[Congressional Record Volume 154, Number 115 (Monday, July 14, 2008)]
[House]
[Pages H6463-H6470]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                 ENERGY

  The SPEAKER pro tempore (Mr. Yarmuth). Under the Speaker's announced 
policy of January 18, 2007, the gentleman from Pennsylvania (Mr. 
Altmire) is recognized for 60 minutes as the designee of the majority 
leader.
  Mr. ALTMIRE. I would ask the gentleman from Georgia (Mr. Price), is 
it your intention to continue the discussion that we are in right now, 
or are you waiting on a different subject?
  Mr. PRICE of Georgia. No, I am pleased to continue the discussion on 
energy and whatever aspect of it you would like to discuss.
  Mr. ALTMIRE. So, Mr. Speaker, here for the next hour, this is where 
we would like to lead this: We will continue talking about the domestic 
production issue; then we will transition into the issue of speculation 
in the market.
  But at this point I will yield to my friend from Connecticut for 
continuing this discussion, and then we are going to start the 
transition. So for those of you on that side of the aisle who want to 
wrap up that discussion, please feel free to talk as long as you want 
about that. But it's our intention to then move into the market 
speculation issue.
  Mr. Speaker, I yield to the gentleman from Connecticut.
  Mr. MURPHY of Connecticut. I thank my friend from Pennsylvania and 
our colleagues from the Republican side for getting together and 
engaging in what has probably been one of the more productive dialogues 
that we have had in at least my short time here in this House.
  I guess I wanted to offer just a few brief comments as a means to 
pivot to this next conversation because I think that you see Democrats, 
the majority party, focusing so much of our time on the issue that Mr. 
Hall will talk about, which is taking oil currently sitting right now 
available in the Strategic Petroleum Reserve and putting it immediately 
in supply on the market. I think you see us talking about what Mr. 
Stupak will talk about, which is going after the very place in which 
the price of oil is actually set. As much as we talk about the oil 
companies and retailers, what it really comes down to is the price of a 
barrel of oil is set on a minute-by-minute, hourly basis on the 
commodities markets, the regulated/unregulated markets. I think you see 
us talking about those areas more than we talk about the subject that, 
quite honestly, occupies most of the time of our friends on the other 
side of the aisle because we see that as the means to immediate relief. 
I mean there is absolutely a conversation that should have occurred a 
long time ago and needs to occur right now to take this crisis that 
families are feeling and turn it into a long-term strategy both on the 
demand and supply side, changing the amount of supply and the very 
nature of the supply, changing the amount of the demand and the nature 
of the demand, to try to make sure that we don't get into this mess 5 
years from now, 10 years from now.
  But what we hear I know is what you hear. I mean this energy crunch 
doesn't discriminate based on the party you're registered with. Whether 
you're a Republican or a Democrat, you're paying the same prices in the 
Fifth District of Connecticut and Texas and in Georgia and all across 
the rest of this country. People are saying to us get us relief today.
  So my estimation of why we have a disagreement at the very least on 
where the issue of drilling should fall on the priority list is because 
we just haven't seen the evidence yet that shows that this idea that 
drilling that will reach peak capacity in 20 years and may not start 
for another 6 or 10 years is going to actually lead to lower prices 
tomorrow or next week or the next month.
  Now, Mr. Rahall is right. We don't have all these tools at our 
disposal. We want prices to come down $2 by sunrise tomorrow. It's not 
going to happen, and we don't have the ability in this Congress to make 
all of those big, broad, short-term changes. But what we are looking at 
is evidence that does not suggest that increased potential future 
supply is going to lead to lower prices today. I mean just look at what 
has happened over the last 6 years alone. We have seen a 361 percent 
increase in drilling permits. Now, there is no correspondence between 
that 361 percent increase in drilling permits and the price of oil.
  Take a very specific example that we all read about just within the 
last 12 months and look and see how the futures markets responded to 
it. In November of last year, news came of potentially one of the most 
important oil field discoveries in the last decade, the Tupi field off 
the coast of Brazil. We

[[Page H6464]]

don't know how much is there, but the estimates already are you 
potentially have 8 billion to 10 billion barrels. You would expect, by 
the logic that we hear here, that that immediate notice of more supply 
around the corner with a government--there's no permit contesting here. 
There's no political problem that we may have in other countries. The 
Government of Brazil's ready to go. So we have got 8 to 10 billion 
barrels, and what do we see happen in world markets? Within 14 days the 
price doesn't go down, it goes up.

