[Congressional Record (Bound Edition), Volume 156 (2010), Part 14]
[House]
[Pages 19789-19794]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      PEAK OIL--ARE WE THERE YET?

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 2009, the gentleman from Maryland (Mr. Bartlett) is 
recognized for 60 minutes as the designee of the minority leader.
  Mr. BARTLETT. Madam Speaker, let me first note some press clippings 
today that caught my eye, kind of signs of the time. One of them talks 
about a 1,900-page omnibus appropriations bill that is being prepared. 
You know, there will be no one person in the country that has read all 
of that bill, and I think the American people are not supportive of 
bringing these huge bills to the floor that nobody has had a chance to 
read.
  But that wasn't what caught my eye so much as the subheading: 
``Earmarkers feast on pork one last time before diet.'' And then in 
brackets it says it includes the Joint Strike Fighter second engine.

                              {time}  1930

  I would like to make a couple of comments on earmarks. I know that 
they are symbolic of frivolous, wasteful, out-of-control spending in 
Congress. Even though the total amount of money in earmarks is pretty 
small, they still are symbolically a very big and important issue.
  I can live without earmarks. I've had earmarks. I publish them all on 
my Web site. None of them have sought to aggrandize me.
  When I first came to Congress, I thought that robotics ought to be of 
increasing importance to the military, and so I supported what is 
called earmarks. We call them, in Armed Services, plus-ups. I supported 
a little company in Carroll County. They now are owned by General 
Dynamics, and they are now the largest military robotics manufacturing 
company in the United States; that probably means the largest in the 
world. And they will tell you that, if it weren't for my earmarks, they 
might not be here.
  I would note that the unmanned aircraft were earmarks. I would also 
note that the Pentagon fought the aircraft carrier when it was first 
suggested, and it was Congress who pushed the aircraft carrier.
  I would like to reflect for a moment on the plus-ups in the military, 
which are really fundamentally different from earmarks other places. 
You see, if you do an earmark on alternative energy--and everybody 
wants to look green, and so just about everybody who does earmarks will 
have an earmark or two on alternative energy. And that money all comes 
out of the program money for a little alternative energy lab in Golden, 
Colorado. They never know how much money they're going to have. They 
never can really adequately plan or execute a program because their 
money gets taken with these little green earmarks that so many of our 
Members like to have.
  That's not what happens in Armed Services and Defense. Defense is a 
bit more than 50 percent of all of our discretionary spending--$600 or 
$700 billion. Whenever you have that many programs with that much money 
involved, there are bound to be some of them that don't go as planned 
and the money doesn't get spent. And so, near the end of the year, that 
money is gathered together and we have, in the past, gone to the 
chairmen of the services and asked them, If you had more money, what 
would you buy? And they respond, Gee, we would like to have this and 
that. We call these ``unfunded priorities.''
  Then, the Members turn in their lists of requests, and these are all 
judged against some standards that everybody has agreed on. You don't 
get all your earmarks. I publish all of mine on my Web site. You 
certainly don't get them all. I can live without earmarks. But I would 
just like to note that the President's budget is one long series of 
earmarks--spend money for this, spend money for that, spend money for 
the other thing--put together by people that you have never seen, that 
you will never see, that are not accountable.
  Now, I understand the psychology of earmarks, and I'm very supportive 
of doing away with earmarks. But I would like to make a point about 
plus-ups in Defense. You see, the President's budget is at least a year 
old. It takes a long time to put together that big budget--some parts 
of it are a couple of years old--which means that all the new 
technology of the last year can't be in the President's budget. 
Traditionally, we have used plus-ups in Defense to make sure that we 
don't fall behind our potential enemies. So if you would like to make 
sure that we're always potentially 1 year behind the Chinese and the 
Russians, then just don't have any plus-ups in Defense.
  I am a big supporter of doing away with earmarks because I think that 
symbolically they have become poison and they tell the American people 
that we are out of control and irresponsible. But, at the same time, I 
would like to note that we have got to have something to permit us to 
introduce the latest technology to our military, because it can't be in 
the President's budget.

