Congressional Record, Volume 146 Issue 113 (Thursday, September 21, 2000)

[Congressional Record Volume 146, Number 113 (Thursday, September 21, 2000)]
[Senate]
[Pages S8872-S8874]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

THE PRICE OF ENERGY

Mr. MURKOWSKI. Mr. President, yesterday I took the floor and
discussed the problems associated with the price of oil and our
increased dependence on imports from Iraq and the regime of Saddam
Hussein.
Yesterday, I told this body that oil had peaked at its highest price
in 10 years. I am here today to tell you that oil has peaked for the
second time in 2 days with the highest point in 10 years--$37.86 a
barrel.
There is a reaction occurring. It is rather interesting. I am going
to discuss it briefly because my intention today was to talk about
natural gas.
Natural gas, as many of us will remember, 9 months ago was about
$2.16. Deliveries in October are in the area of $5.40, a 44-percent
increase in a relatively short period of time. The administration is
reacting.
The news today tells us that there is going to be a recommendation
from the Vice President to open up the Strategic Petroleum Reserve to
set up a heating oil reserve. There are a couple of things that are
pending. One is the reauthorization of SPR in the EPCA bill, which is
currently being held by a Member on the other side of the aisle. The
administration is asking us to release the authority by passing EPCA.
We are going to have to take care of that little matter first. But
let's talk a little bit about the Strategic Petroleum Reserve because
it is probably the most misunderstood issue on the burner today.
SPR was created back in 1973 during the era of the Arab oil embargo
at a time when this Nation was 35-percent dependent on imported oil.
Today we are 56-percent--nearly 58-percent dependent on imported oil.
We swore back in 1973 we would never be held hostage and would never
have such exposure to the national energy security of this country. So
we created the salt caverns in the gulf for storage.
The question of the conceptual purpose behind this was the Mideast
cartel was holding us hostage and, by having a reserve, it would act as
a protection if our supplies were cut off. Congress dictated that we
have a 90-day supply of oil in the reserve to offset the amount of oil
we might import should it be needed if the supply were to be disrupted
from the Mideast.
It is kind of interesting to go back and look at the arithmetic.
When the Clinton administration came in, in 1992, we had an 86-day
supply in the Strategic Petroleum Reserve. Today, we have a 50-day
supply. What has the Clinton administration done with that difference?
They sold some of the SPR to meet their budget requirements. I think
this is a dangerous level--50 days. I think it is inadequate to respond
to any severe disruption that might occur.
The Mideast has always been a hot spot with the possibility of a
conflict at any time and cutting off supplies. We are seeing Saddam
Hussein now threaten the U.N. as the U.N. attempts to hold Saddam
Hussein financially responsible for damages associated with the Kuwaiti
invasion. They are asking for compensation. But yesterday Saddam
Hussein told the U.N. where to go. He said: No, I am not paying
retribution. If you make me pay retribution, I will cut my supply and
my production. Then what are you going to do? We know what the U.N.
did. They backed off and said: We will take it up later. He is
dictating the crucial supply of oil.
As the administration talks about the merits of opening up the
Strategic Petroleum Reserve, I think we have to reflect on what it was
designed to do. It was to be used to give us the timeframe of ensuring
that if the supply were cut off, we would have a buffer by having a
supply on which we could call.
But make no mistake about it. The media completely misses this point.
SPR does not contain refined product. It contains crude oil. You have
to take it out of the reserve. You have to move it to a refinery and
then refine it. Our refineries are virtually at full capacity now. If
you take the oil out of SPR and take it to a refinery, you are going to
offset other oil that that refinery would cut. As a consequence, how
much more refined product have you put on the market? I think the
administration owes us an explanation as they contemplate, if you will,
taking oil out of SPR.
Mind you, the emergency we have is supply and demand. We are
producing much less than we used to produce. Our demand is up 14
percent. Our product