                              {time}  2115

  Within 6 months, a $13 increase in the price of a barrel of oil and 
in 9 months as we stand here today a $55 increase, the biggest oil 
field discovery that many of us have seen in the time that we've been 
in government service and the theory that that should lead immediately 
to the market's responding with oil prices decreasing doesn't happen. 
And so I think that is just a means of explaining why the oxygen on 
this side of the aisle gets spent on issues that Mr. Hall will talk 
about and Mr. Stupak will talk about, the SPR and the commodities 
trading reform efforts. Because we see that as the most effective means 
toward immediate price relief.
  And I think if we had evidence that the markets have responded in a 
different way in the recent future that potential future demand with 
increased oil permits leading to lower prices or new discoveries 
leading to lower prices maybe there might be a different discussion 
here. But the fact is that we haven't seen that kind of response. So I 
just offer that as a means to pivot on to some of the conversations 
that we will have on our side of the aisle. Because I think that is 
part of the explanation as to why you say see a difference in focus.
  And I would be happy to yield.
  Mr. BARTON of Texas. Would you like a response to some of that?
  Mr. ALTMIRE. I yield to the gentleman from Texas.
  Mr. BARTON of Texas. I want to make a couple of responses. First, we 
will talk about the Strategic Petroleum Reserve.
  Under the current law, the Strategic Petroleum Reserve cannot be used 
to manipulate or impact prices. It is specifically in the law. It would 
take an act of Congress to change that. Under current law, the 
President has to find a, has to issue a finding, a national emergency 
on supply that affects the economy of the United States. I think as has 
been pointed out by Mr. Westmoreland, that would certainly be a hearing 
that would be worthy in the Oversight subcommittee of the Energy and 
Commerce Committee, perhaps in the Natural Resources Committee that 
Chairman Rahall chairs. But under current law, we would not be allowed 
to release oil purely to help alleviate the pricing situation.
  On the issue of this big oil field, I wasn't listening closely, but 
is the gentleman referring to the big oil find off the coast of Brazil?
  Mr. MURPHY of Connecticut. That is correct.
  Mr. BARTON of Texas. There are several things about that. We're not 
sure that we have the technology right now to develop that field. We 
certainly don't have the infrastructure in place to produce it or to 
transport it compared to up in Alaska where ANWR is within 200 miles of 
the trans-Alaska oil pipeline that is currently over at half capacity 
and where, as Chairman Rahall pointed out, we certainly would have to 
go through the permitting process if we were to decide you could drill 
in ANWR.
  But I have talked to some of the majors in this country. And they 
believe if we really adopted an expedited process for the permitting 
process, they could have production of about 300 barrels a day within 3 
to 4 years, and they think they could ramp it up to about 1 million 
barrels a day or more within say 5 to 8 years.
  So it's good news if Brazil has done what it has done. But because of 
where that find is and how deep the water is and some of the 
technological issues, it's not quite an apples-to-apples comparison.
  Mr. GINGREY. I want to ask my colleagues if they would yield on 
another point the gentleman from Connecticut made, and that is, again, 
in regard to the Strategic Petroleum Reserve. Now it's my understanding 
that in that reserve we currently have about 750 million barrels. Is 
that what my colleagues agree on? And what would you suggest should be 
the release? How much of that 750 million barrels would you suggest? 
And as my colleague from Texas points out, we would have to change the 
law. That would be something that we could enact by legislation here in 
Congress. How much of that oil would you release?
  Mr. HALL of New York. Well I think that is a subject for some 
discussion. And perhaps somewhere between 30 and 50 million barrels 
would be a good starting point.
  But the most interesting thing about it is that it's one of the few 
investments the American taxpayers made that has more than doubled in 
value. In other words, it was bought at less than $50. Most of the oil 
there was bought at less than $50 a barrel and then would be sold for 
whatever it's going for, $130 or $140, the current value. So there's a 
big mark-up. And there is an opportunity not only to provide supply, to 
loosen up the supply-and-demand equation, but also to use the proceeds 
from that for some important things such as compensating those who are 
hurt the most. In the northeast with home heating oil this coming 
winter, there are many people very afraid about paying $6 for home 
heating oil, truckers who are paying exorbitant amounts for diesel, or 
people on low incomes who can't deal with this, or for that matter 
investing in some alternatives to provide some competition for oil, 
which, by the way, I think we should get to. Because what we're really 
faced with here is we're talking about drilling and drilling and where 
we're going to drill and what kind of oil and how much sulfur, and is 
the diesel going here or is the diesel going there?
  But we're still talking about being at the mercy of oil. And I think 
ultimately this conversation has to come around to breaking the 
monopoly, the energy monopoly, that oil has in this country.
  Mr. GINGREY. If the gentleman from Pennsylvania would continue to 
yield to me to ask a question of the gentleman from New York. The 
gentleman from New York said, well, he wasn't sure, but maybe anywhere 
from 30 to 50 million barrels would be released from the SPR, Strategic 
Petroleum Reserve.
  The purpose of that reserve is if the countries that hate us, and 
certainly many in the Middle East and Venezuela do, if they cut off the 
supply of oil to us tomorrow, we're talking about about 12 million 
barrels a day, about 12 million barrels a day that we would not have of 
the 22 million that we need. So releasing 30 to 50 million barrels of 
oil from the SPR would do nothing. And the purpose of the SPR, of 
course, is if we do get cut off completely from 12 million barrels of 
oil a day, we literally have about 60 days to utilize the SPR, and then 
that is all gone. And it's during that period of time, of course, that 
we would need to negotiate with these countries and bring whatever 
power to bear that we need, hopefully diplomatic, to free the flow of 
that oil back up. So that is why we say on this side of the aisle we 
can ill afford to release any of the SPR because of price manipulations 
in the market.
  Mr. BARTON of Texas. If it's allowed, could I give a factual 
presentation of the Strategic Petroleum Reserve?
  We have a little over 700 million barrels in the reserve. I think the 
average acquisition price is less than $30 a barrel. They have the 
capacity to produce up to 6 million barrels a day at maximum production 
from the reserve. That then leaves at least 2 weeks to gear up to do 
that. World markets today are about 85 million barrels of supply and 
about 84 million barrels per day of demand. To really impact the price 
by releasing oil from the Strategic Oil Reserve, most experts think you 
would have to release at least 2 million barrels per day. And at that 
rate, you could release it for a year approximately, and then you 
wouldn't have any oil.

  So again, it is worthy of a hearing. But I would be very careful 
about changing the law to allow the SPR to be used for price 
alleviation. It was a bipartisan agreement in the 1970s. It requires a 
Presidential directive of a national emergency because of supply 
interruption that is of severe harm to the American economy. That is 
the standard for release from the SPR today.

