[Congressional Record (Bound Edition), Volume 146 (2000), Part 13]
[Senate]
[Pages 19019-19022]
[From the U.S. Government Publishing Office, www.gpo.gov]



                 THE NEED FOR AN AMERICAN ENERGY POLICY

  Mr. HAGEL. Mr. President, the one driving factor in the advancement 
of mankind has been energy. Fire, oil for heat and lamps, water mills, 
coal, electricity, refined oil, hydro power, nuclear power. 
Advancements in energy have fueled the great advancements of 
civilization.
  Today, energy touches every facet of our lives. It heats, cools, 
powers, and lights our homes, our places of business, our schools, and 
our hospitals. It fuels our modes of transportation whether on road, 
rail, sea, or air. It powers up our computers, the Internet and the 
information superhighway. It goes into the production of food, 
medicine, clothing, and every consumer product ranging from household 
appliances to health and beauty products. It allows the stock markets 
to open each morning around the world. It powers the transactions of 
commerce and business. It fuels the planes, ships, tanks, submarines, 
and weapons that protect America.
  Energy is the great connector. It fuels the productive capacity of 
the world. It affects world stability.
  Energy is serious business. America must have a national energy 
policy that ensures we have reliable, stable, and affordable sources of 
energy. This cannot be neglected. To do so leaves our Nation vulnerable 
on all fronts.
  Energy policy ties together America's economy, standard of living, 
national security, and our geopolitical strategic interests around the 
world--and our future.
  Perhaps the area where energy has the most immediate and visible 
effect is on the pocketbooks of individual Americans and the economic 
growth of our Nation.
  Oil prices have more than tripled in less than 2 years, to nearly $37 
a barrel this week--the highest price since the buildup to the Persian 
Gulf war in November of 1990. The President of the Organization of 
Petroleum Exporting Countries, OPEC, said last Friday that the price of 
oil may temporarily hit $40 a barrel this winter. I suspect we might 
see $50 a barrel in the next few months.
  American consumers have felt this most immediately at the gas pimp.
  This winter, consumers are likely to feel an even stronger bite when 
they heat their homes. Natural gas and home heating oil prices are also 
on the rise. The prices for natural gas, which is used to heat 58 
million homes, have doubled since the beginning of the year. Customers 
of heating oil, including more than one-third of the homeowners in the 
Northeastern part of the United States may pay more than $2 a gallon--
or twice the current price--to heat their homes this winter.
  As energy prices rise this winter, Americans will again be reminded 
of the lessons we learned in the 1970s about the volatility of energy 
prices and the impact on our economy. The forecasts are not optimistic. 
Said Leo Drollas, chief economist at the Center for Global Energy 
Studies, ``I think the only thing we can do is pray for a very warm 
winter.'' Praying for a warm winter is not an energy policy.
  The concern over natural gas prices is so great that on Wednesday, 
several of our Nation's Governors met in Columbus, Ohio, to discuss the 
``natural gas crisis.''
  And it is not just gasoline, natural gas and heating oil prices that 
are affected by the current energy predicament. It is all energy. Over 
the past 12 months, costs paid by consumers for all forms of energy 
have increased by 13 percent.
  High energy costs ripple through the economy. They drive up 
inflation. Then deflation. The Consumer Price Index has risen 3.4 
percent in the last year, with energy price increases responsible for 
nearly one-quarter of that increase.
  It also saps the strength of our economy. Energy fuels economic 
growth. ``Oil shocks'' send a shock through the economy, increasing 
prices for everything that uses energy. It is a draining force on our 
society and economy. When consumers are forced to spend more on energy, 
they spend less on other items.
  Higher energy prices increase the cost of doing business, of moving 
goods, of manufacturing, and of farming.
  We are seeing the beginning of the consequences of higher fuel costs 
in Europe. Protests virtually shut down Great Britain last week, at one 
point more than 90 percent of their petrol stations were dry. These 
protests

