Gas Prices
Floor Speech
GAS PRICES -- (Senate - July 17, 2008)
Mr. THUNE. Mr. President, America faces a great many challenges today, particularly with regard to our economy, but none greater than our dangerous dependence upon foreign oil.
I have come to the floor several times in the past few months to talk about what I call the ``terrorism tax.'' The terrorism tax is the transfer of wealth outside of this country to import billions of barrels of foreign oil. A substantial portion of American dollars spent on foreign oil goes to countries that wish to do us harm.
This year, with regard to oil prices, the terrorism tax will total $700 billion. That $700 billion could have been used to pay for health care, groceries, or alternative forms of domestic energy. That $700 billion terrorism tax is more than the annual budget of the Department of Defense and is four times the annual cost of the war in Iraq.
The record high price of gas has been hurting American families and benefitting foreign adversaries for way too long. It is now the No. 1 issue on consumers' minds, and the Senate has been debating this issue for months. However, the Senate has failed to act on reasonable provisions to address historically high energy prices.
Variable and oftentimes unpredictable forces impact cyclical gas prices. However, over the long run, increasing supply while decreasing demand will moderate, if not lower, gas prices for American consumers. The very simple equation is to produce more and to use less.
A comprehensive national energy policy that is focused on finding more energy while using less will put us on the path toward affordable and reliable energy.
Recently, the President made a historic announcement that he ended the Executive moratorium on Outer Continental Shelf energy exploration. Congress cannot wait another day to follow suit by lifting the congressional moratorium as well. This outdated moratorium is blocking access to offer 18 billion gallons of proven reserves in the Outer Continental Shelf. In addition to the proven reserves, an estimated 86 billion gallons of undiscovered reserves exist off of our shores, 85 percent of which is still off limits. Congress should give coastal States the right to explore for oil and natural gas more than 50 miles off their shores.
Another promising area for domestic production is the development of oil and natural gas in section 10-02 of the Alaska Wilderness Wildlife Refuge. Congress authorized production in this remote area of Alaska's North Slope over 12 years ago. If it hadn't been vetoed by the Clinton administration, the United States would have an additional 1 million barrels of domestic production each and every day. One of the objections that gets raised by those who oppose exploration on the North Slope of Alaska is something that has been used for a long time: It would take 5 or 10 years to bring that energy on line. That is an old and tired argument. Evidence of that is when it becomes the punchline on the Jay Leno show. Jay Leno himself, in a monolog, has made that very same observation--that the argument being used today by our political leaders to avoid having to deal with this issue of developing some of our domestic resources is that it would take 5 or 10 years to develop. That is the very same argument that was made by political leaders over a decade ago.
It is important that we get past that argument, that we deal with the issue of our dangerous dependence upon foreign countries for our energy supply, and that we do so by developing the resources we have here at home, including the 6 to 16 billion barrels we know exist on the North Slope of Alaska.
In addition to the traditional sources of oil and gas, unconventional sources of oil are an important solution to our energy crisis as well. Coal to liquids and oil shale in Western States and oil sands in Canada are abundant supplies of fuel and should be fully developed to meet our growing energy needs. Unfortunately, Congress is once again standing in the way of domestic energy production.
The United States has an estimated 2 trillion barrels of oil shale in Western States--more than three times the reserves of Saudi Arabia. Unbelievably, politicians here in Washington are keeping this resource off limits.
As we continue to debate this issue, American energy companies stand ready to invest billions of dollars to make oil shale production economical and environmentally sound. This investment remains stifled since Congress is prohibiting the rules for such production from moving forward.
In addition to oil and natural gas, the Federal Government needs to stand by its commitment to renewable energy.
According to Merrill Lynch:
Biofuels are making up a huge portion of oil supply growth.
Biofuels are now the single largest contributor to world oil supply growth.
As biofuel production increases, our infrastructure to transport and use this fuel must increase as well. Congress has to break the monopoly of oil on the U.S. economy by investing in renewable fuel dedicated pipelines, biofuel refueling stations, and by requiring the production of flex fuel vehicles. Approximately 7 million flex fuel vehicles are on the road today. This is significant progress from a few years ago, and American automakers deserve to be applauded for their dedication to biofuels. However, millions of vehicles are still being produced and purchased without the flex fuel option.
That means the vast majority of Americans have no choice but to pull up to the pump and fill up on traditional gasoline at whatever price the oil company wishes to charge. In this sense, there is virtually no competition in our transportation fuel marketplace.
Congress should also continue to promote the use of hybrid vehicles and create incentives for plug-in electric hybrids, which will lessen the use of gasoline and diesel fuel.
Finally, we should enact moderate reforms and reasonable reforms to limit excessive speculation. Noncommercial investors are playing a historically high role in all commodities, including oil futures. Many analysts say this is adding a premium to the price of oil, which does not reflect the fundamentals of supply and demand. Congress needs to take commonsense steps to limit excessive speculation, without overreacting. Any overreaction will simply move trading overseas to markets with less transparency and oversight.
It is important to note that regulation alone is not going to bring down the price of gas. We need a comprehensive plan that includes all promising solutions to our energy crisis.
I want to make one observation, as well, regarding this issue of speculation, because I know a bill has been filed, and cloture was filed on a motion to proceed to legislation that would be a speculation response, or answer, to the energy crisis in this country. Frankly, I may vote for it. I haven't seen all of the details of it. I understand from people who are close to it that a lot of it is good--about 80 percent, and 20 percent might be things I won't like. I might be willing to vote for something like that, but it cannot be that alone. That is a minimalist solution and we don't have a minimalist problem. This is a problem that demands a major and comprehensive solution and attention from the Congress that includes not only addressing that issue--the narrow issue of speculation--but also the important issue of domestic production, increasing our supply, increasing the production of energy in this country, and also looking at ways to reduce our demand.
