[Congressional Record (Bound Edition), Volume 154 (2008), Part 11]
[Senate]
[Pages 15399-15405]
[From the U.S. Government Publishing Office, www.gpo.gov]




                                 ENERGY

  Mr. KYL. Mr. President, let me say on the point my friend from 
Illinois made, while there may well be room for dealing with 
speculation as part of the overall approach to our energy crisis today, 
it is clear that speculation cannot be the only or even a major piece 
of it. Without new production, we are destined to continue to rely on 
foreign sources for our oil and very high oil prices.
  We will be interested in getting into the debates about the relative 
merits of different approaches to speculation. But let me talk about a 
little different angle to this than has been discussed so far, and that 
is not only the fact that people, when they go to the gas pump, find 
themselves paying very high prices for oil, which hurts their family 
budgets and, in many cases, businesses that have to rely on fuel, but 
also that it is a national security problem for the United States 
because

[[Page 15400]]

of our undue reliance on these other countries.
  The point I want to make today is this: A lot of these countries have 
the ability to actually increase the price because of the instability 
they can create around the world. I think of the Iranians, for example. 
Everyone knows that we get a great deal of our oil from the Persian 
Gulf region, that the Strait of Hormuz is the very narrow area through 
which about 40 percent of all the oil has to go. Forty percent of the 
world's oil tankers have to exit the Strait of Hormuz as they are 
picking up their oil from the Emirates, Saudi Arabia, Iraq, Iran, and 
so forth. That creates an opportunity for mischief, and the Iranians 
have been very good at exploiting that. Whenever they rattle their 
saber, whenever they engage in a naval exercise in that area, or when, 
recently, they shoot off missiles to show everybody they can be tough 
guys and throw their weight around in the world, that gives the markets 
a lot of jitters, and we saw what happened: The price of oil shoots up.
  Ironically, countries that are no friends of the United States would 
create great mischief if they could have an additional reason for this 
belligerent behavior. It drives up the cost of oil, which is where they 
make all their money. So they literally have the ability to help 
dictate the price of the commodity that sustains their economy.
  Iran is not the only country. Russia actually produces more than 
Saudi Arabia. The United States is third. But Russia, as the world's 
largest oil producer--about 9.84 million barrels per day--has produced 
about a fourth of the non-OPEC crude oil since 2007. At today's prices, 
that would be about $1.4 billion per day--think about that--and over 
$500 billion for the year; almost $1.5 billion a day into Russia's 
Treasury.
  As a result, Russia has been able to do some things that are not in 
the interests of the United States. They are rearming their military 
with oil dollars. That is how they are able to afford all of the new 
things they are doing in terms of their nuclear program, their missile 
program, and all of the other things they are doing that are 
antithetical to United States national security interests.
  Moreover, they have shown no reluctance to use their oil and natural 
gas production as a weapon as well. When countries next to them or even 
far away that rely on Russian natural gas or oil do something the 
Russians do not like, they simply cut off the supply. And they have 
done this numerous times. It has much of Europe, which relies on 
Russian natural gas, very jittery because if you make the Russian bear 
mad, he cuts off your source of natural gas and, in some cases, oil. 
This creates a very unstable and very difficult situation for these 
countries, and also has the effect of driving up the price of oil and 
natural gas.
  Because both of these products are fungible; that is to say, they can 
be produced all around the world and everybody around the world buys 
them, there is a world market for them. So even though the jitters are 
in the Persian Gulf or in Europe, for example, the price is reflected 
all around the world, and the United States ends up having to pay more 
at the gas pump because these countries can affect the price of the 
commodity they rely on to fund their government.
  Recently, it happened to be that Russia shut off oil to the Czech 
Republic. They have shut off oil or natural gas to other countries in 
Eastern Europe, especially when they did not agree with the Russian 
position on something. They have shut off natural gas supplies during 
