[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
THE AMERICAN ENERGY INITIATIVE, PART 16: A FOCUS ON RISING GASOLINE
PRICES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
MARCH 7, 2012
__________
Serial No. 112-124
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
_____
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas HENRY A. WAXMAN, California
Chairman Emeritus Ranking Member
CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania EDOLPHUS TOWNS, New York
MARY BONO MACK, California FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina GENE GREEN, Texas
Vice Chairman DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma LOIS CAPPS, California
TIM MURPHY, Pennsylvania MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia
_____
Subcommittee on Energy and Power
ED WHITFIELD, Kentucky
Chairman
JOHN SULLIVAN, Oklahoma BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois JAY INSLEE, Washington
GREG WALDEN, Oregon KATHY CASTOR, Florida
LEE TERRY, Nebraska JOHN D. DINGELL, Michigan
MICHAEL C. BURGESS, Texas EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California ELIOT L. ENGEL, New York
STEVE SCALISE, Louisiana GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington LOIS CAPPS, California
PETE OLSON, Texas MICHAEL F. DOYLE, Pennsylvania
DAVID B. McKINLEY, West Virginia CHARLES A. GONZALEZ, Texas
CORY GARDNER, Colorado HENRY A. WAXMAN, California (ex
MIKE POMPEO, Kansas officio)
H. MORGAN GRIFFITH, Virginia
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
(ii)
C O N T E N T S
----------
Page
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 1
Prepared statement........................................... 3
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 5
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 6
Prepared statement........................................... 8
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 10
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 10
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 10
Hon. John Sullivan, a Representative in Congress from the State
of Oklahoma, prepared statement................................ 170
Witnesses
Robert McNally, President, The Rapidan Group..................... 13
Prepared statement........................................... 15
Jack N. Gerard, President and Chief Executive Officer, American
Petroleum Institute............................................ 36
Prepared statement........................................... 38
Charles Drevna, President, American Fuel and Petrochemical
Manufacturers.................................................. 41
Prepared statement........................................... 43
Chris Milburn, Member, Owner-Operator Independent Drivers
Association.................................................... 66
Prepared statement........................................... 68
Daniel J. Weiss, Senior Fellow and Director of Climate Policy,
Center for American Progress................................... 78
Prepared statement........................................... 80
Michael Breen, Vice President, Truman National Security Project.. 108
Prepared statement........................................... 110
John Eichberger, Vice President, Government Relations, National
Association of Convenience Stores.............................. 114
Prepared statement........................................... 116
Submitted Material
Report, undated, ``The Future of Natural Gas: An
Interdisciplinary MIT Study,'' submitted by Mr. Engel.......... 154
Report, dated October 2011, ``Ensurig America's Freedom of
Movement: A National Security Imperative to Reduce U.S. Oil
Dependence,'' submitted by Mr. Engel........................... 154
Letter, dated March 1, 2012, from Mr. Rush to Gary Gensler,
Chairman, Commodity Futures Trading Commission, submitted by
Mr. Rush....................................................... 161
Letter, dated March 5, 2012, from Hon. Bernard Sanders, et al.,
to Gary Gensler, Chairman, Commodity Futures Trading
Commission, et al., submitted by Mr. Rush...................... 162
THE AMERICAN ENERGY INITIATIVE, PART 16: A FOCUS ON RISING GASOLINE
PRICES
----------
WEDNESDAY, MARCH 7, 2012
House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:37 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Ed
Whitfield (chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Sullivan,
Shimkus, Terry, Burgess, Bilbray, Scalise, McMorris Rodgers,
Olson, McKinley, Gardner, Pompeo, Griffith, Barton, Upton (ex
officio), Rush, Castor, Markey, Engel, Green, Capps, Doyle,
Gonzalez, and Waxman (ex officio).
Staff present: Anita Bradley, Senior Policy Advisor to
Chairman Emeritus; Maryam Brown, Chief Counsel, Energy and
Power; Allison Busbee, Legislative Clerk; Garrett Golding,
Professional Staff Member, Energy and Power; Cory Hicks, Policy
Coordinator, Energy and Power; Ben Lieberman, Counsel, Energy
and Power; Phil Barnett, Democratic Staff Director; Alison
Cassady, Democratic Senior Professional Staff Member; Greg
Dotson, Democratic Energy and Environment Staff Director;
Caitlin Haberman, Democratic Policy Analyst; and Alexandra
Teitz, Democratic Senior Counsel, Environment and Energy.
Mr. Whitfield. I want to thank you all, those of you who
are testifying today, we appreciate you being here. We are
going to wait just a few minutes for our Ranking Member, Mr.
Rush, and then we will get started with this hearing.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
I am going to call this hearing to order, and once again I
want to thank the witnesses for being here today. We look
forward to your testimony. I am delighted that our referees are
back with us today. They have attended a few of our hearings,
and it is always good to have referees here to make sure that
everyone presents a balanced view. And we welcome the rest of
you as well.
