[Congressional Record Volume 154, Number 115 (Monday, July 14, 2008)]
[Senate]
[Pages S6615-S6617]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           ENERGY CHALLENGES

  Mr. DORGAN. Mr. President, my colleague, the Senator from Nevada, 
just described a series of challenges we face. I don't know that I have 
seen a more daunting time in this country in some long while than the 
time before us. The issues today of the credit crisis--the subprime 
loan scandal, bank failures, the threat of bank failures--these are 
serious issues. I am convinced the quick action by the Federal Reserve 
Board and the Secretary of the Treasury this weekend was necessary. But 
on top of that, there is a fiscal policy that is way off track. We are 
engaged in a war in which none of the cost of the war is paid for. We 
have a President who insists the entire cost of the war be added to the 
debt, and an attempt by Congress to change that would result in a 
Presidential veto. It is a fiscal policy that is way out of balance.
  The President requests a budget to the Congress of roughly $420 
billion in yearly deficits, but that, of course, is not the deficit. 
The deficit is how much we have to borrow. This President's fiscal 
policy is off track by the tune of $600 billion to $700 billion a year 
because that is, in fact, what has to be borrowed. He doesn't include 
in his budget request the cost of the Iraq war, which is very 
expensive.
  We have the subprime loan scandal, the problems in the credit market, 
the fiscal policy that is off track, a trade policy that means we are 
running a deficit of over $2 billion a day every single day by 
importing more than we are able to export. Then, add to those issues 
what is happening to energy, particularly the price of oil running up 
like a Roman candle, $140 to $145 a barrel, and suggestions by some big 
investment banking firms that it may reach $200 a barrel. What does all 
of this mean? What do we do about it?
  I have mentioned before a trip late one evening over the Pacific 
Ocean in what was the previous Air Force One, that big, old airplane. I 
believe it now sits at the Reagan Library in California, a 707. It was 
the Air Force One that brought John F. Kennedy's body back to Andrews 
Air Force Base in 1963. It was the Air Force One used by Presidents up 
until George Bush, the senior, and then it was replaced.
  One of the last flights of that airplane was one I was on to Asia, to 
China, Japan, and Vietnam. A number of my colleagues were on that 
flight--the majority leader, Senator Daschle. My colleague from Ohio, 
John Glenn, was also on the flight. It was late at night flying over 
the Pacific that I had a chance, for the first time, to ask Senator 
Glenn a lot of questions about the time he rode around this planet in a 
little space capsule called Friendship 7 by himself orbiting the Earth. 
I was a very young person at the time of the flight, but I remember 
vividly the reports on the radio and television about John Glenn 
lifting off as the first American to orbit the Earth and how excited I 
was. So that evening, as a U.S. Senator, with my colleague, John Glenn, 
sitting there, I began peppering him with questions about that 
spaceflight.
  One of the questions I asked was, I had remembered that the city of 
Perth, Australia, decided to welcome this astronaut flying alone by, 
when he came to the dark side of the Earth, turning on all the lights. 
Every light in Perth was on that night. They lit up this city called 
Perth, Australia, and I asked John Glenn that evening: Did you see the 
lights of Perth as you reached the dark side of the Earth up there in 
space alone? Did you see that shining light of Perth?
  He said: I did.
  The only evidence of human life that existed on the planet below were 
the lights shining up, a product of energy. It was perhaps not a 
surprise to him to understand that product of energy affects our lives 
every day in every way. Energy is critical to our lives. We get up in 
the morning, virtually every one of us who is within listening 
distance, and we flick a switch. That means a light goes on, the 
product of energy. It means perhaps you brush your teeth with an 
electric toothbrush, and thus battery energy. It means you shave with 
an electric razor, perhaps, and use electric energy. You heat up some 
coffee, electric energy. You take a shower and a hot water heater that 
runs on either gas or electric energy produces hot water. Then you get 
in the car to go to work, and you put a key in the ignition and turn 
it. You use energy, in most cases from gasoline.

