[Congressional Record Volume 149, Number 42 (Monday, March 17, 2003)]
[Senate]
[Pages S3768-S3769]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      CRITICAL ECONOMIC SITUATION

  Mr. BINGAMAN. Madam President, I appreciate the chance to speak for a 
few minutes on the critical economic situation we are facing in the 
United States and the direct effect that low crude oil inventories, 
combined with high energy prices, are having on the American economy. 
This is a particularly important time to focus on this issue because of 
the impending conflict with Iraq that we all are keenly aware of.
  We have a situation today of constrained supply of crucial products 
and very high prices. We saw nearly 3 million barrels of oil per day 
come off the market during the Venezuela crisis which began in 
December. This--combined with an unusually cold winter in the eastern 
part of the United States and refiners drawing down their crude oil 
inventories--has left crude oil and crude product markets extremely 
tight.
  From a supply standpoint, we are operating on very thin margins. Any 
accident that unexpectedly shuts a refinery or interrupts flow through 
a major pipeline is capable of producing real shocks in our supply of 
these products. It has happened before. In 1996, a pipeline emergency 
blocked deliveries to refineries in the Midwest during a similar period 
of tight supplies. In the year 2000, a dock collapsed along the 
Intracoastal Waterway near Lake Charles, LA, curtailing supplies to two 
major gulf coast refineries.
  The sharp increase in energy prices that we have seen so far this 
year has caused a major problem for our economy. The Nation's 
manufacturing sector continues to struggle. Consumers across America 
are faced with real hardships because of these high prices. Nearly all 
of the inflationary pressures that our economy is experiencing are 
coming from increased energy costs, which jumped 4.8 percent in 
January. They jumped an even sharper 7.4 percent in February--the 
largest 1-month jump since 1990. Excluding increases in the food and 
energy items, the core inflation index actually dropped 0.5 percent in 
February, instead of rising as it did.
  The simple truth of the matter is this. Rising energy prices are 
keeping Americans from spending their hard-earned dollars elsewhere. 
Given the current energy price environment, consumers are likely to pay 
more than $200 billion in higher energy costs this year. This $200 
billion works out to be about 2 percent of our gross domestic product, 
which is no small item.
  The obvious question we need to be asking is, Where does this money 
come from? Companies are not hiring. In fact, they are laying people 
off.
  A looming crisis that should worry all of us exists in the Nation's 
chemical industry. We are in danger of losing our domestic chemical 
industry as high natural gas prices push it to operate offshore. That, 
of course, will result in the loss of thousands of more good, high-
paying American jobs.
  U.S. oil and natural gas stocks are dangerously low and the risk that 
energy price spikes will continue to significantly damage our economy 
is a very real prospect.
  Gasoline and diesel prices are at near decade highs. In fact, in my 
home State of New Mexico and across the country, diesel prices are at 
an all-time high--$1.75 per gallon today.
  High diesel prices have a direct impact on the trucking industry. 
There was an article in the Albuquerque Journal this weekend that 
talked about the impact of high energy prices on consumers and on the 
trucking industry. I ask unanimous consent to have that article printed 
in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. BINGAMAN. In my home State, again, 12 percent of the State's 
population is estimated to be involved in the trucking industry. High 
diesel prices are shutting down small trucking companies every day. 
These are real economic effects. We are all well aware of the problems 
in the airline industry as well and the threatened bankruptcy of some 
of our major airlines; in part traceable to the high price of energy.
  In our discussion of the current situation and use of the SPR, we 
have used several phrases. One--``Likely to cause a major adverse 
impact on the national economy. . . .''--that description matches very 
closely the statutory provisions we wrote into the law when we created 
the Strategic Petroleum Reserve.
  As I read that statute and look around at what is happening, it is 
clear to me that the time has come to act on that statutory authority. 
I have repeatedly asked the administration to clearly state what its 
policy is with regard to the Strategic Petroleum Reserve, and they have 
refused to do so as

[[Page S3769]]

yet. It has become apparent from what has been said by the 
administration that it is not likely to use the Strategic Petroleum 
Reserve to correct this rapidly deteriorating situation. Rather, the 
administration seems to be relying on OPEC to increase production and 
to send that production to our shores.

