[Congressional Record (Bound Edition), Volume 152 (2006), Part 5]
[Senate]
[Pages 5800-5802]
[From the U.S. Government Publishing Office, www.gpo.gov]




                                 ENERGY

  Mr. WYDEN. Mr. President, the same Bush administration that so 
tragically bungled the response to Hurricanes Katrina and Rita has now 
bungled its way to $3 per gallon gasoline. Unless you were a hermit 
living in a cave last summer, you couldn't have missed how miserably 
the administration has failed in its approach to natural disasters. Now 
it is clear to anyone who fills up at a gas pump that this 
administration is also failing in its approach to energy. In both cases 
the administration had advanced notice that a major problem was 
imminent and in both cases the administration failed to take action to 
head off the problem before it became a major crisis for the American 
people.
  For Hurricane Katrina, disaster experts had testing that predicted in 
the spring what could happen, but the administration ignored the 
warnings of its own experts as major hurricanes were heading toward the 
gulf coast. If anything, the administration's failure to take action to 
prevent gas shortages and price spikes is even more indefensible 
because they had more advanced warning and greater certainty that the 
problem was coming.
  The Bush administration knew last summer--almost 9 months ago--that 
gasoline shortages and price spikes would hit hard this spring. If ever 
there was a time to be watchful about oil markets, it has been during 
the past months as markets have gyrated virtually nonstop with one 
international crisis after another.
  Nigeria has lost a quarter of its output, Iraq's oil production has 
fallen below prewar levels to its lowest point in a decade, Iran says 
something warlike about its nuclear program, and oil prices shoot up 
$10 per barrel, and today Venezuela announced that it will move toward 
nationalizing its oil industry and will cut output, which should put 
even more pressure on supply and demand.
  Yet even with all of this turmoil in world oil markets, the key 
watchdogs at the Energy Department, at the Environmental Protection 
Agency, and the Commodity Futures Trading Commission are all absent 
without leave. No one is home minding the store when it comes to our 
oil and gasoline markets.
  Never before has there been an administration with so much expertise 
in the oil industry. The President and the Vice President of course 
know a great deal about the oil sector. The Secretary of State was a 
director of Chevron and actually has an oil tanker named after her. The 
list goes on and on. But none of this expertise seems to be being used 
to help consumers at the gas pump.
  The administration's recent inaction in the face of soaring prices is 
only the latest in a long line of failures. In what is a virtual rite 
of spring, gas prices typically spike as refineries shut down for 
maintenance to switch over to summertime gasoline blends. That has 
happened each of the last several years, and in each instance the 
administration has done nothing to help consumers at the pump. But this 
year the administration had good reason to know that a ``perfect energy 
storm'' would hit the consumer this spring, and it was clear that 
spikes would be even worse than prior years.
  For example, the Wall Street Journal reported on August 12, 2005:

       A provision in the massive energy bill that cleared 
     Congress last week is likely to shrink the nation's gasoline 
     supplies next spring and could boost prices 8 cents a gallon 
     or more.

  The Wall Street Journal went on to describe the likely impact of 
eliminating the requirement to use cleaner burning additives in 
gasoline, saying:

       United States gasoline production would fall short of usual 
     levels by about 158,000 barrels a day--the equivalent of 
     losing output from four major refineries.

  The Wall Street Journal quoted an official from Valero Energy 
Corporation, the Nation's largest refiner, who said:

       The price of gasoline ``will definitely go up,'' estimating 
     the potential rise at 8 cents per gallon.

  Because of the new regulations for gasoline, there would not only be 
reduced supply but also lots of new hassles in supplying fuel at the 
local level. Gasoline additives would no longer be added at the 
refinery and transported in pipelines. Instead, ethanol would have to 
be shipped separately and blended locally, creating new challenges and 
new logistical hurdles for getting the fuel to America's gasoline 
stations.
  With all of this disruption and all of these new challenges to 
address, it was clear to the oil industry that the energy equivalent of 
another category 5 hurricane would be hitting gasoline consumers around 
this time of the year. It should have been clear to the Bush 
administration as well. But following the same game plan they have used 
for last year's hurricanes, the administration waited until after the 
storm hit to respond. In fact, gasoline consumers are still waiting for 
help at the pump.
  The two major hurricanes that hit the gulf coast last summer only 
made this spring's supply situation worse because those storms shut 
down a number of refineries and reduced oil and gas supplies. Coming in 
the wake of these storms, the impact of the new gas rules would only 
tighten further what was already a tight market for gasoline, and it 
should have been clear to the watchdogs in the Bush administration for 
months and months.

