[Congressional Record Volume 146, Number 16 (Tuesday, February 22, 2000)]
[Senate]
[Pages S674-S676]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          THE PRICE OF ENERGY

  Mr. MURKOWSKI. Mr. President, I rise to share with my colleagues the 
plight of our independent truckers who are here in Washington, many of 
them, expressing their frustration as a consequence of the high 
increase in the cost of diesel oil. These are individuals who own their 
own trucks, for the most part, and supply this country with untold tons 
of food and various other supplies, virtually everything we need.
  This is a mobile society and we are dependent on energy to move us. 
The price of that energy has increased dramatically.
  I have yet to hear from the administration expressing any of their 
concerns, as a consequence of this demonstration by the independent 
truckers who are trying to bring a focus to what kinds of relief the 
administration is proposing because every indication is we are going to 
see higher oil prices, higher energy prices. There are some reasons for 
this. One of them is we have an increased dependence on imports of oil. 
We are currently 55-percent dependent on import oil. Most of these 
imports are coming from the Mideast.
  In the world of the oil market, the United States is certainly a 
giant consumer but, a bit player. The Organization of Petroleum 
Exporting Countries really calls the tune, and the U.S. generally has 
to pay the piper. That organization is known by all of us as OPEC. 
There are 11 countries that make up OPEC, and they produce more than 40 
percent of the world's oil and possess three-fourths of the world's 
proven reserves. The United States, as I indicated, imports 55 percent 
of the oil we use, or about 10.5 million barrels out of the 19.3 
million barrels of oil consumed in the Nation in each and every day.
  The point I want to make is this is not just a one-time incident. If 
you go back to 1973, some of you will remember the lines around the 
block at the gas station. At that time, we had an Arab oil embargo. 
However, at that time, we were 36-percent dependent on imported oil, 
and we created the Strategic Petroleum Reserve. We said we would never 
expose ourselves to near 50-percent dependence on foreign oil. Today, 
we are 55-percent dependent, as I have indicated, and growing. It is 
our own Government's policies, or lack of policies, both local and 
national, that have handicapped our domestic industry. The result is 
consumers from New York to Oregon are paying the price. The truckers 
who are in Washington today, are paying the price, but not without some 
loud howls, seeking some Government relief. Several of these self-
imposed handicaps are correctable if we would only wake up to a few 
realities.
  On the production side, we have banned oil exploration off a good 
portion of our coastline, including California and Florida, because a 
majority of these States oppose it. They have every right to oppose it, 
and we should honor it. However, we refuse to consider exploration in 
many areas where clearly it is supported, such as in some areas of 
Texas, Mississippi, Louisiana, and my State of Alaska.
  We should, in these areas where the public supports exploration, get 
an aggressive leasing plan and proceed to open up these areas, using 
the advanced technology we have and getting on with the task of 
lessening our dependence on imported oil.
  The Arctic National Wildlife Refuge in my State of Alaska has often 
been mentioned as a potential for major oil discovery. From the 
standpoint of my State of Alaska, we have supplied this country with 
nearly 20 percent of the total crude oil produced in the last 27 years. 
We have done it through a pipeline and a development process that has 
been safe. The tragic accident of the Exxon Valdez was a tanker 
accident that had nothing to do with the production or transportation 
of oil by pipeline.
  The Arctic National Wildlife Refuge consists of 19 million acres. The 
assumption is that the entire 19 million acres is going to be open for 
exploration. That is not correct. Congress has set aside 8 million 
acres of that tract in wilderness in perpetuity that can never be 
disturbed. Another 9.5 million acres have been set aside in a wildlife 
refuge. No development is allowed or is going to be allowed. The 
remainder of that 19 million acres is 1.5 million acres which 
geologists have identified as holding as much as 16 billion barrels of 
oil which would or could replace Saudi oil coming into the United 
States for the next 30 years. It is not a drop in the bucket by any 
means.