  At their meeting last week, OPEC Ministers asserted that they would 
provide additional supplies in the event that there is a war with Iraq, 
but they also made it clear that those new supplies would be costly.
  The administration appreciates the promise of the Saudis to raise 
production in the event of a shortage, and I appreciate that as well. 
Some Saudi oil, evidently, is already on its way to United States 
ports. But the fact is, given the present situation, this is not 
enough. This is long-haul oil. We need oil in our system now to keep 
the system functioning and prevent refineries from running on empty.
  We have a timing problem. If war begins--and we all are well aware it 
may begin at any time--Iraqi oil production and perhaps some Kuwaiti 
production will cease. This will cause a shortfall of somewhere between 
2 percent and 6 percent of the world oil supply. We seem to be assuming 
that the Saudis can make up that difference, and it is possible that 
they can. Some analysts estimate however that they are already 
operating at full capacity.
  But let's suppose they can make it up. They still have to get that 
oil here. It takes 40 days for an oil tanker to get here from the 
Persian Gulf, and we need to release oil from the SPR now in order to 
keep liquidity in the system, to keep our refineries running, and to 
prevent further harm to our economy. If it takes 40 days for Persian 
Gulf oil to reach our shores, and those tankers set sail perhaps 10 
days ago, there are still 30 days left before we will see any of that 
oil.
  The delivery process has started, but the extra oil is still far away 
at sea. We need liquidity in the system now, and I am saying the smart 
thing to do is to take out a little insurance policy to cover that 
period, from today until that oil can arrive.
  I am urging the President to allow private companies to exchange up 
to 750,000 barrels of oil per day from the SPR, until this long-haul 
crude from the Middle East reaches our ports. Companies taking part in 
this swap that I am proposing would pay the Government a fee plus a 
future price differential for leasing the oil, and would replace the 
oil with an equivalent grade of crude within 6 to 12 months.
  This modest release would complement and not compete with the oil 
that is headed this way. It would provide supply in a crucial time. I 
believe this swap drawdown could begin immediately and could continue 
until additional oil that OPEC producers have promised actually 
arrives.
  This 750,000 barrels-per-day swap is well-short of the 4.3 million 
barrels-per-day of drawdown capacity we have within the Strategic 
Petroleum Reserve. I understand President Bush does not want to release 
all of the Strategic Petroleum Reserve as our Nation is on the brink of 
war. But what I am proposing leaves nearly 85 percent of that total SPR 
drawdown capacity untouched. We will be minimizing the damage to our 
economy by putting these extra barrels out there into the system now, 
and we will be helping to prevent a gasoline supply shortage and 
further price spikes.
  The U.S. refining sector already is functioning at minimum operating 
levels. Without new crude supplies, refiners may be forced to reduce 
those production levels, leading to higher gasoline, higher jet fuel, 
and higher diesel prices, and causing even more damage to our economy.
  Our economic security is at stake. We cannot afford not to do this. 
The American people also cannot afford for us not to do this. I urge 
the administration to seriously consider this proposal. In my view, it 
is time for us to act.
  I yield the floor.

