[Congressional Record Volume 154, Number 103 (Friday, June 20, 2008)]
[Senate]
[Pages S5928-S5930]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MORNING BUSINESS
Mr. DODD. I ask unanimous consent that the Senate proceed to a period
of morning business with Senators permitted to speak for up to 10
minutes each.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DODD. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DORGAN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Oil Market Speculators
Mr. DORGAN. Mr. President, this morning, watching television as I was
getting ready to come to work, I heard a news report about how much
less Americans were driving. I believe they said 4.5 billion fewer
miles driven in our country in April, although it may have been January
through April. I am trying to get that. But the New York Times
yesterday had the same thing. It says: ``Driving Less: Americans
Finally React to the Sting of Gas Prices.'' It described that in April
of 2008, compared with the same month 1 year ago, Americans drove 1.8
percent fewer miles on public roads. So round it up. Americans drove 2
percent less in April, and presumably they used 2 percent less gasoline
than 1 year ago.
If that is the case, that gas prices are up so Americans are driving
less and using less gasoline--then demand is down, isn't it?
Well, demand is down--and we know that; it doesn't have to be
confirmed by the New York Times yesterday. Demand is down. When gas
goes to $4, people are wondering how on Earth do I pull up to the gas
pump and afford to fill the tank? I had a tribal chairman come to the
Senate yesterday. He described a mother who was driving her
[[Page S5929]]
daughter, who had threatened to commit suicide, to see a doctor. But
the mother didn't have money or enough gas in the car to get back home,
so she came to see the tribal chairman of this particular Indian tribe
to try to get some money to put some gas in the tank to be able to
drive home after driving her daughter to the doctor.
We know these stories. A lot of people can't afford this, so they are
driving less. So if demand is down, then why are gasoline prices
staying up?
Four of the first 5 months of this year, we have seen increases in
crude oil inventories. Let me say that again: Crude oil inventory
supplies in this country have increased 4 of the last 5 months. So if
supplies are up, and demand is down, what justifies a continued
increase in the price of oil? It is not justified. It is unbelievable
speculation in the commodities markets.
I want to talk about that for a moment today. But I want to also note
that in the Washington Post this morning, Steven Pearlstein had an
article. It says: ``On Energy: Same-Old, Same-Old.'' And he is right
about that. Same old thing, isn't it, on energy?
We can't live without energy. The fact is, we get up in the morning
and flip a switch and the light goes on. We plug something in and our
razor works. We get in the car, turn the key, and we can drive. We take
energy completely for granted, and yet we are prodigious users of
energy.
But we have a problem: Part of the problem is that divine providence,
apparently, ended up putting most of the oil under the sands way on the
other side of the planet and most of the demand is here. So we stick
straws in this planet of ours and suck oil out every day. Eighty-five
million barrels of oil every day we suck out of this Earth, and one-
fourth is destined to be used in this little spot called the United
States. We use a quarter of the oil every single day that is produced
in this world.
That is pretty unbelievable when you think about it. So we have big
problems. We use a quarter of the oil, and much of it is produced
elsewhere--Saudi Arabia, Kuwait, Iraq, and Venezuela--in troubled parts
of the world. We need to be less dependent on finding oil from off our
shores, which means we need to be more diligent in finding ways to
produce more here.
But it is not just producing oil, however. There are a lot of ways to
produce energy. My colleagues on the other side, who have spent the
last several days in this Chamber saying we have to drill here and
drill there; that the only way you produce is to drill a hole
someplace. Well, I know people like this. They are the dig-and-drill
type. I call them ``yesterday forever.'' Digging and drilling, that is
the only way they think you can produce energy.
What about planting a crop in a farm field and producing ethanol?
What about putting up a wind turbine and producing electricity by
taking the energy from the air? What about solar? What about biomass?
There is so much more we can and should do with respect to the
production of energy.
