[Congressional Record Volume 146, Number 12 (Thursday, February 10, 2000)]
[Senate]
[Pages S598-S599]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           HEATING OIL PRICES

  Mr. MURKOWSKI. Mr. President, I would like to address very briefly a 
couple of issues. One is the issue of the high cost of heating oil, 
particularly in the Northeast corridor at this time. I know my 
colleagues from the Northeast are looking for relief. Perhaps I could 
enlighten them to some extent on the reasons behind why prices are high 
and why stocks are low.
  I think it is important to recognize a couple of basic facts that 
underline the whole question; that is, understanding the crude oil and 
heating oil relationship.
  There are some who suggest we have a shortage of crude. That is the 
reason we have higher prices for heating oil. Factually, however there 
is no refinery in this country that has been short of a supply of crude 
oil during this crisis. The problem is the refineries have been cutting 
a different mix of product. They cut heating oil. They cut gasoline. 
They cut diesel fuel as well as other hydrocarbons. They have begun to 
cut other mixes instead of heating oil. So if they change the mix and 
reduce gasoline for heating oil, that could give some relief, but it 
may ultimately result in a shortage of gasoline during peak usage in 
the coming months.
  The basic difficulty is coupled with the fact that the inventories 
were low. That is perhaps the fault of the industry. But while the 
inventories were low, the crucial problem is the storage areas for 
these stocks were reduced dramatically. What do I mean by that? I mean 
the tanks around the metropolitan areas that are conventionally used to 
store the heating oils, the gasolines, and so forth.

  In the case of New York, petroleum bulk storage capacity has declined 
15 percent over the past 5 years. Why? According to testimony the other 
day from New York State officials on heating oils, this is a 
consequence of tighter environmental controls that suggest these old 
storage areas are inadequate or a danger to the environment. That may 
well be the case. However, the reality is we reduced our storage and as 
a consequence we don't have the inventory of heating oils that we would 
have had if we had the storage available.
  I am not suggesting that people from New York or anywhere else don't 
need strong environmental regulations. They do. But we have to 
understand how we got into this predicament. That is the reason why the 
inventories are down.
  Some say the answer is to open up SPR, a strategic petroleum reserve 
in Louisiana. We need to recognize we don't have a shortage of crude 
oil at the refineries, and if we further understand that in SPR there 
is no heating oil--it is not refined oil, it is crude oil; therefore, 
by taking oil out of SPR and take it to the refinery, we will displace 
what the refinery is already refining to accommodate SPR. So we don't 
have any net gain.
  Most people cannot quite understand that. They think SPR is for 
heating oil that can be taken out of SPR and distributed, thereby 
easing the shortage. We cannot do that.
  I understand the Secretary of Energy will make an announcement today 
or very shortly about the administration's efforts regarding high oil 
prices. Let's look at this because it is important. They will do 
something more for the Low-Income Housing Energy Assistance Program, 
which provides money for the low-income areas. That is commendable. 
However, that does not solve the underlying problem. They will 
``jawbone'' more with the OPEC countries to release more oil. They can 
release more oil, but will they reduce the price? That is crude oil 
that had to be refined. They will encourage refiners to make more 
heating fuels--they might be able to persuade them to do that but it 
will change the mix and might result in a gasoline shortage this 
summer.
  The interesting thing about the administration's response is, nowhere 
is there a commitment that we increase our domestic petroleum 
production to make us less dependent on OPEC pricing policies. That 
would be contrary to the environmental community who objects to the 
production domestically of oil and gas. Let me go a step forward. The 
Vice President said: If I'm elected I will cancel all the OCS leases, 
oil and gas.
  What does he propose we will do? We cannot address what we will do 
with our nuclear waste. As far as I'm concerned the administration can 
choke on that waste. That seems to be their only solution.
  We have an administration that proposes more new taxes on our 
domestic oil and gas industry. Think about that. We have a heating oil 
crisis, we have high prices, there are barges in transit and ships 
coming over from Europe with heating oil. That may help. We cannot move 
the crude oil out of SPR fast enough. We cannot get it to refineries 
that have any unused capacity. And we don't have adequate storage to 
store the reserves.
  If you want to debate that issue, as chairman of the Energy and 
Natural Resources Committee I will try to work with Members. But let's 
be realistic and try to understand what the problem is and not fool the 
public.
  If anyone saw the Coast Guard cutter grinding through the ice on the 
Hudson

[[Page S599]]

River to try and clear the waterways for the heating supplies to be 
delivered, they would have a better understanding and appreciation of 
some of the real problems.
  I want to work with my colleagues to try and address this but let's 
make sure we understand the realities associated with that. I have a 
problem with our continued dependence on jawboning the Middle East 
countries. Our friend Saddam Hussein is now producing nearly 2 million 
barrels a day. The consequences of that, in view of the fact we fought 
a war not so long ago, suggests that our energy policies are 
inconsistent, to say the least.

  We talked about the administration's ``cure'' to encourage more 
production. The President has proposed $50 million in new and expanded 
user fees over 5 years on our domestic oil companies drilling in 
offshore waters. Is that going to continue to drive production in the 
United States? It will continue to drive it overseas and increase our 
reliance on imported oil from foreign shores--and we are 56 percent 
dependent now. The user fees are included in the administration's 
fiscal year 2001 budget. According to reports, the fees would raise $10 
million in each of the next 5 years by increasing rental rates on oil 
leases, among other fees.
  In addition, we understand the budget recommends reinstating the oil 
spill liability trust fund to add 5 cents a barrel excise on both 
domestic and imported oil. This equals $350 million per year from all 
sources.
  Once again, instead of encouraging our domestic oil industry, this 
administration seeks to discourage it wherever possible. The result is 
that we are 56 percent dependent on foreign oil; and the Mideast, where 
that oil comes from, where there is a huge abundance of oil, is sitting 
back nodding their head and smiling as they continue to control the 
discipline within their cartel not to allow overproduction and a 
decline in price.
  The national energy security of this Nation is at risk as we become 
more and more dependent on imported oil. We have tremendous domestic 
reserves in this country if we can only open them. My State of Alaska 
has produced 20 percent of the crude oil produced in the United States 
for the last 20 years. If allowed on land in Alaska to use the 
technology that we have, we can continue not only to produce 20 percent 
but probably increase that to 30 percent or maybe 40 percent. The 
alternative is to increase our dependence on imported oil.
  Senator Landrieu and I have a bill, Senate bill 25, that will try and 
address a fair return to the coastal impact areas offshore and onshore 
relative to a reasonable revenue stream that ought to come back to 
these areas as a consequence of oil and gas development on the outer 
continental shelf. This is legislation that all coastal States would 
share in, whether they have any oil and gas activities. This 
legislation would benefit the environment but it would put control of 
how that money is spent--not with a central Federal Government dictate, 
but with the participation of the States and the local communities. 
That is the way it has to be.

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