the dead of winter to countries in Eastern Europe that wanted to join 
NATO. Russia says: We don't like that so we will shut you off.
  The Czech Republic decided it wanted to help the United States and 
itself to be protected against missiles. So they are helping to 
establish a missile defense base in the Czech Republic. Russia doesn't 
like it, so half of what is sent from Russia to the Czech Republic is 
cut off.
  This is the problem of relying on other countries, not to mention a 
country such as Venezuela. The United States gets a good deal of its 
oil from Venezuela. We all know the head of Venezuela, Hugo Chavez, has 
done everything he can to undermine United States influence in Central 
and South America and does everything he can to get in the face of the 
United States. If he wants to affect the price of oil, all he has to do 
is rattle his saber as well.
  In each of these cases, we have a situation where the price of the 
product and the availability of the product is dependent upon positions 
over which we not only have no control but countries that have 
interests very inimical to ours, and the end result is it costs more 
for people in the United States for a very necessary product, namely, 
the oil and natural gas product we use to fuel our economy. This is one 
of the reasons why I say it is a national security issue as well as 
affecting the price at the pump.
  It is one of the reasons why the United States has to begin to rely 
less on the oil produced in foreign countries and more on oil we can 
produce right here in the United States. It is not well known, but the 
United States is the third largest producer of oil in the world, after 
Russia and Saudi Arabia. We have huge reserves here of which we are not 
taking advantage. This is one of the reasons why Republicans are 
insisting that any legislation that comes to the floor dealing with 
this energy crisis include taking advantage of the resources we have. 
Let's free up these resources. We have them. They can be obtained in a 
very environmentally sensitive way, and they can help not only to 
reduce the cost of gas in the United States or natural gas but also to 
reduce the ability of other countries around the world to influence 
behavior in a bad way, such as shutting off the oil or natural gas for 
customers of theirs or driving up the cost of oil for everybody else.
  I got to thinking about this in terms of the taming of the West. One 
of the reasons the United States became such a great country so rapidly 
was that we bought land with the Louisiana Purchase. We explored the 
West. We took advantage of natural resources that were in this country, 
and we quickly became a very strong power economically. We had natural 
gas, we had oil, we had minerals--copper and gold and all of the rest. 
We took advantage of the resources that we had to become a wealthy and 
powerful country.
  One hundred years ago, we didn't mine in a very environmentally safe 
way, but no one can deny that the way we produce our wealth today is 
with great environmental sensitivity. Everyone agrees with that. It is 
not any longer hurting the environment. All of this production can be 
done, for example, offshore or in the deep waters of the gulf in a very 
environmentally sensitive way. We are hoping the same thing can be done 
with oil shale.
  So when our friends say we need to be able to deal with the commodity 
markets here and that is going to make a big difference, the answer is, 
there is a lot of dispute as to whether it will make any difference at 
all. But we do know something that will make a difference but it will 
not make a difference just in the long run, it will make an immediate 
difference. The decision to explore and produce right here in the 
United States where we know we have the resources, where we are not 
dependent on other people, where they cannot drive up the price because 
they can rattle their sabers in the Strait of Hormuz or cutting off oil 
and natural gas supplies as Russia has done, we can stop all of that by 
simply producing more in the United States where we know we have it and 
we can produce it safely and in an environmentally sound way.
  It is like the settlement of the West, as I said, in taking advantage 
of our natural resources. We have always been a can-do nation. We have 
always said we can take care of ourselves. We don't want to be 
dependent on others. What we have learned today is that for depending 
on others, we pay a very high price, and I don't mean just a high price 
at the gas pump but a high price in terms of our national security as 
well. That is the reason we are insisting on removing some of these 
moratoria, strictly illegal moratoria. It is a moratorium from being 
able to explore