With regard to the issue of speculation, I want to read from an op ed in the Wall Street Journal by Martin Feldstein, back on July 1. This is what it says:
Now here is the good news. Any policy that causes the unexpected future oil price to fall can cause the current price to fall, or to rise less than it would otherwise do. In other words, it is possible to bring down today's price of oil with policies that will have their physical impact on oil demands or supply only in the future. For example, increases in government subsidies to develop technology that will make future cars more efficient, or tighter standards that gradually improve the gas mileage of the stock of cars would lower the future demand for oil and therefore the price of oil today.
Similarly, increasing the expected future supply of oil would also reduce today's price. That fall in the current price would induce an immediate rise in oil consumption that would be matched by an increase in supply from the OPEC producers and others with some current excess capacity or available inventories. Any steps that can be taken now to increase the future supply of oil, or reduce the future demands for oil in the U.S., or elsewhere, can therefore lead both to lower prices and increased consumption today.
The best thing we can be doing for American consumers is not a narrow minimalist response to the narrow issue of speculation but one that addresses the fundamental issue of supply and demand, because that drives marketplace prices. I believe if the world market believes we in the Congress are serious about addressing that issue--the fundamental issue of supply and demand--it will be reflected in those future prices. That isn't to say we should not have a solution that addresses the issue of speculation as well.
I am for a number of ideas being proposed. I think we need to have more cops on the beat. We need to authorize increased funding and staff for the CFTC, and I think we need to require the CFTC to gather information on index traders and swap dealers, to codify position limits and transparency for foreign boards of trade. Those are reforms that I think are important to address in any comprehensive energy bill. But you cannot address the narrow issue of speculation and expect to impact, in the long term, the dangerous dependence we have on foreign sources of energy. We could address the issue of speculation, but what does that do to affect the basic fact that every single day we get 60 percent of our oil from outside the United States? We use 20 million barrels a day in the United States, or about 24 percent of the world demand, and about 12 million barrels of that, or 60 percent, comes from outside of the United States. That is not a sustainable place to be for a country that is worried about the impact high gas prices are having on its economy, and the impact it could have on our economy in the future if we don't address that dependence upon foreign energy.
We have to have production, and I think the American people get this. I think the American people are interested in this issue of speculation. I think they believe there is a role that plays in the price of oil and the price of a gallon of gasoline. I also think they understand we cannot solve the problem we have in this country absent addressing the issue of domestic production.
Increasing our domestic supply, reducing domestic demand--that is how we go about solving, in the long term, an issue or addressing a problem I think will affect the economy for years to come and make future generations of Americans continue to be held over a barrel by countries around the world that are hostile to the United States.
We cannot address the issue of energy by this bill alone. As I said, I am open to supporting and voting for the bill that is going to be introduced that addresses speculation, but that cannot be it. If that is all we do, we have done very little to address the long-term problem we have, and that problem is that we get 60 percent of our energy from outside the United States. You cannot say no to domestic production. You cannot say no to offshore production. You cannot say no to oil shale. You cannot say no to coal to liquids. You cannot say no to nuclear or to new refineries. You cannot say no to all those things that would help increase our domestic supply and affect that calculation, that basic equation of supply and demand, which is absolutely disastrous for the economy of this country.
I have traveled my State, as most Members of Congress do, on a regular basis. I had a number of meetings over the Fourth of July break where I met with people who are impacted by energy. I met this morning with corn growers who are in town, and also with agriculture and the tourism industry--all of those types of small business interests, people who are impacted, and families who are impacted by the high cost of gasoline. In my view, there is probably no bigger issue in the short term, and no bigger issue in the long term, that impacts the American economy and that could do more harm to that economy than this issue of high gas prices and the dangerous dependence we have on foreign sources of energy. We cannot solve it by saying no. We have to say yes to additional domestic production, yes to conservation measures that will use less energy, yes to renewables and biofuels, and yes to addressing this issue of speculation.
We need a comprehensive approach, not a rifle shot that deals with one aspect of it but doesn't solve the fundamental problem we have, and that is the fact that in every single State we pay a terrorism tax to countries outside the United States.
There is $700 billion of wealth this year that we will shift outside of the United States and pay to other countries around the world--in many ways, petro-dictators--a ``terrorism tax,'' because we have to get energy from them. They set the price and we pay it.
Until we change that fundamental calculation and dynamic, we are going to continue to see high gas prices and high oil prices. And that is not something this economy can withstand. It is certainly not fair to the American people for us to sit by and not take serious, meaningful action.
When the markets recognize we are serious, I believe we will see relief for the American people on the price of a gallon of gasoline and the price for a barrel of oil. That is why we need a comprehensive solution.
When this debate gets joined in the next week and following week, I am going to do everything I can to see that it is not addressing just one narrow issue but addresses this issue of production, addresses the issue of demand. That is the only way, in my view, that we will solve this problem.
I look forward to that debate. I hope we have opportunities to offer amendments. I hope it is not going to be one of those deals where the tree gets filled and we do not have a chance to vote on meaningful solutions to our energy crisis. The Senate needs to be heard. All of us need to have an opportunity to offer amendments and have them voted on, and I hope the process will allow for that.
I yield back the remainder of my time. I yield the floor.
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