Gas Prices
Floor Speech
GAS PRICES -- (Senate - July 24, 2008)
BREAK IN TRANSCRIPT
Mr. THUNE. Mr. President, I congratulate my colleague from Wyoming for his comments. His State of Wyoming and my State of South Dakota share a border. We have a lot of very similar ways of making a living. We share a commonality when it comes to the people we represent, their values. And he is exactly on point when he talks about the importance of energy to a State like Wyoming and a State like South Dakota and its impact on the economy and how families in our States are struggling and sacrificing with this extraordinary challenge that faces our Nation today, and that is the high cost of energy.
I want to speak to that subject today as well because on Tuesday, July 22, the Interagency Task Force on Commodity Markets released its Interim Report on Crude Oil. I think it is important and it bears on the debate we are having in the Senate today because the primary purpose of the bill that is before us, as put forward by the Democratic leadership as a solution to energy, is to focus on the very narrow issue of speculation in the marketplace.
Well, the task force is chaired by the Commodity Futures Trading Commission and includes staff members from the Departments of Agriculture, Energy, and the Treasury, the Board of Governors of the Federal Reserve, the Federal Trade Commission, and the Securities and Exchange Commission.
Although its final report is not expected until September, I think the interim report provides some valuable insight on the energy markets and the record increase that we are seeing in oil prices. The report concludes that record oil prices are caused by the simple economic laws of supply and demand.
The report states:
Current oil prices and the increase in oil prices between January of 2003 and June of 2008 are largely due to fundamental supply and demand factors.
The report describes that worldwide demand for petroleum has greatly increased over recent years due to population growth and rising incomes.
Specifically, the report states:
World economic activity has expanded to close to 5 percent per year since the year 2004, marking the strongest performance in two decades. Between 2004 and 2007, global oil consumption grew by 3.9 percent, driven largely by rising demand in emerging markets that are both growing rapidly and shifting toward oil-intensive activities.
It continues to say:
China, India, and the Middle East are among the fastest growing in the world; together they have accounted for nearly two-thirds of the rise in world oil consumption since 2004.
The report also states:
Since 2003, world oil consumption growth has averaged 1.8 percent per year, representing an estimated 1 million barrels per day in 2008.
On the supply side, on the other side of the equation, the report also details how the worldwide supply of oil is inadequate. Both non-OPEC and OPEC supplies are failing to keep pace with increasing demand.
The report states:
In the past 3 years, non-OPEC production growth has slowed to levels well below historical averages, and world surplus capacity has fallen below historical norms. Preliminary inventory data also shows that the Organization for Economic Cooperation and Development (OECD) stocks have fallen below 1996-2002 levels.
The report continues:
World oil consumption growth has simply outpaced non-OPEC production growth every year since 2003. OPEC production is also falling behind.
The report describes the failure to meet what they call the ``call on OPEC,'' which is the difference between global demand for oil and oil produced by non-OPEC countries.
Since 2003, OPEC oil production has grown by only 2.4 million barrels per day while the ``call on OPEC'' has increased by 4.4 million barrels per day. As a result, the world oil market balance has tightened significantly.
Recently, the President's Working Group on Financial Markets reinforced the Interagency Task Force's conclusion. This working group consists of the Secretary of the Treasury, Board of Governors of the Federal Reserve System, U.S. Security and Exchange Commission, and the Commodity Futures Trading Commission.
In a recent letter to congressional leadership, the Working Group on Financial Markets stated:
Prices appear to be reflecting tight global supplies and the growing world demand for oil, particularly in emerging economies.
The Interagency Task Force and the President's Financial Working Group
have concluded what several Members of Congress and, I think, what the majority of the American people have known for a long time: we have a supply and demand problem. The solution to that problem is to find more energy, to produce more and to use less.
Now, with regard to the supply solution, we have lots of solutions that are out there. We have talked about the North Slope of Alaska. We know there are about 10 billion barrels of oil on the North Slope of Alaska. We have had numerous votes since I have been in the Senate, and prior to that in my service in the House, on opening the North Slope of Alaska to more production. Every time, it gets defeated by the opponents.
In fact, in 1995, it was actually passed by Congress, and it was at the time vetoed by President Clinton. If it had not been vetoed back then, we would have an additional 1 million barrels of oil in the United States each and every single day.
Ironically, we hear the same arguments against that today that we heard back then: that it will take 5 to 10 years to develop it. Well, that is exactly the argument that was used in the debate 10 years ago. If we had acted then, now, 10 years later, we would have that extra 1 million barrels of oil a day available to us, which is the equivalent of about what we get from Venezuela.
The Outer Continental Shelf is home to about 18 billion barrels of oil, and that, too, is off-limits. Some of the Outer Continental Shelf data is almost 30 years old. There are estimates that there are 86 billion barrels of undiscovered reserves that exist right off our very own coasts.
Oil shale--there are estimates of 2 trillion barrels of oil shale that is currently off-limits; 800 billion barrels of that, of the U.S. oil shale, could be economically recoverable.
Now, Saudi Arabia has the world's largest proven reserves of oil in the world; that is, 263 billion barrels. The next largest is Iran with 133 billion barrels, followed by Iraq with 115 billion barrels. Kuwait and Venezuela bring up the next, with 100 billion and 77 billion barrels, respectively.