  Energy affects almost everything we do, and we don't give it a second 
thought until one day when the lights go out and electricity is gone 
for 4 days and an entire neighborhood is up in arms. How on Earth can 
we live without electricity? Or until at some point when gasoline is 
not available and, therefore, your car is of little value. It happens 
from time to time.
  Now what has happened to our country and to the world with respect to 
energy policy is, we have a big appetite for energy. We are seeing the 
price of oil, which is a very important part of our energy appetite, go 
up, up, up, like a Roman candle, $140 to $145 a barrel, and gasoline 
prices follow suit. A whole lot of folks at this point aren't able to 
afford to fill the tank with gas. A whole lot of trucking companies 
can't afford to buy the gas or diesel for their saddle tanks on those 
big trucks. A lot of airlines can't afford to put jet fuel in the wings 
these days. So we have a good many airlines going into bankruptcy, and 
more out of business.
  The question is, Why is the price of oil where it is? What has 
happened? Let me describe a couple things that have happened that lead 
me to believe we have to take action now, and very aggressive action as 
well. In the last 12 to 14 months, the price of oil has doubled. Has 
anything happened in the last year with respect to supply and demand 
that would justify the price of oil doubling? I can't think of 
anything, except perhaps there is less demand for gasoline at the 
moment. Our country is driving less. We have driven something close to 
5 or 6 billion fewer miles in this 6-month period than the previous 6-
month period. So demand for gasoline is actually down. One would think 
if that is the case, prices should abate or come down. But they didn't. 
They went straight up.
  Here is what is happening: Explosive growth of speculation in the oil 
futures market. Speculators in the year 2000 were 37 percent of that 
market. In 2008, 71 percent of the people in this market are 
speculators. That is, they are not interested in owning oil. They are 
interested in contracts for oil with which they can buy and sell and 
trade and make a profit.

[[Page S6616]]

  Will Rogers described it decades ago: People buying things they will 
never get from people who never had it, making money on both sides of 
the trade. So what about speculators? Are they causing price increases?
  Let me share some comments from some people who might know. The 
senior vice president of ExxonMobil, in April of this year:

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

  Another comment:

       Experts, including the former head of ExxonMobil, say 
     financial speculation in the energy markets has grown so much 
     over the last 30 years that it now adds up to 30 percent or 
     more to the price of a barrel of oil.

  Energy Secretary Bodman takes a different view. He says:

       There's no evidence we can find that speculators are 
     driving futures prices [for oil].

  Let me give you a couple different views. The CEO of Marathon Oil:

       $100 oil isn't justified by the physical demand in the 
     marketplace.

  This is from Clarence Cazelot, CEO of Marathon Oil.
  From a chart I have used previously, Mr. Fadel Gheit, who was for 30 
or 35 years the top analyst for Oppenheimer & Co., he said:

       There's no shortage of oil. I'm convinced that oil prices 
     should not be a dime above $55 barrel. I call it the world's 
     largest gambling hall. It's open 24/7. Unfortunately, it is 
     totally unregulated. This is like a highway with no cops and 
     no speed limit, and everybody is going 120 miles an hour.

  I want to go back to the Energy Secretary's notion that there is 
really no speculative role. Here is the Washington Post, July 7, a week 
or so ago:

       The wave of investment dollars has flooded commodity 
     markets in recent years and critics say contributed to the 
     runup in prices.

  Here is the point:

       Investors, including pension funds and Wall Street 
     speculators, have sharply increased their commodity 
     allocations since 2003, from $13 billion to $260 billion. 
     This has made financial actors an even larger force on these 
     markets than farmers, airlines, trucking firms, and companies 
     that buy and sell the physical goods to run their businesses.
       For decades, trading commodity contracts were considered 
     taboo by most pension funds because the market is so volatile 
     and risky.

