank all for coming.

  STATEMENT OF DR. DANIEL YERGIN, CO-FOUNDER AND CHAIRMAN OF 
     CAMBRIDGE ENERGY RESEARCH ASSOCIATES, WASHINGTON, D.C.

    Mr. Yergin. Chairman Schumer, Vice Chair Maloney, 
Congressman Brady, Ranking Members, distinguished members of 
the Joint Economic Committee, it's an honor to appear before 
this Committee, and I certainly want to congratulate the 
Committee on its wisdom in undertaking and encouraging this 
searching examination while policies are being considered and 
before they are being framed.
    We are at a break point in world oil. The pressure on 
markets, the impact on consumers and on the economy, the shifts 
at hand, tell us that a break point is at hand.
    Markets do not go up forever. We're already seeing a 
response. Gasoline demand in 2007, probably reached its peak in 
the United States, and is now begun to decline.
    Secondly, I think, as Chairman Schumer said, the steak, a 
big piece of steak, is energy efficiency. It's the subject that 
drew me into energy research in the first place.
    We've doubled our energy efficiency over the last 30 years. 
I think it's a reasonable goal to double it again. I think it's 
possible, and I think Skip may address this, that we could 
reduce our gasoline demand by 700,000 to 900,000 barrels a day, 
with really no discomfort to consumers at all, by a small 
package of almost behavioral changes.
    The third thing I want to address, is the oil shock, and we 
really are in an oil shock, and you've already addressed how 
painful it is for consumers and businesses. The specter of 
``stagflation'' is once again in front of us with low growth, 
high inflation. We've discussed how oil prices have gone up.
    In such circumstances, the tendency is to try and find a 
single explanation, but for something this big, there is not a 
single explanation. I think we can divide it into the 
traditional fundamentals and the new fundamentals.
    The traditional fundamentals have been addressed, 
particularly the growth in demand. Between 1998 and 2002, world 
demand grew by four million barrels a day. Over the next five 
years, it grew by eight million barrels a day. That's the kind 
of pressure that we have on the demand side.
    There's been a slow response in terms of supply. Why?
    One is the issue of access around the world; secondly, is 
uncertainty about investment, fiscal, and regulatory regimes; 
thirdly--and I'm going to address this--the shortage of people 
and equipment, is a very big part of the picture.
    A second of the traditional fundamentals, is geopolitics. 
It's already been addressed by Congressman Brady, about 
Nigeria, as one example. Forty percent of Nigerian production 
is currently out.
    Last week, more oil was lost in Nigeria, than the entire 
increase from Saudi Arabia, and I could go down a long list of 
that.
    So it's a tight market and it's a crisis-prone market. It's 
more vulnerable to the impact of disruptions.
    I want to add that the dangers and uncertainties related to 
Iran's nuclear program are also a distinctive feature of 
today's oil market, and, clearly, there is an Iranian risk 
factor in the price of oil today.
    What about the new fundamentals? The first one is a 
doubling of costs in the last four years. It costs twice as 
much to develop a new oil field or gas field, as it did four 
years ago. There's a shortage of people, equipment, skills, 
there's the rising cost of commodities like steel, and all of 
this leads to delay, postponement, cancellation, and so we're 
seeing a slower response in terms of supply, than would 
otherwise have been expected.
    Then we come to the controversial question of oil as the 
new gold, and oil as the storehouse of value these days, 
reflects broad global economic trends and imbalances. Also, 
it's increasingly seen as an asset class by investors.
    This is a development that has only really emerged in the 
last few years. We know the role of the financial markets is 
controversial, and no word these days is more controversial 
than ``speculator.''
    ``Speculator'' has a technical meaning; it means the people 
on the other side of the trades of independent gas producers, 
airlines, or farmers, in hedging their risks.
    Then there's the colloquial meaning, which ranges from 
manipulator to risk-taker, to those who collectively get caught 
up in irrational exuberance and help generate bubbles.
    I think it's too limited to focus on that in terms of the 
financial markets. They are playing an increasingly important 
role in price formation, responding to, accentuating, and 
exaggerating supply and demand, geopolitics, and other trends, 
and there's clearly the need for greater transparency in these 
markets, and I think that's the first step, before new 
controls, is actually to understand--make sure we understand 
how these markets work.
    What we observe, is that the people who are called 
financial investors or speculators are in fact in it for many 
different reasons: Some to trade, some to hedge against 
inflation, conflict in the Middle East, a permanent shortage, 
and I think there is a shortage psychology today in the 
financial markets that's widespread and has grown as the prices 
have gone up, partly based on current market conditions, and 
partly based on expectations of what's ahead.
    And as we see in other markets, this becomes self-
reinforcing, at least until the markets turn.
    The U.S. credit crisis, the weakening of the dollar, has 
been addressed as an important point. As the dollar has 
weakened, as interest rates have gone down, oil prices and 
other commodities have gone up.
    There's a painful irony here: The crisis that started in 
the subprime market in the United States has traveled around 
the world and through the medium of a weaker dollar has come 
back home to Americans in terms of higher prices at the pump.
    Just in terms of policy, one, I think we need--we have to 
get beyond the ``either/or.'' We need a broad approach, an 
ecumenical approach, a portfolio strategy that recognizes both 
the importance of demand side, of alternatives, renewables, and 
also the reality that over 60 percent of our energy today comes 
from oil and gas, and that we have to pay attention to the 
environmentally sound provision of that.
    I would say focusing on that question of investment, timely 
investment, there is a shortfall in investment, and that has to 
be stepped up in order to play a vigorous game of catch-up with 
the growing world economy.
    The role of markets: I think if we compare the self-
inflicted gas lines of the 1970s, with the relatively smooth 
reaction to the hurricanes in 2005, a very important lesson 
about how markets can respond, that we should keep in mind.
    The members of the Committee have talked about the U.S. and 
global markets. So often, as I listen to the discussion, it 
seems to me that we're really rather inward in how we look at 
it.
    Our oil imports are twice what they were in the '70s; our 
share of the world market is less; the balance is changing the 
market; national oil companies control over 80 percent of world 
oil reserves.
    The five super-majors account for less than 15 percent of 
total world oil production. China and India are now significant 
players. The list goes on.
    The realities of the global markets and America's 
integration into them emphasize the need for a cooperative, 
multifaceted approach to relations, both with producers and 
other consumers, and that puts a premium on how we manage, how 
we think through, and how we structure our relations with other 
countries.
    My last point is about expectations. A lot of what I think 
is going on in the financial markets, is not only looking at 
the short term--Nigeria, Iran--but particularly an expectation 
of short supplies, three, five years down the road.
    Those expectations feed back into price, and these general 
expectations of very tight supplies, are based upon the 
assumption that the global market cannot generate the responses 
that are warranted in terms of demand and efficiency and 
conservation, in terms of new supplies and timely investment, 
in terms of renewables, new technologies, and alternatives.
    Meanwhile, developments of great importance, like these 
immense discoveries in the offshore of Brazil or downward 
shifts in demand that are occurring, these are currently 
discounted. A major contribution to alleviating today's oil 
shock would be to create an environment based upon realistic 
assessments that change expectations.
    One way to do that is to ensure that timely investment is 
really and convincingly underway.
    In conclusion, the answer here, as you all have already 
said, is not ``either/or.'' We need that broad portfolio 
approach of new supplies, renewables, efficiency, all developed 
with appropriate environmental and climate change 
considerations in mind.
    Such an approach would be a great contribution, not only to 
relieving the pain and pressure that the American people are 
feeling at the pump, and the difficulties that are faced by 
American businesses, small and large alike, as you all have 
addressed this morning, it would also be a fundamental 
contribution to the future prosperity of our nation and to the 
global economy, of which we are so centrally part. Thank you.
    [The prepared statement of Dr. Daniel Yergin appears in the 
Submissions for the Record on page 49.]
    Chairman Schumer. Thank you, Dr. Yergin. Dr. Joutz.

   STATEMENT OF DR. FREDERICK JOUTZ, PROFESSOR OF ECONOMICS, 
         GEORGE WASHINGTON UNIVERSITY, WASHINGTON, D.C.

