[Congressional Record (Bound Edition), Volume 146 (2000), Part 2]
[Senate]
[Pages 2071-2072]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 2071]]

                         THE HIGH PRICE OF OIL

  Mr. MURKOWSKI. Mr. President, Friday, the price of oil exceeded $30. 
It was close to $31.26. That is high--not necessarily an all-time high, 
but it is pretty close.
  Back in 1973, when we had the Arab oil embargo, the prices were in 
that neighborhood. A lot of people don't remember 1973, or the 
consequences of the Arab oil embargo; but for those who do, it was a 
day of reckoning. It was at a time when you went to the gas station to 
fill up and you waited--not just a little while, but in some cases a 
couple of hours. You stood in line because gasoline was short in this 
country.
  There was an indignant response from the American public that never 
again would we be so dependent on imported oil from other countries. As 
a consequence, at that time, we formed the Strategic Petroleum Reserve. 
The important thing to note is that in 1973 we were about 37 percent 
dependent on imported oil.
  The idea of the Strategic Petroleum Reserve was to have a supply of 
oil on hand in case there was an interruption on our imports and we 
could have that oil available for use to meet that emergency. That was 
in 1973.
  Today, in the year 2000, we are approximately 56 percent dependent on 
imported oil. The Department of Energy has indicated by the year 2015 
to 2020, we will probably be dependent to the tune of about 65 percent. 
Now, the question, of course, from the standpoint of our national 
energy security interests, is: What are the implications of this? What 
are the ramifications of our increasing dependence on imported oil?
  Clearly, the pricing structure is determined by the availability of 
oil from the producing countries that have an excess capacity. That is 
primarily in the Mideast. We have seen the efforts by both Iran and 
Iraq to cut production. It is interesting that between those two 
countries, they account for about 8 percent of the world's 75 million 
barrels of daily oil production. But now we see Baghdad and Teheran in 
a new position of power and influence to push their separate agendas in 
various ways.
  We have OPEC. We know the significance of what that cartel controls. 
They decided to have a meeting to address our emergency. The irony of 
that is, that meeting is going to take place on March 27, which is 
hardly responding to our emergency.
  As a matter of fact, our Secretary of Energy traveled extensively 
through the Mideast, meeting with the OPEC ministers, encouraging them 
to produce more oil so we will not see the price escalation that is 
currently occurring.
  The results of that meeting were that we could expect some relief 
from Venezuela and Mexico. Both countries, of course, are outside of 
OPEC, but they wanted to remind us of something, and they communicated 
a little message. This didn't come from the Secretary of Energy, but it 
came from those who have had an opportunity to relate to both Mexico 
and Venezuela with regard to oil prices. On the manner in which we came 
and pled for more production, the Mexicans and the Venezuelans said: 
Where were you when we were going broke selling our oil at $11 and $12? 
Were you giving us any assistance? Were you encouraging higher prices 
so we could maintain our economy? Certainly not. That was not the case 
at all.
  Now when we see oil at $30, we go to Mexico and we go to Venezuela, 
and say: We need increased production. But they are reminding us that 
we weren't at all concerned when the price was low, and when their 
economy was in collapse, they couldn't count on the United States.
  Those are the dangers of that kind of dependence.
  Now we are seeing OPEC on March 27 perhaps responding to increased 
oil production. But it is a little more complex than that because there 
are wheels within wheels in OPEC and relationships within 
relationships.
  Kuwait this weekend signaled its support for an agreement to boost 
production. Remember, it wasn't so long ago that we fought a war 
against Saddam Hussein. It was a war over oil to keep that country, 
Kuwait, from being taken over by Saddam Hussein and Iraq.
  We are now seeing within Iran and Iraq a group of price hawks, if you 
will, within OPEC. They are going to do what is best for their 
country--not what is best for the United States. Teheran has said that 
this is not the time to increase output because demand typically 
declines and higher production could lead to a quick collapse of 
prices. They are certainly looking out for their own best interests. 
Iran, with 3.5 million barrels of daily production, is at about its 
maximum, analysts say.
  Since we are talking about bedfellows, let's talk about Algeria and 
Libya. They also have little reason in the short term to care about the 
world's economy, or the United States economy specifically.
  An interesting suggestion is in this report from the Wall Street 
Journal. If the United States wants to lower its price of gasoline, it 
should reduce its taxes. That is their answer. They simply want to 
reduce our highway taxes and our other taxes and our State taxes that 
are associated with the price of oil. They say that if we really care 
about higher prices, we should simply eliminate our taxes. That is an 
interesting point of view.
  Saudi Arabia, the world's largest producer of oil and an OPEC 
shareholder, has a special interest in keeping Iran happy now because 
relations between those countries are at their best since the Iranian 
revolution in 1979.
  We see countries within OPEC working for their own best interests and 
not necessarily what is good for the United States. The Saudis have 
been more responsive in the past, but not necessarily at this time 
because of their relationship with Iran.
  OPEC producers want to continue the cartel's new-found unity because 
it funds the cash-flow. Wouldn't you rather produce more oil at a 
higher price to meet your cash-flow than a lot of oil at lower prices? 
That is just what they are doing.
  We are seeing the role of OPEC and our neighbors in Mexico, 
Venezuela, and other countries evaluating the kind of response they are 
going to make to the United States at this time of emergency.
  Over the last decade--most of it under the Clinton administration--
production has decreased 17 percent and consumption has increased 14 
percent. That is the reality of what has occurred in this country 
because we have not had an energy policy. We do not have an energy 
policy on coal. We do not have an energy policy on natural gas.
  We just saw the Federal Energy Regulatory Commission basically kill 
prospects for a gas line in the Northeast corridor by making it 
economically unattractive for investors. We have an administration that 
suggests hydro is nonrenewable. It wants to take dams down in the 
Pacific Northwest. So we look at oil, we look at gas, we look at hydro, 
and we look at coal; there is no energy policy of any consequence.
  Renewables are something we all support. But the reality is they 
contribute less than 4 percent of the total energy consumed in this 
country, and the prospects, while encouraging, are not going to give us 
the immediate relief we need.
  As a consequence, we are experiencing a shock. The American public, 
when it drives down to the gas station to fill up the family Blazer or 
sports vehicle, may find itself subjected to a situation where it makes 
a pretty good hole in a $100 bill if it takes a 40-gallon gas tank at 
$2 a gallon, or thereabouts.
  We also have a couple of other considerations. We have the potential 
for added inflation. Somebody made the interesting observation that if 
you consider the cost and availability of labor, if you consider the 
cost of money--namely, interest rates that have been going up--and the 
cost of energy, you have the three factors for inflation. It has been 
estimated that for every $10 increase in the price of oil, inflation 
increases one-half percent.
  It is a very real threat to our economy, a very real exposure to our 
consumers out there, and I don't think we