  That has all changed. Now we have the California pension fund, 
CalPERS, and other pension programs that are shoving money into the 
commodities futures. It doesn't mean they want to own oil. They want to 
speculate.
  Walter Lukken is the Acting Chairman of the Commodity Futures Trading 
Commission. This is the Commission that is supposed to be the referee, 
the Federal regulator wearing a striped shirt and blowing a whistle 
when they call the fouls. Markets work, in most cases, but when markets 
don't work, you have to have a referee. Walter Lukken, the referee for 
us, says the price of oil is going up because demand is outstripping 
supply, strong fundamentals are at play. Apparently, he misses the fact 
from 2003 until now, $13 billion to $260 billion, that is an additional 
$247 billion have gone into this market driving up the price of oil, 
having almost nothing at all to do with supply and demand.
  There is a need, it seems to me, for the Congress to address this 
issue of excess speculation. Those that need a commodities market are 
the airlines, trucking companies, farmers, and others so they can hedge 
risks. There is a legitimate function of hedging risks, and that is 
what the market was created for. A consumer and producer hedges risk 
with respect to a physical product, a perfectly legitimate function. 
But the fact is, those interests that are most concerned about the 
Congress taking action to address a market that is broken are those who 
need the markets to hedge risks--airlines, trucking companies, farmers 
and others--because they know this market is broken. They know this is 
a market that is supposed to work for them to hedge risk, but now it is 
completely broken, taken over by speculators.
  There is a columnist in the Washington Post this morning who does his 
usual--he does about two pages of research and then he skips the next 
five pages, so he never quite gets to the truth. He says this 
speculation stuff, that is made up. He doesn't use the word 
``populace.'' He says they are a bunch of ne'er-do-wells who don't have 
the foggiest idea what they are talking about. It is not a surprise to 
me that there are those who believe the current system is working. It 
certainly works for some, doesn't it?
  The OPEC countries must love walking to the bank with our money and 
making a deposit in their account. The oil companies must love making 
deposits of our money into their accounts. I understand why some of the 
investment banks and other market players who are engaged in neck-deep 
speculation and have been making a lot of money love the status quo. 
They love what has happened here. It doesn't bother them a bit where 
the price of oil is, as long as they make money over all this 
speculation.
  What I think we should do is pass legislation similar to that which I 
have introduced. It is called the End Oil Speculation Act. End oil 
speculation--how do you do that? You do it through a couple of 
approaches. No. 1, you take the oil futures market and you require the 
referee, the Commodity Futures Trading Commission (CFTC), to 
distinguish between legitimate hedging--that is, those who want to, 
between a consumer and a producer, hedge their risk with a physical 
product. You must distinguish between those interests and all other 
interests who are just in this market to speculate.
  With respect to those who are in this market just for pure 
speculation, establish significant position limits. We can wring the 
speculation out of this system and should. I am talking about the 
excess speculation. This oil commodity futures market was created in 
1936, and when President Roosevelt signed the bill, he warned about 
excess speculation. In fact, the bill itself had a provision dealing 
with excess speculation. Now we find ourselves, all these decades 
later, with a dramatic amount of speculation that is wrecking this 
market. Should we do something? The answer is we must. We don't have a 
choice. Of course, we should.
  My hope is--as the majority leader indicated, we are going to be able 
to address this issue later this week. My hope is we will be able to 
take legislation to the floor of the Senate, and if a regulator cannot 
regulate effectively--and this CFTC apparently cannot--and the head of 
the regulators has already made a judgment, a judgment he has stated 
four or five times since January: This market is working fine. This is 
not about speculation. This is about the fundamentals of supply and 
demand. What, me worry? Things are fine. Don't worry. Then, at the end 
of last month, the Chairman apparently had some sort of epiphany, a 
dream and woke up the next day and said: We have actually been 
investigating this for 7 months.
  One of those statements is not true: Supply and demand at work; don't 
worry, be happy; or we have been worried for 7 months. It is not clear 
what position represents the position of the Chairman of the CFTC, but 
they are positions at dramatic odds with one another.
  Let me say in addition, we hope this week we can address some 
legislation that will bring down the price of gasoline and put downward 
pressure on oil prices. Even doing that doesn't address, in the 
long term, what we need to address. All of us understand that. But it 
does address, in the short term, what we have to do to put some 
downward pressure on these prices.

  I don't think there is any question that the price of oil and gas and 
the runup is hurting the economy of this country, hurting key 
industries in this country, certainly hurting American families, and we 
can do something about it, I believe, in the short term.
  In the longer term, some of our colleagues will say: We have to 
drill. I support that. I don't support drilling everywhere. But it is 
interesting, the minority party put together a proposal that talks 
about drilling. But they forgot to include all this area off the coast 
of Florida. Isn't it interesting, I know why they didn't include it. 
Because one of their caucus does not want to drill off the coast of 
Florida, does not want to drill in these eastern waters off the Gulf of 
Mexico. They also know President Bush does not want to allow U.S. 
companies to drill off the coast of Cuba, so these were included in 
their proposals. They are all big drilling advocates, except they don't 
want to drill where most of the oil exists.
  This is a chart of the technically recoverable oil. Let me show where 
it is. This is the Outer Continental Shelf of the Pacific, this is 
Alaska, this is the Outer Continental Shelf of the Atlantic, and this 
is the Gulf of Mexico. We