    Mr. Joutz. Mr. Chairman, Ranking Member and distinguished 
members of the Joint Economic Committee, I would like to thank 
you for holding this hearing and for inviting me to testify on 
the impact of oil prices on the U.S. Economy.
    The impact of rising oil prices on the economy, is an 
important issue, but one that has only recently gathered the 
same attention that was paid to it during the oil price shocks 
of the 1970s.
    Although large increases in oil prices, by themselves, do 
not lead to recessions, large increases in oil prices have been 
associated with and contributed to episodes of falling incomes, 
higher unemployment rates, and rising inflation.
    What's the likely impact of the recent increase in oil 
prices? I put together a very simple model, and I estimate that 
the recent run-up in prices, could lead to a cumulative decline 
in U.S. GDP growth of six to seven percent over the next two 
and a half years.
    These results are due to the increasing share of incomes 
spent on oil, and this is consistent with one of the charts you 
have, showing crude oil's share of GDP has doubled. In fact, 
it's approaching the levels that it reached in early 1980.
    The increase in the share of income spent on oil and the 
future course of oil prices, affects both consumers and 
businesses in the United States. It creates uncertainty about 
income and employment prospects for consumers, and about long-
term profits for businesses.
    When consumers' confidence is low, as it is today, and 
they're worried about how much money they are really making or 
will make in the next few years, they postpone purchases of 
big-ticket items like durable goods, automobiles, and light 
trucks.
    Businesses make similar plans to postpone or cut their 
investment, spending decisions, and upgrade their existing 
machines and structures.
    In addition, they are less inclined to hire new workers and 
maintain the hours of their existing workforce. These changes 
in spending on the part of consumers and businesses, are the 
reasons driving the expected decline in GDP.
    Further, increases in oil prices, are putting upward 
pressure on inflation. From 2006 to the present, inflation has 
risen by about 1.2 percent.
    A substantial number of jobs have been lost, as well. Since 
December of 2007, when employment was slightly over 138 million 
people, there's been a decline of over 200,000 jobs in the 
United States, and we've seen that in just the last two months, 
a big uptick in the unemployment rate.
    I would like to contrast the most recent episodes of oil 
price changes to earlier oil price shocks that the U.S. economy 
had endured. During the two oil price shocks in the 1970s and 
early 1980s, GDP fell by 13.3 percent and 11.8 percent, 
respectively.
    At the same time, inflation rose by 4.9 percent and 4 
percent, thus the term, ``stagflation.'' In contrast, during 
the two oil price shocks in the late '90s and early 2000s, 
there was a much smaller decline in GDP growth, and, in fact, 
GDP actually increased during the second of those two oil price 
shocks between 2002 and 2005.
    At the same time, inflation increased marginally, while in 
2002 through 2005, inflation fell in the United States.
    The behavior of the economy during these two recent oil 
shocks, led many economists to believe that the United States 
had become immune to changes in oil prices.
    However, the evidence and my results, seem to indicate that 
is not the case. This change in response back to one like we 
had in the 1970s, of higher oil prices, should not come as a 
surprise.
    First of all, there's been an enormous real price increase, 
a tripling of oil prices, in a very short period of time.
    As I discussed above, the share of income spent on oil and 
also other energy sources, has risen to much higher levels than 
what has been seen during the earlier episodes in the 1990s and 
the beginning of the 2000s.
    Second, this oil price increase has followed on and 
coincided with a severe financial crisis. The Federal Reserve 
has used expansionary monetary policy to prevent the financial 
crisis from crippling the economy.
    One aspect of that policy, has been a rise in the 
inflationary expectations.
    Finally, I would like to conclude by stating that the 
effect of oil price changes on the economy, is not symmetric. 
Even if oil prices fall, while the downward pressure on GDP 
will ease off, historical evidence suggests that we will not 
see a corresponding economic boom.
    Thank you very much for the opportunity to testify, and I'd 
be happy to answer questions.
    [The prepared statement of Dr. Frederick Joutz appears in 
the Submission for the Record on page 64.]
    [Chart entitled, ``Crude Oil's Share of GDP Has Doubled,'' 
appears in the Submissions for the Record on page 86.]
    Chairman Schumer. Thank you, Dr. Joutz. Mr. Laitner.

    STATEMENT OF JOHN ``SKIP'' LAITNER, DIRECTOR, ECONOMIC 
  ANALYSIS, AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY 
                   (ACEEE), WASHINGTON, D.C.

    Mr. Laitner. Thank you and good morning, Chairman Schumer, 
Vice Chair Maloney, distinguished members of the Committee, and 
Committee staff.
    I'm now celebrating almost four decades of work in this 
thing we call the energy policy arena, and there have certainly 
been some disappointments along the way.
    At the same time, however, I've never been more confident 
in telling you and this Committee, that the United States has 
never been better positioned to move on to a path of what we 
might call sustainable energy production and consumption, one 
that promotes both productivity and economic prosperity.
    The underpinning of this opportunity, is the huge potential 
for cost-effective investments in energy efficiency through all 
sectors of the economy.
    When we put kilowatt hours of electricity, tons of coal, 
therms of natural gas, on a comparable footing of oil 
equivalents, the efficiency potential through the year 2030, is 
on the order of 45 to 50 billion barrels of oil equivalent, 
should we choose to develop it and pursue it.
    This is about two and a half times bigger than what some 
have suggested might be available from offshore drilling, and 
it is about five and a half times bigger than what we will get 
from the improved CAFE standards enacted by Congress last 
December.
    The good news is that if we were to invoke the spirit of 
Leonardo da Vinci's motto, saepe videiri, ``to know how to 
see,'' interpreted, if we know how to see and pursue the 
development of that 45 to 50 billion barrels of efficiency, 
that would generate a significant downward pressure on oil 
prices and increase both the resilience and the robustness of 
the American economy, again, if we choose to develop it.
    As my colleague, Dan Yergin, would perhaps suggest, we 
might think of energy efficiency as the next great prize.
    In all of this, the market responds to direction and 
information. Policy solutions will play a pivotal role in 
strengthening the continued development, dissemination, 
widespread adoption of energy-efficient technologies.
    In that regard, ACEEE recommends a set of ten policy 
actions that might be undertaken by this Congress to 
immediately provide that market signal, and, more critically, 
to change the direction of energy usage through increased 
energy efficiency.
    Our proposals include the immediate passage of a joint 
resolution to reaffirm the energy efficiency resource and 
directing federal agencies to develop that resource at all 
levels within their current budget and mandates.
    They also include an emergency supplemental transit 
appropriation, the creation of what we call a ``crusher 
credit'' to retire older and inefficient cars and trucks, and 
the launch of a national telecommuting videoconferencing 
initiative to reduce unnecessary travel.
    Although Senator McCain appears to have anticipated some of 
the testimony here today, we should also provide an array of 
incentives that parallel the automotive X Prize and the Freedom 
Prize, all designed to stimulate new innovations of energy 
productivity.
    Now, the full set of ten proposals offered here, is 
intended to accomplish two specific objectives. The first is 
provide an immediate catalyst, by launching an effort over the 
next few months, that we think can save oil in a hurry, a small 
amount, but sufficient to provide some certainty into the 
marketplace. If undertaken with sufficient robustness, these 
initial proposals might generate, as already suggested, an 
immediate downward pressure on oil prices, to the benefits of 
consumers and businesses.
    The second is to begin the process of fundamentally 
restructuring our transportation infrastructure, a step that 
will be necessary, if we are to change the energy use path that 
our transportation system is currently on.
    Many of these suggestions lay the groundwork for a shift in 
the larger transportation policy, an opportunity afforded the 
next Congress by next year's reauthorization of the 
Transportation Bill.
    And by way of concluding and underscoring the critical 
importance of the energy efficiency resource, let me share the 
results of a quick experiment and an analogy. First, the 
experiment:
    I confess I've not done all my homework. I have read Dan's 
book, ``The Prize.'' I have not yet read the ``Commanding 
Heights.'' However, I just ordered it, and it's now here in 
this room, and I did it on my Amazon Kindle. It's an e-book.
    I was able to order it and have it accessed here in this 
room within one minute, and I saved $5 in doing it, so I've now 
contributed to the royalties of at least one of the panel here.
    [Laughter.]