                               Exhibit 1

             [From the Albuquerque Journal, Mar. 15, 2003]

                        N.M. Gets Shock at Pump

                           (By Diane Velasco)

       ``It's just ridiculous,'' said Bill Andes of Albuquerque as 
     he pumped $1.69-a-gallon gasoline into his company car at a 
     Chevron station in the Northeast Heights.
       Andes' reaction on Thursday evening was typical of many 
     motorists as gasoline prices spiraled to record levels in 
     Albuquerque, Las Cruces and statewide this week.
       Andes doesn't pay personally for gasoline in his company 
     car, but his wife's Suburban has a 60-gallon tank.
       ``$1.69 times 60--you do the math,'' he said.
       Andes was paying the average statewide price of $1.69 a 
     gallon for regular unleaded gasoline, five cents higher than 
     a week earlier and a record. The previous record, set May 31, 
     2001, was $1.68 a gallon.
       Albuquerque's average price per gallon was lower than the 
     statewide average. In Albuquerque, the price climbed 6 cents 
     to $1.66 a gallon for regular unleaded fuel, according to AAA 
     New Mexico's Weekend Gas Watch, which was released Friday. 
     The price tied a record set two years ago.
       Santa Fe's average price rose 4 cents to $1.73 a gallon, 
     higher than the national average of $1.72 but still below the 
     city's record $1.75 set two years ago.
       In Las Cruces, the average price climbed 3 cents last week 
     to $1.63 a gallon, tying that city's record.
       Rising prices have caused Albuquerque resident Lorenzo 
     Gutierrez to think about parking his 1999 Dodge Ram pickup, 
     which he said gets just 11 miles a gallon, and buying a 
     motorcycle for daily use.
       Nicole Monge used to spend $20 a week to fill her Toyota 
     Tacoma pickup. Now she spends $26.
       ``The prices won't restrict my travel plans, but they will 
     restrict my spending money,'' she said.
       It could be worse.
       Some places around the country are seeing prices above $2 
     per gallon.
       Rising prices at the pumps are caused by the record-high 
     price of crude oil, said Bob Gallagher, president of the New 
     Mexico Oil and Gas Association.
       At the New York Mercantile Exchange on Friday, April crude 
     oil futures closed at $35.38 a barrel.
       Crude now represents 50 percent of the cost of a gallon of 
     gasoline, up from its usual 25 percent, he said.
       The crude oil price has risen by $7 to $10 per barrel 
     because of uncertainty about what will happen if the United 
     States goes to war with Iraq.
       ``At this point, you have to start to become concerned that 
     (price increases) will impact the daily activities of 
     individuals as well as small and large businesses,'' 
     Gallagher said.
       ``If daily activities are impacted, that will have a 
     negative impact on the economy because there will be less 
     money available to spend,'' he said. ``I am hopeful we are 
     all but topped out for the price of gasoline.''
       High gasoline prices will hinder Yvonne Shije's 45-mile 
     trips from Zia Pueblo to Albuquerque. She will try to do all 
     of her shopping at once to eliminate extra trips, she said.
       The world political situation is also making her a more 
     discerning consumer.
       ``I don't want to be purchasing gas from particular 
     stations (whose companies) buy oil from Iraq,'' she said. 
     ``Why would you want to put money into their pockets when you 
     could buy American?''
       Diesel prices are also at an all-time high--more than $1.75 
     a gallon nationwide--said Vic Sheppard, managing director of 
     the New Mexico Trucking Association.
       ``We see a lot of people just closing their doors in New 
     Mexico,'' he said. ``We hear daily of people just saying, `I 
     can't make it any more.' ''
       About 86 percent of the state's trucking firms have six or 
     fewer trucks and are thus more vulnerable to price swings in 
     fuel, Sheppard said.
       While Sheppard does not know how many jobs have been lost 
     in the industry since prices began spiraling, he estimates 12 
     percent of the state's population is involved in trucking, 
     including warehousing and distribution.
       Henry Pacheco, owner of Pacheco Trucking Co., is currently 
     charging his customers a 5 percent surcharge to cover rising 
     fuel costs. He said he plans to increase that to 7 percent 
     next week.
       ``It's put a slowdown on us--I'm not getting as much 
     freight as I used to because I added the surcharge to my 
     rates,'' he said.
       Although he is getting more calls, potential customers are 
     reluctant to pay the surcharge, Pacheco said.
       His 20-year-old Pacheco Trucking Co. has 10 trucks and 
     employs as many as 14 drivers.

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