[Congressional Record Volume 154, Number 85 (Thursday, May 22, 2008)]
[Senate]
[Pages S4763-S4766]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             ENERGY PRICES

  Ms. CANTWELL. Madam President, I rise, similar to many of my 
colleagues this afternoon, to talk about the high price of gasoline and 
what we need to do as we are leaving Washington and going home for 
Memorial Day recess to hear, I am sure, from many constituents that 
they are very concerned about this crisis of paying an ever-increasing 
amount for gasoline.
  Today, I am sure, the market is going to set another record for the 
number of days gas prices continue to go up, and our constituents want 
to see relief. I know many of my colleagues have come out here and 
talked about new supply. I certainly feel one of the biggest priorities 
the Senate has is to pass a tax credit bill for renewable energy so we 
can get predictability in the market and continue to get new energy 
incentives in place. That will take pressure off some of these other 
supply issues. But many of my colleagues keep talking about the United 
States looking for more oil or things the United States can do to get 
into the oil game in a more robust way.
  This chart shows it pretty clearly. The United States has 2 percent 
of the world's oil reserves--2 percent. These are all the other 
countries with which my colleagues are familiar: Saudi Arabia at 20 
percent of the world's oil reserves; Iraq and Iran, another 18 percent. 
These are the big players.
  The point is, the United States is not going to dramatically impact 
the price of oil by what we do with only 2 percent of the world's oil 
reserve. So if we want a solution, we are not going to get a solution 
out of what the United States can do in continuing to be addicted to 
oil.
  It is very important to also note that in the past, we have had many 
a conversation about this problem and what is the high price of 
gasoline. We had the same debate when it was the high price of 
electricity. No one wanted to hear about any other issue than the fact 
that it was just a supply-and-demand problem. In fact, the Vice 
President in 2001 said, when talking about the electricity crisis, when 
prices were going through the roof:

       They have got a whole complex set of problems out there 
     that are caused by relying only on conservation and not doing 
     anything about the supply side of the equation.

  We found out very shortly thereafter that, no, that was not right. It 
was not about conservation and supply side; it was about the 
manipulation of the electricity market. There were lots of people like 
that. The Cato Institute had a similar take on it. This was in 2002. In 
2002, we had gone through much of the Enron debacle, and we had seen 
prices in the State of Washington for electricity rise almost 3,000 
times what they had been. Yet people were still saying:

       Most of the price spike in 2000-2001 is explained by 
     drought, increased natural gas prices, the escalating cost of 
     nitrogen oxide emissions . . . and retail price controls.

  We all know the history, now that we have had a few years to look 
back on it. It wasn't those supply and demand factors but the fact that 
we actually had unbelievable manipulation of the electricity market.
  The reason why I am bringing that up is because I wish to make sure 
we are policing the oil markets. I wish to make sure we in the United 
States are doing everything we can to burst this oil price bubble we 
are seeing. We want to pop this price bubble and give consumers a more 
reliable number about supply and demand that even the oil company 
executives are saying. They have testified before Senate committees 
saying oil should be anywhere from $50 to $60 a barrel; that what we 
are seeing in the marketplace is not about the normal supply-and-demand 
features, but it is actually about the fact that something else is 
going on in the marketplace. This is one CEO from ExxonMobil, recently 
in early April, who testified:

       The price of oil should be about $50-$55 per barrel.

  I am not against discussions about future oil exploration. That is 
not the point. The point is, what are we going to do to solve this 
problem and burst this price bubble that while we are going out for the 
Memorial Day recess is going to continue to plague the economy, 
continue to plague our consumers, and continue to cause major havoc to 
our economy.
  I think one of the solutions is to ensure effective oversight in the 
oil market as it relates to oil futures. I know people say they might 
not wish to talk about oil futures, but I am going to talk about oil 
futures because of the effect of substantial deregulation has had on 
these markets. On December 15 of 2000, at 7 p.m. on a Friday night as 
Congress was adjourning a lame-duck session, the last day of the 106th 
Congress, on an 11,000-page appropriations bill came to the floor of 
the Senate, we added a 262 page amendment--the Commodities Futures 
Modernization Act--that basically deregulated the energy futures market 
and said it didn't have to have the oversight of other products.
  While the Commodities Exchange Act Reauthorization that recently 
passed as part of the Farm bill gives the CFTC more teeth to police 
these U.S. futures markets, under an administrative loophole 
speculators are still free to trade U.S. based energy commodities on 
U.S. trading engines free from full U.S. oversight meant to prevent 
fraud, manipulation, and excessive speculation. This is done under and 
informal CFTC staff ``no-action'' letter, which essentially means that 
the CFTC will not take action against