[[Page 15401]]

for energy off our coasts or in the deep waters in the gulf or on 
Federal lands.
  There is a big up side to the Federal Government in terms of revenue 
royalties, as well as to States as a result of this action. So instead 
of paying money to foreign countries, we can be gaining some of that 
wealth right here in the United States.
  Bear in mind that other countries are the recipients of the payments 
for oil around the world, not oil companies as is the case primarily in 
the West. We send more than $1 billion a day, not to some oil company 
abroad but to foreign governments. They control the oil in Russia, in 
Iran, in Iraq, and so on. Let's get off of sending our money to foreign 
governments that are working against our interests and that can affect 
the price of the commodity simply by their bad actions and rely more on 
the resources we have in the United States, that we know we can extract 
in an environmentally sensitive way, that can reduce the price 
immediately. That is the last point I wanted to make.
  Martin Feldstein had an interesting piece in the Wall Street Journal 
about 2 weeks ago in which he made the point that there will be an 
immediate downward effect on oil prices if we simply announce that we 
are going to go after these resources in the United States. As a 
result, I urge my colleagues, when the opportunity arises and we debate 
this issue over the next week or so, that we support increased 
production in the United States for the benefit of American citizens.
  The PRESIDING OFFICER. The Senator's time has expired.
  The Senator from North Dakota is recognized.
  Mr. DORGAN. Mr. President, I ask unanimous consent to speak in 
morning business for 20 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DORGAN. Mr. President, this is a very important subject. My 
colleague from Arizona speaks of the issue of energy. The price of 
gasoline is skyrocketing. The price of oil has doubled in a year. It 
has an impact on everything and everybody in this country. It is 
important as we discuss this issue, however, that we not create false 
choices.
  It is a false choice for anybody to suggest that, because we do one 
thing, we cannot do another. It is a false choice to suggest that 
because we take the first needed step, we are ignoring subsequent 
steps. We ought to do a lot of things here.
  I mentioned yesterday that we had a witness come to a hearing and 
describe this situation. If you have someone being hauled into a 
hospital emergency room who is grossly obese and also suffering a heart 
attack, do you think some doctor who meets the gurney at the emergency 
room is going to look at this grossly obese person suffering a heart 
attack and say: All right, let's start working on a diet. We have to 
work on this obesity. No, of course not. He will say: Let's take 
emergency action to deal with the heart attack.
  Now, my point is this: We have very serious energy problems. One part 
of it is a gross amount of excess speculation in the commodity market 
that has driven up--actually doubled--the price of crude oil in the 
past year, for which there is no justification in the supply and demand 
of the commodity. It seems to me, at least as a first step, we ought to 
address this excess speculation.
  My colleagues then say you have to drill. I don't disagree with that. 
In 2006, I was one of four Senators who cosponsored the legislation 
that resulted in the law that opened lease 181 for oil and natural gas 
production. This is 8.3 million acres in a portion of the eastern Gulf 
of Mexico that is now open for drilling. Senators Bingaman, Domenici, 
Talent, and I were the people who first introduced that bill. It is now 
law. So that is fine.
  But if the only answer is to drill then I would ask those who say 
that, how many airlines do you think will be serving this country if we 
wait for 5 or 7 years until somebody gets all the permits, undertakes 
the testing, builds a drilling rig up in an area and pumps new oil out 
of the ground? How many airlines will be serving this country? I tell 
you, a number of them have already gone bankrupt. Several are out of 
business, and others will follow quickly. How many small-mom-and-pop 
trucking firms that can't afford to pay for the diesel in their saddle 
tanks are going to be out of business in the next 5 or 7 years before 
this notion of drilling, which is going to produce the additional 
supply they are talking about, will be effective? How many fewer 
farmers are going to be around? How many people will be around trying 
to figure out: How on Earth do I afford to fill my gas tank in my car 
in order to get to work next week because I don't have the money for 
the gas?
  My point is, we need to do a lot of things. Yes, we need to produce 
more, and we need much greater conservation. By far, the most effective 
achievement of additional oil production is to save a barrel of oil. We 
are such prodigious wasters of oil and energy in this country. It is 
unbelievable. There is so much to be gained by conservation and energy 
efficiency. In everything we use from our lights, better doors and 
windows, insulation, virtually every appliance, hot water heaters, 
refrigerators, and stoves, conservation and energy efficiency are a 
very significant part of this issue.
  So, too, is a renewable energy future. We need game-changing 
approaches. I want to go from here to 10 years from now in a game-
changing way that says: I don't want us 10 years from today to be so 
dependent on Saudi oil. My colleagues, all they talk about is drilling. 
I am for drilling. But if that is all you are for, that is a yesterday 
forever strategy. Good for you. But every 10 or 20 years you are going 
to have exactly the same debate--drill more. You are not going to 
change this country's energy future at all.
  So my proposition is this: How about working together on steps, a 
step at a time, doing a lot of things and doing them right. How about 
the first step? We just had testimony this morning in the Energy 
Committee from someone that cited a recent report from the CFTC which 
indicated that more than 73 percent of those trading in the commodity 
futures market have nothing at all to do with hedging a physical 
commodity. That is not what they are interested in. They are 
speculators. He called them investors, but they are speculators. In 
fact, he said speculators. He said I actually called them investors.
  But if 73 percent of that market for the oil futures is now devoid of 
people who are actually trying to hedge a physical product between 
consumers and producers, then that market is broken. That market has 
gone far afield of what it was created to do.
  The market was created in 1936. When it was created, Franklin Delano 
Roosevelt warned about excess speculation when he signed the bill. And 
the bill itself had a provision dealing with excess speculation because 
of concern that speculators could take over a market and ruin the 
market.
  The proposition is this: What has happened in the last 14 months that 
has allowed that market to price oil to double in price? What has 
happened with respect to the fundamentals of oil supply and demand that 
would justify that? The answer is: Nothing. Nothing. It has been pure, 
relentless, excess speculation moving massive quantities of money into 
this marketplace speculating on crude oil futures.
  I have mentioned many times the description of Will Rogers about 
speculation because it is not new to America. It happens. When it 
happens and markets are broken, we have a responsibility to take some 
action. Will Rogers described it as someone buying things they will 
never get from people who never had it. You can add, in this day and 
age, with money they don't possess.
  So what we had is unbelievable excess speculation in the marketplace. 
There are some who scoff and say that is not happening. One of my 
colleagues this morning said what is happening is supply and demand. 
Well, I ask my colleagues to come to the floor and describe to me the 
events that have occurred in the last 14 months or so that would 
justify doubling the price of gasoline or oil. They will not come to 
the floor because they can't. The knowledge of the significant change 
in supply