    The point is that there are many ways to think about moving 
and transporting goods. It is, in fact, easier to move and 
transport electrons than to move and transport people and 
goods.
    We have, through the information communication technologies 
industry, an amazing capacity to deliver greater efficiency 
gains, again, should we choose to develop it. That is one 
example of many that we can rely on and begin to tap, should we 
choose to see it and choose to develop it.
    By way of my analogy, let me draw from the world of 
baseball. Pitcher Nolan Ryan was something of a hero of mine. 
He won, I think, something like 324 games over his career, 
which included a stint with the President's own former team, 
the Texas Rangers.
    But let me ask how many games would the so-called ``Ryan 
Express'' have won, had he taken the field without his catcher 
or without his infield?
    In a very similar way, if we are to design and implement an 
energy policy that sustains our economy in a highly prosperous 
manner, we should be funding and fielding a complete team 
effort, and that includes the full development of the energy 
efficiency resource.
    I thank you for the opportunity to speak, and I also will 
be happy to answer questions.
    [The prepared statement of Mr. John ``Skip'' Laitner 
appears in the Submissions for the Record on page 87.]
    Chairman Schumer. Thank you. I want to thank all three of 
our witnesses for really excellent testimony that tries to deal 
with this issue.
    We're going to limit questions to five minutes and try to 
do two rounds, so people can have a second chance.
    First, to Dr. Yergin, I was surprised that in your 
testimony you really emphasized the psychological effect and 
sort of bad things seem to be prominent and good things seem to 
be downplayed.
    Now, that would sort of not necessarily indicate, but 
augment the view that non-market forces, non-immediate economic 
market forces, are having some effect on this price.
    You know that the U.S. Energy Information Administration is 
predicting that while oil prices may remain high in the short 
term, prices should drop off to the $75 range in the future. Do 
you agree with that prediction?
    A friend of mine says that one thing that will bite in 
here, is the fact that we're using less gasoline, and, sooner 
or later, people are going to realize that, and in a huge 
country like ours, where so much of our oil is gasoline, that 
that will have an effect.
    So, do you agree with the United States Energy 
Administration's prediction?
    Mr. Yergin. We found that the best way to think about--we 
once did a study called ``The Perils of Prophecy,'' about oil 
price forecasting, and that so much of what happens to oil 
prices are affected by other things, such as what happens to 
GDP, what happens to global politics, and so forth.
    I think, though, in our base case, we would think that, as 
we see the kind of things that have been described here, like 
greater efficiency, market response, supplies with delay in 
coming on, that would set the stage for prices to come down 
from where they are.
    I think that right now, I'm really struck by this kind of 
pessimism about future supply and focus on what's going wrong. 
I just find that a very important part of the psychology of the 
markets right now.
    I saw your response when I mentioned that other things like 
the demand response are not getting the attention. When that 
happens, then I think the markets can change.
    Chairman Schumer. And let me then ask you this: Because 
there is so much talk, the issue du jour here in Congress, is 
speculation, and if you just sort of stop the speculation, that 
the price would come down.
    That's a little different than what you're saying. You're 
talking more about markets and the way they function, and, I 
guess, speculators are a result of that, as opposed to a cause 
of that, is how some people put it.
    So, do you think that if we did some things in speculation, 
limiting speculation, either raising margin requirements--some 
talk about that, or at least giving the CFTC power to do that--
or saying that the speculator or the buyer must want the 
product for some eventual use, as opposed to just holding it as 
an investment--that's pretty severe, but Senator Lieberman is 
talking about that--do you think either of those would have--
what kind of effect would those have on price, if any?
    Mr. Yergin. I think that, obviously, the tool of shifting 
margin requirements seems to be a reasonable tool that 
regulators should have, as they do in other markets. Knowledge 
of what's happening in over-the-counter markets, all of those 
things, are the starting point.
    I think that the notion that you should legislate asset 
allocation on the part of investors, our 401(k) plans or 
whoever, you know, whoever it may be, I think that's a pretty 
slippery slope to get into that. If you limit liquidity, how 
then does the airline whose back is against the wall--our 
airlines are spending, I think, $60 billion this year on jet 
fuel--we know the bad shape they're in.
    But if they can't hedge, they would be in even worse shape. 
So I think that removing the liquidity from the market would 
not be a wise thing to do.
    There are some things that make great sense to do. Senator 
Klobuchar raised the question that there needs to be trust 
about the markets, and the first way you'd get that is by 
transparency and better information.
    I think you do that before you rush in and start making a 
lot of changes.
    Chairman Schumer. The proposal that some of us are part of 
here, that our side of the aisle has put forward, is more 
information, giving the CFTC the ability to investigate, and 
then letting them change the margin requirements, without 
setting a number. That seems to be something that you think 
might be a positive move.
    Mr. Yergin. That's a reasonable thing, and I believe the 
CFTC is going to report in September on the state of the 
markets. These markets have changed rapidly, developed rapidly, 
and the first step is to really more fully understand them.
    Chairman Schumer. Thank you. Congressman Brady. We're going 
to have a second round.
    Mr. Brady. Thank you, Mr. Chairman. I appreciate all the 
testimony today.
    I want to focus on Dr. Yergin's comment that global 
supplies will be in short supply over the next three to five 
years, that we need to change the expectations, that timely 
investments need to be confident in the marketplace.
    Given that while the Chairman likes to beat ExxonMobil like 
it were the Brittany Spears of the media, the industry data 
shows that, as you said, costs are doubling. Most energy 
companies are reinvesting more than they profit.
    The cost of an offshore lease, average cost, is between $20 
million and $60 million, the cost of a deepwater lease in the 
Gulf of Mexico, is between a quarter of a billion dollars and 
three-quarters of a billion dollars to explore these. The costs 
are remarkable.
    This Congress has said investments in renewable energy are 
important, even though they may not produce cellulosic ethanol 
for a decade. Well we may not reach the hydrogen goal for two 
decades.
    Aren't timely investments in the oil and gas on United 
States lands and offshore, aren't those equally important, 
timely investments for this country to make?
    Mr. Yergin. Thank you. First let me clarify. I was not 
saying that we necessarily believe that five years from now 
that markets are going to be very tight, but that is kind of, 
as you can see, that is what the prices are telling us.
    I mean, if we have the kind of slowing of the world economy 
that has been described, the delay in new supplies coming on, 
we do not have a crisis involving Iran, then we could see a 
market five years from now that could look quite different than 
it looks today. But that is certainly the expectation right 
now. And there is such a focus in the market on one particular 
country, China, and the growth of Chinese demand, that that 
tends I find to often be the end of all arguments and 
discussions.
    Yes, I think that--that is why I said it is not an 
``either/or'' thing, and that as a country over 60 percent of 
our energy comes from oil and gas, and there are 
environmentally sound ways of addressing the investment 
question there, too. That is part of the picture.
    For instance, we made a huge bet as a country on natural 
gas for electric power. We are going to be using a lot more 
natural gas and electric power. Are we going to import that 
natural gas from other countries?
    We are spending almost $600 billion now to import oil from 
around the world. Or are we going to produce some part of that 
extra gas that we are going to use? I think that is a very 
immediate question we face as a country.
    Mr. Brady. Thank you. I think it is important to understand 
that when looking at both renewables, which we need to do more 
of, but are very long term and traditional energy which is a 
proven source, and we know we can produce again, though it will 
take some time, I think is equally important.
    Let me ask the panel----
    Mr. Yergin. Could I just add one thing?
    Mr. Brady. Yes.
    Mr. Yergin. That is, we focus on oil. But as the carbon 
regime comes into place into this country there is going to be 
an extra premium on natural gas.
    Mr. Brady. Sure.
    Mr. Yergin. So we really have to think about our natural 
gas supplies, as well as our oil supplies.
    Mr. Brady. Absolutely. Thank you.
    For the panel, there is a new proposal called ``Use It Or 
Lose It'' where the premise is there's 68 million acres in 
America that is currently for lease, and there is a vast 
resource of oil and gas underneath it, but energy companies 
just refuse to drill it.
    Not withstanding the fact that the independent American 
Association of Petroleum Geologists basically just dismiss the 
whole premise here in a letter this week in the fact that 
independents drill, explore the balance of I think 70 percent 
of the natural gas, more than two-thirds of the oil here in 
America.
