[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.

       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.
       Such a move, Mr. Summers argued, also would hurt the 
     effectiveness of SPR in the

[[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

       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.''

  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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