[[Page S8873]]

has fallen 17 percent. We are in a supply and demand crunch. As a
consequence of that, we have a third factor many people overlook, and
that is, we haven't built a new refinery in this country in 25 years.
Nobody wants to build them. The reason is the permitting time, the
complexity, and the Superfund exposure. And the industry simply isn't
building them. We are almost up to our maximum capacity of refining.
Now we are going to take oil out of SPR. We are going to displace other
oil. We don't have any significant unused refining capacity.
There is another factor in this consideration. What kind of signal
does this send to Saddam Hussein? What kind of signal does it send to
OPEC? It sends a signal that we are now dipping into our emergency
supply. As we do, what does that do to our vulnerability? The Senator
from Alaska believes it increases our vulnerability. It gives them more
leverage. What are we going to fall back on then? What happens if we
pull oil out of SPR and Iraq reduces production? We have a calamity.
This isn't just something that is happening in the United States. If
there is any question about the severity, ask Tony Blair. The
Government of Great Britain is teetering on the issue of oil. Germany,
Poland, and many areas of Europe are coming to the United States. There
is absolutely no question about it.
High oil prices have caused many Members, therefore, of this body to
call for the release of SPR in a way to manipulate the price of crude.
Some suggest as much as 30,000 barrels. One Senator was saying this
action would bring OPEC to its knees. I think it will bring OPEC to its
feet. They will say: Hey, there goes the United States; they are
dipping into their reserve; now we've got them; we've have got the
leverage.
I think it is highly unlikely that this action is well thought out.
This is not what the reserve was intended for. It is not what the
reserve is to be used for. I hope the administration will not weaken
our national security by releasing oil to drive down prices because it
won't necessarily drive down prices.
You are saying, well, the Senator from Alaska is from an oil-
producing State, and he is just one man's opinion.
Let me for the record submit an article from the Wall Street Journal
of September 21. I ask unanimous consent that it be printed in the
Record.
There being no objection, the article was ordered to be printed in
the Record, as follows:

[From the Wall Street Journal, Sept. 21, 2000]

Summers Slams Plan to Sell Oil In U.S. Reserve

(By Bob Davis and Jacob M. Schlesinger)

Washington.--Treasury Secretary Lawrence Summers advised
President Clinton in a harshly worded memo that an
administration proposal to drive down energy prices by
opening the government's emergency oil reserve ``would be a
major and substantial policy mistake.''
Mr. Summers' vehement objection--which, he wrote, is shared
by influential Federal Reserve Chairman Alan Greenspan--
doesn't mean the prospect of using the Strategic Petroleum
Reserve is dead, as the White House scrambles to contain the
economic and political fallout from oil prices that yesterday
neared $38 a barrel for the first time in a decade.
Indeed, today Vice President Al Gore--in his role as
Democratic presidential candidate--plans to call on the
administration to conduct ``test sales'' from the SPR as part
of what he called ``a major policy speech . . . outlining a
specific course of action'' to address what could become a
serious threat to his campaign.
Yesterday, a week after the Summers memo was dated, White
House spokesman Joe Lockhart told reporters ``all options
remain on the table'' to address energy prices, the SPR
``being one of them.''

signal to markets

In continuing White House deliberations on the matter, two
of Mr. Gore's top aides have backed serious consideration of
test sales as a way to signal markets that the government is
willing to act, one administration official said.
Along with Mr. Summers, the official said, other economic
and diplomatic cabinet members were reluctant to tap the SPR,
a buffer created after the 1973 oil embargo that has been
used only once during the Gulf War in 1991. But this official
added that many of those advisers, including Mr. Summers,
have grown more sympathetic to that option during the past
week as oil prices have continued to climb.
Mr. Summers' Sept. 13 memo did leave open the possibility
of accepting a limited test sale, which could involve selling
as much as five million barrels from the 570 million-barrel
supply--far less than the 60 million barrels the memo said
the Department of Energy advocated. ``There are alternatives
available involving the SPR that are focused and targeted,''
he conceded.
Neither Mr. Summers nor his office would cooperate for this
story or discuss his memo.