  Where is this administration going with regard to lessening our 
dependence on imported oil? It wants to raise taxes on the oil 
companies, saying the royalty valuation in the past has been unfair. Is 
that an incentive for exploration? I think not.
  The President's current proposal in his budget calls for more than 
$400 million in new taxes on the oil industry. Who is going to pay 
those taxes? It is going to be the American consumer.
  The consequences are evident. Since the Clinton administration 
assumed office, U.S. crude oil production has fallen by 17 percent, and 
during that period U.S. consumption of oil has gone up 14 percent. Why? 
Some people drive bigger cars than they used to. Some people like air-
conditioning. Some people get on that jet airplane.
  What has happened to the industry? Our drilling rigs have gone from 
532 active rigs operating in 1990 to 133 rigs operating in 2000.
  What is our policy? Our policy is to become more dependent on 
imports.
  On the downstream side, domestic policy really is not any better. 
Some of my New York colleagues have concerned themselves about the high 
price of heating oil. I am sympathetic with those who are dependent on 
that energy source, but while I sympathize on the one hand, I also 
point out that a good portion of this is self-inflicted. Prices are 
high because stocks are low.
  The State of New York itself reports that the petroleum bulk storage 
capacity has declined over the past 5 years by more than 15 percent, 
and the heating oil storage capacity has declined nearly 20 percent, 
largely due to environmental regulations. Those regulations may be 
well-founded, but the fact is they do not have either the storage for 
crude nor the storage they once had for heating oil. Of course, it has 
been a cold winter. When the heating oil supply is tight, many of my 
colleagues search for an excuse, while the answer is right in their 
backyard.
  Moving over to suggested relief that has been proposed by opening up 
the Strategic Petroleum Reserve, which is our petroleum reserve in case 
of a national emergency, there is a suggestion that if we were to 
release that, somehow this would address the concerns we have over the 
high price of heating oil. Let me walk you through that scenario.
  First of all, the SPR is for supply disruption emergencies. It is a 
crude oil supply in salt caverns in Louisiana. As a consequence, it has 
a limited capacity to get out that crude. It is not heating oil. It is 
crude. So it has to be moved from SPR to refineries, be refined, and 
then go into the market.

  The difficulty with this is the refineries have crude supplies. So if 
you bring in SPR crude, you are going to have to offset that with the 
crude they have at the refinery already. The difficulty is in the mix 
of what the refineries make. As a consequence of low stocks going into 
this winter, based on the assumption this would not be a cold winter, 
those inventories were low. Coupled with the reduction in the storage 
supply for the fuel oil--and then later we did have a colder winter; we 
all saw the Coast Guard breaking ice in the Hudson River--as a 
consequence of that, we could not meet the demand for heating oil, and 
the price went up to nearly $2 a gallon. That was indeed unfortunate.
  Relief. The refiners continued to produce more heating oil. The 
weather

[[Page S675]]