[[Page H6465]]

  So to have a real price impact, given that the world market in oil is 
fungible, you would probably have to release about 2 million barrels a 
day. And if you did that for the entire amount of oil, you would have 
not quite a year's supply.
  Mr. HALL of New York. If the gentleman would yield back.
  I would just comment that it's likely should the countries that don't 
like us and would theoretically cut us off in a crisis would look 
elsewhere to sell their oil, and the oil would probably go on the world 
market to other countries, to China, to Asia and so on and would 
provide slack in the system overall worldwide which would enable us to 
buy similar quantities of oil from other sources. This is all 
speculation on our part.
  But I would just say that it's not by any means certain that a cut-
off of oil from a certain country to us would mean that we would not be 
able to get the same amount of oil elsewhere.
  Let me also say, because there was a comment made before, just 
continuing on a couple of quick points, there was a comment made 
before, many comments about how the American people are hurting, and 
one comment about how the oil companies are being squeezed. I just 
wanted to show the profits of the oil companies since 2001 climbing 
from $30 billion profit to $123.3 billion profit in 2007. And this is 
just from 2007 to 2008.
  Here is an increase for another record year of oil company profits in 
the first quarter of 2008, $36.9 billion. So the curve continues to go 
up even as the gentleman from Pennsylvania said I believe it was, or 
the gentleman from Connecticut, we've had in the last 6 years I think a 
361 percent increase in the number of leases granted and 668 million 
acres, which is either in some part of the permitting process or has 
not yet been drilled on, but is available for drilling in the lower 48 
and adjacent offshore leases. No matter what we do, the oil companies 
continue to make record profit among record profit.
  So against that backdrop, I think it's really important to consider 
such things as the geothermal system. I was personally in the trench 
next to a house that was being built, fastening these loops of hose, of 
plastic piping, that is going to carry a glycol water mixture 6 feet 
underground and enable a 3,500 square foot house in Cold Spring, New 
York, to be heated and cooled for the cost of one 75-watt light bulb. 
There are four buyers so far that have come to this development and 
have been offered a house. I think the base price of the house is 
$350,000. In that part of New York, it's expensive. And that is what 
they're offering these homes at. Or they can pay the extra $15,000 up 
front for geothermal heating and cooling. And all four of the buyers 
have come in with today's price of energy and said, we will take the 
geothermal.
  And the estimates of the company doing the work is that it will pay 
off in 3 years. If it's a full-time resident, it will pay off in 3 
years. If it's a part-time weekend or summer home, it may take 7 years. 
But these are the kinds of things that are here today. And it's not 
rocket science. It's plumbing. And it's common sense.
  And we need to do this because we're at the moment an oil-based 
economy, especially for aircraft. There is no getting around liquid 
fuels. You cannot fly a hybrid plane any time soon. But there are many 
other places that we can find other fuels and other sources of power, 
not only for transportation but for heating and cooling our homes and 
our businesses and free up the oil for the purposes that we really need 
it for.
  I yield back to the gentleman.
  Mr. ALTMIRE. I see several of my friends from the other side who 
would like to speak.
  I will yield first to Mr. Burton.
  Mr. BURTON of Indiana. I won't speak very long. I appreciate the 
gentleman yielding. I really appreciate the information that my 
Democrat colleagues have been bringing out night after night on 
alternative sources of energy. I just learned a little bit more about 
geothermal energy than I did, and I would like to have that right next 
to my house.
  But the problem, as I see it right now, is how do we deal with 
bringing the price of gasoline down, and what do we do in the case of a 
national emergency?
  The former chairman of the Energy Committee, Mr. Barton, was talking 
about what would happen if there was an emergency and how we would 
utilize this Strategic Oil Reserve. My concern is what would happen if 
a major supplier of the United States and the rest of the world could 
not supply that oil? Right now, and I spoke about this the other night, 
there is a lot of unrest in the Middle East. There is concern about 
Iran developing a nuclear weapon. And they have been working on a 
program for some time. Israel just flew a mission the other day about 2 
weeks ago where they had over 100 planes fly the length down the 
Mediterranean that it would be to fly from Israel to Tehran. And so 
there is the possibility that none of us want to see occur where there 
could be a major confrontation over there.
  If you sink two or three ships in the Persian Gulf in the Straits of 
Hormuz, you're going to have a terrible problem in getting maybe 20 
percent of the world's oil supply to market. And we get a lot of our 
oil from there.
  And so I think we ought to look at the long-term problems that we 
face in this country while we're converting to other forms of energy, 
which I agree with you we should be doing. But oil is going to be with 
us for a while. And we're going to need that energy, as you said, for 
aircraft, transportation, for trucks and other things as we make this 
transition. And during that period of time, we need to be thinking 
about what we are going to do to protect this country strategically in 
the event of a conflict during this transition period.
  And that is why I think that this bipartisan group that started 
meeting tonight is talking about trying to get everybody together to 
come up with a comprehensive plan to deal with the energy problem and 
the gas prices, that we look at that. We look at the problems that 
occur not only today but what might occur a month from now, 2 months 
from now, 1 year from now, or 3 or 4 years from now.

                              {time}  2130

  And during this period of transition when we want to move to cleaner-
burning fuels, we need to have the energy here in America. I appreciate 
everything that you are bringing up, but I also am concerned about the 
security of this Nation. And right now we are so dependent on foreign 
oil, if we have a problem in certain parts of the world, we will have 
an even higher price for a gallon of gasoline. That is why I believe we 
should expand our drilling opportunities out on the Outer Continental 
Shelf and ANWR.
  I appreciate this discussion tonight. I think we should be doing this 
on a regular basis.
  Mr. ALTMIRE. I thank the gentleman, and I know Mr. Westmoreland and 
Mr. Price want to speak on this issue. I yield to Mr. Westmoreland.
  Mr. WESTMORELAND. I just wanted to ask the gentleman from New York 
one question. When he was talking about the profits for these oil 
companies, are they making 50 percent profit or are they making 30 
percent profit or are they making 25 percent profit? What percentage of 
their sales is that profit? I am just curious to understand.
  Mr. HALL of New York. I just know they have made the biggest profits 
in the history of any corporation in the history of the world, and that 
the CEO got a pension of $400 million. There are certain things that to 
the American people look excessive. I can't tell you whether they are. 
All I can say is what it looks like, and I can say that my sympathy for 
the oil companies is not at a very high level. Hence, my likelihood to 
pursue use it or lose it. If you are sitting on 68 million acres, some 
of which may be in the process of being developed, but my understanding 
is that all or most of it has passed the permitting stage and is ready 
for the drill bit to go in the ground, and the drill bit is not going 
in the ground because they are waiting for the drill rigs, they don't 
have enough offshore exploration ships. They have enough money to buy 
the company that makes the drill rigs. Most of these oil companies have 
more money than most countries have. When you are floating that kind of 
money, I think there may be another incentive at work which is where is 
the oil worth more? Is the oil worth more left in the ground or pumped 
and sold into dollars because the dollar is going down. You can't 
invest it in real estate right now because

