[Congressional Record (Bound Edition), Volume 149 (2003), Part 17]
[Senate]
[Pages 24170-24172]
[From the U.S. Government Publishing Office, www.gpo.gov]




                         IRAQI GASOLINE PRICES

  Mr. WYDEN. Mr. President, I come to the floor this afternoon because 
I am troubled by what appears to be a request by the Bush 
administration in the Iraq supplemental that would have our citizens 
use their hard-earned tax dollars to subsidize the cost of gasoline in 
Iraq so Iraqi citizens would only have to pay 10 cents a gallon.
  The questions I am going to raise this afternoon with respect to this 
proposal can all be found essentially on page 29 of the report with 
respect to the request for the supplemental funds for rehabilitation 
and reconstruction of Iraq.
  For those who are following this discussion, this is under the 
question of the purchase of oil products at page 29 of the request for 
the supplemental.
  I want to begin asking some questions about the fairness of this Bush 
proposal and about how this subsidy program that is in this report 
would work if it was actually to be funded by the Senate.
  Today I also intend to send a letter to the President trying to get 
answers to some of these questions. But I would tell the Senate that 
here is what we know at present.
  The Bush administration has included in its Iraq supplemental funding 
request an estimated cost of $900 million to cover the difference 
between ``Iraqi demand and refinery production to establish and 
maintain a 30-day reserve in all major petroleum products to ensure no 
interruption in basic services due to terrorist activity.''
  The administration's funding request specifies:

       $600 million will be needed in the first quarter of 2004 to 
     compensate for the large difference between demand and 
     production and to build this 30-day reserve.

  The first question is, How much is going to be spent on creating this 
reserve, and how much is going to be spent on purchasing gasoline for 
Iraqis? Using demand data from the Energy Information Agency's latest 
report on Iraq and current market conditions, it is estimated the 
establishment of a 30-day fuel product reserve would cost approximately 
$200 million. If that amount is correct, that would mean roughly $400 
million would be spent to purchase gasoline and other petroleum 
products for Iraqis in the first 90 days of next year. Iraq is 
importing about 750,000 gallons of gasoline a day, according to recent 
statements by senior oil ministry officials.
  Based on those statements, Iraq would need about 67.5 million gallons 
during the first quarter of 2004. If that estimate is correct, U.S. 
taxpayers would be paying almost $6 per gallon for the gasoline that is 
provided to Iraqis by the United States in the first quarter of 2004.
  The question I ask today and in the days ahead will be: Why does it 
cost $6 per gallon to provide gasoline to Iraqis when the cost in 
neighboring countries such as Saudi Arabia and Kuwait is

[[Page 24171]]

less than $1 per gallon and below the $2 per gallon cost almost 
everywhere in our country?
  According to an article in the Houston Chronicle on September 28, the 
United States has already spent hundreds of millions of dollars to 
provide gasoline to Iraq under the contract previously issued with 
Halliburton. My question here would be: What is the cost of gasoline 
that has been sent to Iraq by the United States? What was the wholesale 
price involved here that Halliburton paid for the gas sent to Iraq at 
taxpayer expense?
  Of course, I think our citizens would want to know what profit was 
made on these deliveries.
  The Houston Chronicle also reported that in Iraq the low-octane 
government-subsidized gasoline sells for less than a dime a gallon.
  I ask unanimous consent that the article from the Houston Chronicle 
entitled ``U.S. Taxpayer Footing Bill for Cheap Iraqi Gasoline'' be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
       [From the Houston Chronicle; Sept. 28, 2003]