[[Page 19790]]

So let's call them plus-ups or something and ban earmarks elsewhere, 
but make sure that we don't fall behind in Defense.
  Another thing that was in the news was the leadership is not going to 
bring a separate Defense authorization bill, but they have taken one 
small part of that bill out--the Don't Ask, Don't Tell. One may wonder 
at the priorities. For the first time in many, many years, we're 
probably not going to have an authorization bill. And if we have an 
appropriations bill, it will be a part of this big 1,900-page omnibus. 
One might wonder a little bit about priorities when we're engaged in 
two wars and we face a resurgent Russia and a booming China that it is 
maybe not important to pass the Defense authorization bill, but it is 
really important to bring to a separate vote Don't Ask, Don't Tell.
  Then there are a couple of articles that I was really pleased to 
see--and we'll talk a little bit more about those later--from the 
National Defense Magazine: ``Navy Takes Biofuels Campaign Into 
Uncharted Waters''; and the second headline is that the ``Air Force 
Tells Biofuels Industry to `Bring It.''' They want to buy these 
alternative fuels. There were two articles; one by Beidel and one by 
Grace Jean. And a little bit later, we'll have an opportunity to look 
at biofuels and their role and why the military is focusing so much on 
these.
  And then an interesting article in the L.A. Times, ``Pressure builds 
in the House to pass tax-cut package.'' A little bit later, we'll have 
an opportunity to look at taxes and should we cut them. We really have 
a huge debt, getting bigger every day. Getting money from our people to 
bring down this debt is important.
  So what are the arguments for cutting taxes? Benjamin Franklin, in 
1787, came out of the Constitutional Convention, and he was asked--and 
one of the stories has it that it was a lady who asked him that. I like 
that story--Mr. Franklin, what have you given us? What have you 
wrought? And his answer was: A Republic, madam, if you can keep it. A 
very short response: A Republic.
  But I thought we lived in a democracy. At events we do that Pledge of 
Allegiance to the flag, and you come to that part that says, ``the 
Republic for which it stands,'' and then we get up and talk about this 
great democracy that we live in. What is the difference between a 
republic and a democracy?
  Before reflecting on that and why it is important to understand that 
difference, I would like to spend just a moment looking at Benjamin 
Franklin's hope: ``if you can keep it.'' I wonder what he thought the 
biggest threat to this Republic, this Constitution would be. I kind of 
think he wasn't all that concerned about foreign powers that got here 
across a big ocean in sailboats. I'm sure he had some concern about 
threats from outside the country. But I kind of think that he might 
have been more concerned about threats from within: A Republic, madam, 
if you can keep it.

                              {time}  1940

  What is the difference between a republic and a democracy?
  I'd like to use a couple of examples of a democracy to help us 
understand that two wolves and a lamb voting on what they are going to 
have for dinner would be a democratic process; the majority wins in a 
democracy.
  So what do you think is going to happen if the body is made up of two 
wolves and a lamb, and they are voting on what they are going to have 
for dinner?
  If it is a democracy, there will be lamb for dinner because the 
majority wants that. If it is a republic and the constitution, or 
whatever they call the body of laws that they live by, says you can't 
have lamb for dinner, you won't have lamb for dinner, no matter whether 
the majority wants it or not, because, you see, it is against the law. 
In our country, we would say it's unconstitutional.
  I really kind of hesitate to use this next example of a democracy, 
but I hope you will understand.
  A lynch mob is really an example of a democracy. Isn't the will of 
the majority being expressed in a lynch mob? Aren't you glad you live 
in a republic where it is not the will or the whim of the majority that 
controls but the law that controls?
  I remember back a number of years ago when, I believe it was, Harry 
Truman nationalized the steel mills. They were going to strike. Back 
then, it mattered that we wouldn't have any steel made as we had some 
manufacturing in those days. It wouldn't matter a whole lot now, would 
it? The economy was already in trouble, and it was going to be in even 
bigger trouble if they did that, so Harry Truman nationalized the steel 
mills. That was a very popular action. A huge majority of the American 
people applauded that because that made them, you see, Federal 
employees, and as Federal employees, you can't strike. That was a 
hugely popular action--an executive order. The Supreme Court met in 
emergency session. In effect, what they said was, Mr. President, no 
matter how popular that is, you can't do it, because it's 
unconstitutional.
  Now, why is this important?
  Congress is doing a lot of things that are not specifically permitted 
by the Constitution. Four years after the Constitution was ratified, 
there was the Bill of Rights. They started with 12 amendments, and 10 
of them made it through the process: two-thirds of the House, two-
thirds of the Senate and three-fourths of the State legislatures. We 
call them the Bill of Rights. There was a lot of argument that they 
really didn't need to do that, because every one of those rights so 
explicitly enumerated in the Bill of Rights was implicit in the 
Constitution, itself.
  We in the Congress today involve ourselves in almost everything that 
affects citizens of the country. We use two different things in the 
Constitution to justify doing that. One of them is ``promote the 
general welfare.'' That's in the Preamble to the Constitution, itself. 
It is also repeated in the preamble to section 8, which specifies what 
the Congress can do. The Preamble of the Constitution simply says: 
``promote the general welfare.'' But in the first paragraph of article 
I, section 8, it says to promote the ``general welfare of the United 
States.''
  What they were talking about was the responsibility of making sure we 
had a strong country. Words change their meanings, and their use of the 
word ``welfare'' didn't even come close to our use of the word 
``welfare'' because, when we think of welfare, we think of a big 
organization that handles a lot of money and that takes care of people 
who are in need.
  Then, in the Bill of Rights, there are the last two amendments, which 
are seldom referred to. The Ninth Amendment simply says that 
essentially all the rights belong to the people, and the people have 
chosen to give a few of those rights to the government.
  A few days ago, I was privileged to spend an hour or so with one of 
the Justices on our Supreme Court, and he gave a very interesting 
example. He had a piece of paper like this, and he tore off a little 
corner of it:
  These are all the rights that we have--and he tore off a little 
corner of it--and we're going to give this much to the Federal 
Government.
  Just a little.
  So the Ninth Amendment reiterates that. It says that essentially all 
the rights belong to the people except for those few that they give to 
the government.
  Then there is the 10th Amendment. This is the most violated amendment 
and the least referred to amendment in the Constitution. The 10th 
Amendment in everyday English--it's written in Old English and 
legalese--you've got to kind of interpret. What it really says is, if 
you can't find it in article I, section 8, you can't do it.
  Now, we do a whole lot of things that you can't find in article I, 
section 8. We use two things to justify that. One is the ``promote the 
general welfare.'' If it helps people, if it makes things better, we 
can do it. The second thing we use is called the commerce clause, which 
says that Congress has the responsibility and the authority to regulate 
commerce between the States. Now, there is nothing that doesn't pass

