[Congressional Record Volume 157, Number 41 (Thursday, March 17, 2011)]
[Senate]
[Pages S1806-S1808]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        OIL AND GASOLINE PRICES

  Mr. BINGAMAN. I want to take a few minutes to discuss high oil and 
gasoline prices. I think when we get home to our respective States this 
next week, we are going to find that many of the people we represent 
are understandably concerned about the rising price of gasoline at the 
pump. They have good reason to be concerned.
  Senator Murkowski and I hosted a Senate-wide briefing on Tuesday 
afternoon with three top oil industry analysts. We had Dr. Richard 
Newell, the head of the Energy Information Administration; Mr. Bob 
McNally, who was part of the Bush administration's White House team on 
energy markets; Mr. Frank Verastro, who is the head of the Energy and 
National Security Program at the Center for Strategic and International 
Studies. They gave us their insights and explanations as to what is 
causing the rise in the price of gasoline at the pump.
  Let me go through four charts to try to summarize what they told us 
at that briefing. I think it is very useful information for my 
colleagues, and anybody else who is interested in the subject.
  This first chart is labeled ``Gasoline Prices Reflect the Cost of 
Crude Oil.'' A fundamental truth, which they all subscribe to, is that 
the primary driver of the price of gasoline at the pump is in fact the 
price of crude oil on world markets. This chart demonstrates that. It 
shows the price trends since 2005 for gasoline; that is the yellow line 
on the chart. It shows the price of crude oil; that is the green line. 
While some past gasoline price spikes can be attributed to phasing out 
the additive MTBE, for the last 3 years gasoline price movements have 
tracked global crude oil prices. So the idea that our gasoline prices 
are high today because of some particular action the Obama 
administration has taken is not supported by the facts.
  The reasons for the current crude oil price increase are equally 
straightforward. In listening to each of the analysts highlight the 
factors he thought were important in explaining why crude oil prices 
are at the levels we have not seen since 2008, I was struck by two 
explanations advanced in many of the political speeches in Washington 
and around the country about oil and gas prices. Frankly, the 
conclusions, or the allegations, or the arguments made in those 
political speeches did not comport with what the analysts told us.
  First, none of the experts who talked to us highlighted the 
administration's permitting process in the Gulf of Mexico as being a 
significant factor in determining world oil markets. I asked Dr. Newell 
whether the current pace of permitting had any implication for the

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Energy Information Administration's short-term forecast. His answer was 
refreshingly direct; he said, ``No.'' I will point out that neither of 
his co-panelists disagreed with that conclusion.
  Second, any anticipated Environmental Protection Agency regulation of 
greenhouse gas emissions at refineries was not included in any of the 
presentations as a driver behind the current increase in prices. In 
fact, more broadly, neither the EPA nor any kind of U.S. regulations 
were discussed as important to understanding world oil prices. I know 
some of my colleagues remain concerned that we have not built a new 
refinery in the United States since the 1970s. I assure them that the 
data suggests that their concerns are not well-founded at this 
particular point. Demand for refined products is believed to have 
peaked in the United States. At the moment, 17 percent of our existing 
refining capacity in this country stands idle, and that is not because 
of environmental regulations; it is because demand for refined products 
has come down. In my opinion, it doesn't make a lot of sense to be 
debating whether we need new refineries, when we are not using the 
capacity we already have in existing refineries.