[[Page 2072]]

realize what is ahead. Not too many people know that every time they 
get in the airplane now, they are paying a $20 surcharge on that 
airline ticket, whether they go from here to Seattle or from here to 
Baltimore. The Northeast corridor has felt the impact of $2 a gallon 
for heating oil.
  The question is, Is it going to get worse? The answer is, probably. 
When can we get relief? The question is whether we want to just depend 
on the Mideast or whether we want to reduce our dependence on imported 
oil.
  There are many areas of this country over the overthrust belt of the 
Rocky Mountains--Utah, Montana, North Dakota, New Mexico, Wyoming, and 
my State of Alaska--where we have a tremendous abundance of oil and gas 
if given the opportunity to initiate exploration. This is not supported 
by President Clinton. I am glad to say it is supported by some of the 
Republican candidates running for President.
  The point is, what are we going to learn from history? Some say not 
much. If the Department of Energy predicts we will be 65-percent 
dependent in the years 2015 to 2020, should we not be doing something 
about it now? We should be committed to a policy of reducing our 
dependence on imported energy sources by developing sources in the 
United States. My State of Alaska, in the ANWR area, has an estimated 
16 billion barrels. That would be an amount equal to what Saudi Arabia 
exports to America over an estimated 30-year timeframe.
  We have areas in Louisiana, in Texas, and other coastal States that 
want to have OCS activity, yet we have an administration that does not 
support that activity. That is, indeed, unfortunate.
  The bottom line is, when are we going to wake up? When will we 
relieve our dependency on imported oil? I might add, for those who 
think imported oil is the answer from an environmental point of view, 
it is estimated that from the year 2015 to 2020, it will take more than 
30 tankers, 500,000 barrels each, docking every day in the United 
States, to supply that increase; that would be 10,000 ships per year. 
If that is not an environmental risk, I suggest anyone check the 
registration of the ships because they will be foreign ships.
  Finally, in 1990 we had 657 rigs working in this country; today we 
have 153. In 1990, we had 405,000 jobs in the oil industry; today we 
have 293,000, a 28-percent decline.
  If one considers the makeup of our trade deficit, a trade deficit of 
$300 billion, $100 billion is the cost of imported oil.
  I encourage my colleagues to recognize that it is time to move. It is 
time to address opportunities to relieve our dependence on imported oil 
with meaningful proposals on the basic premise that charity begins at 
home.
  I ask unanimous consent an article from the Wall Street Journal be 
printed in the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

              [From the Wall Street Journal, Mar. 6, 2000]

            Oil Output May Be Hostage to Iran, Iraq Agendas

                 (By Steve Liesman and Neil King, Jr.)

