Employer-Employee Cooperation Act

Floor Speech

EMPLOYER-EMPLOYEE COOPERATION ACT -- (Senate - May 12, 2008)

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Ms. CANTWELL. Mr. President, I rise tonight to continue the discussion on the votes we are going to have tomorrow on this important legislation and, really, what will be the start of the legislative alternative to deal with the high price of gasoline.

I know tomorrow there is going to be a vote, and many of my colleagues have come to the floor talking about the high price of gasoline and what we need to do about it.

I know going home this weekend and filling up my own car I spent over $3.80, and almost $3.90 a gallon. It is not lost on the consumers of Washington State that this problem has to be fixed.

Many of my colleagues are talking about supply. And while I wish this was an issue of simple supply and demand, I think the market is showing us that it is not about supply and demand; that it is about the manipulation of oil markets and the fact that we have deregulated the energy futures market and created loopholes so that the speculators can have their say in how the market functions without the proper oversight that I think we need to restore.

So we are going to have a chance to talk about that later when the Democratic proposal is put forward before the Senate. But tonight I want to make sure my colleagues understand this is not an issue about getting more supply out of the United States. I have been on the Senate floor several times talking about energy executives saying that it is not the companies that have been holding up the supply in the United States or that is going to solve this problem.

But I think it is important to look at the world's oil market and to understand that the United States only has 3 percent of the world's oil reserves. We are not in the top 10 leading countries in producing oil. And this exaggerated chart on size shows the top countries with the most oil: Saudi Arabia and Iran and Iraq and Kuwait and UAE. And this shows by proportion, for national size, how small the United States is. The United States is over here because we do not have that much supply of oil. In fact, if you look on the chart, the top 10 countries, we are not in the top 10 countries in supply of oil. So the bottom line is, do we want to continue to be reliant on these countries for an oil supply or do we want to diversify? I think many of my colleagues realize we have to take aggressive steps to diversify a little differently.

Here is a pie chart that shows exactly where the world oil reserves are: 20 percent in Saudi Arabia, Iraq is another big number, Iran is another big number. This little red piece of the pie here, 2 percent; 2 percent is what the United States has. So this notion that we are going to dramatically change this equation for the U.S. consumer or the price of gas by taking that 2 percent of the world's oil reserves and somehow maximizing it, I do not care how much you maximize it, I do not care how or where you drill, you are not going to change the impact on the price of oil today on the market when these are the other players. These are the people who are dominating the marketplace.

So I think it is very important that we get a handle on this situation. We have seen now that oil has been over $125 a barrel. At one point in time last Friday, oil closed at $126, and went back down.

But we keep seeing this inch up every day. You turn on the television, the situation does not seem as though there is any relief in sight. This keeps going up. This is the national average, $3.71. In my State I clearly saw $3.80. I will not be surprised if it is even higher than that. And we have to do something to give consumers relief. They cannot continue to afford to pay this price.

Well, we have listened now to oil company executives. I like to listen to what they have to say about this matter because they are the people who are involved in the supply and demand on a daily basis. They are the ones who are going out and getting this product and putting it in the marketplace.

Here is the CEO of Marathon Oil, who said:

$100 oil is not justified by the physical demands in the market.

It is not justified. So here we are, a lot of these executives having testified before various House and Senate committees saying that oil should be at $60 a barrel. They are saying it is not even justified at $100 a barrel. What is causing this problem?

I would have to say that the $100 a barrel in the market is definitely causing problems with various industries. Last week we heard from some in the airline industry who were testifying before the Commerce Committee. These are their first quarter losses: Delta, $274 million; American Airlines, $328 million; United, $537 million.

When you talk to them about these losses, because these are things that help take care of the employees, take care of pensions, take care of bills, they will tell you that fuel costs used to be the second expense in the business. Now it is No. 1 because of the extraordinary costs of fuel. And these are the losses they are racking up because of that.

This is what one market analyst basically was saying about out-of-control jet fuel prices:

Should the current fuel prices persist, the impact on airline industry profitability is expected to rival if not exceed that of the 9/11 terrorist attacks.

This is a quote from a JP Morgan analyst. What they are saying is, I think people here remember how dramatic the impact was on the airline industry after 9/11, how people did not want to fly. Here is an analyst saying, if this keeps going, it is going to be worse than 9/11.

I had a flight attendant tell me the same thing this weekend. She said: You know, we survived 9/11 and the terrorist attacks. We survived bankruptcy and reorganization. Now we have to survive this. I do not know that we can do it if oil just keeps going up and up and up.

That is what these people are saying; that it is going to get as dramatic as the impact that we saw from 9/11 if we do not deal with this issue. Well, one way I can tell you that we are not going to deal with it, and not because of the legislative approach, simply because if it even was a solution, drilling in the Arctic Wildlife Refuge would only reduce it by a few pennies per gallon when it is at its full peak production, say, 10 to 20 years from now. And the fact that it would only be two pennies per gallon, if you average that out over what a consumer buys in a year, we are only talking about a few dollars to the American consumer because I go back to that chart where it shows the United States with only 2 percent. How can we affect the price? These are new updated numbers.

Basically, the fact is, you cannot affect the price by drilling in the Arctic Wildlife Refuge. That should tell us something. This is a false argument on the other side about the supply.

Our own administration, the Energy Information Administration, came to the conclusion that if we would drill in the Arctic Wildlife Refuge thinking that we were going to put world supply on the market, this was their conclusion, not mine.

They said: OPEC could countermand any potential price impact of ANWR coastal plain production by reducing its exports by an equal amount and basically continuing to keep the price high.

So this notion we are debating tonight, that somehow we are going to drill our way to energy security and lower the $120-plus barrel of oil, even by the account or our own Energy Information Administration, is not correct.