[[Page S4764]]

a foreign exchange to prevent fraud, manipulation, and excessive 
speculation. That means, at least on ICE Futures Europe, trading of 
U.S. crude oil futures, particularly the West Texas Intermediate oil 
contract, and U.S. home heating oil futures and U.S. gasoline futures--
products that are produced in the United States, delivered in the 
United States, consumed in the United States, and traded in the United 
States--are escaping U.S. oversight. I think that is a great concern to 
the American consumer who wants to make sure we have transparency in 
energy markets.
  If we think about other trading, stocks for example, we have the 
Securities and Exchange Commission. They look at the stock market, and 
they have oversight to make sure there is nothing untoward happening in 
the market, like manipulation. We also have NYMEX, another exchange in 
the United States. The Commodity Futures Trading Commission oversees 
that futures exchange and has oversight. Also the Chicago Mercantile 
Exchange--the CFTC has oversight of that futures exchange. The CFTC 
implements market rules. But as for trading U.S. energy futures on ICE 
Futures Europe, the CFTC has said: No, we don't have to have oversight 
of that exchange.
  As I mentioned, the Congress has charged the CFTC with protecting 
consumers by policing futures markets for fraud, manipulation, and 
excessive speculation. It does this by requiring certain market rules 
like position limits, large trader reporting, record keeping, and 
trader licensing and registration. These are tried-and-true tools that 
Government has used to protect consumers, to protect investors, to 
protect business, to protect our economy, to make sure manipulation is 
not happening.
  I often think these are great programs, but wonder why we allow 
certain trading of critical energy commodities to escape such oversight 
requirements. I always like to give the example of cattle futures 
because somehow it seems we are more willing to regulate hamburger in 
America and than we are oil.
  Here are two examples of U.S. commodities: cattle futures trading and 
oil futures trading. When we look at the rules, cattle futures are not 
an exempt commodity; but when you consider the ICE Futures Europe, oil 
certainly is. For cattle futures, the exchange trading U.S. cattle 
futures has to register with the CFTC, whereas oil trading on the ICE 
Futures Europe does not. And daily reporting requirements: more for 
hamburger and less for oil on ICE Futures Europe. What about 
speculative limits? more for hamburger and less for oil on ICE Futures 
Europe.

  Why am I so concerned about this significant change that transpired? 
The significant change that transpired is since ICE Futures Europe--
which again is not subject to U.S. oversight meant to prevent fraud, 
manipulation, and excessive speculation--began trading West Texas 
Intermediate oil in February 2006, oil has gone from $60 a barrel in 
2006 now to over $134 a barrel. You bet I want to get down to the brass 
tacks about exactly how this exchange is working, to have the oversight 
and to see what large trading positions are being used in this market.
  Many people have a concern about this. One report in the Asia Times 
was quoted as saying:

       Where is the CFTC now that we need [speculation] limits? It 
     seems to have deliberately walked away from its mandated 
     oversight responsibilities in the world's most important 
     traded commodity, oil.

