[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
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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
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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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