[[Page 19020]]

blocked transportation and caused disruption in medical services, 
postal delivery, education, and food supply. As a matter of fact, for 
the first time since the years after World War II, Great Britain had to 
ration food. Great Britain, one of the great powers of our time had to 
ration food at the supermarkets last week, and they introduced a policy 
of one loaf of bread per customer. The British Chambers of Commerce 
estimated that the protests cost Britain's economy $351 million per 
day. These protests erupted throughout Europe. In almost every country 
in Europe there were protests.
  High energy prices will dramatically affect the United States, 
Europe, Japan, and other industrialized nations. But these 
industrialized nations' economies are better prepared to cushion the 
heavy blow than the recovering economies in Asia, developing countries, 
and emerging market economies. These nations, including South Korea and 
Taiwan, still depend on such heavy industries as steel production for 
their economic growth. Studies have shown that if oil prices do not 
fall quickly, these economies could lose at least 2 percent of their 
gross national product this year.
  One of Europe's central bankers has predicted that the current spike 
in oil prices could cut a full percentage point off the GDP growth 
expected around the world during the next 12 months. This is an awesome 
number when you step back and understand what that means. And what that 
means is catastrophe. The President of the World Bank, James 
Wolfensohn, echoed these fears in an interview in the International 
Herald Tribune. He predicted a $10 shift in oil prices could decrease 
global economic growth by at least one-half of a percentage point.
  In the United States, a slowdown in economic growth due to higher 
energy prices will have a negative impact on our Federal budget. The 
assumptions for projected Federal budget surpluses over the next 10 
years do not take into account what would happen if high energy prices 
or energy shortages stalled our economy.
  Where then would be our proposals to finance new prescription drug 
plans for Medicare recipients, provide more funding for education, 
grapple with the restructuring of our entitlement programs, and much-
needed funds to improve our Nation's military? Where then would the 
money come from? The money needed to fund these areas of the Federal 
budget and pay down our national debt would have gone up in smoke--
literally.
  Other countries would be affected in the same way. High energy prices 
affect nations the same way they affect individual households--the more 
money spent on energy, the less there is available for other 
priorities.
  But this has broader implications than budgetary issues. Increasing 
energy prices will affect efforts to improve the environment. In recent 
years, we have made great strides in working with developing nations to 
help them use responsible measures to grow their economies. But they 
will do what they must do to survive. If their national self-interests 
are at stake, they will clear cut forests to grow food, and they will 
not consider environmental measures. They will draw natural resources 
from wherever they can get them. They will abandon efforts to upgrade 
to cleaner technologies and stay with their dirty smokestacks and other 
energy-producing methods that damage the environment, if energy costs 
go too high.
  The price of oil also has broad national security implications, as 
you know so well. These broad national security implications to the 
United States are there because we are so reliant on foreign sources 
for our supply of crude oil.
  During 1973, at the peak of the energy crisis, we relied on foreign 
sources of oil for 35 percent of our domestic supply. Since that time, 
we have become more--not less--dependent on foreign oil. Today, we 
import almost 60 percent of the oil used in the United States. The 
Department of Energy estimates that we will at least be 65-percent 
reliant on foreign oil by 2020.
  The response to the current high oil prices by the Clinton 
administration has been to try and cajole oil-exporting nations to 
increase production in an effort to lower prices. U.S. Secretary of 
Energy Bill Richardson has said, regarding the pressure on OPEC 
nations: ``Our quiet diplomacy is working.'' I ask, what diplomacy?
  Crude oil is at a record high. We import more oil than we did during 
the energy crisis in the 1970s, spending more than $300 million a day. 
Petroleum accounts for one-third of the U.S. total trade deficit.
  Who are we kidding? This has bigger implications than high gas 
prices. In February 1995, President Clinton issued the following 
statement:

       . . . the nation's growing reliance on imports of crude oil 
     and refined petroleum products threatens the nation's 
     security because they increase U.S. vulnerability to oil 
     supply interruptions . . . I concur with the Department's 
     recommendation that the Administration continue its present 
     efforts to improve U.S. energy security.