[[Page H6466]]

that is going down. If you put it in the stock market, you are taking 
your chances. A financial analyst inside one of these oil companies may 
look at the choices and say, let's leave it in the ground. Let's 
acquire more and more leases and pump it in 5 years when it is worth 
more. I want to be sure that is not the incentive that is driving this.
  Mr. WESTMORELAND. I don't think anybody has any sympathy for oil 
companies, and I'm not trying to say that they do. I'm trying to ask, 
do you know if they are making 50 percent profit, 30 percent profit, 20 
percent profit, 10 percent profit? What percent profit are they making 
that relates to these high numbers? Is there a percentage of profit on 
there that they are making? And what percent of profit is too much?
  Mr. HALL of New York. Well, that is a very good question, and a 
philosophical one, I might add.
  I would say your colleague, the gentleman from Oregon (Mr. Walden) 
who sits on the Energy Independence and Global Warming Select 
Subcommittee, asked the five CEOs of the biggest companies when they 
came in, and I am paraphrasing Mr. Walden, he said, I am a small 
businessman, I am a capitalist, I believe in making a profit, but at 
what point when you have made bigger profits than you have ever 
imagined, breaking your own record for 3 years in a row, is there some 
point where you would think about lowering your price to your 
customers? Is there ever a point where you feel that way?
  Mr. WESTMORELAND. If the gentleman would yield, and I don't know if 
you have a list or what, but it is a simple question. Do you know what 
percent of profit the chart represents?
  Mr. HALL of New York. No. What this chart shows is all profit. I 
don't know what percentage that is, how much deeper the iceberg goes 
below the starting point, but these columns stand for profit.
  And I think when national interests conflict with corporate 
interests, that is when government needs to step in. The question is, 
are we at that point?
  Mr. ALTMIRE. I yield to the gentleman from Georgia.
  Mr. PRICE of Georgia. I thank the gentleman for yielding.
  Far be it for me to defend oil companies, but my understanding is 
that the profits in oil companies has been about 8 percent for the past 
couple of years. I don't know what it ought to be, but I know how you 
figure that out in our society, and that is you allow markets to work. 
I also know there are some significant increases, there are some major 
companies that are making 15 and 20 percent margins.
  And the gentleman is right, it is a philosophical question, when 
should the government step in. I think the points that have been made 
are very good points to talk about the strategic petroleum reserve and 
to talk about alternative fuel and conservation and geothermal and the 
like.
  My point would be that we on this side believe we ought to have a 
comprehensive solution, that it ought to include all of these things, 
and all of these things means utilizing more of the supply that we 
have, American supply, whether it is offshore, whether it is deep-sea 
exploration, or whether it is on-shore exploration. Or oil shale.
  We haven't talked about oil shale at all, and I think it is a bit of 
a transition into the speculation discussion because oil shale has been 
taken off the table earlier by the new majority. And oil shale is, as 
many of my friends know, estimated to have 2 trillion barrels of oil. 
That's a hard number to get your arms around. But when you look at in 
perspective, 1 trillion barrels of oil is what the entire human 
population has used since we began using fossil fuels. And we, America, 
have 2 trillion, estimated to be 2 trillion barrels of oil in terms of 
reserves.
  I do know when you take that kind of supply off the table, the 
speculators, those who look at how much reserve, how much supply is out 
there in the world, when we as the government take that off the table, 
that immediately jacks up the price because that is not even there. 
That is not even there to be talked about or utilized.
  So I look forward to the comments of my friend from Michigan about 
the issue of speculation because I think that we would again give the 
message that we are interested in talking about all of these things and 
having a comprehensive solution.
  I would hope that our friends on the other side of the aisle are also 
interested in a comprehensive solution and not a targeted solution that 
picks winners and losers and picks friends and punishes enemies from a 
governmental standpoint.
  Mr. ALTMIRE. I yield to the gentleman from Georgia.
  Mr. GINGREY. I think the gentleman from New York had to step off the 
floor, but his chart is still up there and it says ``oil companies reap 
record profits during the Bush administration.'' Now, my colleague from 
Georgia (Mr. Price) pointed out it is about 8 percent per year. Many of 
our parents and grandparents have stock in oil companies, and they are 
glad that the companies are doing well.
  But I wanted to point out during the Clinton years, during the dot-
com years when profits were double digit year after year after year, I 
never heard my colleagues call for windfall profits against these dot-
com companies, mostly out in California and Silicon Valley, and then 
the bubble burst and the market corrected itself. And it will do the 
same thing in regard to this. Oil companies will not continue to make 
record profits forever. I want my colleagues to put that in 
perspective.
  Mr. ALTMIRE. I yield to Mr. Murphy.
  Mr. MURPHY of Connecticut. I wasn't here during that time, but I do 
clearly think that people can understand the difference. One of the 
reasons we are talking about the urgency, as Mr. Stupak will about 
affecting the commodities market, when you are talking about a 
speculative bubble on a commodity like oil, which is dependent on 
whether people can heat their homes in winter and stay alive and get to 
work on a daily basis, that the urgency about bringing down that 
speculative bubble is imperative on this body.
  So I think the reason you hear so much commotion about bursting this 
bubble, and I wasn't here during the height of the housing and the 
height of the dot-com bubble, but the reason we are talking about the 
urgency of pressing government action to bring down the price to 
something that resembles the laws of supply and demand is because of 
the life-altering nature of the product that we are talking about.
  Mr. ALTMIRE. We have approximately half an hour remaining in the 
debate.
  At this time I yield to the gentleman from Michigan (Mr. Stupak).
  Mr. STUPAK. Before I get into speculation, because we want to address 
speculation, but because my friends on your side keep saying it is only 
an 8-percent increase in oil company profits. I agree, it might be 8 
percent from 2006 to 2007, but when you make $118 billion, the most 
ever of any corporation, to top it the next year is pretty darn hard.
  But 8 percent on $118 billion is $123 billion, where 5 years ago they 
were at $30 billion. They doubled it in 2003 and went to $60 billion. 
That is a 50 percent increase. Then you go to $82 billion, and I am no 
math major, but that is about a 25 percent increase. And then from $82 
billion to $109 billion, that is a 20 percent or 21 percent increase. 
And then $118 billion, I guess they had a bad year, they only made $8 
billion more than the previous record year. That might be 8 percent.
  But look at these numbers, they are staggering. They are absolutely 
staggering. That is why we think on this side of the aisle you have to 
have a short-term policy and a long-term policy, and how to lower those 
excess profits from the $118 billion, or the $36 billion we have seen 
already in the first quarter of 2008, there is just no way to justify 
the doubling of prices based on supply and demand. Oil company profits 
are excessive, and we think speculation is part of the reason.
  Mr. PRICE of Georgia. If the gentleman would yield, I agree those are 
big numbers. What those numbers don't tell us is what kind of money 
they used to invest and what those margins were. And I don't know the 
answer to that.
  Mr. STUPAK. Cut the investment malarkey argument. This is profits. 
This is after you deduct your investments. I don't care if it is on 
geothermal or wind or solar, after you do all of these and pay your 
executive a