  This is by F. William Engdahl, who said this in early May of this 
year.
  People are observing and wanting to know what we are going to do 
about this situation. That is why I think it is incredibly important to 
take action. What am I talking about, taking action? First of all, 
today Senator Snowe and myself and several of our colleagues are 
sending a letter to the CFTC insisting that they reverse their no 
action in oversight of this foreign market, noting that this is a dark 
foreign market where oil futures are traded. We are saying bring the 
bright light of day into this exchange and protect consumers by 
ensuring that market manipulation of oil prices is not happening.
  As I said, the CFTC basically gave up this oversight under an 
informal staff no action letter process. How did this happen? Well, in 
1999 the London based International Petroleum Exchange, the IPE, which 
was a much smaller and foreign owned exchange, asked the CFTC for a no 
action letter, and received it. The IPE wanted to locate trading 
terminals in the U.S. but did not want to be subject to direct CFTC 
oversight. The CFTC decided that the IPE did not have to have to be 
subject to direct CFTC oversight because the CFTC agreed that the 
United Kingdom was going to be doing it. Then, in 2001, the U.S. owned, 
Atlanta based, InterContinental Exchange, or ICE, came along and bought 
the IPE. After that, the now U.S. owned IPE continued to escape U.S. 
oversight even though it received the foreign exchange no action letter 
based on it being a foreign based exchange.
  So, in 2001, we can see a U.S. based entity basically purchased this 
foreign exchange, and the CFTC did not take action. In 2006, now named 
ICE Futures Europe, it starts trading what is a U.S. oil product, 
trading on U.S. desks in the United States and the CFTC continues to 
basically take no action to review that.
  Our letter says the CFTC should start reviewing these trades 
immediately and reverse their no action decision. We hope that while we 
are at recess, the CFTC will take this action.
  Why is this so important? Because many are concerned that U.K. 
oversight over U.S. energy trading is not sufficient to protect our 
consumers from fraud, manipulation, and excessive speculation. In fact, 
CFTC Commissioner Bart Chilton, on April 22 of this year, said:

       I am generally concerned about a lack of transparency and 
     the need for greater oversight and enforcement of the 
     derivatives industry by the [United Kingdom's Financial 
     Services Authority].

  He is basically saying he has great concerns about the oversight by 
the government in the United Kingdom. He should have great concerns 
about that because the oversight in the United Kingdom is not 
comparable to the oversight in the United States.
  The problems at the FSA led to the collapse of England's Northern 
Rock Bank. There was much written about this issue. They had high 
turnover in the staff, inadequate numbers to carry the load of what 
they were responsible for, very limited direct contact with the bank, 
incomplete paperwork, and limited understanding of their duties.
  All this led to major problems, and it led the CEO of the Financial 
Services Authority to say:

       It is clear from the thorough review carried out by the 
     internal audit team that our supervision of Northern Rock in 
     the period leading up to the market instability of late last 
     summer was not carried out to a standard that was acceptable.

  There are those in the United Kingdom who are criticizing the 
oversight abilities of their Financial Services Authority to handle 
this area.
  The CFTC could act today in helping the United States bust this price 
bubble by doing their job and step in to provide needed oversight of 
this market.
  One energy trader analyst from Oppenheimer said in April:

       Unless the U.S. Government steps in to rein in speculators' 
     power in the market, prices will just keep going up.

  This is what energy analysts are saying. So we have a great deal of 
continuity in the marketplace of people telling us it is time for us to 
act. In fact, we are going to be having a hearing when we return on 
Tuesday after the Memorial Day recess. I know we are going to hear from 
many people, but one of them will be Professor Greenberger of the 
University of Maryland Law School, a former CFTC department head, who 
testified before one of our joint Democratic Policy Committee hearings. 
He says:

       The ICE [oil trading] loophole could be ended immediately 
     by the CFTC without any legislation.

  I want to make sure the CFTC knows we will continue to pursue this. 
We hope they take action. We hope they will address this issue. But if 
they do not, we stand ready to make sure oversight in this financial 
market, that is a dark market on the ICE Futures Europe exchange, has 
the bright light of day and that they take immediate action to start 
investigating what is happening in our U.S. commodities markets so we 
can give consumers better protection. It is time to burst the oil price 
bubble. I think people everywhere across this country, and analysts on 
Wall Street, are saying: This is

