[Congressional Record Volume 152, Number 45 (Monday, April 24, 2006)]
[Senate]
[Pages S3409-S3411]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ENERGY
Mr. WYDEN. Mr. President, the same Bush administration that so
tragically bungled the response to Hurricanes Katrina and Rita has now
bungled its way to $3 per gallon gasoline. Unless you were a hermit
living in a cave last summer, you couldn't have missed how miserably
the administration has failed in its approach to natural disasters. Now
it is clear to anyone who fills up at a gas pump that this
administration is also failing in its approach to energy. In both cases
the administration had advanced notice that a major problem was
imminent and in both cases the administration failed to take action to
head off the problem before it became a major crisis for the American
people.
For Hurricane Katrina, disaster experts had testing that predicted in
the spring what could happen, but the administration ignored the
warnings of its own experts as major hurricanes were heading toward the
gulf coast. If anything, the administration's failure to take action to
prevent gas shortages and price spikes is even more indefensible
because they had more advanced warning and greater certainty that the
problem was coming.
The Bush administration knew last summer--almost 9 months ago--that
gasoline shortages and price spikes would hit hard this spring. If ever
there was a time to be watchful about oil markets, it has been during
the past months as markets have gyrated virtually nonstop with one
international crisis after another.
Nigeria has lost a quarter of its output, Iraq's oil production has
fallen below prewar levels to its lowest point in a decade, Iran says
something warlike about its nuclear program, and oil prices shoot up
$10 per barrel, and today Venezuela announced that it will move toward
nationalizing its oil industry and will cut output, which should put
even more pressure on supply and demand.
Yet even with all of this turmoil in world oil markets, the key
watchdogs at the Energy Department, at the Environmental Protection
Agency, and the Commodity Futures Trading Commission are all absent
without leave. No one is home minding the store when it comes to our
oil and gasoline markets.
Never before has there been an administration with so much expertise
in the oil industry. The President and the Vice President of course
know a great deal about the oil sector. The Secretary of State was a
director of Chevron and actually has an oil tanker named after her. The
list goes on and on. But none of this expertise seems to be being used
to help consumers at the gas pump.
The administration's recent inaction in the face of soaring prices is
only the latest in a long line of failures. In what is a virtual rite
of spring, gas prices typically spike as refineries shut down for
maintenance to switch over to summertime gasoline blends. That has
happened each of the last several years, and in each instance the
administration has done nothing to help consumers at the pump. But this
year the administration had good reason to know that a ``perfect energy
storm'' would hit the consumer this spring, and it was clear that
spikes would be even worse than prior years.
For example, the Wall Street Journal reported on August 12, 2005:
A provision in the massive energy bill that cleared
Congress last week is likely to shrink the nation's gasoline
supplies next spring and could boost prices 8 cents a gallon
or more.
The Wall Street Journal went on to describe the likely impact of
eliminating the requirement to use cleaner burning additives in
gasoline, saying:
[[Page S3410]]
United States gasoline production would fall short of usual
levels by about 158,000 barrels a day--the equivalent of
losing output from four major refineries.
The Wall Street Journal quoted an official from Valero Energy
Corporation, the Nation's largest refiner, who said:
The price of gasoline ``will definitely go up,'' estimating
the potential rise at 8 cents per gallon.
Because of the new regulations for gasoline, there would not only be
reduced supply but also lots of new hassles in supplying fuel at the
local level. Gasoline additives would no longer be added at the
refinery and transported in pipelines. Instead, ethanol would have to
be shipped separately and blended locally, creating new challenges and
new logistical hurdles for getting the fuel to America's gasoline
stations.
With all of this disruption and all of these new challenges to
address, it was clear to the oil industry that the energy equivalent of
another category 5 hurricane would be hitting gasoline consumers around
this time of the year. It should have been clear to the Bush
administration as well. But following the same game plan they have used
for last year's hurricanes, the administration waited until after the
storm hit to respond. In fact, gasoline consumers are still waiting for
help at the pump.
The two major hurricanes that hit the gulf coast last summer only
made this spring's supply situation worse because those storms shut
down a number of refineries and reduced oil and gas supplies. Coming in
the wake of these storms, the impact of the new gas rules would only
tighten further what was already a tight market for gasoline, and it
should have been clear to the watchdogs in the Bush administration for
months and months.
The record is clear as to what the facts were that the administration
had some time ago. First, if the administration had read its own
report, it would have known that gulf coast oil and gasoline production
would not be fully restored by this spring. Congress knows this because
the administration sends weekly reports to the Congress with updates on
the situation. Yet again the administration failed to take any action
to head off the problem before consumers got hit again.
If the administration had read its own report, it also would have
known that the impact of the new gasoline rule would be substantial,
equivalent to 2 percent of the Nation's gasoline supply overall, and 10
percent of the supplies in areas with smog problems. This information
has been in Energy Department reports as well. Once again, there was no
response from the administration.
Finally, if the administration had read its own reports and
publications, the administration would have known that finding
alternatives to replace these supplies would not be easy. In fact, a
study by the U.S. Department of Energy estimated that it would take 4
years for refiners to find substitutes for the most commonly used
gasoline additive known as MTBE.
In fact, the new rules are likely to be a double whammy for
consumers. They tighten not only domestic supplies but also the
availability of imports that were so crucial for supplying U.S.
consumers following last year's hurricanes. That means the impacts will
be similar to last year's hurricanes. But the same solution to address
the problem won't be available this year.
As the president of Petroleum Industry Research Institute pointed out
last summer, in the past the United States has imported gasoline from
Europe to deal with this particular issue and prevent shortages. But at
this point we may not be able to do that since European refiners use
MTBE.