[[Page 19791]]

over a State line, so you can argue that, therefore, we can concern 
ourselves with anything and everything--and we do.
  But then I asked myself the question: If that were how they wanted us 
to interpret the Constitution, why did they put all that detail in 
article I, section 8--like duties and imposts and excises, and 
borrowing money and regulating commerce?
  Well, that's the one they use.
  Establish uniform rules of naturalization, laws for bankruptcy, 
coining money.
  Somehow we gave that away to the Fed without amending the 
Constitution. I'm not sure how.
  Provide for the punishment of counterfeiting, to establish post 
offices and post roads, to promote the progress of science and useful 
arts, this is, copyrights and patents to constitute tribunals inferior 
to the Supreme Court.
  That's our lower Federal courts.
  To define and punish piracies and felonies committed on the high seas 
and offenses against the law of nations.
  Then all the rest of it deals with just two things--to declare war, 
grant letters of marque and reprisal, and then the military.
  The last paragraph, of course, relates to the seat of government, 
what we call the District of Columbia.
  Then it ends with a paragraph that is used to justify doing anything 
and everything we want to do: ``to make all laws which shall be 
necessary and proper for carrying into execution the foregoing powers, 
and all other powers vested by this Constitution in the Government of 
the United States.''
  But the 10th Amendment says, if you can't find it in article I, 
section 8, you can't do it. Now, there are three big things that we 
do--more than three, really, but there are three big things we do that 
I can't find there. One is our involvement in education. Another is our 
involvement in health care, except for our military, and the third one 
is philanthropy.
  By the way, Madam Speaker, if you will do a Google search for Davy 
Crockett--he was a Congressman from Tennessee and a farmer--you will 
find a very fascinating discussion of philanthropy. We don't have time 
here today to go through it, but you will be fascinated by it. Then he 
gave a speech on the floor, talking about philanthropy.
  Now, these are good things. We support the National Institutes of 
Health. We support the National Academy of Sciences. None of these 
things are in the Constitution, and we do them all without amending the 
Constitution.
  Since these are good things and they help us, why should I be 
concerned?