[[Page 15402]]

and demand in the last 14 months does not exist.
  This is not about supply-and-demand fundamentals. Go back 2 or 3 
years and ask yourself: What do we know about the desire of the Chinese 
or Indians to drive more cars? What do we know about all those factors 
that might, in the longer term, increase demand for gasoline or diesel? 
Did we not know them a year ago? Is that new knowledge? Not at all.
  The fact is, nobody is going to come to this Chamber and tell us 
there is something that has happened to supply and demand that 
justifies the doubling of the price of gasoline and oil because it does 
not exist. This doubling existed because, in my judgment, of excessive, 
reckless speculation in the futures markets for oil. We have a 
responsibility to do something about it.
  Now, the legislation that we introduced yesterday is the Stop 
Excessive Energy Speculation Act of 2008. Let me say that again: Stop 
Excessive Energy Speculation Act of 2008. I worked with Senator Reid 
and others on the legislation. It is not brought here, as my colleague 
from Arizona just suggested, to do this and nothing else. That is a 
false choice, and it is being presented on the floor of the Senate 
every chance they get. If we do this, it means we don't want to do 
anything else. I say let's do this and everything else.
  Now, I am not suggesting, as some perhaps would, that we drill in the 
Grand Canyon or drill in the Everglades. There are certain areas where 
we ought not drill. We have a substantial amount of area that is 
available for drilling. And when they say: Well, we are not drilling. 
Why don't you go north of Kidder, ND, and take a look at a rig right 
now. We have about 70 to 80 of them in North Dakota, and they are 
drilling right now in something called the Bakken shale.
  Some may not understand, but in the last 2 months, the U.S. 
Geological Survey put out an assessment that said the Bakken region has 
the largest assessment of recoverable oil ever recorded in the lower 48 
States. This is 3.6 billion barrels to 4.3 billion technically 
recoverable barrels, and they are pulling oil out of that formation. 
There are drilling rigs all over western North Dakota and eastern 
Montana.
  So when someone suggests we are not drilling, that's nonsense. Get a 
car and drive around a little. I will show you where the rigs are. We 
are drilling onshore and offshore. We have, in fact, opened lease 181, 
a portion of the Gulf of Mexico that was not previously opened until 
2006. We don't see a lot of activity there at the moment, but we did 
that because there are substantial oil and gas reserves there.
  I will make one additional point. There are a half million barrels 
that can be potentially produced off the coast of Cuba. Spain, Canada, 
India, and others are interested. But U.S.-based companies are not able 
to get involved in leasing off the coast of Cuba because we have an 
embargo against Cuba, among other things. President Bush doesn't want 
us to be involved in this region.
  So it is not a case where those who come to the floor suggesting that 
we drill, drill, drill, would want us to drill everywhere. In fact, the 
legislation they brought to the floor of the Senate that touts drilling 
conveniently left out a substantial portion of the eastern Gulf of 
Mexico because a Member on their side doesn't support that. So they 
left that out of their proposal. Oh well. I guess one doesn't have to 
be consistent to come to the floor to make presentations.
  The issue is this: Let's do something together because this country's 
economy is being damaged. American families are being injured, and 
farmers, truckers, and airlines are getting killed with these prices. 
Let's do something together to address it.
  What would make sense? What is the first step, or at least a sensible 
first step? Does it make sense to say let's do something that will 
provide some relief in 7 years? That will be great to tell Aunt Millie: 
I know you won't be able to pay your fuel bill this winter, but 7 years 
from now, just wait, we will have another field in production 
someplace.
  What about taking first steps first? What about stopping excessive 
energy speculation with the bill we introduced yesterday? Now, how does 
the bill do that? It requires the Commodity Futures Trading Commission, 
which has been a regulatory agency that I have had fairly strong words 
about recently, to actually stand up, put on striped shirts, blow the 
whistles and be the referees for this marketplace. They have been an 
abysmal failure, in my judgment. They have an acting chairman, who 
says: What, me worry? The only thing going on here is the market 
demands and the fundamentals are working. It is just supply and demand.
  In fact, the Commodity Futures Trading Commission has been issuing 
over the years what are called ``no action letters.'' Boy, that is a 
fitting tribute to this agency--no action letters--that have said, 
essentially: We are not interested in seeing what is going on. In fact, 
we will be willfully blind to what is going on, and here is a letter 
that demonstrates we are interested in that position.
  So what we say in the bill is: Look, there is a regulatory agency 
here, and we believe it ought to function and we require it to function 
in a certain way. No. 1, we say it ought to distinguish between groups 
of traders. There are those who are hedging their risk, the consumers 
and producers of a physical product, because that is the purpose for 
which this market was established and all others. All the others are 
speculators.
  And this bill would impose substantial position limits on what are 
the nonlegitimate hedge trading transactions. Again, very specific. 
Within 30 days, we would require the regulator to impose very specific 
and strong position limits on all non-legitimate hedge trading. What 
that does is to take some of the air out of this balloon and put some 
downward pressure on oil and gas prices.
  Now, I have shown this chart many times, but it is worth going over 
some of the things we have heard here in the Congress, and it is worth 
it because of those who come to the floor to say: What speculation? 
There is no speculation.
  I had Fidel Gheit, an interesting guy, testify in front of our 
committee before, and I have talked to him by phone, and here is what 
he says:

       There is no shortage of oil. I'm convinced oil prices 
     shouldn't be a dime above $55 a barrel.

  And he said, talking of the futures market:

       I call it the world's largest gambling hall. It is open 24/
     7. Unfortunately, it's totally unregulated. It's like a 
     highway with no cops and no speed limits and everybody going 
     120 miles an hour.