[[Page S4765]]

not supply and demand. So it is up to us to make sure we have the 
enforcement in place to protect consumers, and that is what we hope the 
CFTC will realize their role and responsibility is.
  I thank the Chair, and I yield the floor.
  The PRESIDING OFFICER. The Senator from Utah is recognized.
  Mr. HATCH. Madam President, I was very interested in the 
distinguished Senator's remarks and her analysis. What is interesting 
to me is that a number of years ago Boone Pickens came to me and when 
oil was down around $40 a barrel, he said: Orrin, oil is going to go to 
60 bucks a barrel, and it is going to go up from there to $100 a 
barrel. This was years ago. And I said: That is not true. He said: It 
is true. Well, he told me a couple of weeks ago, and this is pathetic, 
and said we are sending $600 billion of our money to purchase non-
American oil when we have it within our grasp to create much of the oil 
the United States of America needs from our own American oil sources.
  I will cite with particularity the oil shale and tar sands in 
Colorado, Wyoming, and Utah. It is well established that there are 3 
trillion potential barrels of oil there, and it is pretty much taken 
for granted that we can get at least 800 billion to almost 2 trillion 
barrels of oil out of that at somewhere between $40 and $60 a barrel. 
But because of legislative maneuvering by my friends across the aisle, 
we can't get regulations established to do the work that has to be 
done.
  Now, I am for every form of alternative oil. And, frankly, nobody has 
a right to say I am not because I am the one who passed, with some very 
important colleagues, the CLEAR Act. The CLEAR Act created the 
incentives for alternative fuels, alternative fuel vehicles and 
alternative fuel infrastructure that are being used right now.
  Ms. CANTWELL. Will the Senator yield for a question?
  Mr. HATCH. Yes.
  Ms. CANTWELL. I certainly want to say that I know of the work of the 
Senator from Utah, because we worked together on plug-in hybrids and 
other incentives, and he clearly does support renewable fuels and 
changing our tax credit policies, so I applaud that.
  I am glad you brought up Boone Pickens, because I heard him on the TV 
the other day, I think it was 2 days ago, and he said that while he 
thought the United States had great opportunity in natural gas, he 
thought the way to get off our dependence on foreign oil, besides that, 
was to make investment in wind and solar. So I will look forward to 
working with the Senator when we return on trying to push those tax 
policies to make sure we continue to incent those good renewable energy 
policies.
  Mr. HATCH. Well, I thank the Senator from Washington for her 
comments, because she has been central to this effort, especially with 
regard to plug-in hybrid vehicles. Now, those are a still a distance 
away yet, but, nevertheless, we can do it. That effort may not 
completely solve our energy problem, but it certainly would alleviate 
some of it.
  In addition, a number of other measures I put through are the 
investment tax credits to spur the development of solar, geothermal, 
wind, and other renewable forms of electricity. No question about it. 
But that alone still not going to solve our problem, especially not 
with liquid fuels.
  We had testimony yesterday from oil company executives who said if we 
do everything in our power on alternative fuels by 2025, or around that 
time, we might be able to get 20 percent of our energy needs. But in 
the meantime, what are our cars, trucks, trains, and planes going to 
run on? They have to run on oil. And we have the oil within the 
confines of the United States, on land and offshore, to resolve a lot 
of these difficulties. But it will take years even to do that, if we 
can get past the environmental extremists to be able to do this. In the 
meantime, we are losing jobs, we are losing our economy, and we are 
losing with respect to a lot of other problems. In the end, we are 
going to have to resolve it by drilling for American oil, both 
conventional and unconventional oil, and we have the ability to do it, 
and to do it in ways that make sense, that are environmentally sound, 
and are economical. Some of my colleagues on the other side object to 
Canadian oil because Canada is putting up a million barrels a day out 
of their tar sands, and they do not like the fact the tar sands have 
some carbon in them. But the fact is, Canada is going to go to 3 
million barrels a day. So what do we do if we don't take Canadian oil 
when they are happy to sell it to us? We are going to have to go to 
Venezuela, Russia, the Middle East, and other places to get our oil, 
and many of those countries are antithetical to what we believe in and 
are not particularly happy about United States power in this world.
  Now, Mr. Pickens also predicted it is only going to be a matter of 
time until we are going to be called in and these oil barons from these 
other foreign lands, who aren't particularly enamored of the United 
States--in fact, if anything, they are jealous of the United States--
are going to say: You have been consuming 25 percent of the world's 
oil, but you only have 6 percent of the world's population. We are 
going to have to cut you back, especially now that they can sell all 
they want to China, India, and other countries that are voracious in 
their demands for oil.
  We have to wake up and realize we can't sit back and hope ethanol is 
going to solve this problem. We can produce about 5 billion barrels of 
ethanol, which is the equivalent to about 3\1/2\ billion gallons of 
oil. However, we consume 3\1/2\ billion gallons of gas. If we do 
everything in our power to do ethanol, we are not going to be able to 
resolve our energy problem without increasing our oil supply, too.
  I might add that I see some very important work being done on 
renewables. I talked to my friend Vinod Khosla. Vinod is building a 
solar thermal plant, 200 megawatts, in California that should be 
finished by 2010. He believes we can do that all over the place. Boone 
Pickens has decided that in the wind corridor from Canada right down 
through Texas, he could build windmills all up and down that corridor 
that would provide over one thousand megawatts of power, which would be 
very beneficial to our country, but that's electricity, not liquid 
fuel.