                              {time}  1950

  They're not explicitly permitted by the Constitution, and we haven't 
amended the Constitution so that we can legitimately do it. Let me tell 
you why I am concerned.
  This little country--and we're little, one person out of 22 in the 
world--and we have a fourth of all the good things in the world. And I 
ask myself the question, why? What is so special about us that just one 
person in 22 has a fourth of all the good things in the world? We no 
longer are conspicuously the hardest working people in the world. We no 
longer have the highest respect for technical education. This year, the 
Chinese will graduate seven times as many engineers as we graduate. 
About half of our engineering students are Chinese students. And we no 
longer have the most respect for the nuclear family. This year, almost 
50 percent of all of our children will be born out of wedlock.
  Why then are we so darn fortunate, that just one person out of 22 has 
a fourth of all the good things in the world? You may have other 
reasons, Madam Speaker, but I think that our enormous respect for our 
civil liberties established a climate and milieu in which creativity 
and entrepreneurship can flourish, and I think that if we put at risk 
these civil liberties, we put at risk who we are.
  If we can rationalize that because it's a good thing to support the 
National Institutes of Health or provide health care or have a 
Department of Education, that you can then just kind of ignore the 
Constitution, that sets, I think, a very dangerous precedent because, 
in the future, it may be that a majority of our people will feel that a 
minority of our people should be denied some of their civil liberties. 
And if we can just rationalize that we don't have to pay any attention 
to the specifics of the Constitution and these other things, why 
couldn't that happen to our civil liberties? And because I am so 
convinced that these civil liberties are such a huge reason that we are 
such a favored country, I'm very concerned that we shouldn't just 
ignore the Constitution because what you're going to do seems okay and 
popular and going to help.
  I remember back when we were congratulating ourselves because we had 
a budget surplus. We had to raise the debt limit ceiling. Kind of 
jokingly I asked our leadership, what are you going to tell the 
American people--all these months you've been telling them we have a 
budget surplus and now we're voting to raise the debt limit ceiling? 
Why would we have to raise the debt limit ceiling if we've had a budget 
surplus? We did have a budget surplus, and we did pay down a debt, but 
it wasn't the national debt. It was the public debt.
  I suspect, Madam Speaker, that there are not a large percentage of 
the American people that know the difference between the public debt 
and the national debt. The public debt is the Wall Street debt, the 
debt we owe to people who have bought our securities, who have loaned 
us money. The national debt is the sum of the public debt and the trust 
fund debt.
  You see, we have about fifty trust funds. Two of the biggest ones are 
Medicare and Social Security, and we have been running surpluses in 
those fortunately because when the baby boomers all come on line, we're 
going to really need those surpluses, but there's no money there.
  You see, this budget surplus was in what we called the unified 
budget, when we put the trust funds on budget, and then we made the 
perfectly irrational statement that the Social Security surplus offset 
the deficit. Well, if you have taken the money that you have taken out 
of the paychecks of our citizens for Medicare and Social Security and 
you spend it, which is exactly what we've done, you have incurred 
another debt.
  So what we did when we had this surplus, we paid down the national 
debt; for every dollar of national debt we paid down, there was another 
dollar increase in the trust fund debt. The sum of those two debts is 
the national debt. And if we kept our books on the accrual method, 
which we require of every business with more than something like a 
million dollars in transfers of money during the year, there never was 
a moment in time, I'm told, that the national debt really went down.
  Now I talk about this tonight because we're going to talk about taxes 
and what we haven't done and what we should do, and I just wanted to 
point out that when Congress tells you what the deficit is, add several 
hundred billion dollars to that, now less this year than other years 
because this year for the first time there was no surplus in Social 
Security, but there was a whole lot of surpluses in other areas.
  So, remember, it's the unified budget and the public debt that 
they're talking about, but it's the national debt that we need to fund, 
and that's the debt that determines how much money we owe and what the 
interest on that money will be.
  Madam Speaker, I've thought a lot about taxes. If we had a zero 
percent tax rate, we'd collect no money. And then if we had a 100 
percent tax rate, we'd collect no taxes because nobody would work if 
you're going to take all their money. So I thought a lot about what's 
that magic number: somewhere between zero percent where you collect no 
taxes and 100 percent taxation where obviously you'll collect no taxes 
because nobody's going to work. Somewhere in there is the magic number 
where you're going to collect the most taxes.
  Now obviously if taxes are too high, 100 percent, nobody's going to 
work; and if you come down from 100 percent, people are going to drop 
out. It's not

[[Page 19792]]

worth working; the government takes so much money. So what is that 
magic number where we will not depress the economy and, therefore, have 
the biggest revenue from our taxes?
  I submit that it is probably less than where we are now, because Tax 
Freedom Day, I think, is sometime in April. I haven't seen the number 
for this last year. But Government Freedom Day--that's when you can 
work the first day so that you can have money to buy your car and pay 
your mortgage and send your kids to college--that's sometime in July. 
For a year or two, it was just about July 4th, and I thought, How nice. 
That's the second freedom that we now have. We have the freedom to use 
the money that we've made for ourselves; government's not going to take 
it.
  Tax Freedom Day is sometime in April; Government Freedom Day is in 
July. You may have a different perspective, but I think that that's 
kind of a pretty big burden. As a matter of fact, we may be collecting 
less revenues from taxes because the taxes are that high.
  I want to spend the time remaining in talking about these last two 
articles that I mentioned, biofuels and our defense focus on energy. I 
have some slides here that will help to illuminate this. Of course, the 
thing that we're all concerned about now is the economy and taxes, and 
I think that if you don't factor energy in, oil particularly, you won't 
have considered all of the inputs that are going to determine what our 
economy will be.