    With your expertise as a panel, of those 68 million acres 
can you identify any of those acres that have vast resources, 
and that an oil company refuses to explore?
    Mr. Yergin. You know there's a famous U.S. wildcatter at 
the end of the 19th Century who discovered the biggest oil 
field in Texas, and somebody once said to him: Is there oil at 
such-and-such a place where he was drilling?
    And his answer was: Well, actually only Dr. Drill knows for 
sure.
    We have had an immense advance in technology over the last 
10 or 20 years in terms of identifying resources, but still the 
reason it is called ``exploration'' is because you do not know.
    And of course companies go out with different viewpoints. 
They read the geology differently. And then they have to 
prioritize in terms of where do you put your money. And as I 
think you suggested, you can drill an exploration well in the 
Gulf of Mexico that could be $120 million and it could turn out 
you are wrong.
    So I think it is a question of people taking that acreage--
Senator Bennett described how the process works--and then you 
prioritize, and of course you go after your best prospects 
first.
    You also have to deal with the fact that your costs are 
four times--or twice what they were four years ago as you try 
and figure out what to do.
    Mr. Brady. Right. Thank you. Any other comments?
    Mr. Laitner. Yes, if I might offer one comment, I think it 
is an interesting question but we need to take one step back 
and look at the entire energy market, the production system, at 
all points in the production process.
    We are flat-out 24/7 in something akin to an energy 
straitjacket. We can't get the right number of trained workers 
on the rigs. We can't find the right kind of quality piping any 
longer. We can't find the right number of railroad locomotives 
to haul coal in a timely way. We can't get tires out to 
excavation equipment to mine the coal. Even renewables and 
combined heat and power technologies are 18 months on back 
order. At every point in the production process the system is 
constrained.
    Even if we drill more oil, there's no guarantee we're going 
to be able to deliver it, and refine it, and make it available 
in a timely way.
    I talked to some of my colleagues in the oil industry and 
they told me, flat out, they are a little bit worried about 
their ability to even deliver oil should they be able to 
produce it. You can only push it through the pipeline 6 miles 
an hour, and not much faster. So if the demand goes up, we are 
in trouble.
    The point I am saying is there is a great need for an 
investment in this Nation's energy infrastructure. If we are 
going to have to spend a good bit of money anyway, we should 
step back and think what we can do to provide that slack in the 
market, and that slack I think includes the need to stimulate 
oil saving in a hurry and greater efficiency to provide the 
slack that the market can then readjust and the prices can 
similarly readjust.
    Mr. Brady. At some point I hope we will move away from the 
gimmicks and move toward what I think is the balanced portfolio 
approach all of you are proposing today. Thank you, Mr. 
Chairman.
    Chairman Schumer. Senator Klobuchar.
    Senator Klobuchar. Thank you very much, Mr. Chairman.
    Mr. Laitner, I was captivated by your testimony about the 
positive position we could be in if we made some good policy 
decisions in terms of energy efficiency.
    I will say I think the country, the people itself, have 
moved on beyond Jimmy Carter getting on with the sweater and 
looking glum on TV. I just see a real interest in this issue in 
our State, because I see it beyond an environmental issue; that 
it is a way for them to save money if we give them the tools so 
that they can make those decisions, whether it is the types of 
cars or trucks that they purchase, if they have more of a 
choice so they can make that decision, or a little technology 
that they can put on their washer and dryer to figure out when 
to run it.
    I always think back to when Kennedy said he wanted to put a 
man on the Moon. It was a question of resources, but it was 
also leadership. And out of that leadership came everything 
from the CAT scan, to infrared technology, to those little 
chocolate space sticks that my family would take on camping 
trips in the 1970s.
    I was reading your testimony where you talked about even 
these GPS monitors, how you could use the technology so people 
would know how to avoid congested routes, which I thought was 
fun as I love going with those GPS monitors and having my 
husband be told ``take a U-turn, take a U-turn, you've gone the 
wrong way.''
    [Laughter.]
    Senator Klobuchar. But anyway, I think that there are all 
kinds of possibilities here. My question is: Do you agree that 
if we could take some of these--you know, we have limited 
budgets here, and a lot of us wanted to take some of these oil 
giveaways, the $17 billion to Exxon and these other companies--
by the way, Congressman, I don't think that Britney Spears got 
$17 billion--but to take these investments in these resources 
and put them into what you're talking about, into the hybrids, 
and the electric cars, and the investment, that we could move 
this change quicker?
    Mr. Laitner. Yes, Senator Klobuchar, a good question. I 
absolutely agree.
    Let me give you one of many examples--I could go on. Not 
too long ago I took a trip to Stockholm, Sweden, but I did that 
by walking two blocks down from my office here in Washington, 
D.C.
    I had an absolutely fabulous meeting. It was a form of 
video conferencing. And in your profession you may recall that 
now increasingly they are taking affidavits and witness 
testimony long distance by video conferencing.
    This happened to be a legal firm earning secondary income 
by allowing video conferencing. We had absolutely quality 
image, quality sound, and I saved I estimated something like 
3700 pounds of carbon dioxide emissions that I did not use 
because I was doing air travel to Stockholm, Sweden.
    One of the initiatives we are calling for is a greater 
understanding of both telecommunication, or teleworking, 
telecommuting, video conferencing, which can lay the foundation 
for I think some substantial energy savings in the short term, 
to be sure.
    But more generally, if we take a step back and understand 
the levels of efficiency, we are still no more efficient in 
terms of our electricity production than we were in 1960.
    Now imagine, had Intel introduced its micro chip in 1971 
and stayed at that same level of transistors per chip where we 
would be as an economy. We have some huge opportunities at all 
points in the production process, the refinement process, and 
the use process to encourage efficiency, if we will take a step 
back.
    But I think your point is critical in that leadership is 
absolutely required, which is why we tried to frame our ten 
proposals addressing the transportation perspective initially 
in a step-by-step sequence so that we can inspire confidence in 
the market.
    If we first announce what we are going to do, and then we 
reinforce that by taking actions, I think that will do a lot to 
stimulate and inspire the confidence that will reduce the 
tendency to the price levels we're seeing today.
    Senator Klobuchar. Thank you. Dr. Yergin, now you talked 
about the demand going down. Did you mean worldwide, or just in 
our country, for oil?
    Mr. Yergin. I was just talking about U.S. gasoline demand. 
Also you're seeing it in Europe. Obviously if you look at 
China, if you look at India, they are on a very different curve 
in terms of their demand.
    Senator Klobuchar. How about worldwide demand, then? Is 
that going up?
    Mr. Yergin. Worldwide demand was growing at about a 
million-and-a-half barrels a day. We think this year it will 
grow by about 900,000 barrels a day. So the rate of growth is 
slowing, and that is significant, and that is of course a 
response to price.
    Senator Klobuchar. And so, still going back--so the rate of 
growth is slowing, but this year is the year we see the gas 
prices going up 30-some percent, and the diesel prices up 66 
percent, crude oil up 98 percent.
    How much do you think that this migration of investment--I 
won't use the word ``speculation''--the migration of investment 
from subprimes and other things into this market has affected 
things?
    Mr. Yergin. Well I think it is very hard to quantify. I 
think it is part of it, and we particularly saw it if you start 
looking back at July when the subprime crisis began. You 
certainly start to see in oil and other commodities those 
prices going up substantially telling you there's a shift in 
investment.
    So is it $20? Is it $30 of the price that reflects the 
impact of the investment market and the kind of growing 
pessimism?
    You see the Iranians make a statement, a bellicose 
statement, and you see the price of oil go up $5 or $7, and 
they made an extra $85 million that week, too.
    Senator Klobuchar. Do you think those statements, when they 
make the statements, but do you think that investors sort of 
use that as an excuse to then jack up the prices?
    Mr. Yergin. It's people get nervous, and it's not only 
investors but it may also be people, airlines or others, who 
have to worry about supplies hedging it.
    So I think it is kind of a reinforcing process. I think if 
we saw demand--but the other side of it is, supply is also 
growing rather slowly this year. So the two things are coming 
together in this pessimism.
    At some point these other factors of demand, the kind of 
things that Skip is talking about and that have been described 
by Dr. Joutz in terms of the economy, those are the factors 
that have not yet been factored into the market, but that is 
when the market will have its top in turn.