[[Page H6467]]

$400 million pension, they still make $123 billion. I'm sorry, but I 
just can't find any sympathy in my heart with those numbers.
  Mr. PRICE of Georgia. If there were an investment of $120 billion, 
and I don't know what it was, then the margin would be a percentage and 
that is what you determine what the actual profits are.
  Mr. STUPAK. Of all of the corporations in the history of the world, 
these are the biggest after all of their investments.
  Mr. PRICE of Georgia. In absolute numbers, you are absolutely 
correct. I have no doubt about it.
  Mr. STUPAK. What I'm saying is why don't you invest more. What I'm 
saying in my role as chairman of the Oversight Investigations 
Subcommittee, and for 3 years holding hearings in this area, let's end 
the excessive speculation in the market that runs up the basic price of 
crude that results in these record profits because corporations, not 
only do they have a responsibility to their shareholders, they also 
have a responsibility to this country to be a corporate citizen.
  Mr. PRICE of Georgia. And I agree.
  Mr. STUPAK. Because high energy costs kill our economy. Every aspect 
of our economy is being strangled while they make record profits and 
pay obscene pensions to their CEOs.
  So I believe one of the ways we can in the short term bring down 
these prices is take out the excessive speculation.
  If you take a look at it, the Government Accountability Office 
released its report on the ability of the Commodities Futures Trading 
Commission to properly monitor the energy markets, to monitor what they 
are making here. What they said, the GAO said they found that the 
volume of trading in energy commodities has skyrocketed, exploded, 
especially after 2002 when we enacted the Enron loophole.
  The GAO also found that while trading has doubled since 2002, notice 
that's when the profits start doubling, in 2002, the number of staff to 
actually monitor what is going on in the markets has declined.
  If you take a look at this chart here, if you will, this is the 
evolution of speculation, trading on west Texas intermediate crude, 
average open interest on NYMEX long and short positions.
  Between September 2003 and May 2008, traders holding crude oil 
contracts jumped from 714 to more than 3 million contracts. That is a 
425 percent increase in trading oil futures.

                              {time}  2145

  Since 2003, the commodity index speculation has increased 1900 
percent. It used to be a $13 billion market, now, today, it's a $260 
billion market. By Lehman Brothers estimate, that 1,900 percent 
increase in commodity index speculation has inflated the price of crude 
oil by $37. Other experts say it could be even more.
  So on June 23, as chairman of Oversight Investigations of the Energy 
and Commerce Committee, I held my sixth hearing on gas prices over the 
past 2 years, Fadel Gheit, the managing director and senior oil analyst 
at Oppenheimer & Company testified, and I quote, he said ``I firmly 
believe that the current record oil price in excess of $135 per barrel 
is inflated. I believe, based on supply and demand fundamentals, crude 
oil should not be above $60 a barrel.
  We are at over $136 per barrel today. It should be no more than 60, 
says Mr. Gheit. In 2002, here is what is happening. Over here on the 
yellow side, these are the commercial hedgers. These are the airline 
industries, these are trucking companies, these are the Big Oil users. 
They want to hedge.
  The blue area, pink area or blue area here, purple area, that's the 
nonhedgers. They have no interest in hedging; they are just in to play 
the market. Sixty-three percent in 2000 were legitimate hedgers, 22--
about 37 percent--were not. Come fast track April 2008, the legitimate 
hedgers are down to 30 percent, the swap dealers and the 
noncommercials, if you will, are 70 percent of the market.
  So what's happened? By April 2008 the physical hedgers only 
controlled 29 percent of the market, those who really do need the 
supply. What we now know is that approximately 71 percent of the market 
is taken over by swap dealers and speculators, a considerable majority 
who have no physical interest in the market. Over the past 8 years, 
there has been a dramatic shift of physical hedgers continuing to 
represent a smaller and smaller portion of the market.
  NYMEX, we have talked about the that tonight, New York Mercantile 
Exchange, has granted 117 hedging exemptions since 2006 for the West 
Texas intermediate crude oil contracts, many of which are for swap 
dealers without any physical hedging position. This excessive 
speculation is a significant factor in the price Americans are paying 
for gasoline, diesel and home heating oil. Even the executives of major 
oil companies recognize this.
  At a May 21, 2008, Senate judiciary hearing, Shell Oil President John 
Hofmeister agreed that the price of crude oil has been inflated, saying 
that the proper range for oil prices should be somewhere between $35 
and $65 a barrel.
  In May of 2008, the IMF, the International Monetary Fund, compared 
the price of crude oil over the past 30 years, crude oil for the past 
30 years, to the price of gold. Gold prices are not dependent upon 
supply and demand and have been viewed as a highly speculative 
commodity. The IMF's analysis shows us that crude oil prices track 
increases in gold prices. The big spike right here, that's the oil 
embargo.
  Look what happened as soon as you had the oil embargo in the late 
1970s there, mid 1970s there, gold shot way up. Look at the track, look 
at the last 5 years of gold how they go hand in hand one over the 
other. What this really means is that oil has been transformed from an 
energy source into a financial asset like gold, where much of the 
buying and selling is driven by speculators instead of producers and 
consumers. Oil has morphed, has morphed from a commodity into a 
financial asset traded for its speculative value instead of its energy 
value.
  Even the Saudi oil minister has argued that high oil prices are due 
to excessive speculation in the market. Former Secretary of Labor 
Robert Reich noted on National Public Radio a few weeks ago, the 
problem is government's failure to curb excessive speculation.
  Now, the Commodities Future Trading Commission has the authority to 
set position limits and to take other action necessary to curb 
excessive speculation. Unfortunately, they have not done it. There are 
significant loopholes that exempt trading from these protections 
against excessive speculation. You have the Enron loophole, you have 
the Foreign Boards of Trade, no action letters, issued by the 
Commodities Future Trading Commission.
  You have the swaps loophole, you have the bona fide hedging 
exemption. While the recently passed farm bill that both Democrats and 
Republicans voted for and overrode President Bush's veto addressed the 
Enron loophole for electronic trading, only for natural gas, a 
significant portion of the energy continues to be exempt from any 
commodities future trade action to curb excessive speculation.
  As I said earlier, for 3 years I have looked at excessive speculation 
in the energy markets. In my latest bill to prevent the unfair 
manipulation of prices, the PUMP Act, H.R. 6330, would end or take away 
all these exemptions, to ensure that excessive speculation is not 
driving these markets beyond the fundamentals of supply and demand.
  We would crack down. The PUMP Act is the most comprehensive energy 
bill, and we would crack down on energy speculation through a bilateral 
trade, we would address that. We would take the Foreign Boards of 
Trade, and we would clarify the CFTC's jurisdiction over these Foreign 
Boards of Trade. The PUMP Act would give the CFTC the authority over 
the exchanges, if they are using computers here in the United States, 
or they are trading energy commodities that provide for delivery point 
in the United States.
  The swaps loophole that we talked about over here, that would be 
closed, you see, 32 percent right now, right now our swap dealers would 
close that loophole because there is no requirement for position 
limits. These swaps have grown exponentially, driving up the price of 
crude. By limiting this exemption, swaps would be subject to position 
limits to prevent excessive legislation.