                              {time}  2000

  The first slide that we have here, the first chart, it's several 
years old as you can see, 2008, a couple of years old, and you will see 
the highest price for oil there was less than $100 a barrel. It really 
went a little after this to $147 a barrel. These two lines here are the 
lines that are compiled by EIA and IEA. One of those is a creature of 
the OECD, to which we belong, and the other is a part of our Department 
of Energy. And they have been pretty consistently agreeing with each 
other. This, starting in 2002 and ending in 2008, represents the amount 
of oil that the world has pumped. And you'll see, for about 3 years 
before the recession, the supply of oil was constant.
  Now, with a constant supply of oil and increasing demands, this year, 
China sold more cars to their people than we did in our country. China 
has now become the largest CO2 emitter on the globe, not yet 
the largest energy user, because they are not as good as we are at 
reducing the CO2 footprint. But what this says is that 3 or 
4 years before the recession, the supply of oil was constant and demand 
was going up in our country.
  We like to grow. The stock market has a lot of trouble if you only 
have about 2 percent growth, you may have noticed. And the Chinese are 
growing. India is growing. Brazil is growing. So there were increased 
demands for oil. And so the price you can see going up here. It went 
from $50 to $100 to nearly $150 a barrel. And then the recession.
  Now, what does the future look like? Because unless you have some 
concept of what the future is going to be like, you won't be making 
rational decisions about taxes and spending, because energy is a huge, 
huge part of our lives. We live better than any civilization has ever 
lived at any time, largely because of the enormous supplies of this 
energy.
  This next chart is world oil production, looking to the future and 
where will it come from. The dark blue here is conventional oil. That's 
the kind of stuff we have been using for a lot of years now. We started 
using it way back in the early 1900s, and we are producing more and 
more and more. And now, as this chart shows, we have reached a peak. 
It's called peak oil.
  By the way, that happened in our country in 1970. It was predicted 14 
years before that by M. King Hubbard, who was relegated to the lunatic 
fringe and ridiculed. But right on schedule, as he predicted, in 1970, 
we reached our maximum oil production in this country. The world, this 
chart says, has reached it now; and apparently that is so, because, as 
you just saw from the previous chart, both the EIA and the IEA had oil 
production flat for the last 4 years.
  Now, what will the future look like? This is their projection of what 
the future will look like. They say that we are going to get from this 
light blue area a lot of oil. By 2030, we are going to be getting as 
much oil from fields yet to be developed as we are getting from all of 
our developed fields now. That may or may not happen. But even more 
speculative is this interesting red area: Crude oil, fields yet to be 
found. And that's almost as big in 2030 as the fields we now know and 
the fields we have discovered and are yet going to develop.
  Now, the brown area is enhanced oil recovery, live steam and 
CO2 and pushing a lot of seawater down there if you are near 
it. These are ways to get some more oil out or, you know, opening up 
the fields down there and shale and so forth can get more oil out. So 
this is the additional oil we will get from fields that we now have. 
That's their guess as to how much that will be.
  Nonconventional oil, that's like the heavy sour from Venezuela, and 
it's like the tar sands of Alberta, Canada, which are very interesting, 
about a million and a half barrels a day. Bitumen, I think, is what 
they call it. It won't flow, so you have to cook it and then add some 
volatiles to it so that it will flow.
  I am reading a very interesting book, written by a Canadian, with a 
long discussion of the Alberta tar sands. They soon will have mined all 
that you can do by surface mining, and then it kind of ducks under an 
overlay that is too big to remove economically. So what they are going 
to have to do then is develop it in situ, which means, like, you know, 
pumping live steam down there to make it 1,000 degree temperature to 
soften up the stuff so that it will flow.
  But this is a guess as to how much unconventional oil we will get. 
And then with natural gas--and we are using more and more natural gas--
there are some liquids that will come with that, so they will increase.
  I think that both this light blue area and the red area and maybe the 
others, too, are kind of wishful dreams. I think that we will be more 
than lucky if this top line here is level. I think we will be more than 
lucky if we can make up through developing fields that we have already 
discovered, discovering new fields, and enhanced oil recovery and so 
forth, we will do very well if we can make up for the oil we are not 
going to get from the fields that we now know.
  The next chart shows that in a very different way. If you had only 
one chart that you could look at that would help you decide what you 
need to do about your economy and what you need to do with taxes, I 
think this would be the chart. There is a lot of information on this 
chart. The vertical bars here are the amount of oil that we found in 
each of those years. And you can go back to the thirties a little and 
the forties and, wow, the fifties, and then it exploded in the 
seventies and through the eighties. And we just found a lot of oil, a 
whole lot more than we were using, because this solid line here 
represents the oil that we were using. Of course, the area under that 
will be the total amount of oil that you have used. And if you draw a 
curve over these, the area under that curve obviously represents the 
total amount of oil that you have found.
  So up until about 1980 or so, we had, every year, found more oil than 
we had pumped. But then after 1980, look what happened. We are using 
more and more and finding less and less. Now, this chart is about 5 
years old, as you can see, because the lightly shaded area there, which 
was a projection for the future, begins at 2005. And they were 
projecting a peak at about 2008 or 2009. That's precisely what 
happened, as you saw from the first two charts.
  Now, the discoveries for the future are not going to be that very 
smooth ever less and less. It's going to be up and down like this. But 
it's not going to be this kind of magnitude. The oil that we are 
finding now is in very difficult places. A major find in the Gulf of 
Mexico is under, what, 7,000 feet of water and 30,000 feet of rock. 
That is way down there.
  An oil discovery of 10 billion barrels of oil, we heave a sigh of 
relief. Ten billion barrels of oil. Why do we worry?