began to cooperate, and reports suggested that Europe sent over refined 
product.
  The point I want to make is, SPR is not the answer because the simple 
reality is, you do not displace one type of crude oil with another. 
That does not relieve the problem. It is the mix within the refineries.
  Now we have an administration that is petitioning them to still 
produce large volumes of heating oil even though there are indications 
the inventories are now adequate. The real threat is that they should 
be producing gasoline soon for the summer market. We could see a 
shortage of gasoline this summer and perhaps retail price increases in 
the neighborhood of nearly $2 a gallon.
  We did a little comparison on the west coast, which is the area where 
I am from. We did a comparison for retail prices in three Western 
States and Alaska. We found California's regular gasoline was $1.38 per 
gallon; for Oregon's regular gasoline, it was $1.42 per gallon; for 
Washington's regular gasoline, it was $1.35 per gallon; and for my 
State of Alaska, it was $1.35 per gallon.
  But when we talk about self-inflicted problems, we need to look at 
the taxes imposed on each gallon of gas within the four States.
  California's tax burden is about 46.4 cents on the gallon; for 
Oregon, it is 45.4 cents per gallon; for Washington State, it is about 
the same. The taxes include Federal, State, and local taxes in the 
three States. California includes a sales tax, as well, and has the 
added burden of 5 to 8 cents a gallon its residents must pay for 
reformulated gasoline.
  Oregon is a little different. It adds to its cost by banning self-
service as an option at the pumps. In other words, you do not fill up 
your car in Oregon. Somebody does it for you. You pay for it. The 
estimated additional cost is about 15 cents a gallon.
  But in Alaska, my State, the combined taxes are only 26 cents. 
Without taxes, my State of Alaska actually pays the highest price for 
gasoline of the four States; yet we produce it all--or a good portion 
of it.
  Gasoline prices. If you take off gas taxes, take off the cost of 
additives, take off the cost in relation to whether or not somebody 
fills your tank, then you begin to be able to identify what the true 
costs are to the consumer for a gallon of gasoline.
  My State of Alaska supplies 46 percent of the current stock to the 
west coast. But barrels of oil from Alaska are beginning to decline. We 
are producing little more than a million barrels a day. Virtually all 
of that is shipped to Washington and California; significant portions 
go from Washington to Oregon.
  California's Senators object to any development in the Arctic. But 
without new development, the production will continue to decline, and 
it will be necessary for the west coast and their west coast 
constituents to purchase more oil from even more expensive sources, 
such as the Mideast. How are they going to get the oil in? In foreign 
tankers owned by foreign companies that clearly have more of an 
environmental exposure than our own domestic fleet.
  Common sense tells us we should stop handicapping our industry. We 
should do this by encouraging exploration, development of our reserves, 
and not increasing taxes on this industry.
  Oil development in my State can be done right. It is environmentally 
sound. It keeps land disturbance to a minimum.
  To give you some idea, out of the 19 million acres of ANWR that we 
talked about, of the million and a half acres that Congress has the 
authority to open up--and I add, this body voted to open it up; and the 
President vetoed it a number of years ago--the footprint is estimated 
to be no larger than the footprint of the Dulles International Airport, 
assuming the rest of Virginia were wilderness. That is to give you some 
idea of the magnitude of what the footprint is. It is relatively small.
  Again, I remind you that the estimates are that the ANWR area could 
produce more than 16 billion barrels of oil, which would equate to 
about what we bring in from Saudi Arabia over a 30-year period. Yet 
this administration would rather bolster the oil output of Saddam 
Hussein by lifting oil production limits in Iraq, which is what they 
have done. Should we really be placing our energy security on OPEC 
decisions?
  The administration pursues policies that discourage investment within 
our borders, driving investment overseas, and our jobs overseas. If we 
are going to participate in this energy race, we are going to need to 
get in the game. If we choose to continue to drive oil production 
offshore, then we will have no room--or little room--to complain about 
the high price of that decision, or the insecurity of our future oil 
supplies.
  There is no question in my mind that our national energy security is 
very much at risk. We still do not seem to get it. We do not understand 
the vulnerability of increasing our dependence on imports.
  If we look over our shoulders at world crude markets, since 1997, we 
have gone from a low of $10 a barrel to $30 a barrel. To some extent, 
we have explained that this was due to the slowdown of the Asian 
economy, mild winters, and increased Saudi and Venezuela production. 
Then we have also seen OPEC kind of get its act together with self-
discipline. It cut production 6 percent. They decided they would rather 
sell less oil but sell it higher than sell more oil and sell it lower.
  Then we saw the Asian economy rebound. Winters in the U.S. got colder 
even with global warming. The thought from OPEC was: Wait a minute. We 
are going to hold off for a little while. We saw the low stocks as a 
result of this.
  Of course, we have discussed the heating oil situation and SPR and 
OPEC and ANWR. But when we get back to what the administration is doing 
about it, we are still stuck with the reality that they are throwing 
more taxes at us--$400 million. They are not encouraging the industry 
to go out and drill, as evidenced by the reduction in drilling rigs.
  Some of them say: We will simply go out and hook up to natural gas. 
The National Petroleum Council report indicated that is not going to be 
a viable alternative. They said that we consume about 20 trillion cubic 
feet of gas today. We will be consuming about 31 trillion cubic feet in 
the next 10 years. We do not have the infrastructure in to meet that 
demand. It is going to have to be an expenditure of about $1.5 
trillion. Gas will not be cheap.
  The Secretary of the Interior, Mr. Babbitt, won't make public lands 
available to produce natural gas. The Federal Energy Regulatory 
Commission puts up environmental roadblocks to building new gas 
pipelines to the Northeast. Where is the power going to come from?
  Some would say hydroelectric. We have already seen the proposal by 
the Secretary of the Interior. He wants to tear down four dams in the 
Pacific Northwest. Now a FERC Commissioner, Commissioner Hoecker, 
claims that FERC has the authority to tear these dams down.
  Moving over to coal, the administration is proposing to take a number 
of plants down through EPA decisions. Those were plants that were 
grandfathered in under the Clean Air Act, with the assumption that they 
would operate for a period of time. As the power industry has attempted 
to maintain those plants, they have been subjected to criminal 
prosecution by the EPA for extending the life of the plants. I am not 
debating the issue of, if you stay within your permit by continuing to 
maintain your plant at a level that you have to, whether you are 
extending the life of that plant or not. But that is the dilemma for 
the coal industry.
  We have already debated for days the reality and role of the nuclear 
industry, the fact that it contributes 20 percent of the power in this 
country. The administration does not want to address a solution on its 
watch. It would just as soon let the industry choke on its own waste. 
While we had 64 votes the other day, we were still a few short of a 
veto override, and the President threatened to veto the legislation 
that would address, temporarily, relief so our nuclear industry could 
continue to produce power.
  With the attitude of the administration, it is evident that in the 
area of nuclear, coal, hydroelectric, there are simply no alternatives 
being proposed. I suggest to the Senate that is an irresponsible 
attitude. It seems all this administration wants to do is to hang on 
until it is over--and I can't wait--in