[[Page H6468]]

  Bona fide hedging exemption, those who really need to have supply of 
oil, we would make sure that they are, we would limit businesses to 
hedge their legitimate anticipated business needs.
  I have trouble with the Harvard University needing a legitimate 
hedging exemption, which they certainly enjoy right now. What does 
Harvard University need to hedge on oil? The PUMP Act would also 
clarify that legitimate anticipated business needs does not mean energy 
speculators. Strong aggregate position, you have the NYMEX, you have 
the Intercontinental Exchange and now you have the Dubai exchange 
coming on. If you are going to have a limit, position, limit the 
position, it should apply to all three of the, the aggregate of all 
three, not just one or two.
  So if you see, if we would close these loopholes and set strong 
aggregate position limits, the Commodities Future Trading Commission 
would be better able to monitor trades to prevent market manipulation 
and help eliminate unreasonable inflation of energy prices caused by 
excessive speculation to help out the American people.
  If you don't believe excessive speculation is causing a problem, look 
at today's business news, especially in the New York Times, they are 
talking about home heating oil. And at our June 23 hearing that we 
held, Oversight Investigation, we had the home heating oil companies 
there. On that day home heating oil was $3.98 a gallon.
  Three days later, 3 days later I introduced the PUMP Act in the 
Senate with Senator Cantwell. Home heating oil then jumped to $4.60 a 
gallon. If you want to lock in, or if you want to hedge, you want to 
hedge your home heating costs for this winter, it's $5.60 a gallon, a 
20 percent increase in about 4 or 5 days. That's excessive speculation 
gone wild.
  Our PUMP Act has 60 cosponsors, bipartisan piece of legislation, 
endorsed by agriculture, airline, labor, industry groups, trucking 
industry. So I urge my colleagues in this House, and I have enjoyed 
this discussion here tonight, to take seriously a look at excessive 
speculation.
  When they testified on June 23 in our committee, I know Mr. Barton 
was there and some others in this room tonight, Mr. Masters, Professor 
Greenberger, Fadel Gheit and others all indicated that if we would pass 
the PUMP Act the way it is right now, the most comprehensive 
legislation on excessive speculation, we could lower the cost of oil, 
of a barrel of oil coming into this country, by 50 percent, they said, 
within the next 30 days.
  I believe it might be 30 to 50 percent, but the point being, in the 
short-term, as we started this discussion, we could do something right 
now. I would take the excess of speculation, all markets, all 
commodities, be liquidated, although they will need some speculation.
  But when the physical hedgers are 2-1 being outbid by the swap 
dealers and the noncommercial people, the floor traders that manage 
money, the nonreportables, then we have a market that has been turned 
upside down, and we have turned supply and demand into really a 
financial asset and not really looking at the needs of the American 
people, or the U.S. economy.
  Mr. ALTMIRE. I thank the gentleman. With approximately 15 minutes 
remaining, my friends on the other side, to achieve balance, have about 
10 of that remaining 15 minutes.
  I would yield at this point to the gentleman from Texas.
  Mr. BARTON of Texas. I thought we had about 12 minutes, 12 minutes, 
so it's about 12-3.
  Mr. ALTMIRE. Okay, 12 minutes to the remaining 15. I yield to the 
gentleman from Texas.
  Mr. BARTON of Texas. Let me make a couple of comments about what my 
good friend Mr. Stupak just said.
  First, in terms of speculation, I think that most Republicans would 
agree that there is some speculation in the market. I certainly believe 
there is. I held hearings when I was full committee chairman in the 
last Congress and you, Mr. Stupak, have done an excellent job in that 
hearing that he referred to, I think, on June 23.
  Some of the things that are in his PUMP bill and some things that are 
in the bill that I have introduced and Chairman Dingell has introduced, 
we are going to have a markup in the Energy and Commerce Committee on a 
bipartisan basis sometime next week and hopefully come to a bipartisan 
agreement about what to do on speculation, putting some position 
limits, bringing the foreign exchanges under rules that the U.S. 
exchanges have to go by, creating a two-tiered system where physical 
traders play by a different set of rules in terms of margin requirement 
than people that don't take physical possession or provide for physical 
delivery. There are a number of issues we have agreement on, and we 
will be working together.
  I might also point out that the gentleman's chart that shows the 
tracking of oil and gold, that is a, to me, a disconcerting chart, 
because what it shows to me--and I am not an economist--but we have 
taken oil from a commercial commodity that had value because of the end 
use that it could be put to, to a commodity that now has become a value 
of storage like gold. I mean, there is not a big commercial demand for 
gold in terms of jewelry and dental work.
  Gold is basically--has historically been a hedge against inflation, 
and what the world financial community has decided with oil, because of 
the tightness of the market, since it is almost a necessity in the 
modern age, it, too, has now become a store of value, and it has a 
value applied to it above and beyond the commercial value of being 
used.
  If we really want to do something to dampen speculation, and, again, 
we are going to work with Mr. Stupak on a speculation bill, we have got 
to fundamentally change the supply and demand tightness. Right now, 
world available supply is about 85 million barrels a day. World demand 
is about 84 million barrels a day. That supply number, that 85 million 
barrel a day number hasn't changed significantly in the last 3 years, 
because most of our major oil fields are growing older, the war in 
Iraq.
  I could say corruption in some of the national oil companies, I won't 
name names, but even with these high prices, we haven't seen that 
supply and demand tightness go away. We have got to get either the 
demand down or the supply up, and, so, some of the things that the 
Republicans are talking about to increase domestic supply would help on 
the speculation side.
  My final comment, before I yield back to the majority side for some 
time, is that in terms of the oil company profits, apparently the 
gentleman from New York, who is no longer on the floor, has made a big 
deal about how high these profits are.
  Well, let me make a couple of comments. If you can't make money at 
$130 a barrel, you don't deserve to be in business. I mean, we would 
expect profits to be up when the price is up where it is. Believe it or 
not, there are some of these nationalized oil companies whose profits 
have not gone up.
  Now, one can speculate as to why that is, but in the United States we 
have a transparent market-based system and our oil companies are not 
price setters, they are price takers. If the world market is $130 a 
barrel or $140 a barrel, our national--our private oil companies take 
that price. Now, the question is, how do we want them to use those 
profits?
  Let's unlock these reserves, these domestic resources, 85 percent of 
the OCS has been off limits? We can't drill in Alaska where we think 
there is a 10 billion barrel oil field in ANWR? Let's allow our private 
companies to invest those profits in American-made energy.