I will talk about that some more, but I want to come back to this
issue of speculation. Right now, the price of gas is killing us. We
have, I think, 12 airlines that have gone bankrupt in recent weeks and
months. We have a whole lot of trucking companies that are now out of
business because they cannot afford to continue to operate by paying
current diesel prices to fill their trucks. We have farmers who can't
figure out how they are going to order a load of fuel for spring's work
and summer's work because it costs too much. We have a lot of families
driving up to a gas pump and putting in only five gallons because they
can't possibly afford to fill the tank.
What is causing all that? Well, we have what is called a commodities
market that has now been infested with hedge funds and investment
banks. Investment banks, for the first time in history, and in recent
years, are in this commodity market speculating. They have actually
purchased storage capacity in order to take oil off the market. That is
not a particularly good way to bring down prices, is it? But that is
not the interest of some of these speculators. They think increasing
the price is fine. It is exactly what they want.
Will Rogers described all this years ago. He described people who buy
things they will never get from people who never had it, making money
on both sides. It wouldn't matter so much if the speculation on a
commodity isn't so essential to this country. There is unbelievable
speculation on oil and gas prices in this country, particularly oil
prices at this point, that is damaging our economy. It is damaging our
country, it hurts American truckers, farmers, and others, and we need
to do something about it.
Now, the question is, what? I am going to hold a hearing next week. I
chair the subcommittee that funds the Department of Energy, among other
things, and it funds the Energy Information Administration. That is the
agency we pay in the Department of Energy to tell us what they know
about energy. This is not a policy group, but we spend a lot of money
on the EIA. If somebody is talking about energy and giving you some
analysis about energy statistics, it is probably the Energy Information
Administration, run by Mr. Caruso. Mr. Caruso is going to testify
before my subcommittee this coming week.
But I want to show you this chart. I am not showing this to
demonstrate that the EIA is incompetent. That is not my allegation
here. However, I wanted to show you what the Energy Information
Administration has estimated each month, because they estimate what the
price of oil is going to be. Nobody knows, so EIA makes the best
estimate they can, because they have the best people and the experts.
So here is what they have estimated.
By the way, this red line is the actual price, okay? Go back here in
May 2007, and they estimated the price of gasoline was to be about
here. In July 2007, they said here is where we think the price will be.
In September of 2007, here is where we think the price is going to be.
In November 2007, we think the price will go down, actually. In January
2008, the price is going to go down. March 2008, it is going to go
down, and in April, it is going to go down.
Here is what actually happened. Oil prices went straight up, like a
Roman candle. So the best people we have in the agency instructed to do
this analysis say, here is our estimate of oil prices--and the
fundamentals of the marketplace should reflect supply and demand. I
assume they probably thought people were going to drive a little less
as prices went up so that we would have more conservation. But they
said, we think we are going to be okay on supply and have a little less
demand and prices will moderate. Instead, prices went like this.
How can we be so wrong for so long? That is the question, I guess,
for next week. But I have had a chance to ask the head of this agency
at a previous hearing whether there is some speculation here. My notion
is this is an unbelievable orgy of speculation, and that is what is
happening to this market. The market is broken, doesn't work, it is
full of speculators, and they are interested in driving up the price.
They do not give a rip about the damage to the economy. But the answer
from the EIA was, well, a little bit of speculation, but, you know, not
very much. It was kind of a two-step shuffle with your hands in your
pockets, ruminating. Wearing a gray sweater and smoking a pipe and
ruminating: Well, maybe a little speculation.
You know what? I think the truth is--and this chart with these lines
demonstrates how wrong we have been for so long--that there is a
massive amount of speculation here. There are plenty of experts around
who say this market is like a casino, open 24/7.
Now, what does it matter? Well, what matters is this is doing
unbelievable damage to our economy and to our country. I would
understand it--I wouldn't accept it, but I would understand it, if at
least the supply and demand relationship here justified an increase in
price, but it does not. Refineries in this country in recent months
have actually cut back in their capacity because they have had too much
inventory out there. Drivers are driving less, crude stocks in 4 of the
first 5 months have been up, yet the price of oil continues to rise.