    Senator Klobuchar. So part of this would be just--I do not 
want to paraphrase what you're saying--but you believe in using 
a cautious approach with speculation in terms of getting 
transparency and giving the agencies the tools, and 
acknowledging that this might be part of the short-term 
problem?
    Mr. Yergin. Yes.
    Senator Klobuchar. But the longer term of doing some of the 
things he is talking about could actually affect the price, 
because people will see that we are going another route?
    Mr. Yergin. Yes. I'll tell you, I think something--it is 
not in the power of this Congress--but if there was a way to do 
something about the Nigerian Delta region, that would be a real 
contribution to helping reduce the prices that Americans are 
paying at the pump.
    In the new book that I am writing--Skip called it the 
``Next Great Prize''--the new book, I was going to write one 
chapter on energy efficiency. I ended up writing three chapters 
because there is so much going on, and as he suggests in his 
testimony we have so many tools today that we just did not have 
even 5, or 10, or 15 years ago.
    What I see in this country, I can remember when energy 
efficiency was in that ``either/or'' category. Now what I can 
see is it is something that everybody across the spectrum says 
this can make a major contribution, and this is a major element 
in the solution.
    Senator Klobuchar. Thank you very much.
    Chairman Schumer. Thank you, Senator Klobuchar. Just to 
underscore, the proposal that we have, our Caucus, on 
speculation, which is CFTC looking at the facts and maybe 
changing the margin requirement without setting one, is right 
consonant with what Dr. Yergin has said.
    There are other proposals that go beyond that.
    Senator Bennett.
    Senator Bennett. Thank you very much, Mr. Chairman, and 
thank you all on the panel. This has been very illuminating and 
very helpful.
    Dr. Yergin, you have been helpful to this Committee over 
the years and it is good to see you again. Let me focus, 
because I think you have put your finger on it, on the issue of 
expectations.
    I have learned the one thing the market hates more than 
anything else is uncertainty. Whenever there is a sense of 
uncertainty, the price of whatever it is the market is trading 
in will go up, or down.
    If there is uncertainty about a company, the stock will 
fall even below legitimate projections of what the company will 
really do, but if there is uncertainty that they will be able 
to meet those goals the price will fall.
    And here there is uncertainty that the efficiency will kick 
in, that the supply will be there--whether it is oil shale, or 
whatever it is that we have been talking about--the Nigerians? 
Oh, there's uncertainty. The Iranians? There's uncertainty. And 
we flee from uncertainty, and in this case the price goes up.
    So as I look at it, I say what can we do to increase the 
sense of certainty that in the three- to five-year period that 
Dr. Joutz is talking about, or two- to three-year period even, 
that we are on the way toward solution.
    You talk about Brazil being discounted, and Iran being 
exaggerated, if I can put words in your mouth, you put those 
two together, here's a major new find and people are 
discounting it, and here is an existing producer that has a 
crazy president and everybody is going nuts over the 
consequences of that.
    If we could reverse that and say: Well, Iran is going to 
have another election. Iran is going to do something a little 
bit more stable. And Brazil is going to really come on. That 
could have a significant impact simply because it changes the 
expectations. But in the framework I have created here, creates 
a sense of certainty.
    So that is a different kind of approach than, gee, let's 
change the CAFE standards, or let's build more natural gas 
ports so we can bring in more liquid--a comprehensive approach 
to this whole thing.
    Now, Mr. Laitner, I resonate completely with what you are 
saying about the lack of people and facilities. We have oil 
piling up in Utah because we do not have the refinery capacity 
to bring it on line. And most of the refinery in Utah is 
dedicated to refine Canadian oil that's coming out of tar 
sands, and the tar sands are closely related to the shale oil 
thing that I'm talking about because the technology is somewhat 
similar.
    React to that. And give me your thoughts about what 
immediate things we could do to create a greater sense of 
certainty with respect to the future that might help calm down 
the markets.
    Mr. Yergin. In my testimony I mentioned one thing that the 
U.S. Government did during the 1990s which did not get a lot of 
attention but was very important. That was the support it gave 
to the Baku-Tbilisi-Ceyhan Pipeline from Azerbaijan to Turkey.
    Without U.S. Government support and involvement, that would 
not have happened. That is now putting 700,000 barrels a day 
into the Mediterranean, a major contribution to energy 
security, and in a sense the U.S. Government gave support, a 
sense of certainty to it, and this very uncertain thing 
happened.
    Now that does not happen overnight, but that is an example 
of where on an international stage we played a very important 
role.
    Indeed is there a role that the U.S. can play with other 
countries to help stabilize the Delta in Nigeria? That could be 
very important. So I think our diplomacy is actually part of 
our energy policy in a way that they do not normally get 
connected.
    To go back to the relationship with Brazil, it takes on an 
increasing importance from an energy dimension. What we heard 
in the last week or ten days about Iran, the reason that has 
such an impact is it is not only of course about Iran but there 
is that chronic question that 40 percent of the world's traded 
oil flows through the Strait of Hormuz, and whenever tension 
gets high there is a focus on that.
    As I was writing this testimony and thinking about the 
issues about speculation and the financial markets, this issue 
of expectations, as you suggest, really came to loom very high.
    Stability in the investment environment, whether you are 
talking about oil and gas, whether you are talking about wind, 
whether you are talking about--across the range, if you have 
uncertainty it not only affects prices, it affects investment 
and the path of investment.
    I think a couple of other things to focus in on:
    One is focusing on this kind of question that Skip 
described and I talked about, the shortages of people and 
equipment, we have to grapple with that. There is an 
educational issue about assuring the next generations of 
expertise.
    So I wanted to highlight what will change the expectations, 
including if people start to become more confident about what 
is happening in education. I have to say, though, Dr. Juntz's 
comments about the economy--I do not think we have heard it 
expressed as clearly as he has what the risks are to our 
economy. That highlights the need to address the issues you are 
talking about in terms of creating a stable environment 
expectations, not changing the rules, because that is what is 
going to make things happen sooner rather than later.
    Senator Bennett. Thank you, very much.
    Chairman Schumer. Okay, we will go to a second round here. 
This is for all three panelists, but particularly Mr. Laitner 
first.
    There is no silver bullet, but if there is one cost-
efficient way to deal with this that we have not dealt with 
since the 1970s it is efficiency, in my judgment. I think it is 
the easiest, and it has the greatest bang for the buck.
    I mentioned in my testimony the success California has. 
People do not realize that if you took away cars, California's 
efficient per-capita use of energy would be similar to many 
countries in Europe. And even with cars they are more efficient 
than most states.
    Why is it that efficiency, which should not create the kind 
of political hackles that some of the other things do, why has 
it gotten so little attention, play, in the United States thus 
far? And I would ask Mr. Laitner, and then the two other 
panelists to comment briefly.
    Mr. Laitner. Chairman Schumer, that is an excellent 
question. We just put out a report last month on what we term 
``The invisible efficiency investment boom.''
    Since 1970 we have in effect doubled our efficiency over 
time in ways that have been responding to smart investment, but 
it is the efficiency we do not see as we use our goods and 
services.
    In other words, efficiency is the energy we do not use in 
providing travel, or providing entertainment, or food on the 
table. And because of that hidden nature, that secondary 
attribute, it is not something that jumps out that you can 
count and you can reliably turn to for immediate impact on the 
market.
    So the critical need is to make that efficiency much more 
visible.
    Chairman Schumer. Has efficiency slowed? I mean, we know 
that there was a dramatic increase in efficiency after the oil 
shocks of the late 1970s. Has our, if you will, rate of 
efficiency slowed down?
    Mr. Laitner. Yes. Let me just give you a quick sense of the 
history.
    Up till 1973 we were very anemic in our ability to improve 
efficiency. But as you suggest, 1973 to 1986 we improved our 
efficiency better than about 2.6 percent a year as an economy.
    Then it flattened out, less than 1 percent a year over the 
next decade. Then something interesting happened. One of the 
new fundamentals that Dan is talking about I think has to do 
with broadband information communication technologies.
    In 1995 Moore's Law began to have an economic consequence. 