  Energy Secretary Bodman, who is one of these people who says there is 
nothing going on with respect to these marketplaces and this 
speculation, says:

       There is no evidence that we can find that speculators are 
     driving futures prices for oil.

  He says he can't find the evidence. Well, let me find evidence that 
indicates the opposite. Here are at least two examples. First, the 
House Subcommittee on Oversight and Investigations released a report 
showing that speculators in the oil futures market went from 37 percent 
to 71 percent. It seems to me that is some pretty substantial evidence. 
Second, testimony this morning before the Energy Committee revealed 
that speculators represented 73 percent of the market--almost 
identical.
  So I would say to the Secretary: If you can't find the evidence, I 
can. If you have the right evidence, maybe you could search for the 
right solution.
  Our Energy Information Administration--the EIA--doesn't do anything 
with respect to policy. We spend $100 million for this agency, and it 
is supposed to simply provide the best information available. Here is 
the information they have provided: In May 2007, they said here is 
where we think the price of oil will be--right across here, about a 
straight line. In July 2007, they said: Here is where the price of oil 
will be. In September 2007 and in November 2007, they said here is what 
we think. Now, in March 2008, here is where we think it will be.
  Well, guess what. These lines were so far off, I mean it is almost 
laughable. Here is where the price of oil went.

[[Page 15403]]

Why is that? I assume these folks were taking a look at supply and 
demand and the normal relationship that determines a price, and they 
didn't understand that what has happened is that this market is 
perverted and broken as a result of excess speculation. The price went 
just like a Roman candle.
  There is no way to describe this as anything that is rational. We are 
not off not by a mile, but by a country mile.
  I had a hearing on this subject. Of course they couldn't answer the 
question of why they were off so far.
  The senior vice president of ExxonMobil:

       The price of oil should be about $50 to $55 per barrel.

  The same with the president of Marathon Oil, same answer.
  My sense is that we ought to do everything, but we have folks coming 
to the floor of the Senate to say: You can't do anything unless you do 
drilling first.
  We are doing drilling right now, but we will not allow you to do 
anything unless you do something that is going to affect something 5 or 
7 years from now.
  It doesn't make much sense to me. It seems to me, if this is an 
opportunity to move forward, you address the hurdles that are in front 
of you. The first hurdle, it seems to me, is to set this market 
straight. I believe the market we have with respect to the futures 
market is broken. There is reason to debate that. I respect those who 
disagree, but I think the evidence is not on their side.
  What I think we should do is decide we have a very serious problem, 
and we should address it three steps. The first step would be to tackle 
this speculation issue. We introduced that legislation last Tuesday. 
That legislation brings everything under the control of the Commodity 
Futures Trading Commission so they can see all of it, including the 
over-the-counter trades on foreign exchanges. It requires strong 
position limits. The fact is, it requires that a distinction be 
developed between legitimate hedgers and just pure speculators. We 
should do that. So that is step No. 1.
  Step No. 2, it seems to me we should develop a broader position with 
the six or eight things we need to do as a country in a much more 
aggressive way that increases additional production, conservation, and 
energy efficiency measures because all of these opportunities in the 
future.
  For step three, we ought to do something that is game changing 
because we come here every 10 years or so, every 20 years, and the 
drillers come in and say: The only way to solve our energy problem is 
to drill. As I said, that is a yesterday forever policy. That is fine 
if you are comfortable coming back to the same debate and putting our 
country in the same position. But the game-changing approach, in my 
judgment, is to say there are a lot of ways for us to develop renewable 
sources of energy, a lot of ways for us to develop renewable sources of 
energy in a way that really changes our energy future significantly.
  Those are the three things I think we ought to do and do them in that 
order and fairly close order, and I believe we ought to do it 
understanding that this is an emergency.
  If all we do is just to deny that this market is broken and deny that 
there is excess speculation, then we will just be talking past each 
other. If that is all we do, I wonder how many airlines will be left in 
this country 5 or 7 years from now, if that is the time period in which 
maybe you get some additional drilling up and get some additional 
production? How many trucking firms are going to be operating out 
there? How many mom-and-pop firms go belly-up in the next 6 months or 
year or 2 years? How will the folks who are trying to fill their tanks 
and figure out how they are going to pay gas prices go to work? How 
will they fill that tank to get to work next week or next month or next 
year?
  I think there is an urgency. One of the things to respond to with 
respect to that urgency is the first challenge in front of us. That 
urgency is to set straight the excess speculation in this marketplace. 
We can do that. There is nothing Republican or Democratic about that. 
It is just to look at this with a level head and say: Here is a 
problem, let's address it. The underlying law that created the futures 
market was created in 1936. It has a provision dealing with excess 
speculation.
  I will make one final point. The regulatory authority here has been 
an abysmal failure, but that is not just in this case. We face a lot of 
challenges today. We face challenges with respect to banking. We face 
challenges with respect to the subprime scandal and a whole range of 
other things, and you can trace it right back to the root that so many 
people felt regulation was a four-letter word. They decided we want to 
have regulators who decided not to regulate. That is certainly the case 
with this market. It is the case with other issues as well.
  I think we have a Congress that has the responsibility and 
opportunity to set it straight.
  I yield the floor.
  The PRESIDING OFFICER. The time of the Senator has expired.
  The senior Senator from New Hampshire is recognized.
  Mr. GREGG. Mr. President, I believe Senator Stevens is going to 
speak, but I ask unanimous consent that he be recognized on the 
completion of my statement.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GREGG. Mr. President, obviously the issue of energy is at the 
center of everybody's concern.
  Does the Senator from Alaska wish to go forward?
  Mr. STEVENS. Yes.
  Mr. GREGG. Mr. President, I ask to reserve my time and ask that I be 
recognized at the completion of the presentation by the Senator from 
Alaska.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. STEVENS. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. STEVENS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Tester). Without objection, it is so 
ordered.
  The senior Senator from Alaska is recognized.
  Mr. STEVENS. Mr. President, I am here once again because the price of 
oil remains at a historic high. It has come down slightly today, and I 
hope that will continue. As a matter of fact, I hope people listen to 
what we are saying so it will come down because I do think this drop 
has something to do with the fact that everybody is talking about 
speculation.
  There is no question that my people, Alaskans, are paying more for 
fuel oil and gasoline and petroleum products than anyone in the country 
despite the fact that we produce almost a million barrels of oil a day. 
We don't have any gasoline refineries. We have refineries for jet fuel 
because we have such an enormous traffic, through our State, of 
commercial cargo planes. Of course, during the summertime we have 
enormous tourist traffic to our State by the airlines.
  It is a great problem for us right now because we have less than a 
million people spread out over an area that is more than twice the size 
of Texas. We are absolutely fuel-intensive in terms of our lifestyle 
because 70 percent of our cities can be reached only by air year round. 
We really have to deal with the problems that are presented by this 
energy crisis.
  I applaud the President lifting the offshore drilling ban. I do think 
it sent a signal to the country that it is a very serious thing. After 
all, his father placed that in effect, and it has been there, and it 
really is something that has to be dealt with.
  The difficulty is that even with the ban lifted and even with full 
approval of the Congress, we are going to the Outer Continental Shelf 
now to determine how much we can produce. We know we can produce a 
great amount, but how much we can produce from the Outer Continental 
Shelf? Two-thirds of the Outer Continental Shelf is off our