[[Page 19793]]

Why do we still worry if we've found that oil? And we may find several 
fields of that size. That is because, in the math, it's pretty simple. 
Every 12 days, we use about 1 billion barrels of oil. We use 84 million 
barrels a day. I think 84 goes into 1,000 a little less than 12 times. 
So every 12 days, we've used a bit more than 1 billion barrels of oil. 
So that big find of 10 billion barrels will last 120 days. That's it.
  Notice the discontinuity in this use curve, a very interesting 
phenomenon. Notice the date back in the seventies.

                              {time}  2010

  The Arab oil shocks back then, it changed the world. In a way they 
were fortuitous and good, because look what happened, or look what 
would have happened if we didn't have those oil shocks.
  This is the rate of increase in the use of oil. Had that exponential 
curve continued, we would be off the charts. That was a big wake-up 
call. And we, and most of the rest of the world, became very much more 
efficient in the way we use oil. Your new freezer and refrigerator and 
air conditioner is very much more efficient than those of the seventies 
and early eighties.
  Exponential growth is a poorly understood phenomenon. Albert Einstein 
was asked, when they were talking about nuclear energy and what that 
was meaning to the world, what was going to be the next big thing that 
we'd find? And he said the most powerful thing in the universe was the 
power of compound interest.
  If you just think about that, 2 percent growth doubles in 35 years. 
And 2 percent growth is not much. It's kind of feeble. Our stock market 
doesn't like 2 percent growth. It wants more than that. But 2 percent 
growth doubles in 35 years. It's four times bigger in 70 years. It's 8 
times bigger in 105 years. It is 16 times bigger in 140 years; 16 times 
bigger in 140 years. Obviously, we're not going to be using 16 times as 
much energy in 140 years from now as we are using now.
  So when you're thinking about spending and taxes and what we ought to 
be doing you need to keep in the back of your mind this reality. Gas is 
now a bit more than $3 a gallon. Oil is what? Pushing $90 a barrel. And 
the world is struggling to get out of this recession.
  There are many economists who believe that when the world comes out 
of this recession it's going to demand a lot more oil. But we're up 
against a peak. We can't produce oil any faster. So when you have this 
demand for oil, and it cannot be supplied, the price is going to go up.
  And you know, we, in this country, attributed this recession that 
we're trying to recover from to the housing bubble. But it was kind of 
the perfect storm. At the same time that we were doing grossly 
irrational things with financing these houses, we were also hit by peak 
oil. And I guess it's an economist debate as to whether it was the cost 
of energy effect or the housing bubble that was most responsible for 
bringing us to our knees.
  Now, you can make any projection you want about the future, but one 
thing is absolutely certain. You can't pump oil you haven't found and 
developed. And the probability that we're going to be pumping 
meaningfully increased amounts of oil in the future is very, very 
small.
  The next chart is one you need to be looking at when you're thinking 
about our taxes and our economy and what we ought to be doing, because 
this is the world according to oil. And the premise here is, let's draw 
a world where the size of the country is relative to how much oil in 
reserve that it has. What would the world look like? And then let's 
color it, so that those who are using a lot of oil show up as yellow, 
and then blue and then on down to lesser amounts of oil.
  Well, you look at us over here. A couple of really interesting 
things. We don't have much. And we're the only country colored yellow. 
So we're big users of oil, and we don't have much. Well, we don't. We 
have only 2 percent of the world's reserves. We use 25 percent of the 
world's oil, and we import about two-thirds of what we use.
  Our largest exporter is Canada. Wow, they don't have probably as much 
oil as we have, and they don't have very many people either, so they 
can export oil.
  Until very recently, our second-largest exporter was Mexico. They 