          U.S. Taxpayers Footing Bill for Cheap Iraqi Gasoline

                           By Michael Hedges

       Baghdad, Iraq.--Mahmoud Ali, a gap-toothed 15-year-old, 
     worked steadily under a penetrating sun at his rather 
     monotonous job outside the large Mansur filling station here.
       Taking turns with his two uncles, Ali waited in line in the 
     family's 1982 Chevrolet to get a tank of cheap gasoline, 
     which the locals call benzene, at the station subsidized by 
     the Iraqi Oil Ministry.
       After filling up the faded white Chevy, the men pulled the 
     vehicle to a curb. There, they siphoned the fuel into 20-
     liter plastic jugs to sell at triple the posted price to 
     other drivers too frustrated to wait in the lengthy lines.
       Then, one of the men drove the Chevy back to the line to 
     sweat it out until another full tank of fuel could be 
     secured.
       Selling fuel at three time its state-set price about 100 
     yards from a line of 14 working pumps would be a hard dollar 
     to earn in another economy.
       But it works here in Iraq, because the low-octane, 
     government-subsidized fuel sells for less than a dime a 
     gallon. Even working-class Iraqis earning a few dollars a day 
     are willing to pay outrageous mark-ups to avoid the line.
       ``Benzene is cheaper than water here,'' local journalist 
     Qais Al-Bashir said Friday.
       What it is costing American taxpayers is another story.
       Since the fall of Saddam Hussein's regime last April, 
     Iraq's resuscitated oil industry has been unable to produce 
     enough gasoline, cooking oil and other petroleum products to 
     meet the country's needs.
       So far, U.S. taxpayers have spent some $562 million under 
     the Halliburton contract to bring in gasoline and other fuels 
     and make needed repairs to Iraq's gas distribution network, 
     according to the Army Corps of Engineers. In fact, that 
     effort has accounted for nearly half the $1.22 billion worth 
     of work that Halliburton has performed in Iraq since the war.
       ``The benzene we sell here comes from Turkey, Kuwait and 
     Saudi Arabia,'' said Majed Mohammed, 44, who manages the 
     Mansur station for the Iraqi Oil Ministry.
       ``Before the war,'' he said, `` it was 100 percent from 
     Iraq. But now we have problems with sabotage of the 
     pipelines. The refineries are working at far less than 
     capacity.''
       Mohammed, who has worked for the Oil Ministry for 21 years, 
     said artificially low fuel prices are nothing new to his 
     country.
       ``The cost is subsidized by the ministry,'' he said. ``It 
     was like that before the war when Saddam was here, and it is 
     the same now. We are obliged to do it because of the needs of 
     the people. If we didn't, there would be major problems and 
     even more anger at the Americans.''
       Iraq is importing about 750,000 gallons of gasoline a day, 
     according to recent statements by senior Oil Ministry 
     officials. Expectations by the Bush administration that oil 
     could fund the massive rebuilding of the country--or at least 
     the needs of its people in the immediate future--have not 
     been met.
       Iraq's oil output is less than half the pre-war level of 
     2.3 million barrels per day and only about one-third the 3.2 
     million barrels produced by the nation before the 1991 
     Persian Gulf War and the subsequent United Nations embargo.
       Experts differ on when Iraq's fuel production capacity will 
     reach 1990 levels. The Coalition Provisional Authority, which 
     oversees the U.S.-led occupation, has said that production 
     could reach 3 million barrels per day by later summer of 
     2004. Private analysts have said it could take at least a 
     couple of years to reach that level.
       For the foreseeable future, the occupation authority will 
     have to spend massive amounts to underwrite the fuel used by 
     Iraqis. And conservation seems unlikely in a country where 
     decades of cheap gasoline have created a culture in which 
     driving around in aging, fume-spewing cars is seen as a form 
     of recreation.
       ``Iraqis always loved to drive, and there are more cars 
     than ever now--cars from Kuwait and Jordan that have come in 
     since the war,'' said Mohammed, the Mansur filling station 
     manager.
       Even on Friday, the Muslim holy day, lines formed at the 
     city's fuel stations.
       ``We used to be open 24 hours a day before the war, so 
     there were no lines,'' Mohammed said. ``Now we have a curfew, 
     and people don't feel safe to wait in line after dark because 
     of the explosions.''
       The 10-person staff at the Mansur station provides its own 
     security, and a stack of AK-47s is kept handy in the main 
     office.
       Not all the city's fuel stations are owned and operated by 
     the Oil Ministry, though none is a truly private business.
       Meqdam Abdullah, 30, runs a station near the Sheraton 
     Ishtar Hotel in central Baghdad that his family leases from 
     the Oil Ministry. In exchange, officials sell fuel to the 
     station at a slightly reduced price. By averaging sales of 
     more than 100,000 liters a day, the station ekes out a small 
     profit, Abdullah said.
       But it is a tough business. During the war, the station got 
     caught in a firefight between U.S. soldiers and armed 
     looters, as evidenced by patched bullet holes.
       Since the war ended, thieves have struck more than once, 
     taking, among other things, the station's generator that is 
     needed to produce electricity. Abdullah's family had to pay 
     the looters to get the generator back. It was a necessary 
     expense, because officials provide electricity to Baghdad in 
     sequences of three hours on, three hours off.
       Like many other Iraqis, Abdullah said the failure of U.S. 
     authorities to provide security is his biggest complaint in 
     the post-Saddam era. The lack of consistent electricity is 
     the second.
       He attributed the sporadic power to some inscrutable form 
     of manipulation similar to the times, he said, that Saddam 
     cut off fuel to disfavored minorities.
       ``America,'' Abdullah said, ``is the world's great 
     superpower, and it can't get the electricity back? I can't 
     believe that.''
       The generator briefly failed at the service station on 
     Friday. Ironically, dirty fuel provided by the government 
     because of poor refining was believed to be the cause, 
     Abdullah said.
       For a while, the station was quiet. But as the generator 
     sputtered back to life, cars immediately veered into the 
     lanes besides the pumps.
       The only types of gasoline transaction not largely 
     controlled by the Oil Ministry here are the bootleg 
     operations like those of Ali and his uncles.
       ``It is illegal, but no one bothers with them,'' shrugged 
     Mohammed, the Mansur station manager.
       On Friday, business was slow as Ali and his uncles offered 
     large plastic jugs of fuel for sale.
       ``It is always slow like this on Fridays, because it is the 
     holy day,'' Ali said. ``But we'll be back tomorrow. We always 
     do well on Saturdays.''