[[Page 15404]]

State, and there is only one oil well there now. There are hundreds of 
thousands of wells in the other one-third, but because of the constant 
opposition of those who oppose exploration and development in our 
State, we are stymied.
  Take for instance the leases on the Chukchi Sea, which is the area 
off the northwest coast of Alaska, some 70 miles off the coast. The oil 
industry has obtained leases there to explore for and develop that area 
for its oil and gas potential. That has been, now, tied up for over a 
year by a series of lawsuits. One of them is claiming that oil and gas 
exploration would harm the polar bear. I want the Senate to know that 
just a week ago, the ice at that area was 17 feet deep. The ice is not 
disappearing the way people say it is, particularly in the period of 
time when the polar bears are there. But beyond that, the difficulty is 
there is a whole series of things that--these people who are against 
exploration and development in my State have caused wildlife to be 
listed as endangered or at least threatened, and they are using those 
findings in order to delay the development of new facilities to bring 
us the new production we need, the new production the Government needs.
  It reminds me of the time I spent here on the floor--almost 4 years--
in the seventies when the first group litigated again and again to 
delay the oil pipeline. Finally, we reached the stress point where we 
had to ask the Senate to do something it had never done before and 
hasn't done since, and that is to close the courts of the United States 
to this constant delay in building that pipeline. We finally brought 
that amendment to the floor. It was debated at length for 4 days, and 
it ended up with a tie vote--the only tie vote at the time of the then 
Nixon administration. Vice President Agnew broke the tie. It was 49 to 
49.
  Think of what that means. At that time, there was a paradigm that the 
Senate would not filibuster anything that involved national security. 
The availability of oil to meet our needs is a matter of national 
security, but we faced a filibuster ever since then, in terms of trying 
to develop the Arctic.
  One of the things we ought to look to today, though, is the letter 
that has been sent by almost all the airlines in the United States. 
AirTran, Alaska Airlines, American Airlines, Continental, Delta, 
Hawaiian, JetBlue, Midwest Airlines, Southwest, United, and U.S. 
Airways, all joined in sending a letter to the holders of their 
frequent flier programs dealing with the problem of the skyrocketing 
oil and fuel prices and what they are doing to destroy the capability 
to provide air transportation to the United States.
  I read before and let me read again this one paragraph. I think it is 
absolutely something everyone should understand. I am quoting now from 
this letter signed by all the presidents and heads of these companies.
  Mr. President, I ask again to have it printed in the Record following 
my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. STEVENS. The letter says:

       Twenty years ago, 21 percent of oil contracts were 
     purchased by speculators who trade oil on paper with no 
     intention of ever taking delivery. Today, oil speculators 
     purchase 66 percent of all oil future contracts, and that 
     reflects just the transactions that are known. Speculators 
     buy up a large amount of oil and then sell it to each other 
     again and again. A barrel of oil may trade 20-plus times 
     before it is delivered and used; the price goes up with each 
     trade and consumers pick up the final tab. Some market 
     experts estimate that the current prices reflect as much as 
     $30 to $60 per barrel in unnecessary speculative costs.