[[Page S676]]

the hope that there won't be some kind of calamity that will disrupt 
their departure. I suggest there is going to be a calamity. It relates 
to what is happening in Washington today with the truckers. This is 
proof the folks out there are fed up. They are looking to Government 
for a response. They are fed up with the administration's attitude 
which suggests we should go over to OPEC and beg that they increase 
production, that we become more dependent on imported oil. The 
realities of that are totally unacceptable to this Senator.
  It is going to get more serious. OPEC would like to see oil at 
somewhere between $20 and $25; that is good for OPEC. I suppose now 
that it is $30, it might be good for the United States.
  OPEC is having a meeting in March, but some economists suggest it is 
too late. We are going to be increasingly exposed to increased gasoline 
prices this summer. Some suggest we are going to be subjected to $40 
oil, if Saddam Hussein chooses to cut off his supply in protest of 
United Nations sanctions. Here we are in the United States, dependent 
on what Saddam Hussein might do to his oil production that could affect 
our price of energy. Incredible, Mr. President, incredible, but 
nevertheless true.
  As I have indicated, the past year alone, oil has tripled in cost to 
$30 from less than $11; heating oil, nearly $2 a gallon; our airline 
tickets, $20 surcharge. One of these days when you go to fill up that 
sports utility vehicle, it is going to cost you $60 to fill your gas 
tank.
  People in this technological age wonder what the role of oil is. Is 
oil energy king? Well, let's look at inflation. We hear Chairman 
Greenspan worry about inflation, about oil prices increasing. The 
Secretary of Energy, in the meantime, tours six oil-producing nations. 
He says he can't ignore the potential for oil to have an impact on 
inflation. He says what OPEC does matters, and it sure does. I think we 
are at a point of reckoning where oil has reemerged as a political and 
economic threat to our economy.

