[Congressional Record (Bound Edition), Volume 154 (2008), Part 8]
[Senate]
[Pages 11786-11787]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           PRICE OF GASOLINE

  Mr. DORGAN. Mr. President, I spent part of this morning visiting with 
some experts about the issue of energy speculation and the price of 
gasoline. I am very concerned about the price of gasoline. I come from 
a State that not only produces a lot of energy but uses a lot of 
petroleum products. We are a farm State and a big State with a sparse 
population. North Dakota is spread over the equivalent of 10 
Massachusettses in landmass. We use a lot of energy per capita. When 
the price does what it has been doing recently, it is very harmful to a 
rural State that does a lot of family farming and requires people to 
travel a lot because of its sheer size.
  Here is what happened to oil prices in the last year: They have 
doubled. There is no justification for that--none. There is no 
justification for this at all. Get this, crude oil futures hit a record 
$139 per barrel today.
  I used to teach a little economics in college--not in a serious way. 
I taught the supply and demand intersection and what happens to price. 
I understand all that. If we take a look at supply and demand, there is 
nothing that justifies what is happening in the futures market with 
respect to oil prices.
  Now back up 14 months, in fact, to the time prior to the price of oil 
doubling and ask yourself what happened in this world. Were we 
oblivious then to the fact that India and China were going to want more 
fuel in their economies? I understand there are probably 150 million 
Chinese who want to drive cars. Where are they going to get the fuel? A 
lot of folks in India want to drive cars too. I understand all of that. 
These signals were already in the market 16 and 18 months ago. That is 
not different.
  Here is also what I understand. Since the first part of this year, 
our inventories of petroleum stocks have been going up in this country 
and use has been going down. People are driving slightly less and using 
less. So what is happening to price? It has doubled.
  I will tell you what I think is happening. On the oil commodity 
markets, we have a dramatic orgy of speculation and carnival of greed. 
Are all of the speculators who are neck deep in these markets there 
because they want oil or want to hold oil? Have they tried to lift a 
42-gallon drum? I don't think so. They want to make money speculating. 
As a result all of this excess speculation, they are driving up the 
price of a commodity. That damages this country and injures most 
Americans.
  This is what has happened to speculation. This Congress and this 
President have a responsibility to stop it. When excess speculation 
damages an economy, damages the country and its people, we have a 
responsibility to stop excess speculation.
  This is a picture of NYMEX, where they trade commodities. Most people 
have seen pictures of the floor of a trading session like this. In 
fact, I think it was 80 years ago when Will Rogers talked about these 
guys buying things they will never get from people who never had it. At 
NYMEX, they trade futures contracts.
  Let me describe what one fellow testified before the Energy 
Committee. By the way, he has had 30 or 35 years as an executive 
analyst in these markets. Fadel Gheit said this:

       There is absolutely no shortage of oil. I am absolutely 
     convinced that oil prices shouldn't be a dime above $55 a 
     barrel. I called it the world's largest gambling hall. It's 
     open 24/7. Unfortunately, it is totally unregulated. This is 
     like a highway with no cops and no speed limits, and 
     everybody is going 120 miles an hour.

  Mr. President, the New Jersey Star Ledger wrote:

       Experts, including the former head of ExxonMobil, say 
     financial speculation in the energy markets has grown so much 
     over the last 30 years that it now adds 20 to 30 percent to 
     the cost of a barrel of oil.

  The president of Marathon Oil, Clarence Cazalot, Jr., said:

       $100 oil isn't justified by the physical demand in the 
     market.

  Here is an oil executive saying this price isn't justified.
  Stephen Simon, a senior vice president at Exxon, said on April 1, 
2008:

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

  Mr. President, how did we get here? On December 15, 2000, in this 
Chamber, one of our colleagues, Senator Gramm from Texas, stuck a 
little provision into the Commodity Futures Modernization Act which was 
included in a very big piece of legislation that was being enacted. I 
believe it was the Consolidated Appropriations Act of 2000, a large 
supplemental bill being done. That little provision changed everything. 
Prior to that time, prior to Senator Gramm from Texas putting this 
provision into law, every futures contract in this country was subject 
to regulation and oversight. Senator Gramm stuck a provision in a very 
big piece of legislation that said essentially certain commodity 
provisions need not be subject to regulation and oversight. Then it 
started. That was called the Enron loophole.
  I know something about that because I chaired the hearings at which 
the late Ken Lay, the CEO and president of Enron Corporation, 
testified. He raised his hand, took an oath, sat down, and then took 
the fifth amendment. He ran one of the biggest energy companies in this 
country. We found out that at least part of it was a criminal 
enterprise. It benefitted greatly by the actions of the Congress, and 
only a few in the Congress knew what they were trying to do. That 
created this loophole by which Enron and others down the road could 
create an energy market that was unregulated, outside of the view of 
regulators and of the grasp of regulators.
  So now, going forward from December 15, 2000, to today, what is 
happening is that we have seen, outside of the purview of regulators, a 
dramatic amount, an obscene amount of speculation in energy markets.
  I have met with experts who have said that there is no speculation 
here. Yesterday, I met with a person yesterday, someone who is an 
expert in this area and runs a major corporation, who said there is no 
speculation here. That is just wrong. That is false on its face. All 
one has to do is look at what is happening in these markets. Can 
anybody, anyplace, anytime, anywhere tell us that something has 
happened in the last 14 months in terms of the market fundamentals that 
justifies doubling the price of oil or gasoline? There is nothing that 
justifies that.
  This Congress cannot sit around any longer. I know the President and 
the Vice President opposed responding to the electricity crisis out 
West when they first came to office. I recall when some of us in 
Congress were trying to take some action against what was happening to 
hijack wholesale electric prices on the West Coast by the Enron 
Corporation that they stood by idly. I and others pushed and pushed. 
The Federal Energy Regulatory Commission said there is nothing going on 
there. Dick Cheney made fun of us, saying these markets are working, we 
just don't like markets. The President didn't want to do anything. We 
finally found out what was something illegal happening. Every day was 
criminal. They were manipulating supply in a criminal way, and there 
are people sitting in prison for it. Ken Lay died beforehand, but he 
was on his way to prison because it was a criminal enterprise he was 
conducting. And the Vice President was belittling those of us in 
Congress who were trying to do something about it. The Federal Energy 
Regulatory Commission was dead asleep, very content to do nothing.
  That cannot continue to be replicated now. We have to do something to 
soak the speculation out of these futures markets. There needs to be a 
futures market for energy, I support that. There are legitimate hedging 
requirements, I understand that. There needs to be liquidity, I 
understand that. But when you have excessive speculation that damages 
this country and runs up the price of oil to double the price when, in 
fact, the market fundamentals do not justify it. Hedge funds, 
investment banks, and many others rush into these markets in order to 
make profits through speculation and the public be damned. It doesn't 
matter what it does to the country, then something is wrong, and it is 
the responsibility of the Congress to act. It is our responsibility and 
requirement. We cannot sit around and ignore this any longer.

[[Page 11787]]

  I had a call from the owner of a trucking company in North Dakota the 
other day. They have been running a trucking firm for years. His dad 
ran it, and his family has been running it for four or five decades. He 
said: I don't think we can continue. We can't afford the price of 
diesel fuel.
  I understand we have had 12 airlines that have gone into bankruptcy. 
I know of five in the last 6 or 8 weeks. The fact is, this country 
cannot exist without a vibrant aviation industry. We have to have 
airline companies that are able to move Americans back and forth across 
the country. The price of jet fuel is even worse than the description I 
just offered with respect to gasoline and oil.
  We need to work on this issue in a very aggressive and urgent way, 
and we need to do something that shuts down this speculation. I 
indicated yesterday that I am working on legislation to try to do that 
and to try to make certain we have a completely regulated system with 
respect to the trading of these contracts.
  First of all, they ought to be regulated. Some say that, if we try to 
regulate them here, they will move offshore. We ought to be able to 
regulate it. If you are in this country, you want to play games in the 
commodities markets as a speculator, if you are picking up a telephone 
and trade commodities in this country, as far as I am concerned, you 
ought to be regulated with respect to your order of commodities 
contract.
  A lot of work is being done. As I said, I spent part of this morning 
with experts who understand the complexities and the vagaries of these 
commodity markets and especially the oil markets and the speculation 
that is occurring. I side with those who believe there is excessive 
speculation and that there is a requirement that we do something about 
it.
  Mr. President, I yield the floor and 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. NELSON of Florida. Mr. President, I ask unanimous consent that 
the order for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. NELSON of Florida. Mr. President, what is the parliamentary 
procedure we are in?
  The PRESIDING OFFICER. The Senate is in a period of morning business.
  Mr. NELSON of Florida. Mr. President, if I may be recognized.
  The PRESIDING OFFICER. The Senator from Florida is recognized.

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