[[Page 5801]]

  The record is clear as to what the facts were that the administration 
had some time ago. First, if the administration had read its own 
report, it would have known that gulf coast oil and gasoline production 
would not be fully restored by this spring. Congress knows this because 
the administration sends weekly reports to the Congress with updates on 
the situation. Yet again the administration failed to take any action 
to head off the problem before consumers got hit again.
  If the administration had read its own report, it also would have 
known that the impact of the new gasoline rule would be substantial, 
equivalent to 2 percent of the Nation's gasoline supply overall, and 10 
percent of the supplies in areas with smog problems. This information 
has been in Energy Department reports as well. Once again, there was no 
response from the administration.
  Finally, if the administration had read its own reports and 
publications, the administration would have known that finding 
alternatives to replace these supplies would not be easy. In fact, a 
study by the U.S. Department of Energy estimated that it would take 4 
years for refiners to find substitutes for the most commonly used 
gasoline additive known as MTBE.
  In fact, the new rules are likely to be a double whammy for 
consumers. They tighten not only domestic supplies but also the 
availability of imports that were so crucial for supplying U.S. 
consumers following last year's hurricanes. That means the impacts will 
be similar to last year's hurricanes. But the same solution to address 
the problem won't be available this year.
  As the president of Petroleum Industry Research Institute pointed out 
last summer, in the past the United States has imported gasoline from 
Europe to deal with this particular issue and prevent shortages. But at 
this point we may not be able to do that since European refiners use 
MTBE.
  When you add it all up, the administration's record of bungling on 
gas supply and prices is extraordinary. They have known since last 
summer that there would be a big problem for consumers this spring. 
They knew that the problem had gotten even bigger since the hurricanes 
last fall. They knew it was going to take a long time to solve the 
problem and that what was done last fall to increase supply after the 
hurricanes might not be an option this spring.
  But yet with all of the advance warnings and red lights flashing, the 
administration still sat on its hands. At a minimum, the administration 
should have convened the National Petroleum Council to seek advice and 
counsel on what options might be available to help consumers at our 
gasoline stations this spring.
  But as we have seen all too often, the administration doesn't look to 
outside advice, and even more rarely does it listen to it. And there is 
little reason to believe the major oil companies, which have such a 
voice in American politics, would urge the administration to take any 
kind of significant step to help the consumers.
  So what can be done now that predicted gasoline shortages and price 
spikes are upon us? What could we have prevented or certainly out of 
this time period helped to minimize the harm that consumers are facing? 
Those steps weren't taken, and the challenge is to put in place the 
best possible steps now to try to ameliorate a very bad situation that 
could have been minimized.
  First, the administration should grant waivers of requirements to use 
ethanol in gasoline in areas where it is contributing to shortages or 
price spikes at the gas pump.
  Section 1501 of last year's Energy bill provides the administration 
with this authority in cases where there is inadequate supply or where 
the mandate would severely harm the economy. Both of these criteria 
have already been met in a number of areas on the west coast and 
elsewhere in our country.
  For example, my home State of Oregon isn't required to have ethanol 
in our gas to meet air quality standards. We also have little in-State 
ethanol production. So ethanol has to be transported into Oregon, 
largely from the Midwest, for blending into our gas supply. Waiving the 
requirement to have ethanol in Oregon gas would also free up supplies 
for other parts of the country. That reduces demand. And by simple 
supply and demand, that could serve to reduce prices around the 
country. It would also help to bring down the cost of gasoline in 
Oregon by eliminating the transportation costs of shipping ethanol from 
the Midwest.
  Second, the administration should take steps to go after those who 
are speculating right now in our country's oil markets. In the press, 
for example, speculation is continually cited as a factor in the high 
oil and gasoline prices. For example, in last week's Wall Street 
Journal, there was a report:

       Crude oil closed above $70 a barrel for the first time, 
     highlighting a phenomenon reshaping the petroleum world: 
     Investment flows into oil futures are supplanting nitty-
     gritty supply and demand data as prime drivers of prices.