  Yet through the Clinton-Gore administration policies, this 
administration has discouraged, and in many cases blocked, American oil 
and gas producers from increasing domestic production. Since that time, 
we have increased our use of oil and turned more and more to foreign 
countries to supply the oil we use. We import 1.5 million barrels of 
oil more per day than we did 5 years ago. That is an increase of nearly 
22 percent in the last 5 years. Therefore, it should not be surprising 
that President Clinton issued a nearly identical ruling on March 24 of 
this year, stating again that oil imports threaten U.S. national 
security.
  High energy prices also impact the security of other nations and 
threaten global stability. Energy fuels the productive capacity of 
national economies. The adverse effect of high energy prices can cause 
instability in emerging democracies and in market economies, which then 
can quickly erupt into regional turmoil, conflict, and war, devastating 
all prospects for growth, prosperity, and for eliminating hunger and 
poverty.
  The contributing factors to the current high oil prices demonstrate 
the geopolitical consequences of energy, and the leverage granted to 
oil-exporting nations. Prices have increased for oil and natural gas 
because supply has not kept pace with demand. From 1994 to 1999, global 
oil consumption grew by almost 10 percent, while production rose only 
at about 7 percent.
  Do we have a supply problem? Of course we have a supply problem. When 
demand stretches supply to the breaking point, the result is rationing. 
What a dangerous, dangerous development--the rationing of energy.
  When the price of oil fell dramatically a few years ago, drilling 
companies cut back on their exploration of both oil and natural gas. 
They reduced their spending. There was a drastic decline in global 
drilling during 1998, 1999, and early this year. Astonishingly, there 
are only about 40 percent as many drilling rigs working today as there 
were in the early 1980s. Even OPEC nations must constantly drill to 
offset depletion. Low levels of drilling reflect a capital shortage, 
and the result is that oil production has been falling continuously in 
the United States; it is stable or falling in the North Sea; it is 
falling in most of Latin America; and it is not growing hardly anywhere 
else in the world. Capital not invested in energy production a few 
years ago is now reflected in lower supplies and product.
  During this time, global demand for oil has increased, fueled by a 
strong U.S. economy--which we all applaud, which we all take advantage 
of, and which we based projected surpluses on--economic growth in 
Europe, and a stronger than expected economic recovery in Asia, which 
are all responsible for this demand.
  The economic growth of developing nations is a very energy-intensive 
exercise, we must know. China and India show oil demand growing at 
nearly 8 percent a year on a sustained basis. This increased demand, 
coupled with low supplies, has pushed oil reserves near their limits 
worldwide. Inventories are at low levels. In most industrialized 
nations, it will take many years to correct the imbalance between 
supply and demand.
  In addition to current inventories, the oil industry normally has 
another

[[Page 19021]]