We began to see that in the rapid drop in prices for 
semiconductors, in computers, even in software. That led to 
what we are now seeing as the Internet economy in various ways. 
It led to my ability to download Dan's book through Amazon-
Kindle. I did not have to travel anywhere. It is not in paper 
at all. It is a dematerialized thing, easily available. I saved 
money doing it.
    That is among the things that are contributing to the new 
tools that Dan was talking about. So that we did see a process 
of capital deepening in the United States up to about the year 
2000-2002 that led to an uptake in efficiency again. But now 
more recently, beginning with the uncertainties in the market 
and what we are here today feeling very seriously, that process 
has slowed.
    So we are no longer investing quite like we are even in the 
computer industry. There is hesitation to make those 
investments in that smart technology. The capacity is there if 
the will is there. And if we had that leadership, I think it 
can again return.
    Chairman Schumer. Right. And that is market forces working 
in technology, which generally are efficiency-producing things, 
but here in the government if we were to adopt the standards 
that California did on a national basis--buildings, appliances, 
utilities--that would have a dramatic effect, I would assume?
    Mr. Laitner. That would have a dramatic effect, and that is 
one of the reasons we laid out the 10 policies we have 
recommended to be taken a look at. And that would include 
exactly that point.
    Chairman Schumer. Yes. I have tried in the energy bills to 
get us to do that, and just nobody even cares about it very 
much.
    And, Dr. Yergin, I would make a point here and hear what 
you have to say, it may have something to do with just the 
psychological effects you are talking about. People are not 
paying attention to efficiency, even though it is happening, 
and even though it could happen relatively easily, and they pay 
attention to ANWR where there is huge contention and that it is 
unlikely to happen.
    Do you think a greater focus on what efficiency can do, 
just that in itself might help a little bit?
    Mr. Yergin. Yes. It is something I have thought about for a 
long time. As Skip was talking, as you were asking the 
question, I was thinking: If we wanted to put out a book about 
energy, we could have a dramatic photograph of windmills, and 
offshore platforms----
    Chairman Schumer. Right.
    Mr. Yergin [continuing]. A power plant, but how do you put 
a photograph of energy efficiency on the cover?
    Chairman Schumer. Yes.
    Mr. Yergin. It is, as you said it is the invisible one, and 
yet when you look at how much we have saved as a country 
compared to where we were in the 1970s, you see this is an 
immense resource.
    So you say: How do you get there?
    Well it is the advance of technology itself. You get it 
through regulation, information, exhortation, price, tax; all 
of those things do it.
    You know in 1998 was the lowest gasoline price we had ever 
had in the history of our country, and that of course is a time 
when you had the great SUV boom because it didn't make sense to 
worry about gasoline prices.
    Chairman Schumer. Right.
    Mr. Yergin. Now you see how quickly everybody is playing 
kind of catch-up with this new regime of prices. So I think it 
really needs kind of a multi-faceted approach to keep it front 
and center.
    It seems to me that it has--I don't know if you find it in 
your discussions on the Hill; do you find greater resonance now 
than say two years ago on this subject?
    Chairman Schumer. Some, but not enough to get us moving 
here. I mean, one of the things I was thinking of talking about 
was, well, I am not wild about this offshore drilling, but at 
least if you are going to try to do that you ought to do it 
combined with some demand reduction and serious efficiency.
    As I said, ten years ago I proposed--my friend Senator 
Bennett is gone, but I mean some of us are trying to be two-
sided on this, demand and supply. Now how much of demand should 
be fossil fuels, and how much demand should be alternatives we 
can debate, but even putting that aside as I said I proposed to 
Senator Murkowski, get me 10 votes for automobile efficiency 
and I think I could get you 10 votes for Alaska. In those days 
Alaska was less contentious.
    And I talked to some of the environmental groups and not 
all but some of them said, you know, I would hold my nose but 
if you could do that, or not do that, I would rather do it.
    So I think, you know, we do have to come up with sort of 
the grand compromise here where Democrats sort of hold their 
nose a little bit and figure out ways to increase supply. As I 
mentioned, I supported--there was a handful of Democrats 
supporting drilling in the East Gulf, and Republicans do far 
more, even though they may think it's not just the market, to 
encourage efficiency, and we might have the work of a grand 
compromise.
    Frankly, I do not think this Administration can pull it 
off. It is too late, and they have not shown it, but either 
President Obama or President McCain might be able to do that.
    Mr. Yergin. Well I think that grand compromise is what our 
$14 trillion economy requires to assure that it has the proper 
energy foundation for the future.
    Chairman Schumer. Right. Let me, since we are in the second 
round, I will go a little--my time is up, but I will go a 
little longer with Congressman Brady's permission--Dr. Joutz, 
tell us about the dollar and the fall of the dollar and how 
much effect that has had on our increased oil prices?
    And again I would be happy to have either Dr. Yergin--well, 
Dr. Yergin in particular; it is not Mr. Laitner's area of 
expertise--comment on that.
    Mr. Joutz. First, I think one thing that is important to 
mention is that the world oil market uses the U.S. dollar as 
its benchmark price. And as the dollar moves, that affects 
their revenues, and it affects their revenues for also 
importing goods from the United States and other countries.
    When the value of the dollar is appreciating, their real 
revenues increase and their real imports increase. However, 
when the dollar depreciates, as it has been doing since about 
2002, we have had on a trade-weighted basis about a 20 to 25 
percent decline in the value of the dollar.
    That means two things. First, the revenues that oil 
exporting countries have received purchased less than they did 
before.
    On the other side of the coin, the one that is more 
important to us from the American consumers and firms 
standpoint, as the dollar has depreciated and the price of a 
barrel of oil has increased, we've been paying the full price 
effect of these much higher oil prices.
    So when it has risen from $25 to $30 a barrel in the mid-
1990s to $40, and today $138, or $135, we are paying the full 
freight on that. And part of that is due to the value of the 
dollar declining against other currencies.
    Now----
    Chairman Schumer. If you had to put a percentage--I know 
that is hard to do----
    Mr. Joutz. I think it is about, I want to say about 25 
percent.
    Chairman Schumer. Of the increase?
    Mr. Joutz. Overall, I think I could say----
    Chairman Schumer. Pretty significant.
    Mr. Joutz. It is pretty significant. But there is another 
sort of double-edged sword here.
    As the value of the dollar has decreased, yes, we have been 
paying more for oil. As Dan mentioned, I think this year it is 
going to be about $600 billion of importing oil. As the value 
of the dollar has decreased, U.S. manufacturing firms, U.S. 
service companies, have become much more competitive around the 
globe.
    And what we have seen over the last two to three years is 
we have seen the export sector in the United States has been 
rising. And American firms that previously were competing 
against foreign firms are now more competitive domestically.
    So the movements in the dollar make some of us better off, 
and in other ways worse off.
    Chairman Schumer. Do you have anything to say on that, 
Dr.Yergin?
    Mr. Yergin. Yes. In the testimony I cite the Dallas Federal 
Reserve which attributes between 2003 and 2007 about a third of 
the price, increase in the rise in the price of oil, to the 
dollar's decline. And we think that if you start looking from 
July 2007 you certainly see with the dollar and other 
commodities they start to go up as the dollar goes down. In 
other words, this is part of the global impact of the credit 
crisis.
    At the same time, you know just this week we saw in terms 
of stagflation the doubling that the Chinese are going to pay 
for iron ore prices which tells you that the demand for all 
commodities prices are high. And although we focus on the 
downturn here, everywhere else you go in the world there is 
this preoccupation with inflation.
    Chairman Schumer. Right. One other--this is a question for 
Dr. Yergin. So you look for--everyone demands a short-term 
solution. You know, let's snap our fingers and get something 
done. Very hard. Very hard to do. Maybe the best one is the one 
you mentioned, sort of a psychological talking up the good 
side, and talking down the bad side a little bit.
    But it seems to me something I have thought, the one place 
where there is a more ready supply is the Saudis. They have 
increased supply a couple of hundred thousand barrels, I think 
300,000 and then 200,000, but they still have by most estimates 
I would guess a million more barrels a day that they could 
produce.
    Is there anything that would induce them to do so? Is there 
anything we can do to get them to do so? Or do you feel that it 
will not make a difference, or they just will not do it?