  Last fall, former ExxonMobil chairman, Lee Raymond, the $600 million 
man, testified before the Senate Energy and Natural Resources Committee 
that speculation in oil markets was inflating prices by $20 per barrel. 
That inflated oil price, in return, raises gasoline prices at the pump 
by 50 cents a gallon. Yet the administration has done little to 
investigate speculation or to stop this activity.
  To the contrary, on this question of speculation in the oil sector, I 
questioned the Bush administration's witness from the Commodity Futures 
Trading Commission last September. I asked specifically what the 
Commodity Futures Trading Commission was doing to investigate reports 
of oil traders making extraordinary profits immediately following 
Hurricanes Katrina and Rita. My question was about reports that there 
are traders who made so much money that week that they won't have to 
punch a ticket for the rest of the year.
  Here is what the witness representing the Commodity Futures Trading 
Commission said from the Bush administration:

       Granted, a number of them made money, and that is how they 
     do their job, that they earn a return from providing this 
     service.

  So the CFTC's response to reports of traders taking advantage of the 
worst natural disaster in our country's history to make extraordinary 
profits is: Well, they were just doing their jobs.
  If that is the market at work, clearly it is not working for the 
American people who saw gasoline prices shoot up above $3 per gallon 
after last year's hurricanes and again this spring. The regulators of 
oil and gas markets need to rein in speculation, not defend it.
  Another step that could help address speculation would be to have 
greater transparency in our oil markets. For example, pension funds and 
other institutional investors are buying oil as part of their 
investment portfolio, and this has created additional pressure on 
supply and prices. Institutional money managers now hold between $100 
billion and $120 billion in commodities investments, at least double 
the amount 3 years ago, and up from $6 billion in 1999. More 
transparency about these transactions would help both the American 
consumer and the investors by reducing volatility while stabilizing 
prices.
  Finally, for the long term, Congress should repeal oil tax breaks, 
breaks the industry executives told me when I questioned them in an 
open hearing they did not even need. Those unneeded oil tax breaks 
should be replaced with incentives to use biofuels that can replace 
supply lost from eliminating MTBE from gasoline.
  These actions would address the immediate supply and price problems 
that the administration has failed to address since last summer. It 
will give the biofuels market incentives to do more research and 
increase production of cleaner alternatives to replace MTBE in the 
gasoline supply.
  My guess is--and I am happy to see my friend who has an enormous 
amount of expertise on this issue in the Senate--over the next few 
weeks, we will hear a lot of debate about price gouging and 
exploitation. There is no question in my mind that there are

[[Page 5802]]

certainly people trying to exploit the situation and trying to take 
advantage of these extraordinary circumstances we see in our energy 
markets.
  A significant part of these problems such as the change from MTBE to 
ethanol, problems that we knew about a year ago, that the Wall Street 
Journal was reporting on, could have been minimized if those folks in 
the Bush administration, at the Department of Energy, at the 
Environmental Protection Agency, at the Commodity Futures Trading 
Commission, if they had been on deck doing their job to stand up for 
the American people, these problems would not be so serious today.
  Yet the same people who bungled the response to those hurricanes last 
summer are bungling America on its way up to $3-per-gallon gasoline. I 
don't think that ought to be acceptable to any Senator. On a bipartisan 
basis we can force those watchdogs in the Bush administration to get 
back to the post and stand up for the public.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Alexander). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. ALEXANDER. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Chambliss). Without objection, it is so 
ordered.
  Mr. ALEXANDER. Mr. President, I ask unanimous consent to speak for up 
to 15 minutes as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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