                              {time}  2200

  Increase that supply demand balance so that, as the supply goes up, 
the price goes down.
  Now, having said that, I agree with Chairman Stupak in that we need 
to do something on speculation. I don't agree with everything in his 
pump bill, but I do agree with probably 75 percent of it.
  In the committee markup of the Energy and Commerce Committee that 
Chairman Dingell has announced to me--and I, hopefully, will publicly 
announce it soon if he has not already--you will see bipartisan 
agreement. We have to live within the market structure of the United 
States and the regulatory structure through the Commodity Futures 
Trading Commission and through the Securities & Exchange Commission. 
Certainly, we can do some things to do something on speculation, but if 
we don't change the fundamental

[[Page H6469]]

tightness in the supply and demand situation, all of the speculation 
bills in the world are not going to make that much difference.
  With that, I yield back to the gentleman from Pennsylvania.
  Mr. ALTMIRE. I appreciate the gentleman from Texas.
  On the point that the gentleman just made, I would yield to the 
gentleman from Connecticut (Mr. Murphy) and then to the gentleman from 
Michigan (Mr. Stupak).
  Mr. MURPHY of Connecticut. Thank you, Mr. Altmire.
  The point is that I think we would all have a slight degree more 
comfort with these numbers if we had confidence that those companies 
were investing back into capital, into exploration, into drilling a 
commensurate amount in comparison to what they're making in pure 
profit. I don't have the figures in front of me. I would be happy to 
see something that displays this to the contrary, but what I have seen 
is that you have not seen a corresponding increase in capital 
reinvestment--Mr. Stupak may know this and may want to comment on this 
as well--as you have seen in returns back to shareholders.
  Now, everybody wants shareholders to do well here. We want there to 
be enough excess profit to make some of the people who have invested in 
these companies do all right, but I'd like to also see some evidence, 
as you have suggested, Mr. Barton, that there's a willingness to take a 
piece of that money and to put it into more drilling and into more 
exploration and into more supply.
  I'd be happy to yield to Mr. Stupak.
  Mr. STUPAK. Thank you.
  On that point, there is some skepticism on the majority side that 
somehow we're going to drill our way out of this or that somehow we'll 
just increase supplies, because if you take a look at it right now, 
according to government statistics, 82 percent of the Outer Continental 
Shelf is available for drilling for gas. Seventy-nine percent of the 
Outer Continental Shelf is available for oil exploration and is leased. 
The last time was in 2006. We went along with it. We voted to extend in 
2006, not even 2 years ago, more of the Outer Continental Shelf for oil 
and gas exploration.
  What happened between 2006 and 2008? Profits kept going up. Costs 
kept going up. We didn't see a tangible result.
  So, when you have 82 percent of the Outer Continental Shelf already 
available for leasing for natural gas and when you have 79 percent of 
the Outer Continental Shelf available for oil already available for 
leasing and as we had just relaxed the standards in 2006 and you do it 
2 years later to get the last--what?--18 percent, 21 percent, how is 
that going to change the costs we're paying at the pump? How is that 
going to come down? We don't see the investment of these record profits 
into getting that oil up.
  In fact, we're saying use it or lose it. You have record profits. You 
have more of the Outer Continental Shelf than ever in the Nation's 
history available for exploration, and you're not doing it. So use it 
or lose it. So that's why we look at speculation as, maybe, one way to 
bring it down.
  I thank Mr. Barton for his willingness to work with us on speculation 
legislation. At my June 23rd hearing on excessive speculation in the 
market, he was actively engaged in that, and he asked a number of good 
questions. I agree that we might not agree on 100 percent of the PUMP 
Act, but I think there is enough common ground there, and I've enjoyed 
the discussions we've had in recent weeks on the PUMP Act. Hopefully, 
we can do something. I've really enjoyed the discussion here tonight.
  I thank Mr. Altmire and others for having this discussion because I 
think it has been a good discussion. We've had some disagreements, yes, 
but I think it's all fair in what we're trying to do and in how we view 
things, and we are looking at the short term, what we need in the short 
term and in the long term, and I think there is more agreement than 
disagreement between the two sides.
  Mr. ALTMIRE. I thank the gentleman.
  With approximately 6 minutes left, to achieve balance, the 
Republicans can control the rest of the time. We will certainly answer 
any questions, but I will say to the gentleman from Georgia: Have at 
it. The time is yours or it is that of the gentleman from Texas.
  Mr. BARTON of Texas. We have 6 minutes. We're going to speak for 
about 5 minutes, and then we'll give you a minute to close. I think 