  Having explored those factors that are not influencing oil price 
movements, let me discuss factors that are contributing to increased 
oil and gasoline prices.
  The bulk of the discussion at this briefing we had on Tuesday about 
high oil prices was about what is going on in the Middle East and North 
Africa. This chart depicts what happened to the price of oil. This says 
``U.S. Oil Prices, January through March 2011.'' From the beginning of 
this year, until the current time, I think it is obvious that the major 
force driving oil prices is the instability we have seen in the Middle 
East and North Africa.
  When the world's key oil-producing and exporting region--which is the 
Middle East and North Africa--is unstable, world oil markets are also 
unstable.
  When political unrest threatens major chokepoints in the world oil 
transit routes, world oil markets react as they have.
  When a member of OPEC, the Organization of Petroleum Exporting 
Countries, stops exporting oil, which has virtually occurred in the 
case of Libya, world oil markets react.
  Also, when there are fears that a nearby neighbor, and a close ally 
of Saudi Arabia, home of the world's largest oil production capacity, 
begins to have political upheavals, that raises tensions in world oil 
markets as well.
  So as you can see from this chart, oil prices are very sensitive to 
these kinds of developments. Oil prices went up as regime change was 
realized in Egypt, amid concerns about access to the Suez Canal. Prices 
quickly came down again as it looked increasingly unlikely that traffic 
through the canal would be disrupted.
  Then Libya became the first major oil-exporting country to be 
affected by the wave of popular uprisings spreading throughout the 
Middle East and North Africa, and oil prices reacted immediately, 
indicating market concerns that the situation might get worse before it 
got better. It, indeed, has worsened. We have virtually all Libyan oil 
exports terminated or stopped or suspended. Sanctions against Qadhafi's 
government, combined with chaos on the ground in Libya, have driven 
Libya's exports to near zero. There is little hope for improvement, so 
far, in the near future.
  We are just beginning to face a potential further escalation of 
tensions in the region. On Monday, of course, Saudi Arabia sent troops 
across the causeway onto the island neighbor Bahrain. This adds to 
world tension.
  World oil markets have reacted to this tension with expectations--and 
I am avoiding using the more politically loaded term ``speculation,'' 
although I do believe that word is appropriate--that the situation is 
at risk of getting worse before it gets better.
  Into this uncertain environment, we now have a new source of even 
greater uncertainty. The earthquake that has plagued the island nation 
of Japan, the ensuing tsunami, and the nuclear disaster that struck 
Japan--all of that has introduced the possibility that the world's 
third largest economy might be consuming less oil in the near future 
than was earlier assumed.
  Worldwide markets have again reacted, this time by falling to under 
$100 per barrel as we try to better understand the size and the scope 
of the disaster our Japanese friends and allies are facing.
  What can Congress do to help ease the burden of high prices for U.S. 
consumers when oil prices are determined mostly outside our borders, as 
I think they clearly have been?
  A realistic, responsible answer has to be focused on becoming less 
vulnerable to oil price changes over the medium and the long term. By 
doing so, we become less vulnerable by using less oil.
  I believe increased oil production can play a significant role in 
world oil markets. The United States has fairly modest resources 
compared to much of the world. Our base of proven reserves is small. 
Many people have observed that the United States has less than 2 
percent of the world's proven reserves.
  Despite what economists and analysts agree is a relatively modest 
resource oil base, the oil and gas industry in the United States has 
led the world in developing state-of-the-art technology for exploration 
and production. Our companies are continuing to get more oil out of the 
ground and into world oil markets than any of us could have believed 
was possible. To use a boxing metaphor, we are punching above our 
weight in oil and gas production thanks to the technology lead our 
companies have developed.
  According to the Energy Information Administration, oil production in 
North Dakota has risen by 150 percent since 2005. That is all from the 
Bakken shale formation. This is due to the advent and application of 
new drilling technology. It is a success story that we all can 
celebrate.
  Let me talk about this third chart. Oil production is up strongly 
across the United States in the last few years. This chart demonstrates 
that current increases in oil production are a significant change from 
what we have seen in the last several decades. We have not had to 
repeal any environmental laws to achieve this or change the protections 
that apply on public lands.
  Let's not forget that even with U.S. production strongly increasing 
oil prices have also been increasing. While domestic oil production 
plays an important role in ensuring the energy security of the country, 
its contribution to the world oil balance is just not sufficient to 
bring global oil prices down. It is, therefore, not a complete answer 
to the high oil and gas prices that tax our consumers and threaten our 
country's economic health.
  This leads me to conclude that the key to reducing our vulnerability 
to world oil prices and volatility is for us to find ways to use less 
oil. We need to diversify our sources of transportation fuel. We need 
to set ourselves on the right path, as we did when we passed the Energy 
Independence and Security Act of 2007. That law required us to make our 
vehicles more efficient and to shift toward relying more on renewable 
fuel.
  This final chart shows the Energy Information Administration's long-
term forecasts for U.S. dependence on imported oil as predicted prior 
to the passage of that 2007 bill, and what they now predict it is after 
the passage and implementation of that bill.
  There are two main features of this graph that I think are 
noteworthy. First, prior to the enactment of this bill in 2007, the 
Energy Information Administration had been predicting that U.S. 
reliance on imported oil would continue to increase. In large part, 
because of the biofuels and the fuel efficiency policies that we 
included in that act, the latest forecast shows our reliance on 
imported oil probably peaked, in fact, in 2005, and is now going down 
and is expected to continue going down for the rest of this forecast 
period, which is out to year 2035.
  Second, the amount of oil we now will not need to import from today 
to 2035--that is, the oil that we will be able to save because of the 
Energy Independence and Security Act we passed in 2007--amounts to 
about 26 billion barrels. That compares to the previous forecast.
  What I am saying is, the difference between the blue line, which is 
the earlier projection, and the red line, when we take that out to 
2035, the total oil involved there is 26 billion barrels. This amount 
is greater than the total U.S. proven oil reserves, which are estimated 
at 23 billion barrels. I hope we

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can all agree this has been a significant success.
  How do we continue on this path toward reducing our oil dependence? I 
will conclude by highlighting three areas, three key goals I hope we 
can focus on in the Senate in the coming weeks.
  First, we need to enable further expansion of our renewable fuel 
industry, which is currently facing infrastructure and financing 
constraints.
  Second, we need to move forward the timeline for market penetration 
by electric vehicles.
  Finally, third, we need to make sure we use natural gas vehicles in 
as many applications as makes sense based on that technology.
  Every barrel of oil we displace from the transportation sector and 
we, therefore, do not need to consume in the United States makes our 
economy stronger--not to mention our personal pocketbooks--and less 
vulnerable to the volatility of the current marketplace.
  We need to keep drilling. We are good at that. It is helpful to have 
more supplies on the world market. I am not arguing against that. But 
at the same time, we need to recognize that the long-term solution to 
this challenge is to move away from such great dependence on oil. This 
is a strategic vision President George W. Bush, who previously had 
worked in the oil industry, clearly articulated in his 2006 State of 
the Union Address. We subsequently proved in Congress, in 2007, the 
year after that State of the Union Address, that we have the ability to 
make significant changes in our energy consumption and that it is 
possible to mobilize a bipartisan consensus to do so.
  The bipartisan path we laid out in the Energy Independence and 
Security Act in 2007 is the right approach. As part of whatever 
bipartisan approach we take to energy in the weeks and months ahead, we 
need to continue moving in this same direction.
  I yield the floor, and I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Franken). 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.

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