also have less oil than we. But their people are too poor. They have a 
lot of people. Their people are too poor to use the oil, and so they're 
exporting the oil.
  Within about a decade, by the way, the rate at which they are using 
the oil and the decline in the rate at which they are producing oil, 
and that's about a decade, maybe less, Mexico will be an oil importer.
  Venezuela. Hugo Chavez dwarfs us and Canada and Mexico and all the 
rest of South America. Huge relative to this side of the Atlantic, huge 
supplies of oil.
  Saudi Arabia represents 22 percent of the landscape, if the country 
was sized relative to the amount of oil it has because it has about 22 
percent of the reserves of oil in the world.
  Iraq and little Kuwait, it looked to Saddam Hussein like an errant 
province down there on the southeastern border. Tiny. Qatar, even 
smaller United Arab Emirates, hard to find them on the map, isn't it? 
Look how big they are as far as oil is concerned.
  And Iran, a present and growing problem.
  Now, look at China over there. China's next to the biggest user, 
blue, next to the biggest user of energy to us.
  By the way, this lighter blue here in Iran. With their present curve 
for exporting oil and their present increasing use of oil, within a 
decade, Iran will cease to be an exporter. And this is one of the 
problems that we face in the world. All these developing countries have 
increasing populations that, through the miracle of communication, know 
the benefits of industrialized society, and they're saying, hey, what 
about us?
  There are 900 million people in China, three times our population, 
that live in rural areas that are making just that request of the 
Chinese government: What about us? So China has a huge challenge in 
supplying the energy needs of this developing population.
  And there's Russia. They are vying now with Saudi Arabia to be the 
biggest exporter of oil in the world. They have more than us. About the 
same as Venezuela. They don't have anywhere near as many people as we 
have, and they don't use, per capita, as much energy as we use. So 
Russia is a big exporter. As a matter of fact, as I said, they're vying 
with Saudi Arabia to be biggest exporter in the world
  India. Can you find India on the map there? A billion people, growing 
rapidly. Buying oil.
  So you can see the challenge that this presents. And the recognition 
that we have got to look at our taxes, and we've got to look at our 
economy relative to the world situation and energy and what is likely 
to happen to the price of gasoline, because about 70 percent of all oil 
is used for transportation, and 90 some percent of all transportation 
is oil.
  Relative to this is an interesting statement from Condoleezza Rice, 
former Secretary of State: We do have to do something about the energy 
problem. I can tell you that nothing has really taken me aback more as 
Secretary of State than the way that the politics of energy is, I will 
use the word ``warping'' diplomacy around the world. We have simply got 
to do something about the ``warping'' now of diplomatic effort by the 
all out rush for energy supply.
  I don't have the chart here, but China is now buying oil all over the 
world. Why would China buy oil when it doesn't make any difference 
today who owns the oil? The person who comes to the auction with money, 
as we do every week, because we have only 2 percent of the oil, we use 
25 percent of the oil; we simply buy the oil from those who have it 
because we come with the money to do that.
  Your government has paid for four studies. Here are the four studies 
that they paid for starting in 2005, two of them in 2005, 2006, 2007. 
And one of them had two reports, but there were four studies: The DOE 
report, the Hirsch study, Army Corps of Engineers, and Government 
Accountability Office.

[[Page 19794]]

Oh, and the National Petroleum Council also did a study, but two of 
these are from the same study, just was reported later. All of these 
said essentially the same thing, that peaking of oil is either 
present--we didn't know then; you never know until you look back that 
it's peaked--or, imminent, with potentially devastating consequences.
  I just wanted to spend the last few minutes we have in looking at 
some of the statements in these four reports.