  If those pieces of paper that represent future delivery of oil are 
purchased by people who are just speculating and that purchaser ends 
up, after selling the paper, acquiring it again, to me, that is 
absolute proof of a criminal conspiracy in this country.
  I think this speculation has to stop. We have to start talking more 
about it, and we have to do something about it. What I would do is make 
sure it is a criminal matter if someone acquires the same piece of 
paper dealing with futures in oil and has no ability to use the oil. I 
really do not think there is any reason--I can understand a company 
might buy ahead for 2 or 3 years in oil and buy futures and hedge 
against the price, that, in fact, it might go up, but people who buy 
those pieces of paper solely to manipulate the price--and that is what 
happens when someone not involved, these institutional investors, buys 
a piece of paper to buy oil in the future and then sells it to another 
institutional investor and then another one. If that piece of paper 
ends up in the same hands the second time, to me, that is a criminal 
conspiracy, and it is time we looked at that and understood it. This 
letter sets it forth.
  Believe me, any Member of the Senate who ignores this letter ignores 
the fact that every single frequent flier person in the country has it 
in their hands. I don't know about the rest of you, but I am getting 
thousands of letters from people who are sending me this letter and 
saying: What are you going to do about it? I say what we have to do 
about it is send a signal to these speculators to take notice that 
Congress is serious about speculators.
  I know there is a difference of opinion out here on the floor of the 
Senate, there is no question about it, but in the last 5 years, 
investments in commodity index funds jumped from $13 billion to $260 
billion. That means institutional investors have gone from owning $13 
billion worth of oil futures to $260 billion in oil futures.
  Now, someone tell me that is not a conspiracy.
  Let me put up this chart. This chart represents the so-called NYMEX 
oil futures. The red on the chart represents the price of oil; the gold 
represents the volume of trading. The volume of trading has gone up, 
but the price has gone up more than twice as much as the volume.
  There is only one thing that can drive up a spike like that. That is 
speculation, it is not demand. Someone told me not to try to understand 
supply and demand in the oil business. I think I know something about 
oil demand in the oil business, because we tried to meet that demand in 
terms of our State. We had a better chance of satisfying the demand of 
the United States than any State. But to have this situation go along I 
think is wrong, to go forward I think is wrong.
  I have personally talked to one of the economists. I must say he does 
not share my feelings that we ought to make this a crime immediately, 
because, it is my understanding, he does not believe we have seen 
evidence of criminal conduct yet.
  But I say it is criminal conduct if someone owns one of those pieces 
of paper twice. There is no reason to sell a future in oil and then 
turn around and buy it later at a higher price. They are actually being 
acquired and turned over more than 20 times before the oil is 
delivered. That ought to be something the Justice Department and the 
CFTC should have notified us on before it took the time of all of these 
presidents of these companies to send this letter to their customers so 
they can send it on to us. These people have told their customers to 
contact us. Well, this is one time I hope all of us listen to what they 
are saying. Because there is no question that we have to find some way 
to restrict this trading to those who need oil in the future, those who 
legitimately hedge to try and save their customers money, not to cost 
them more money but to save money. A true hedge would save money for 
the customers of the particular person who acquired the futures.
  I think the legislation Senator Feinstein and I introduced some time 
ago represents an important step toward breaking this bubble. The 
position limits we would place on institutional investors would be very 
minimal and would make them stay away from market manipulation.
  If we can see these investments shift away from the energy 
commodities and back to the stock markets the way we have in the last 
few days, I think the stock market would recover.
  I thank my friend from New Hampshire for letting me use part of his 
time. But I say, we cannot stop at mandating transparency. We have to

[[Page 15405]]

do something to put these people in fear before they will stop this 
action of driving this price up.