       Iran and Iraq, the two major oil producers over which the 
     U.S. has the least sway, are playing a crucial role in 
     determining where oil prices are headed and are positioned to 
     affect the world economy.
       Together, the two countries account for 8% of the world's 
     75 million barrels of daily oil production. But tight world 
     oil inventories, high prices and declining production 
     capacity in the Organization of Petroleum Exporting Countries 
     have given Baghdad and Tehran new power to push their 
     separate agendas, analysts say.
       OPEC members will gather in three weeks to decide whether 
     to reverse the past year's production cutbacks, which reduced 
     world output by about five million barrels a day. Leading 
     producers support an increase as soon as April to cool prices 
     that recently topped $31 a barrel for the benchmark West 
     Texas Intermediate crude.
       After initial reluctance, Kuwait during the weekend 
     signaled its support for an agreement by Saudi Arabia, 
     Venezuela and Mexico to boost production. Meanwhile, a strike 
     by oil workers in Venezuela withered quickly.
       Iran still leads the group of price hawks within OPEC and 
     ``is one of the key stumbling blocks to coming out with a new 
     decision,'' said Raad Alkadiri, an analyst with the Petroleum 
     Finance Co., a Washington energy consultant.
       Officially, Tehran says the second quarter is the wrong 
     time to increase output because demand typically declines and 
     higher production could lead to a quick collapse in prices. 
     But domestic economics are at least as much of a factor. 
     Unlike other major producers, which have extra capacity, 
     Iran's 3.5 million barrels of daily production is about its 
     maximum, analysts believe. Declining investments in its oil 
     fields, as well as continued U.S. sanctions on spare parts, 
     suggest production capacity may actually be declining. ``They 
     don't have more capacity to make up for the price drop,'' Mr. 
     Alkadiri said. Higher output world-wide--which could result 
     in lower prices--would do little for the Iranian treasury at 
     a time when payments on $11 billion of foreign debt begin to 
     peak.
       Iran, which has the backing of Algeria and Libya, also has 
     little reason in the short term to care about the world 
     economy. Its oil minister recently said that oil-consuming 
     nations should lower energy taxes if they are concerned about 
     inflation from higher oil prices.
       Saudi Arabia, the world's largest exporter and OPEC's clear 
     leader, has a special interest in keeping Iran happy. 
     Relations between the two countries are at their best since 
     the Iranian revolution of 1979. Their rapprochement last year 
     was the linchpin of OPEC's ability to cut back production. 
     ``The Saudis might have been more responsive more quickly [to 
     world oil markets] had it not been for this relationship with 
     Iran,'' said Amy Jaffe, senior energy analyst at the James A. 
     Baker III Institute for Public Policy in Houston.
       OPEC producers want to continue the cartel's newfound 
     unity, fear a production free-for-all if OPEC cooperation 
     dissolves. Of course, oil-producing countries ultimately 
     could go ahead without Iran, as they have in the past. 
     Venezuela's oil minister is to visit Tehran in coming weeks 
     to lobby the government to accept higher production levels.
       But the one million to two million barrels that OPEC is 
     considering putting back on the market could be quickly 
     removed if Iraq withheld its two million barrels a day of 
     exports. In November, Iraqi President Saddam Hussein pushed 
     oil prices up almost $1 a barrel in a single day when he 
     turned off his spigots to protest United Nations sanctions. 
     This time, ``with oil inventories very low, any interruption 
     in crude supply could cause prices to skyrocket,'' said Gary 
     Ross, president of PIRA Energy Group, a New York energy-
     consulting company.
       Whether Mr. Hussein would use the opportunity is a matter 
     of debate, but few dispute he has ample reason. Baghdad is 
     feuding with the U.S. about Iraq's need to import spare parts 
     for its oil industry. It could decide to use the tight oil 
     market, analysts say, to get Washington to ease up--or to 
     undermine U.N. sanctions altogether. ``We have seen him do 
     this before and we would not be surprised if he resorted to 
     the same tactics again,'' one U.S. official said.
       Other OPEC producers' ability to make up for any Iraqi 
     cutbacks would be strained in the short term. Mr. Ross said 
     OPEC production capacity has fallen by about 500,000 barrels 
     a day during the past year. Venezuela in particular has let 
     its capacity dwindle as it diverted oil revenue to pay for 
     the extensive social agenda of President Hugo Chavez. In 
     time, however, OPEC countries should be able to make up any 
     shortfall with their four million to five million barrels a 
     day of excess capacity.

  Mr. MURKOWSKI. I yield the floor.
  The PRESIDING OFFICER (Mr. Thomas). The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I thank the distinguished chairman of 
our Energy Committee for the remarks. They are not new. He is not 
making a political statement. Chairman Murkowski is here because he has 
spoken out for years, virtually since this administration has been in 
office, about discouraging--through so many rules, regulations, and 
taxes--the domestic production of oil and gas.
  He has warned we would be at this point. Here we are. The best way by 
far to deal with this is to make sure we have more domestic production 
because it will help keep the prices down, and it will also help ease 
our balance of payments.
  I thank the Senator for his leadership on this issue.

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