When you add it all up, the administration's record of bungling on
gas supply and prices is extraordinary. They have known since last
summer that there would be a big problem for consumers this spring.
They knew that the problem had gotten even bigger since the hurricanes
last fall. They knew it was going to take a long time to solve the
problem and that what was done last fall to increase supply after the
hurricanes might not be an option this spring.
But yet with all of the advance warnings and red lights flashing, the
administration still sat on its hands. At a minimum, the administration
should have convened the National Petroleum Council to seek advice and
counsel on what options might be available to help consumers at our
gasoline stations this spring.
But as we have seen all too often, the administration doesn't look to
outside advice, and even more rarely does it listen to it. And there is
little reason to believe the major oil companies, which have such a
voice in American politics, would urge the administration to take any
kind of significant step to help the consumers.
So what can be done now that predicted gasoline shortages and price
spikes are upon us? What could we have prevented or certainly out of
this time period helped to minimize the harm that consumers are facing?
Those steps weren't taken, and the challenge is to put in place the
best possible steps now to try to ameliorate a very bad situation that
could have been minimized.
First, the administration should grant waivers of requirements to use
ethanol in gasoline in areas where it is contributing to shortages or
price spikes at the gas pump.
Section 1501 of last year's Energy bill provides the administration
with this authority in cases where there is inadequate supply or where
the mandate would severely harm the economy. Both of these criteria
have already been met in a number of areas on the west coast and
elsewhere in our country.
For example, my home State of Oregon isn't required to have ethanol
in our gas to meet air quality standards. We also have little in-State
ethanol production. So ethanol has to be transported into Oregon,
largely from the Midwest, for blending into our gas supply. Waiving the
requirement to have ethanol in Oregon gas would also free up supplies
for other parts of the country. That reduces demand. And by simple
supply and demand, that could serve to reduce prices around the
country. It would also help to bring down the cost of gasoline in
Oregon by eliminating the transportation costs of shipping ethanol from
the Midwest.
Second, the administration should take steps to go after those who
are speculating right now in our country's oil markets. In the press,
for example, speculation is continually cited as a factor in the high
oil and gasoline prices. For example, in last week's Wall Street
Journal, there was a report:
Crude oil closed above $70 a barrel for the first time,
highlighting a phenomenon reshaping the petroleum world:
Investment flows into oil futures are supplanting nitty-
gritty supply and demand data as prime drivers of prices.
Last fall, former ExxonMobil chairman, Lee Raymond, the $600 million
man, testified before the Senate Energy and Natural Resources Committee
that speculation in oil markets was inflating prices by $20 per barrel.
That inflated oil price, in return, raises gasoline prices at the pump
by 50 cents a gallon. Yet the administration has done little to
investigate speculation or to stop this activity.
To the contrary, on this question of speculation in the oil sector, I
questioned the Bush administration's witness from the Commodity Futures
Trading Commission last September. I asked specifically what the
Commodity Futures Trading Commission was doing to investigate reports
of oil traders making extraordinary profits immediately following
Hurricanes Katrina and Rita. My question was about reports that there
are traders who made so much money that week that they won't have to
punch a ticket for the rest of the year.
Here is what the witness representing the Commodity Futures Trading
Commission said from the Bush administration:
Granted, a number of them made money, and that is how they
do their job, that they earn a return from providing this
service.
So the CFTC's response to reports of traders taking advantage of the
worst natural disaster in our country's history to make extraordinary
profits is: Well, they were just doing their jobs.
If that is the market at work, clearly it is not working for the
American people who saw gasoline prices shoot up above $3 per gallon
after last year's hurricanes and again this spring. The regulators of
oil and gas markets need to rein in speculation, not defend it.
Another step that could help address speculation would be to have
greater
[[Page S3411]]
transparency in our oil markets. For example, pension funds and other
institutional investors are buying oil as part of their investment
portfolio, and this has created additional pressure on supply and
prices. Institutional money managers now hold between $100 billion and
$120 billion in commodities investments, at least double the amount 3
years ago, and up from $6 billion in 1999. More transparency about
these transactions would help both the American consumer and the
investors by reducing volatility while stabilizing prices.
Finally, for the long term, Congress should repeal oil tax breaks,
breaks the industry executives told me when I questioned them in an
open hearing they did not even need. Those unneeded oil tax breaks
should be replaced with incentives to use biofuels that can replace
supply lost from eliminating MTBE from gasoline.
These actions would address the immediate supply and price problems
that the administration has failed to address since last summer. It
will give the biofuels market incentives to do more research and
increase production of cleaner alternatives to replace MTBE in the
gasoline supply.
My guess is, and I am happy to see my friend who has an enormous
amount of expertise on this issue in the Senate. Over the next few
weeks, we will hear a lot of debate about price gouging and
exploitation. There is no question in my mind that there are certainly
people trying to exploit the situation and trying to take advantage of
these extraordinary circumstances we see in our energy markets.
A significant part of these problems such as the change from MTBE to
ethanol, problems that we knew about a year ago, that the Wall Street
Journal was reporting on, could have been minimized if those folks in
the Bush administration, at the Department of Energy, at the
Environmental Protection Agency, at the Commodity Futures Trading
Commission, if they had been on deck doing their job to stand up for
the American people, these problems would not be so serious today.
Yet the same people who bungled the response to those hurricanes last
summer are bungling America on its way up to $3-per-gallon gasoline. I
don't think that ought to be acceptable to any Senator. On a bipartisan
basis we can force those watchdogs in the Bush administration to get
back to the post and stand up for the public.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Alexander). The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. ALEXANDER. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Chambliss). Without objection, it is so
ordered.
Mr. ALEXANDER. Mr. President, I ask unanimous consent to speak for up
to 15 minutes as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
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