[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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