candidates' scapegoats

Yesterday, Candidate Gore gave several interviews to the
major television networks to preview today's address,
blasting the Organization of Petroleum Exporting Countries
and what he called the profiteering of ``big oil''--the
latter a not-so-subtle swipe at the Republican ticket of
George W. Bush and Dick Cheney, both of whom have ties to the
oil industry.
Mr. Bush yesterday tried to turn the tables on his rival,
saying the Clinton-Gore administration ``needs to be held
accountable for a failed energy policy.'' In an interview
with MSNBC, Mr. Bush also said he would do more to encourage
domestic oil exploration, and he chided the White House for
failing to use American ``diplomatic leverage'' more
effectively to get Persian Gulf allies to increase
production.
Yet there is no clear, quick answer to the problem, as Mr.
Summers's two-page memo argued. He wrote that using the SPR
would have, at best, ``a modest effect'' on prices, and would
have ``downsides . . . that would outweigh the limited
benefits.''

``dangerous precedent''

He warned that the DOE's 60 million-barrel proposal would
``set a dangerous precedent'' by using the SPR to
``manipulate prices'' rather than adhering to its original
purpose of responding to a supply disruption, and added that
the move ``would expose us to valid charges of naivete'' for
using ``a very blunt tool'' to address heating-oil prices.
Noting the potential sale's ``proximity to both [an
upcoming] OPEC meeting and the November election,'' the
Treasury Secretary also said it ``would simply not be
credible'' to claim, as some proponents have, that an oil
sale could be portrayed as a technical inventory management
of the reserve.
Such a move, Mr. Summers argued, also would hurt the tool's
effectiveness in the event of a real oil-supply crisis,
diminish the ``psychological value'' of using the SPR again
if Iraq makes good on implied threats to cut oil output, and
undercut Saudi Arabian cooperation with the U.S.

greenspan's clout

And he took the unusual step of invoking Mr. Greenspan,
whose prestige has increasingly been used to influence
economic-policy issues far beyond his purview of monetary
policy. The letter begins: ``Chairman Greenspan and I believe
that using the Strategic Petroleum Reserve at this time, as
proposed by DOE, would be a major and substantial policy
mistake.''
Energy Secretary Bill Richardson has staked out the
opposite side of the debate from Mr. Summers, and prepared
his own two-page memo urging use of the SPR. Both letters
were presented to Mr. Clinton along with a brief summarizing
the pros and cons of the issue prepared by Gene Sperling,
head of the National Economic Council.
Spokespersons for Messrs. Greenspan, Richardson, and
Sperling declined to comment on the memos.

Mr. MURKOWSKI. Mr. President, this article is entitled ``Summers
Slams Plan to Sell Oil In U.S. Reserve.'' ``Treasury Secretary's Memo
Says Greenspan Agrees It Would Be a Mistake.''
The Washington by-line of the Wall Street Journal:

Treasury Secretary Lawrence Summers advised President
Clinton in a harshly worded memo that an administration
proposal to drive down energy prices by opening the
government's emergency oil reserve ``would be a major and
substantial policy mistake.''

This isn't the Senator from Alaska. This is our Treasury Secretary.

Mr. Summers's vehement objection--which, he wrote, is
shared by influential Federal Reserve Chairman Alan Greenspan
. . .
Indeed, today Vice President Al Gore--in his role as
Democratic presidential candidate--plans to call on the
administration to conduct ``test sales'' from the SPR as part
of what he called ``a major policy speech . . .''

We have had a tradition of test sales from SPR under this
administration.
In 1991, we offered 32 million barrels; in 1996, decommissioning
Weeks Island, 5 million; 1996, the recession bill, 12 million. We had
swaps, appropriations in 1997. What we did is we bought high and sold
low. We lost hundreds of millions of dollars on our sale. I only assume
the government figured they would make up the difference on the volume.
Our experience hasn't been very good. Let me get back to the other
sale. Summers says it is a dangerous precedent.