                              {time}  2020

  I think that we paid for the second, third, and fourth because we 
weren't happy with what the first report said. That was the Hirsch 
report. But they ended up all essentially saying the same.
  Let's just spend the last few minutes we have together looking at 
some of the comments that were in these reports.
  This is the Hirsch report: World peaking of oil is going to happen. 
It is obvious. Oil is finite. One day it will be gone. But before it is 
gone, we are going to reach our maximum ability to produce oil. Peaking 
of oil is going to happen.
  Then they say that the world has never faced a problem like this. 
Unprecedented. The world has never faced a problem like this.
  From the same report: The peaking of world oil production presents 
the U.S. and the world with an unprecedented risk management problem. 
As peaking is approached, liquid fuel prices and price volatility will 
increase dramatically--$147 a barrel--and without timely mitigation--
which we have not done--the economic, social, and political costs will 
be unprecedented.
  Now, we need to be thinking about this when we are thinking about 
taxes and spending. We are going to face some huge challenges.
  By the way, I find facing a big challenge and meeting it successfully 
is very exhilarating, so I see these reports as challenging and 
exhilarating.
  This next one is from the Army Corps of Engineers' study: Oil is the 
most important form of energy in the world today. And, if you think 
about it, this is really true. Historically, no other energy source 
equals oil's intrinsic qualities of extractability, transportability, 
versatility, and cost. The qualities that enabled oil to take over from 
coal as a frontline energy source for the industrialized world in the 
middle of the 20th century are as relevant today as they were then. As 
President Bush said, ``We are hooked on oil.'' That is true.
  This is a quote from Gene Laherrere, a very early pioneer in this, 
with Colin Campbell, a Frenchman and Scotsman, I think. But they were a 
number of years ago predicting that this was going to happen and the 
world should be paying attention.
  We have had very optimistic projections of how much oil there is 
going to be in the future. These people have come down from that, by 
the way, way down from those hopeful projections. But this is 
Laherrere's assessment of the USGS Report: The USGS estimate implies a 
five-fold increase in discovery rate and reserve addition, for which no 
evidence is presented. Such an improvement in performance is, in fact, 
utterly implausible given the great technological achievements of the 
industry over the past 20 years, the worldwide search, and the 
deliberate effort to find the largest remaining prospects.
  So Laherrere said that what they were proposing was utterly 
implausible. Now they have come way down from those projections.
  As we are thinking about our taxes and our economy and what we need 
to be doing about that, this is a reality that we need to pay attention 
to. This is the top ten companies on the basis of oil production and 
reserves. The left one is production.
  Now, we have some big giants like BP and ExxonMobil and Shell. They 
have 22 percent of the production. Companies that are owned by--well, 
they aren't companies, really. They are owned by a country. They have 
78 percent of all the production.
  Now, when it comes to reserves, our three big guys don't even show up 
among the top ten. They aren't even there. Ninety-eight percent of it 
is from countries like Saudi Aramco, National Iranian Oil, Iraq 
National Oil, Kuwait Petroleum, and so forth. LUKOIL, which is kind of 
private, Russia, is 2 percent.
  As you are thinking about our taxes and our economy and what we ought 
to be doing, you really need to factor this in because it is a 
geopolitical reality that is going to make cutting taxes and reducing 
spending so that there will be something to buy this energy with, which 
is really going to go up, or our quality of life is going to plateau 
and turn down and our economies are going to sour quickly with very 
difficult recovery.
  All these charts, by the way, you may have noted, are from the 
Government Accountability Office, a very respectable nonpartisan 
organization.
  Worldwide Proven Oil Reserves by Political Risk. How much of it can 
we really count on and how much of it has some political risk involved? 
Well, let's see.
  Low political risk, 413.
  These are billion barrels, by the way, and these are going to add up 
to a bit over 1 trillion, which is a generally accepted number of how 
much oil is out there. Now, we will add a little to it, but it is not 
going to be a huge amount we add to it.
  Medium risk, 314. And high risk, 389.
  What this says is that only roughly one-third, a little more than 
one-third of the oil that is out there has low political risk, we could 
really count on in a pinch that it is going to be there. The other may 
not be there because there is medium and high political risk.
  This same dynamic is shown in the next chart here, and this is by 
investment risk. Where can the big oil companies invest their money? 
Where can we invest our money? Where do we have low risk? Where do we 
have high risk?
  Well, in 384 billion barrels, there is no foreign investment. They 
own it all. They don't need any money, so there is no foreign 
investment there. Only 165 billion barrels have low risk; 164, medium; 
402, high. So just a whisker over one-fourth of the oil that is out 
there has low and medium risk.
  I have been privileged to spend this hour talking about our economy 
and the impact energy is going to have on that.

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