there ought to be balance in terms of closing. We don't have to be 
exactly right in terms of time.
  Before I yield to Mr. Westmoreland, let me say that we've got a 
factual disagreement about the Outer Continental Shelf as to what is 
available. This chart that's down by Mr. Westmoreland shows that 85 
percent of the Outer Continental Shelf is off limits. The entire coast 
of the Pacific is off limits. I believe the entire Atlantic coast is 
off limits. The western Gulf of Mexico, where we've been drilling for 
60 years, is accessible, and I think some of the eastern Gulf may be 
accessible. So we have a factual discrepancy that should be resolvable 
before we do this again because it looks to me like most of the OCS, 
with the exception of the western Gulf of Mexico, is simply not 
available because of a congressional moratorium. Now, if we can agree 
on a bipartisan basis to change that, then we're going to create some 
areas for our oil companies to invest their funds domestically.
  With that, I would like to yield to Mr. Westmoreland, who is one of 
the godfathers of this experiment this evening.
  Mr. WESTMORELAND. Well, I certainly want to thank the gentleman from 
Texas for his participation and for his willingness to come here 
tonight and to lead it with the expertise that he has had as former 
chairman of Energy and Commerce and that he has now as the ranking 
member.
  I also want to thank Mr. Altmire for his willingness to participate, 
and I would like to thank the gentleman from Michigan.
  While we don't necessarily agree on a lot of the facts, I think it 
has been a good example of why we need to have committee hearings. I 
was glad to hear that the gentleman from Michigan's bill is going to 
actually have a markup in the Energy and Commerce Committee, so I think 
that's a positive step in that we're finally, hopefully, having the 
majority ask for the minority's input.
  It does concern me a little bit as to what Speaker Pelosi said today 
in her quote, that she is going to continue to do these things under 
suspension. Mr. Speaker, I believe that that is out of fear that we 
will come back with a motion to recommit.
  Let me say this: While we're talking about gas today, we cannot 
regulate ourselves out of this crisis. While we came down today to 
discuss, I thought, some U.S. oil production and drilling, it's good 
that we got into some of the other things that the majority is saying 
are causing these gas prices to go so high, but even from listening to 
them about this not affecting it immediately, we need to look to the 
future for our children and for our grandchildren. So I hope we'll 
continue this discussion.
  Again, I want to thank all of the parties who participated.
  Mr. Altmire, I will yield back to you.
  I think the gentleman from Texas (Mr. Burgess) would like to say 
something.
  Mr. BARTON of Texas. Yes. We'll let Mr. Altmire have about 1 minute, 
and we'll let Dr. Burgess have the last minute.
  Mr. ALTMIRE. I would yield to Dr. Burgess at this point.
  Mr. BURGESS. I thank the gentleman for yielding.
  It has been a fascinating discussion tonight.
  Of course, as the gentleman from Michigan knows, I was in the hearing 
as well on June 23rd. It was a long hearing, but it was a good hearing, 
and we heard from a number of witnesses.
  When you listened to the discussion of the witnesses, especially on 
the concept of the non physical hedger, I think one of the most 
striking things to me was that there was a component, just the sheer 
volume of dollars, that was going into that, and that clearly had an 
effect, so there may be a very immediate return that can be had. There 
was a disagreement as to how quickly that could come about, but the 
pressure could be put on the price of oil to come down.

[[Page H6470]]

  What was not lost on me, though, was the concept that these very 
tight supply and demand markets are around the world, and I think, man, 
those first four witnesses that presented to us that day said that by 
the year 2015, world demand would vastly outstrip supply. The message I 
took from that is we'd best be looking at the next level of supply 
because we had about a 7-year window in which to achieve that, so you 
had to be sure that some of these other methods that we've heard today 
would be several years down the road before we would actually get the 
supply from those areas, but we need to start today to be able to get 
that supply.
  The other thing that was just absolutely amazing was the number of 
dollars going into those markets and where the actual rate of rise 
really began to increase. It was in about December of 2006 or in 
January of 2007.
  I think my time has expired. I yield back to the gentleman from 
Pennsylvania.
  Mr. ALTMIRE. I thank the gentleman.
  I thank the gentleman from Georgia (Mr. Westmoreland). I especially 
thank the gentleman from Texas (Mr. Barton) for these 2 hours.
  This, I think, was very productive, very eventful. We had a good 
debate. Hopefully, this is not the last time that we will do this. I 
thank the Speaker for the time, for both this hour and for the previous 
hour.
  At this point, I would yield back.

                          ____________________