    Mr. Yergin. Part of the issue is the quality of the oil 
that they have available is not the one that there is a demand 
for. There isn't a physical shortage.
    That would also leave the world with zero--let's say they 
produced it all. It would leave us with zero spare capacity, 
which would be a very precarious position in terms of any kind 
of a crisis.
    The other thing that I focus on--and this is in Skip's 
area--I really do think that we could very quickly, without 
influencing any of our standards of living, bring down our 
gasoline consumption by 6-, 7-, 800,000 barrels a day, with 
some very minor changes in our behavior.
    This is always put over there under that category called 
``tips,'' but if you say it is not ``tips'' it is a strategy. 
So I actually see conservation as part of our strategic 
resources----
    Chairman Schumer. The kinds of things Mr. Laitner laid out 
in his ten points.
    Mr. Yergin. Yes. And it is just, you know, it bugs me that 
they are always regarded as just ``tips'' when you can put them 
together, and that can have an impact. Because changes in 
demand can help change the outlook.
    Chairman Schumer. Congressman Brady is being very kind. I 
had a few other questions I wanted to touch on.
    The oil workers that you mentioned, that we have a shortage 
of just people and equipment, classic market economics would 
say that is going to solve itself rather soon because there is 
a greater demand for oil, and it has not happened yet.
    Could you please tell us a little about what you think of 
why it has happened? And will it solve itself? And is there 
anything we can do about it?
    Mr. Yergin. Yes. What happened is that you had a 20-year 
contraction in the oil and gas industry. You had two price 
collapses, two episodes of $10 a barrel.
    So just as the industry finishes its contraction and 
downsizing, that is when demand explodes with China and India 
and so forth, and that is why we are playing a game of catch 
up.
    Petroleum engineering departments closed down. People 
stopped enrolling. So I do think that will fix. But it will not 
fix overnight because it takes 5, 10 years to get an engineer 
up to appropriate standards and experience.
    You need a--but, you know, four years ago you could have 
rented a deep-water drill skip for $125,000 a day. Today it 
would cost you $650,000 a day. Those ships are going to get 
built, but there again it does not happen overnight. But I 
think it will--those incentives three, four years from now will 
see an industry that will be more equipped to meet the needs.
    It will be a much more internationalized industry. We will 
see more Chinese and Indian engineers.
    Chairman Schumer. Anything we can do to hasten that?
    Mr. Yergin. I would like to give that a little thought. I 
think on the educational side that might specifically look at 
the education of energy technologists and would be something 
that would be well worth--that would be one thing well worth 
examining.
    Chairman Schumer. Well thank you.
    Congressman Brady has been very patient as I have gone over 
my time by a significant amount.
    Mr. Brady. No, this is an important topic. And besides, you 
have the gavel so I think that works well that way.
    [Laughter.]
    Mr. Brady. I agree, coming from an energy producing state, 
we do have a shortage of energy workers today, and an aging 
energy working population. It is a real concern today. In 
Southeast Texas we have three major expansions of refineries 
desperately seeking about 15,000 workers both to construct and 
ultimately to maintain those refineries, and it is an issue.
    Energy efficiency. I am pleased that we are talking about 
this. America is making progress on energy efficiency. The Ways 
and Means Committee held a hearing, oh, 24 months ago where we 
basically sat through three days and listened to testimony that 
shows that we could make virtually everything we touch each day 
at home or at work more energy efficient. There are remarkable 
potentials there. And to accelerate that really is the key.
    I think part of the challenge is to recognize in rural 
communities like 10 of my counties where people are forced to 
drive a long way to work. They are forced to drive a long way 
to the hospital. They are forced to drive a long way to school. 
They are making cutbacks and changes in their behavior today, 
but it is simply not enough to offset the dramatic increase in 
energy.
    I think that may be why the recent Bloomberg poll from 
yesterday showed that while the American public supports more 
energy efficiency and supports investments in renewables, that 
68 percent of Americans believe we ought to be exploring more 
here in America.
    In fact, 60 percent of Democrats in the country believe we 
should be exploring more here in the United States. And it has 
been frustrating I think that we have not had, or been allowed 
to vote even once on any bill that would create more production 
and supply here in America.
    So, Senator, I and others would welcome any potential grand 
compromise on efficiency and production, because I think it is 
long overdue.
    Let me ask you this: One of the frustrations--one of the 
reasons I think we have trouble with drilling in our deep ocean 
exploration is that Congress has allowed former Presidents and 
current Presidents with ratification in Congress has allowed 
states to basically lock off federal waters off their shores.
    I understand that states ought to have control over the 
three miles of state waters, but beyond that those are federal 
waters, resources that are owned by the American public, and I 
think should be reclaimed for the American public as we have 
this debate about a national energy policy.
    We can't have a national energy policy if states control 
the resources that in fact the U.S. owns.
    My question to the panel is: As we go about looking at 
making timely investments, not just in renewables but in 
traditional energy as well, is there a reason why the 
national--why Congress should not reclaim authority over 
federal waters throughout this country?
    [Pause.]
    Mr. Brady. Don't all talk at once on this one.
    Mr. Laitner. I might open a few comments with the note that 
the states indeed are in many ways responding much more agilely 
than the Federal Government at this point with regard to a 
number of different energy initiatives.
    Certainly California is leading the way. New York is doing 
some really----
    Mr. Brady. On the production side?
    Mr. Laitner. Well even on the production side. For example 
I am thinking of more efficient supply like combined heat and 
power technologies, or waste energy type generation 
technologies.
    Mr. Brady. But as it relates to oil and gas?
    Mr. Laitner. That I agree, there is a stasis there.
    So the point being that the states are eager to do 
something----
    Mr. Brady. Sure.
    Mr. Laitner [continuing]. And they need to be let loose. At 
the same time, the issues are so paramount that we as a Nation 
are risking more by not acting at all; that it may be time to 
rethink what it might require to both develop new sources and 
to promote efficiencies.
    So I would be put in the category of what Chairman Schumer 
had called ``the nose-holder.'' I can imagine that not acting 
is going to cost us more environmentally and cost us more 
financially than coming together with some form of compromise 
that might allow some offshore drilling to occur.
    Mr. Brady. Well we have, for example, off Florida, 100 
miles off Florida, on the tiny sliver of Section 181 that we 
are allowed to explore, and we have a small 2-acre platform 
there, the independents have, a $2 billion investment, that 
produces 10 percent of all the natural gas in the Gulf, 2 
percent of all the natural gas in America.
    You can barely find it. If you and I flew over it for a 
week, it is so small and environmentally well planned out, it 
just seems to me some proposals say let's extend state waters 
even farther out and give states more control perhaps to 12 
miles or beyond, but then you can't even see an oil rig 6 miles 
from a coast. The curvature of the earth doesn't allow it.
    But the point being, perhaps the compromise is to extend 
those waters under state control farther out so there is that 
reassurance for states, but then to reclaim beyond that and 
find some thoughtful ways that we can lease what are tremendous 
resources for us, and which can be done a very environmentally 
friendly way.
    Mr. Laitner. I think we are in such a straitjacket that we 
need to put all resources on the table, but make sure that they 
are all evaluated at the same level of analysis in terms of 
full costs and full benefits, and then make some decisions 
about what is the mix of resource that should be developed, 
given our investment capability. Given our need to maintain a 
robust economy, how should we move forward?
    So that might mean, for example, that if there were some 
mechanism as you described, it might be one part oil drilling 
and two parts further efficiency gain. We would be better off 
economically and environmentally than allowing nothing to 
happen at this point.
    Mr. Brady. Right.
    Mr. Laitner. I would need to think about that more, but in 
order to break open the discussion that needs to be put on the 
table.
    Mr. Brady. That is the kind of thinking we need.
    Mr. Yergin. Right. I think that--I don't know and am very 
interested to understand more clearly the jurisdictional issues 
between the states and the Federal Government, between 3 and 
12----
    Mr. Brady. Sure.
    Mr. Yergin [continuing]. And farther out. I would rather 
not call it ``the nose-holder.'' I would rather call it the 
``Grand Bargain. I think that as part of addressing 
conservation and new technologies, that offshore is clearly 
part of that.