Now, the large oil companies that are going to the bank depositing
our money have a permanent grin. They can't stop smiling. The Saudis
and the OPEC countries can't stop smiling either because they are
contributing
[[Page S5930]]
even more of our money to their bank accounts. This is not bad for
everybody. This is good for some. It is just bad for most of the
American people and bad for the economy of this country.
I believe that speculation is rampant and the regulatory authorities,
the people who are supposed to wear the striped shirts and call the
fouls, the Commodity Futures Trading Commission are largely doing
nothing about it except for the last couple of weeks when someone has,
apparently, lit their fuse or when the Chairman had some sort of
epiphany overnight and said it looks as if we ought to start
investigating this. The Chairman of the regulatory body has said
repeatedly now, for many months: It is just the fundamentals, there are
no problems here, the market is working fine, just fine. He said it
last July, he said it in January, he said it in February, he said it in
May, be happy, there is no problem here. The fundamentals of the oil
markets are working just fine.
Then, all of a sudden, we had a kind of tipping point. The Chairman
of the Commodity Futures Trading Commission said: There might be
something wrong. We are going to look at it. And oh, by the way, we
have been looking at it for 7 months.
It is a little confusing to me and I expect to the American people.
Either the fundamentals were not right, or they were, back when he was
assuring the American people everything was fine.
Having said all of that, it is pretty clear to me what is going on
here. We have a dramatic amount of speculation, a bunch of big
interests running up the price of oil on the commodities market--hedge
funds, investment banks, and others--speculating, purely speculating in
these oil markets.
I am going to introduce some legislation next week that addresses
that subject. It will be the End Oil Speculation Act. It will require
the Commodity Futures Trading Commission, which has largely been asleep
at the switch, to use the authority it has to do what is necessary to
separate legitimate trading for hedging purposes on the commodities
market for oil from trading that is purely speculative. It will
increase the margin requirement on trading that is purely speculative.
It will do a number of other things that respond to the need to say: We
believe this market should work. We think this market is necessary. But
when a market is broken, the U.S. Congress has a responsibility to
address it.
My legislation will have time requirements and will make certain that
the Commodity Futures Trading Commission takes the action that is
necessary to wring the speculation out of these markets. I will
introduce that early next week.
I do want to say with respect to the Stephen Pearlstein article that
I think he has it right--``same old, same old.'' He said: Somebody
brings up offshore drilling, and immediately some say ``no,'' others
say ``yes,'' some say ``there,'' others say ``nowhere.'' Should we do
some offshore drilling? Sure. I supported offshore drilling in the Gulf
of Mexico. I was one of four Senators who constructed the legislation
that is now law that opens what was called lease 181. Substantial oil
and natural gas are there. We ought to open much more of that on the
eastern Gulf of Mexico. That is where the highest potential of
recoverable oil is, in the Gulf of Mexico. We can do that safely.
The fact is, you need to do much more. We are not going to drill our
way out of this problem. We need much more renewable energy and more
conservation. By far, the lowest hanging fruit in the energy issue
would be to retrofit all buildings in America. The Mackenzie study says
that is the quickest and easiest way to achieve substantial savings in
energy. There is so much to do and so much available to us in renewable
energy, in conservation, efficiency, and also the other elements that
come together outside of just drilling and digging.
I support some drilling and I support some digging. But that is not a
policy, it is just a chant to say: Let's keep doing what we have been
doing. That has driven us into a ditch. We want to get out of the
ditch. We don't want to make the ditch deeper.
I am going to be introducing legislation next week to address this
problem of speculation. My hope is that all those who believe, as I do,
that this market is not working right will support this effort. When
you have an increase in supply of oil and you have a decrease in
demand, you would expect that prices would begin going down, not
continue to go up on a steep path. This market is broken, and I believe
Congress has a responsibility to fix it. That is what I hope my
colleagues and I will be able to do beginning next week.
I yield the floor, and I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Casey). The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. HATCH. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________