  Now, here we are, looking at dependence on Mideast oil-producing 
countries, and we are asking them to change their cash-flow to 
accommodate us and increase production. I wonder if they will be 
inclined to do that.
  If we look at some of the realities associated with inflation, I 
think we have to look over our shoulder and recognize what happened in 
the past. Many people don't remember the gas lines in 1973. December of 
1980, inflation in this country was 11 percent; the prime rate was 20.5 
percent. People started to wake up. Are they waking up now? The signs 
are there. Is OPEC willing to sacrifice windfall oil profits to help 
keep economic growth on track in the United States, Europe, and Asia at 
their own expense? I happen to believe that charity begins at home. We 
have become dependent on OPEC. Can we be dependent on them increasing 
the supply of oil?
  A source of information from the International Energy Agency says 
that OPEC will have to increase by 10 percent just to keep up with 
world demands. If they don't want to keep up with world demands, the 
price goes up, doesn't it? That will increase production somewhere 
between 4.5 and 12 percent, or between 1.2 and 3.1 million barrels per 
day.
  A lot of people don't realize how long it takes for a barrel of oil 
from the Mideast to reach their gas station. It is roughly 6 weeks. If 
we go into this summer with the current forecast we are getting, we 
will see gasoline at $2 a gallon. We depend on oil to keep us warm, for 
travel, for our homes, sport utility vehicles, on and on, and we are 
concerned about prosperity. We are concerned about inflation.
  There was an article by Daniel Yergin with the Cambridge Energy 
Research Association, an expert on oil. He indicated there are three 
things that can get people concerned about inflation and spook the 
stock market. When I highlight them, you will agree they are here.
  It is the price and availability of labor. It is the cost of money or 
interest rates that are on the rise. And it is the increased price of 
oil.
  We are starting to move. Mark my words, the Organization of Economic 
Cooperation and Development has estimated that every $10 rise in the 
price of oil lifts inflation by\1/2\ percentage point and reduces 
economic growth by \1/4\ percent. If that isn't what is happening right 
now, I will trade places with the President of this body. Oil prices 
have accounted for the doubling of inflation, to 2 percent from 1.1 
percent in the last year.
  I quote Chairman Greenspan:

       I've been through too many oil shocks to not take them 
     seriously. If price changes, it impacts the economy.

  These are a few of the highlights of where the United States is, why 
the truckers are circulating in Washington, DC.
  What is this administration doing about it? They are kowtowing to the 
Arab world. They are wringing their hands. They have no positive 
suggestions. Least of all, they have not made one single statement to 
encourage domestic exploration and production in this country. One 
wonders what you learn by history; some people say ``not much.'' If you 
look over your shoulder at where we were in the early 1970s with the 
Arab oil embargo, where we are today--and, of course, in the interim we 
fought a war over oil in Iraq and Kuwait. Today, we are right back 
there, only we are more dependent on the Mideast. If we don't take the 
steps now to reduce that dependence, this is going to happen again.
  Keep in mind that, for the time being, it isn't over. We are just 
starting into this crisis. This administration must be held accountable 
for the lack of an energy policy in this country. There is no energy 
policy on nuclear power, no energy policy on coal, no energy policy on 
gas, no energy policy on oil. It kind of drifts out there. And they are 
well-meaning, but some extreme environmental groups basically propel 
the direction of this administration. It is no direction at all because 
there is no energy policy.
  So as we look at the increased price of energy, we look at the 
frustration of the truckers in Washington, DC, and we look at what the 
administration is doing to address it, we have to come to the 
conclusion that the administration's efforts--if you can identify them 
at all--are limited to pleading with the Mideast oil barons to simply 
produce more oil. That is inadequate. They are simply exporting jobs 
and dollars. We are going to have to turn this around in the Congress 
of the United States. The administration won't stand up and recognize 
the reality that charity begins at home. We have the resources in this 
country, we have the technology, we have the capital, and we can 
relieve our dependence on imports if given the support of the Clinton 
administration.

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