But the point very simply is that Utah, Wyoming, and Colorado may have more oil than Saudi Arabia, Iran, Iraq, Kuwait, and Venezuela combined. Right now, U.S. energy companies are ready to invest billions of dollars in developing this domestic research. They are not asking for Government funding. They are not asking for Federal financing. They are not asking for environmental exemptions or any kind of special treatment.
All they are asking for is for the U.S. Government to govern. They simply want consistent regulation that will allow them to move forward with their research. Unfortunately, this Congress has said no--no to ANWR, no to the Outer Continental Shelf, no to oil shale, no to coal to liquid, no to nuclear, no to all of the things that could lessen our dependence on foreign sources of energy.
Meanwhile, I think the American family is asking, why? Why will Congress not work to lower gas prices? Why is Congress standing in the way of American ingenuity? Why is Congress limiting access to our resources while we send, Americans send, $1.6 billion each and every single day outside the United States for imported oil to petro dictators around the world, where we are propping up and enriching people in places such as Iran and Venezuela who have nothing but hostile intentions toward our country?
Well, it is past time for Congress to act on a supply solution. It is time for us to deal with this issue of our supply, and it is also important that we deal with the issue of demand because, as I mentioned earlier, when you are talking about impacting supply and demand, you can do one of two things. You can affect supply by increasing domestic production or you can affect the demand side by using less energy. I think the solution consists of both, but neither are getting a vote in the Senate.
Congress must invest in advanced technology, batteries and hydrogen fuel cells. Those are new technologies that we have to support, and we need to continue to invest in renewable fuels. There has not been a bigger advocate in the Senate than I am of renewable energy. It is already reducing domestic demand for traditional petroleum by about 130,000 gallons per day.
We also need to address America's fleet of vehicles. Last year, Congress raised the vehicle efficiency standards by 40 percent to 35 miles per gallon for cars and light trucks. I think we can and we must do more. We should extend the tax credits for fuel-efficient hybrid vehicles.
I believe Congress should create a new tax credit for next-generation electric plug-in hybrid vehicles which can go 20 to 40 miles before using an internal combustion engine.
In addition to tax credits, Congress should require the production of flex-fuel vehicles. This week, a tripartisan group of Senators, led by Senator Brownback, introduced a bill that would dramatically change our transportation sector. Senators BROWNBACK, LIEBERMAN, SALAZAR, COLLINS, and I have introduced the Open Fuel Standard Act, which essentially requires that starting in 2012, 50 percent of new vehicles be flex-fuel vehicles that are warranted to operate on gasoline, on ethanol, on methanol, or on biodiesel.
This requirement increases 10 percent each year until 2015 when 80 percent of new vehicles would be required to operate on renewable fuel.
We will never break OPEC's monopoly over our fuel supply without enacting bold policies. And the one I just mentioned is an example of such a policy. That bill would give consumers a choice at the pump and give all consumers the option of purchasing cheaper, homegrown fuel such as ethanol and biodiesel when it comes to addressing their energy needs.
But the fact is, as I noted in the study that I cited, we cannot solve America's energy problem by simply dealing with a narrow solution, a minimalist solution such as that which has been put on the floor by the Democratic leadership in the Senate. What they have attempted to do is to block the consideration of amendments that would address those other issues that I think are so important to this debate. There is not anything in this bill that was put forward by the Democratic leadership that reduces the dangerous dependence that we have on foreign energy. Now 60 percent of our energy is coming from outside the United States. There is not one thing in this bill that affects that.
They can talk about lawsuits. They can talk about taxing oil companies. You can talk about regulating, further regulating the commodities markets. I am all for some of the things that are being proposed with regard to speculation and the commodities market. I, frankly, think there are things in the bill that are good.
But the bottom line is, it does nothing. It does nothing to affect the fundamental rule of supply and demand, which, as I just noted, is what is driving energy prices higher in this country. And if we try to do something in the Senate or in Congress to address energy in this country and the tremendous economic impact it is having on American families and businesses without going at this fundamental basic issue of increasing our domestic supply or domestic production and reducing our demand, we will not have done anything meaningful for the American people to address the issue that is impacting their pocketbooks more than anything else today; and that is, the high price of gasoline.
If you are serious about getting the commodities futures market to reflect or to bring down the futures price for energy stocks and all this trading that is going on, the way to do that is to send a clear, unequivocal signal to the energy markets that America is serious, that American ingenuity and hard work and our entrepreneurship in this country--that we are serious about increasing the domestic supply of energy that we have, about increasing domestic production because the market will interpret that.
The market looks down the road and says: OK, in the future, what is the price of oil going to be based upon the current supply of oil and the current demand?
If we are serious about increasing supply and reducing demand, the market will reflect that. We will see lower prices per barrel of oil, per gallon of gasoline, and some relief for hard-working American families and small businesses taking on tremendous water in their personal households and in the needs they have to meet for families because they are spending all their money, literally, to fill their cars with gasoline and to pay for the high cost of energy. It is affecting literally every sector of the economy.
South Dakota, as my colleague from Wyoming spoke to earlier, is a vastly rural State and sparsely populated, heavily dependent upon transportation. The energy issue impacts in a dramatic way our ability to grow our economy and create jobs. I hope the debate today will include more than only a narrow issue and will get to the fundamental issue of supply and demand, that we can have an open debate in which we may offer amendments so this issue will be addressed.
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