So what do we want to do? Democrats want to police the oil and gas markets. Democrats want to police these markets because we are tired of the oil company executives saying that prices are not justified. We are tired of analysts saying that this price is not justified. We are tired of looking at the results when we deregulate the energy futures market and allow excessive speculation without proper controls. Like we have on the stock exchange, like we have on other exchanges such as NYMEX and the Chicago Mercantile Exchange, we want rules in place. We want rules in place so consumers can be protected.

We know hedge funds are playing a big role here. This is not my quote. This is from Ann Davis of the Wall Street Journal:

Hedge funds are taking ever-larger bets in a futures market that is smaller than the stock or bond markets, and the funds are using borrowed money to maximize their bets, magnifying the impact on [energy market] prices. That is why people on this side of the aisle have talked about a few things such as closing loopholes and making sure there is transparency in the energy markets. The Amaranth case showed the harm of this excessive speculation and large trader positions without proper market controls. Amaranth was a natural gas company that basically took huge positions in the natural gas market, and because we had deregulated the oversight of that energy trading, they were able to manipulate the market. And after they got out of the marketplace because they crashed after some of their manipulative activities, we were able to see a huge decrease in the price of natural gas. So we know these hedge funds are able to impact the price of energy, and we are very concerned about that.

We know that after the electricity market crisis, we were able to put new rules into place for electricity and natural gas. It ended up having a very positive impact. In fact, this is what the chairman of the FERC said about that:

The manipulative schemes in question were designed to lower the prices in [a futures] market in order to benefit positions held in a [physical] market.

I want my colleagues to understand how this works, but here is what the chairman of the Federal Energy Regulatory Commission that has oversight over electricity and natural gas markets said. What he was pointing to is the fact that people were driving up the physical price of oil by manipulating the futures market. When the futures market isn't regulated, the price is easier to manipulate. Right now some oil futures for 2015 delivery are well over $100 a barrel, and that is going to continue to dictate the price of oil markets in the future.

One analyst basically said the Government must act:

Unless the U.S. government steps in to rein in speculators' power in the market, prices will just keep going up.

If we have analysts on Wall Street telling us we should act and do something, they are telling us what is happening on Wall Street. Here is an energy analyst saying:

Unless the U.S. government steps in to rein in speculators' power in the market, prices will just keep going up.

The reason why they are saying that is there are exemptions for oil that aren't there for other commodities. Cattle futures is an example. If you want to trade in cattle futures, you are not exempt from CFTC oversight. You have to register at an exchange. You have daily reporting requirements. That is so somebody who comes in and takes a big position in oil to impact the price and trades around to impact the price can be evaluated, and the CFTC and others can understand exactly what is going on and there is speculative limits. But look over here at oil trading, not on the NYMEX but on this other international continental exchange, and you see none of the same requirements. So we have deregulated this on this side, and now we wonder why oil has gone from $60 a barrel to $125 a barrel. It is not supply and demand. People in the industry will tell you it is not supply and demand. You have oil company executives telling you it is not supply and demand. You have analysts telling you it is time for us to do something to restore the oversight and transparency so the markets function properly.

I hope we get to this debate on the Senate floor in the next week or so.

As I said, we will be out here to talk more about that because there are several factors in the proposals we are talking about that I think will be important. Obviously, closing the Enron loophole is critical, which we are trying to push out of this body in a final farm bill conference report; this will require oversight of all oil futures in the futures markets, which my colleagues, Senator Levin and Senator Feinstein, and others have been working on; getting the FTC to implement market rules, and they are in the process of doing that. Our body has to have a huge oversight in making sure the proper rules are put in place. We want to make sure the price-gouging legislation that is being proposed in the Democratic package gets passed. But having the Department of Justice continue to help in this effort to look at the fact that there has been this lack of transparency and funny business going on in the marketplace is going to be very important for us to continue to police these markets.

I urge my colleagues to think about the fact that this is a real crisis, that our economy can't continue to pay these prices, and that there is nothing wrong with bona fide speculation, but there is certainly something wrong with excessive speculation and with markets that don't have sufficient transparency and oversight or rules in place to make sure it is functioning correctly. That is why Democrats want to make sure we police the oil and gas markets to protect consumers. We are going to propose that through votes on the Senate floor. We are going to continue to push Federal agencies such as the FTC and the Department of Justice and the CFTC to do their jobs.

If I may, Mr. President, on a separate note, I saw last week one of the solar companies made an announcement on their earnings. I will not detail the company today, but the company was very specific in its announcement. It had increased record sales. They were very excited about what was happening in the solar market. But they announced they were going to lay off people, and they were going to cancel jobs. They said in their earnings statement, because this is what companies have to do, you have to give guidance to your investors. You have to tell them what are you are going to do for the rest of the year. This company made this announcement, and it said, because Congress is not giving predictability about the investment tax credit, we can't plan for the future for these projects. So we will be canceling projects, and we will be laying off people.

I say that tonight because I am frustrated we have not been able to get the production tax credits and investment tax credits passed. I thought we would get to this point where companies would start canceling projects and thought that we had until about the first quarter of this year and their earnings statements where, again, they have to give guidance and tell the public what is going on. But that is where we are. We need to do our job. If we believe in this situation where we are right now with this energy crisis out of control and the future being uncertain, it is time to invest in different types of energy solutions. I know many of my colleagues, 88 of us here, support getting a bill out and passed over to the House of Representatives. I know there has been a debate between the Senate and the House of Representatives on that measure and exactly how to pay for it.

What I can say to my colleagues is that when we start losing jobs and canceling projects that are needed for energy production, we haven't done our job. It is time for us to put differences aside and to get this investment tax credit and production tax credit passed and get it implemented so we can save this investment cycle and save the production for what is going to be much needed in future generations.

I yield the floor.

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