[[Page S6617]]

can see where the bulk of the technically recoverable oil is. I was one 
of four Senators--Senators Bingaman, Domenici, and then-Senator 
Talent--who offered the legislation to open lease 181. Lease 181, which 
is now 8.3 million acres in the gulf, was opened in 2006. That is an 
additional 8.3 million additional acres opened for oil and gas leasing.
  I have also introduced legislation that opens all this additional 
area in the eastern Gulf of Mexico and off Cuban waters. So do I 
support drilling? I do. It is just that the minority side does not 
support it quite as much as they pretend to support it.
  Let me describe this chart. These are the waters off Cuba open for 
leasing. There is half a million barrels of oil a day that could come 
into production, and our U.S. companies cannot go in there to compete 
against other nations to drill for it. Spain is there. Canada is there. 
India is there. China is there. They all have a desire to drill in that 
water. We cannot go there because our companies are told by President 
Bush: No, we have an embargo against Cuba; you can't go after this 
500,000 barrels of oil a day in these waters because of our embargo 
against Cuba. That is absurd, absolutely absurd.
  I have said often on the floor of the Senate, we stick little straws 
in this planet as we circle the Sun and we suck out about 86 million 
barrels of oil a day. We use one-fourth right here on this little place 
on the planet called the United States. We have a prodigious appetite 
for oil. That reflects in many ways the economy we built. We have built 
a wonderful economy. This is a great place to live. There is no place 
like it on Earth. But divine providence did some strange things. Most 
of the oil is under the sands halfway around the world in the Persian 
Gulf, and most of the demand is in the United States. There is more and 
more demand ahead of us with respect to China and India. We understand 
that. We knew that 12 to 14 months ago. So that is not what is causing 
the runup in prices today.
  But we all know, if we look ahead, we need to leapfrog to other 
technologies, even as we search for additional oil. We will drill for 
more oil in the right places. Obviously, the chart I showed for the 
Gulf of Mexico has far more than my friends in the minority would 
aspire to achieve in other regions.
  In addition to drilling in an appropriate way, we need much more 
conservation. Conservation is the easiest and by far the least 
expensive way to produce energy because we are such unbelievable 
wasters of energy. So conservation is, first and foremost, the best 
place to get additional energy.
  Second is efficiency. It doesn't matter what you use--a hot water 
heater, a furnace, an air-conditioner--it doesn't matter what you use. 
The dramatic increase in efficiency of every appliance everybody uses, 
including these light bulbs, can substantially reduce our need for 
energy. The incandescent light bulb is on its way out. It will not be 
too many years when we will not find one in this country because we can 
light America's houses and commercial facilities with about 80 percent 
savings of what we have been using in the past.
  Finally, and most importantly, in my judgment, as we look forward 
some years, we have to, as a country, decide to get dramatically 
involved in renewable energy. We are not nearly there yet. We have some 
movement toward renewable, but we are not doing what we should do. The 
debate in the Congress has been about whether we should increase the 
production tax credits, tax incentives by 1 year. That is pathetic. We 
ought to say we are going to do this for a decade. America, you can 
count on where we are headed.
  In the next decade, we are going to build substantial capability for 
wind, solar, biomass, and more. We ought to say here is where America 
is headed for 10 years. We are nibbling around the edges talking about 
a 1-year extension of this and that. It is not that we have not tried.
  We had a longer extension on the floor of the Senate, but 
regrettably, the minority side largely blocked it. In fact, they have 
blocked these extensions three times. Our hope is that we as a country 
will be able to say our policy is conservation, efficiency, yes, 
drilling in the right places, but our policy is especially to move 
forward with substantial and dramatic amounts of new renewable energy.
  I know the American people look at the Congress from time to time and 
wonder if anything can get done. There certainly is an urgency with 
respect to the policies I described--the fiscal policy that is way off 
track, a trade policy that is producing $800 billion a year in trade 
deficits, a policy that has allowed the subprime loan scam to exist and 
develop right under the nose of regulators who apparently were dead 
from the neck up. All these things are urgent needs for this country to 
address. But none is more urgent at the moment than trying to find a 
way to put some downward pressure on gas and oil prices that have risen 
out of sight, in my judgment, disconnected to the supply-and-demand 
fundamentals of where a market ought to be.
  Every American is affected by this runup in prices, and our country 
is being irreparably damaged by what it costs for us to send all this 
massive money every single day overseas in search of oil that is 
produced outside our country's borders.
  We need a short-term urgent plan and a long-term thoughtful plan to 
find our way through this situation and put America on a better course 
for energy.
  I yield the floor and suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. BROWN. 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.

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