  Mr. WYDEN. Mr. President, my question flowing from what we have 
learned and the various issues we have been exploring throughout the 
days since we learned about this is, Were U.S. taxpayer funds spent to 
keep the cost of gasoline in Iraq at this heavily subsidized low price?
  I am of the view that our taxpayers deserve to get answers to these 
questions. I think we deserve to get them before Congress votes on the 
Bush administration's funding request.
  I can tell my colleagues in the Senate that when I read page 29 of 
this particular report with respect to oil products purchased, I was 
very concerned. My citizens and the folks I represent in the Pacific 
Northwest consistently pay some of the highest gasoline prices in our 
country. Oregon, Washington, and California have been very hard hit 
with respect to gas prices. It amounts to a quasi-monopoly in 27 States 
in our country. We have red lining. We have zone pricing, and a whole 
host of anticompetitive practices. Now we have outlined on page 29 of 
this request for supplemental funds what appears to be a request from 
the administration to have the hard-earned tax dollars of our citizens 
go to subsidize the cost of gasoline in Iraq so Iraqi citizens will 
only have to pay 10 cents a gallon. I can tell my colleagues there are 
people we represent here in the Senate who are not paying that kind of 
money.
  That is why I want to get the details on this proposal. I am 
amplifying on the questions I am asking today in a letter to the 
President of the United States. We also come away with a concern that 
the administration seems to

[[Page 24172]]

be willing to support creating a reserve in Iraq to protect Iraqi 
citizens against interruptions in gasoline and diesel fuel supplies 
when there is no gas and diesel reserve in the United States to protect 
our citizens in the event of terrorist activity or other disruptions.
  This proposal in the report which I have outlined and referred to 
specifically so that colleagues can see it raises some very troubling 
questions.
  Given what we already know now that the administration has included 
in its Iraq supplemental funding request an estimated cost of $900 
million to cover the difference between Iraqi demand in refinery 
production to establish and maintain this reserve due to possible 
terrorist activities, I think it is time for the Senate to take out a 
sharp pencil and review this proposal very carefully. I think it raises 
fundamental questions with respect to fairness and with respect to how 
the hard-earned tax dollars of our citizens are being used at a time 
when in my State, with the highest unemployment rate in the country, 
there is a world of hurt.
  I urge my colleagues to take a good look at this proposal because I 
intend to focus more on it when the Senate comes back after having the 
opportunity to be home and gather with the people we represent.
  I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. FRIST. 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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