    I think we should recognize that the same advance in tools 
that make possible the kind of advances in efficiency that 
today drilling offshore is a very different industry than it 
was 20 or 30 years ago. It is space age, it's extraordinary in 
terms of its capabilities and its abilities to do thing right.
    We see countries like Norway, which is the greenest country 
on earth in terms of policies, have found a way to address the 
offshore. And about a third of the world's oil today comes from 
the offshore. So it is an important resource.
    What you describe in terms of our natural gas needs next 
winter, that is going to be something. We are now focused on 
gasoline. Next winter we will be focused on natural gas, and 
that is part of the picture.
    I just wanted to add one other thing to Chairman Schumer's 
question about how quickly. There is still this people deficit 
issue that is a big issue. I was just thinking as part of the 
National Petroleum Council study last year that found that 55 
percent of the petrol professionals, as you'll call them, 
engineers and scientists, are within 10 years of retirement.
    So there really is a missing generation in terms of energy 
technology in our country.
    Mr. Brady. And I think, too--and I will close with this, 
Mr. Chairman--I think one of the reasons we are seeing perhaps 
a discouragement of new energy workers is that some of our 
policies here in Washington I think tend to discourage that 
investment of human capital.
    For example, two years ago Congress, worried about the 
outsourcing of manufacturing jobs, passed legislation that 
creates a lower manufacturing tax if you produce, invest, 
create jobs here in America; a higher one if you do that 
overseas.
    Unfortunately, this Congress has continued to pursue tax 
changes that would single out one industry, energy, to 
basically say, no, you do not qualify for that tax credit any 
more. In fact, we are going to--when you invest in American 
workers, in American production, in American exploration, we 
will actually raise your taxes to do that.
    I cannot imagine that we are going to lower gas prices or 
make more timely investments by actually discouraging companies 
from exploring, and producing, and creating jobs here in 
America. That may be part of the problem we are having 
attracting and recruiting not just engineers, researchers, 
Hispanic workers, union workers, skilled welders, it's a broad 
range, 2 million energy workers today. I think we need to do 
more of that, not less.
    I yield back, Mr. Chairman.
    Chairman Schumer. Thank you.
    Congressman Cummings had four hearings today, so he is a 
little bit late. We said we would close at 11:30, but we are 
going to make a little exception with the okay of the witnesses 
so that Congressman Cummings can ask his full round of 
questions.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Laitner, you state in your written testimony that 
increased energy efficiency has played a significant supporting 
role in the growth of our economy.
    Essentially you argue that increases in energy efficiency 
have resulted in a lower per capita energy use in 2008 compared 
to the trends that could have been expected in 1970 had the 
energy efficiency increases not occurred.
    Can you comment on how much of the increase in energy 
efficiency resulted from specific government policies, and how 
much resulted from technology improvements that industry chose 
to bring about without prompting from the government?
    Mr. Laitner. A very interesting question and, not to be a 
middle-of-the-roader on it, I think it has been both. There has 
been some amazing innovations on the industrial side. We tend 
to think of industry as a user of energy, when in fact in many 
ways they are the source of the innovations that we are all 
putting to work.
    Work I have been doing recently with the likes of Dell 
Computer, Intel, and others, Verizon, a number of firms like 
that, I am quite stunned at the level of innovation that they 
are putting into this effort.
    Part of it is market driven; they are trying to be 
competitive, but clearly a source of innovation. And I would 
have to say it is probably on the order of maybe half of the 
efficiency gains, if you want me to put it in that rough 
measure, has been because of industrial innovation.
    But the other half has come from a combination of price to 
an extent, but more critically government policies. And 
Chairman Schumer has raised the issue of California, what they 
have done. They have enacted a variety of standards. They have 
funded a number of programs. They have provided a great deal of 
information, technical assistance, and incentives to move more 
aggressively with respect to increased efficiency.
    And at the federal level we have seen everything from a 
very successful, voluntary Energy Star Program that I think is 
a resource that needs to be deployed more fully, and recognized 
more credibly than has been, but also other things like 
standards for appliances and consumer products.
    So that there has been a mix. There has not been a single 
silver bullet to be sure, but it has been a very dynamic mix. 
The issue then becomes how to enrich and build on that resource 
to really extend the full potential that can be there should we 
make that decision.
    Mr. Cummings. It is interesting. As you were talking I was 
just thinking that yesterday I met with some bond counsel and 
they were saying that there is a lot of new bond work coming 
up, municipal bond type work, whereby the companies are going 
in and showing municipalities how they can save, and they make 
arrangements--the savings are so great with regard to energy, 
the savings are so great that in many instances they have been 
able to cut energy consumption in half.
    Baltimore and a number of other places are looking into 
doing more of that. That is just a very interesting thing, to 
think that you can cut that much use of energy. And when you 
multiply that throughout the country, you are talking about 
quite a bit.
    As a member of the Transportation and Infrastructure 
Committee, I read with great interest your comments on our 
Nation's transportation infrastructure.
    Unfortunately, many of these measures such as co-funding 
local land-use planning and developing policies to expand 
alternative modes of freight transportation are geared more 
towards the long-term.
    Are there measures that you would recommend that could be 
implemented more immediately?
    Mr. Laitner. Yes. One of the measures I have already 
referenced earlier is the movement towards a telecommuting and 
video conferencing capability at the Federal Government and at 
the municipal level, but within industry.
    One of the reasons in fact I am no longer at the 
Environmental Protection Agency is because my management did 
not like me telecommuting. I could be with my daughter's riding 
lessons and talking to people in Russia, and she insisted I had 
to be in the office because that's where you forced me to be. 
It was Congress that set up that, and I had to adhere to that.
    So extending the ability of telecommuting and video 
conferencing at all levels I think can go a significant way to 
reduce transportation requirements. I mentioned earlier I took 
a trip to Stockholm just a couple of months ago by walking down 
the street in a very high-quality participation in a video 
conference with 20 of my colleagues in Stockholm and me here in 
D.C. I saved almost 4000 pounds of carbon dioxide by not 
traveling that distance. It saved me two days of time and cost 
me $200 to get the job done.
    I think we would be surprised at the extent of what we 
could do with information communication technologies to 
leverage greater efficiencies in freight, in logistics, 
personal travel, entertainment, and just general worker 
productivity.
    Mr. Cummings. I recently talked to some newcomers to 
Baltimore. Baltimore is changing drastically, and a number of 
them said that they came to the City from the country because 
of gas prices. And it was just more convenient.
    I look at what is happening in Washington and other places 
and I guess it is much easier to live where you work and so 
that if you are not commuting an hour, an hour and ten minutes 
one way, that is quite a bit of savings. I had not thought 
about it from that perspective.
    I think that what will happen is a lot of your urban areas 
will probably continue to grow much faster than they normally 
would have, and I think this gas situation has caused a number 
of people to do that, to move into the more urban areas. Would 
you agree?
    Mr. Laitner. I would absolutely agree. And if I might 
comment on your suggestion about communities more generally, as 
a source of effective action, to the extent that we think about 
greater energy productivity as a form of economic development, 
communities can become a critical deployment resource to get 
the job done.
    I with a number of other architects have put in a bid for 
the City of Elgin, outside of Chicago, to help them redesign 
much of their economic activity with that precise goal in mind, 
to deliver quality investment in ways that build on the 
information broadband infrastructure, but in ways that also 
allow greater productivity from transportation and from 
entertainment and their own personal working capabilities. I 
think it is a critical opportunity.
    Mr. Cummings. Thank you, Mr. Chairman.
    Chairman Schumer. Well I want to thank all our panelists, 
and particularly our witnesses. I think it was very 
instructive.
    Two points. First, it was good to hear that Dr. Yergin, who 
is one of our great experts here, believes that prices may well 
come down over a period of time. That is good news, and maybe 
that will help the psychological problems that we are talking 
about.
    And second, I was heartened to see on both sides of the 
aisle here, as well as on the panel, at least the little 
seedling of perhaps a grand compromise. Because I do think we 
need it, and I would certainly be one who would be very much 
eager to pursue that in terms of energy.
    So with that, let me again thank everybody. This was a very 
productive hearing, and we are adjourned.
    [Whereupon, at 11:34 a.m., Wednesday, June 25, 2008, the 
hearing was adjourned.]
                       Submissions for the Record



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