cushion to use to meet increased demand. This is called ``spare 
capacity'' or unused wells that can be called on to produce additional 
supplies when necessary.
  Turning on these spigots can help correct the imbalance between 
supply and demand. However, except for the days of the gulf war, the 
world's spare capacity is at its lowest point since the days leading up 
to the 1973 energy crisis--less than 3 million barrels per day. 
Therefore, the world oil market is very tight and very vulnerable to 
supply disruptions and price fluctuations. A further tightening of the 
market could lead to the kind of energy rationing we saw in the 1970s.
  The situation is even worse in the natural gas market, especially for 
North America.
  But correcting imbalances of supply and demand in oil markets is very 
different from traditional economic models. Oil does not move on a free 
market. The demand is given--individuals and nations do not have a 
choice about whether they need energy or not, and oil is still the 
greatest source of global energy in the world today. Its production is 
concentrated in the hands of a few who have the ability to control the 
flow of oil into the market and, thereby, the price of this commodity. 
This makes oil a political commodity.
  Our reliance on foreign oil leaves the U.S. vulnerable to the whims 
of foreign oil cartels. If something happened to threaten this supply, 
we could not turn on the spigots here in the United States overnight.
  A tight oil market gives additional leverage to individual oil-
exporting nations. Half of the world's spare production capacity today 
now is in Saudi Arabia. Iraq, interestingly enough--Iraq, whom we 
bombed almost daily--is the fastest growing source of U.S. oil imports. 
We import about 750,000 barrels of oil a day from Iraq.
  What if Saddam Hussein were to decide to bully the market by turning 
off its tap, which currently pumps 2.3 million barrels a day on to the 
global market?
  On Monday, he warned that OPEC nations were bowing to pressures 
from--in his words--``superpowers'' in agreeing to increase production 
in an attempt to lower prices. He said, ``The superpowers will fasten 
their grip on oil producing countries.'' This is a very dangerous 
development.
  Our allies, of course, would be even more vulnerable to threats from 
oil-producing nations because Europe and Japan are even more dependent 
than the U.S. on foreign oil.
  How did we, the United States, get ourselves into this precarious 
position?
  How did we get here? We have bumbled into it because we were not 
paying attention. Every administration in the last 25 years must share 
some responsibility for where we are today. But in particular, this 
administration, the Clinton-Gore administration, has drifted through 
the last 8 years without an energy policy, content to sit back and 
enjoy a good economy--of course, to take credit for that economy--but 
unwilling to prepare our Nation for the challenges ahead and make the 
tough choices and hard decisions necessary for energy independence.
  The lack of a Federal energy policy for the last 8 years has worked 
to decrease U.S. oil production, making American consumers more 
vulnerable to the volatility of prices set by oil cartels such as OPEC. 
The wild swings in price over the last 2 years have hurt U.S. oil and 
gas producers and shut down many drilling wells because of instability 
in the markets, loss of investment capital, loss of qualified 
employees, and elimination of the petroleum infrastructure.
  The lack of an overall policy has made U.S. producers more 
susceptible to the manipulation of prices by cartels such as OPEC. In 
testimony before the Senate Foreign Relations Committee in March, 
Denise Bode, an Oklahoma corporation commissioner, discussed the impact 
of OPEC's manipulation on oil markets:

       Whatever OPEC's motivation, the impact on American 
     petroleum production is that each time this happens, they 
     make the domestic oil and gas production industry in America 
     a little less predictable, driving away capital, qualified 
     oil field employees and scrapping petroleum infrastructure. . 
     . .