[[Page S8874]]

event of a real oil-supply crisis, diminishing the
``psychological value'' of using the SPR again if Iraq makes
good on implied threats to cut oil output, and undercut Saudi
Arabia's cooperation with the U.S.

Greenspan's Clout

I ask Members to consider the mechanical function of what has to take
place. There are some people in this body who just assume you pull it
out of SPR and, bang, it is there for the heating oil requirements of
the Northeast Corridor, or it is there to relieve our pricing. It
isn't. It is not a refined product. It has to be refined. It has to go
to refineries. The refineries are operating at nearly full capacity,
and when you pull it out of your reserve, it is like taking it out of
your savings account. What do you do for an encore when the savings
account is gone? We are certainly not going to replace SPR during this
timeframe when oil prices are at an all-time high. We increase the
vulnerability of the United States; we increase the potential for
further increases in the price of oil.
There is one other point I want to make. The idea of a government-
operated heating oil reserve, we don't really know what it means. But
if I am in the business of storing heating oil, if I am a jobber in the
Northeast and I know the government is going to store, I am not going
to build up my reserve. Why should I? The government is going to take
care of that. What does that do to the incentive of the private sector
to build up reserves?
We have to think this thing through. I hope that the press will
question the Vice President a little bit on the mechanics of what the
net gain is. What does it do to our national security? Does it make us
more vulnerable to OPEC? I also request the media to check on whether
we have the authority or not--because the administration is begging us
to pass EPCA, which gives us the authority, allegedly, to reauthorize
the Strategic Petroleum Reserve. We have a lot of bits and pieces that
we haven't taken care of.
It will be interesting to see what kind of explanation the American
public is given because so often it is very easy to spin the story that
the answer is SPR. Do you know what the administration is doing? They
are buying more time, hopefully, to get through this election because
that is the bottom line. We are heading for a train wreck on energy.
I will throw a little bit more water in my remaining 2 minutes, not
on SPR but on the realization of what is coming in the second show. The
second show is natural gas; $5.35 per thousand cubic feet, October,
next month. It was $2.16 6 months ago. Inventories are 15 percent below
last winter's level. We will not have any new supply this winter. Fifty
percent of American homes rely on natural gas and nearly 18 percent of
the Nation's electric power.
There we have it. The administration doesn't have a plan. We have
introduced legislation to get this matter back on course, the bottom
line, as Senator Lott and a number of us have joined together in coming
down with what we think is a responsible energy plan that would
increase the domestic supply. It would increase certain tax benefits
that would ensure that we have the incentive in order to relieve the
supplies associated with the realization that the next crash is coming
on natural gas.
I wanted to identify the specific mechanics associated with the issue
of opening up the Strategic Petroleum Reserve and remind my colleagues
that gas is right behind us in the crisis area, and the American
taxpayer will bear the brunt of this. I hope the administration will
rise to the occasion with some real relief.
I yield the floor.
The PRESIDING OFFICER (Mr. Roberts). The distinguished Senator from
Pennsylvania is recognized.
(The remarks of Mr. Specter pertaining to the introduction of S. 3086
are located in today's Record under ``Statements on Introduced Bills
and Joint Resolutions.'')
The PRESIDING OFFICER (Mr. Bunning). The Senator from Texas.
Mr. GRAMM. Mr. President, it is my understanding that Senator Biden
has time reserved to speak. He is not here. I ask unanimous consent
that the Senator from Maine and the Senator from Kansas be recognized
for 20 minutes; that if Senator Biden is here at that point, he then be
recognized; and that I be recognized for 20 minutes when Senator Biden
has completed his remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SPECTER. Mr. President, I have been advised that Senator Biden's
schedule will not permit his arrival at this time, so I suggest holding
his time in abeyance. I have no objection to the request by the Senator
from Texas.
The PRESIDING OFFICER. The Senator from Maine.
Ms. COLLINS. I thank the Chair, and I thank the Senator from Texas
for arranging the time this morning.

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