                               Exhibit 1

       An Open letter to All Airline Customers:
       Our country is facing a possible sharp economic downturn 
     because of skyrocketing oil and fuel prices, but by pulling 
     together, we can all do something to help now.
       For airlines, ultra-expensive fuel means thousands of lost 
     jobs and severe reductions in air service to both large and 
     small communities. To the broader economy, oil prices mean 
     slower activity and widespread economic pain. This pain can 
     be alleviated, and that is why we are taking the 
     extraordinary step of writing this joint letter to our 
     customers. Since high oil prices are partly a response to 
     normal market forces, the nation needs to focus on increased 
     energy supplies and conservation. However, there is another 
     side to this story because normal market forces are being 
     dangerously amplified by poorly regulated market speculation.
       Twenty years ago, 21 percent of oil contracts were 
     purchased by speculators who trade oil on paper with no 
     intention of ever taking delivery. Today, oil speculators 
     purchase 66 percent of all oil futures contracts, and that 
     reflects just the transactions that are known. Speculators 
     buy up large amounts of oil and then sell it to each other 
     again and again. A barrel of oil may trade 20-plus times 
     before it is delivered and used; the price goes up with each 
     trade and consumers pick up the final tab. Some market 
     experts estimate that current prices reflect as much as $30 
     to $60 per barrel in unnecessary speculative costs.
       Over seventy years ago, Congress established regulations to 
     control excessive, largely unchecked market speculation and 
     manipulation. However, over the past two decades, these 
     regulatory limits have been weakened or removed. We believe 
     that restoring and enforcing these limits, along with several 
     other modest measures, will provide more disclosure, 
     transparency and sound market oversight. Together, these 
     reforms will help cool the over-heated oil market and permit 
     the economy to prosper.
       The nation needs to pull together to reform the oil markets 
     and solve this growing problem.
       We need your help. Get more information and contact 
     Congress by visiting www.StopOilSpeculationNow.com.
         Robert Fornaro, Chairman, President and CEO, AirTran 
           Airways; Bill Ayer, Chairman, President and CEO, Alaska 
           Airlines, Inc.; Gerard J. Arpey, Chairman, President 
           and CEO, American Airlines, Inc.; Lawrence W. Kellner, 
           Chairman and CEO, Continental Airlines, Inc.; Richard 
           Anderson, CEO, Delta Air Lines, Inc.; Mark B. 
           Dunkerley, President and CEO, Hawaiian Airlines, Inc.; 
           Dave Barger, CEO, JetBlue Airways Corporation; Timothy 
           E. Hoeksema, Chairman, President and CEO, Midwest 
           Airlines; Douglas M. Steenland, President and CEO, 
           Northwest Airlines, Inc.; Gary Kelly, Chairman and CEO, 
           Southwest Airlines Co.; Glenn F. Tilton, Chairman, 
           President and CEO, United Airlines, Inc.; Douglas 
           Parker, Chairman and CEO, US Airways Group, Inc.

  The PRESIDING OFFICER. The Senator from New Hampshire is recognized.
  Mr. GREGG. Mr. President, it is my understanding that I have 10 
minutes to speak as in morning business?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. GREGG. Mr. President, I rise to participate in this discussion on 
energy. I agree with the Senator from Alaska, and I agree, in part, 
with the Senator from North Dakota, that there has to be an addressing 
of the issue of speculation.
  I think any deal that takes shape on this floor will help if we do 
that. In addressing the issue of speculation, there are a lot of 
different factors, however. One of them is that we make sure to 
maintain control over these commodity markets, and we not create an 
atmosphere where these commodity markets move offshore and therefore we 
lose any regulatory control on our part.
  But, in addition, I do not think we can repeal the laws of common 
sense. The essence of the law of common sense is that you have India 
and China moving toward fairly developed nations and creating massive 
increases in the demand for oil. There are 2.5 billion people in those 
two countries. We have 300 million people in our country. We still use 
the majority of the world's oil. But the simple fact is that demand for 
oil has radically increased, and we are not going to be able to reduce 
our energy costs in this country unless we produce more American 
resources, and also conserve more. That is the simple fact. It is a 
function of supply and demand. And part of producing more means that we 
have got to look at those places where we have sources of energy. Two 
of the key places we have sources of energy are offshore and also oil 
shale. Both of those resources and, in fact, in the case of oil shale, 
those resources, the reserves of oil there, exceed the reserves of 
Saudi Arabia by a factor of two or three. In both of those instances we 
can recover energy by exploring and drilling in a manner that is 
environmentally safe. We have proved that beyond any question relative 
to offshore drilling, when you see that Hurricane Katrina came right up 
the gulf coast and destroyed one of our great cities but at the same 
time there was essentially no oil leak or no gas leak from any of the 
production facilities in the Gulf of Mexico.
  We have proven we can produce this energy in a safe and 
environmentally sound way, and we need to produce it. If you want to 
see the price of energy drop in this country, you have got to show the 
world community that we as a nation are willing to step forward and 
produce and conserve more energy. The way you produce more energy is by 
drilling, drilling offshore and using the underground resources of oil 
shale which exceed the reserves of Saudi Arabia. So if we want to 
address the cost of energy, we should do it, and we should do it now. 
We should not be waiting.
  That is why I congratulate the President for lifting the moratorium. 
The Senate should lift the moratorium that was put in place by the 
Senate, by the Congress, on both oil shale and offshore drilling.
  (The remarks of Mr. Gregg pertaining to the introduction of S. 3279 
are printed in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')
  Mr. GREGG. I yield the floor, and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Ms. KLOBUCHAR. 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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