  We know we can find more and more natural gas on our Federal lands if 
we want to do it. We know how to do natural gas-driven vehicles right 
now. We actually have natural gas stations in Utah and we have natural 
gas drivers, but they are the exception to the rule. We know how to 
build hydrogen cars that have absolutely zero emissions, but we only 
have 9 million tons of hydrogen in this country. You would have to have 
at least 150 million tons of hydrogen to make a dent, and the only 
feasible way to get that much hydrogen is probably through nuclear. We 
are about the only major nation in the world that isn't going ahead 
with nuclear as we should. We know it is one of the cleanest sources of 
energy in the world. I personally believe we will find methodologies 
and ways of neutralizing nuclear waste.
  We can no longer afford to sit back and believe ethanol is going to 
solve all our problems, or wind power is going to solve all our 
problems, or solar power is going to solve all our problems, or that 
geothermal is going to solve all our problems. We have to distinguish 
between electricity and liquid fuels. Because of the work I have done 
to promote geothermal, I went out to Utah 2 weeks ago and helped 
dedicate the ground for the first geothermal power plant in over 20 
years. This company, which is a very rare company, is going to build 
these all up and down Utah, where we have all kinds of geothermal 
prospects. It's wonderful, but it doesn't solve our liquid fuel 
problem. It will not get us to where we can continue to keep our 
economy alive in America.
  A lot of this has stopped because of environmental extremism. We all 
want clean air and clean water, and I don't think any environmentalist 
should start chewing me up when I am the one who helped put these bills 
through that have spurred on alternative energy and hybrid 
technologies, and I will do everything in my power to continue spurring 
it on. But let us make no mistakes about it, we have to have oil over 
the next 20, 25 years and beyond that in order to keep America strong.
  And to blame the big oil companies--we hear: Big oil companies--one 
of the Senators yesterday said: How could you do this to America? Now, 
let's get the facts. The big oil companies are only 6 percent of the 
world's deliverers

[[Page S4766]]

of oil. The vast majority of oil that is delivered is by government-
owned entities. Not ours, but foreign government-owned entities. We 
have made it all but impossible to drill for oil within the continental 
United States, especially on Federal grounds. And again, it is 
environmental extremism that is stopping that.
  I want people to have jobs. I also want to go full bore in all of 
these other alternative forms of energy that hopefully will alleviate 
some of this dependency we have, but we can alleviate a lot of our 
dependency by doing the oil shale work in Colorado, Wyoming, and in my 
home State of Utah. That needs to be done. It takes one acre to produce 
5 barrels of ethanol. I'm a big fan of ethanol incentives, as I've 
said. However, Mr. President, do you realize how much oil can be 
achieved from 1 acre in oil shale in those tri-State areas? It is 
between 100,000 and 1 million barrels of oil. And we are just letting 
it sit there because we can't get the leases and my friends on the 
other side of the aisle are specifically blocking it.
  Because of liberal, excessive environmental restraints, we can't get 
American oil to save America. We can't drill in American waters. China 
is. They are coming right over to our waters and drilling for oil that 
we can't drill for because of these extremists. And they blame 6 
percent of the world's oil-producing companies and say they are the 
cause of all these problems? Give me a break. It is about time we wake 
up. Sure, politically it sounds good, but practically and 
scientifically it is total bull corn, I think may be my best way of 
describing it.
  I am for all these environmental things too, but I want it to work. I 
don't want it to be a political exercise so one side can win over the 
other.

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