  The policies of this administration have actually served to 
discourage and at some point completely block or shut off domestic oil 
and natural gas production. While oil consumption in the United States 
has risen by 14 percent since 1992, over the last 8 years U.S. crude 
oil production has dropped by 17 percent. The number of American jobs 
in exploring and producing oil and gas has declined by 27 percent. The 
number of working oil rigs has declined by 77 percent. This 
administration has failed to encourage viable energy alternatives. They 
pursue policies promoted by environmentalists with no comprehension or 
acknowledgment of the consequences of these policies and what these 
consequences are for real Americans, for our economy, our Nation, and 
our future.
  This administration has blocked exploration in the Alaska National 
Wildlife Refuge which could contain 16 billion barrels of domestic 
crude oil. In 1995, President Clinton vetoed legislation to allow any 
exploration in Alaska. In 1998, President Clinton closed most of the 
Federal Outer Continental Shelf to any exploration until the year 2012.
  Vice President Gore has vowed to prohibit any future exploration for 
oil and natural gas on the Outer Continental Shelf. Increased 
Government regulations over the last 8 years have affected investment 
in our energy industry. Thirty-six oil refineries have been closed in 
the last 8 years, and no major oil refinery has been built in the last 
25 years. This is in part due to the requirements of the Clean Air Act 
that make it difficult to build or upgrade any refineries.
  EPA regulation has placed more and more and more burdens on fewer and 
fewer oil refineries by forcing them to produce reformulated gasoline 
for different markets. Use of hydroelectric power has been sharply 
declining due to the onerous regulatory burdens on the industry. This 
administration does not consider water to be a renewable resource--that 
is the definition by this administration of ``water''--and has even 
advocated taking down current valuable hydroelectric dams in the 
Pacific Northwest that supply power.
  Nuclear energy has not been promoted as a clean energy alternative by 
this administration. No new plants are scheduled to begin operating. 
This administration has steadfastly opposed and recently vetoed 
legislation that would ensure timely construction of a desperately 
needed Federal storage facility for spent nuclear fuel. In addition, 
virtually all nuclear operating licenses are up for renewal by 2015. 
Yet the Nuclear Regulatory Commission has indicated it expects no more 
than 85 of the 103 units will file renewals. That means we will be 
taking out of current service, at a minimum, 18 nuclear powerplants in 
the next few years. Where in the world are we going to recover that 
capacity? Where will that capacity come from? We don't talk about that.
  Furthermore, this administration, while professing a desire to 
increase natural gas as a source of energy, works constantly against 
efforts to increase the availability of domestic natural gas. The 
National Petroleum Council has identified a critical barrier to 
increasing supplies of natural gas: Access to over 200 trillion cubic 
feet of natural gas reserves is either off limits or is being severely 
restricted on multiple-use lands and the Outer Continental Shelf.
  This administration says, well, use natural gas but just don't drill 
for it. This administration's budget clearly demonstrates where its 
energy priorities are. This year's Department of Energy budget, 
submitted by this administration, has $1.2 billion for climate change 
activities, but yet it has only $92 million for oil, gas, and energy 
research and development--a clear statement on where they are with 
their priorities. An energy policy that emphasizes only some energy 
sources and priorities without regard for their negative impacts on 
energy markets threatens the sustainability of this economy, the 
welfare of our people, the stability of the world, and the future of 
this country.

[[Page 19022]]

  What can we do to address this problem? Can we address this problem? 
Of course, we can address this problem. Both the next President and the 
Congress must pursue a comprehensive energy policy that decreases our 
reliance on foreign oil by increasing the safe, environmentally sound 
production of our domestic oil and gas resources and by developing a 
more diversified supply of energy sources.
  The answer is not, as Vice President Gore recommended yesterday, to 
tap into the Strategic Petroleum Reserve. These 570 million barrels 
were set aside to deal with severe disruptions in oil supply caused by 
war or other national emergencies.
  The strategic reserve was not created to make up for 8 years of 
inattention from the Clinton-Gore administration or to make up for the 
detrimental impact their policies have had on domestic production. The 
Vice President himself acknowledged in February this statement when he 
said it would be a ``bad idea''--his words --to tap into the strategic 
reserve. And so has the President's Secretary of the Treasury, Mr. 
Summers; as has the Chairman of the Federal Reserve, Mr. Greenspan.
  Furthermore, opening up the strategic reserve will not do anything to 
address the shortage of home heating oil. Why? The strategic reserve 
consists of crude oil. It would need to be refined into heating oil, 
and our refineries are already running at full capacity. If we still 
had the 36 refineries that were shut down over the last 8 years of this 
administration, then we might be able to refine that extra oil from the 
strategic reserve, but it does nothing to help our current situation. 
It is bad policy, shortsighted policy.
  In addition to augmenting domestic oil production, the United States 
must explore other future energy options that will reduce other foreign 
oil dependency. Our Nation's future is directly connected to energy 
capacity. If we fail this great challenge, our children and history 
will judge us harshly and we will leave the world more dangerous than 
we found it. That is not our heritage. That is not our destiny. It will 
require bold, forceful, intelligent new leadership. That is America's 
heritage. That is America's destiny.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The distinguished majority leader.
  Mr. LOTT. Mr. President, I commend the Senator from Nebraska for his 
remarks. He certainly is making points that need to be made. I am sure 
we are going to hear a lot more about it in the next few days. I thank 
him for wrapping up his remarks at this point so that we may proceed 
with a number of business items before we go out for the week.

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