Today, we are going to focus on increasing gas prices, an
issue that has an impact on the pocketbook of practically every
American. When President Obama took office, the average
gasoline price was around $1.85 a gallon, and today it is over
$3.60 per gallon. Now, I do not intend today to place all of
the blame on the President, but I am going to give him some
blame. But I think the facts clearly show that if we continue
to follow his policies, gas prices are not going to go down,
they are going to go up.
Now, the President's supporters like to say, and they are
correct, that oil production is up in the U.S. since President
Obama became the President, but it is important to recognize
that the increase in production is due to production on private
and State lands, the Bakken Field being a prominent example of
that. In fact, oil production is down on Federal lands, and
that is what the President has control of. In fact, one of the
President's first initiatives in 2009 was to cancel oil leases
on Federal lands and to delay the offshore leasing program, and
he cancelled five offshore leases even before the Horizon--
Deepwater Horizon incident. I might also say that when he
became president, offshore drilling was possible in the
Atlantic and in the Pacific. Today it is not.
In a speech at the University of Miami a few weeks ago, in
the wake of criticism for denying the permit to build Keystone,
the President said he has approved dozens of new pipelines.
Well, presidential permits are applicable only on international
pipelines, and since he has been President, only one has come
before him for approval, and that has been Keystone and he
denied that.
The President and his administration have decided to
address energy costs by spending billions of taxpayer dollars
to develop electric cars. They have raised the CAFE standards,
which is fine, and they are imposing more regulations instead
of encouraging production of our domestic resources. They are
putting regulations on refineries and they are encouraging--
discouraging production, as I said.
For example, GM received millions of dollars and they
curtailed the production of the Volt automobile because sales
are lagging. Tesla and Fisker, both recipients of Federal
taxpayer dollars, have curtailed production primarily because
Americans cannot afford to buy an automobile that costs around
$100,000.
Now, we all recognize that it is important to improve the
mileage of automobiles, and so CAFE standards are important,
but it is also important to recognize that it does raise the
cost of cars. EPA itself said that by the year 2016, cars are
going to increase by $1,000 and by 2025, they are going to
increase by $3,000. So rather than trying to reduce the cost of
existing regulations by EPA, they are considering adding more
regulations, such as new source performance standards targeting
greenhouse gas emissions from refineries and new Tier 3
regulations.
So I think there is a clear contrast here. This
administration is looking way, way, way into the future, which
is important, but we need some immediate assistance and the
best way to go on that avenue to address this need is to make
production of our domestic resources more available to the
American people.
[The prepared statement of Mr. Whitfield follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Whitfield. At this time, I would like to recognize the
gentleman from Illinois, Mr. Rush, for 5-minute opening
statement.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. I want to thank you, Mr. Chairman.
Mr. Chairman, we all know that gas prices are set on the
global market and there are a variety of real political factors
that determine the price of fuel, many of which are beyond the
control of the much-maligned President of which you speak, or
this Congress, which in the last 2 years has been basically
described as a ``do nothing'' Congress.
But there are some factors that we do not have control
over, including the role of speculators in setting fuel prices.
Mr. Chairman, while we understand that speculation plays a
significant role in setting gas prices, it is very difficult to
get a clear answer on how big a role speculators actually play.
That is why on March 1, I sent a letter to the Chairman
Gensler, who is the Chairman of the Commodities and Futures
Trading Commission, the CFTC, asking him to conduct an
investigation into the practices of Wall Street traders, and
also to examine how much of an impact these speculators
actually have on increasing gas prices. Additionally, on Friday
I entered my name to a bicameral letter to the CFTC, calling
for strict position limits on all futures contracts in order to
eliminate excessive speculation. In fact, Mr. Chairman, I
believe it would benefit this subcommittee to hold a hearing
strictly on this issue, in order to bring transparency to the
American people so that we all can better understand the role
that speculators play in raising fuel prices.
In an ABC News article entitled ``How Wall Street is
Raising the Price of Gas'' dated February 23, 2012, one CFT
commissioner estimate that speculators do indeed contribute
significantly to raising fuel prices. Commissioner Chilton
estimated that Wall Street speculators raised the price an
additional $7 to $14 every time a consumer fills up the tank,
depending on the size of the car
While industry groups dispute these figures, I think it
would behoove us all to shed some light on this issue in order
to bring transparency and help the American consumer better
understand this relationship between the speculators and rising
fuel prices and raising fuel prices also. And while some may
argue that rising fuel prices are simply a matter of supply and
demand, today's sharp increases are happening at a time when
under President Obama we are producing more oil than at any
time in our history. We are importing less oil than at any time
in the past 13 years, and the American demand for oil is
actually lower than it was a year ago.
Now you take that and think on those facts. An article by
``The Washington Post'' with Bloomberg Business entitled gas
prices rise for the 27th straight day, oil recovers late to
close above $107 a barrel, dated February 29, 2012, Washington
Post and Bloomberg business both reported that Americans were
paying an average of $3.73 cents a gallon for regular gasoline,
which is 30 cents higher than it was just last month, and 36
cents higher than it had been at this time last year. At the
same time, the Department of Energy recently reported that
average demand has actually dropped 6.7 percent as compared to
nearly the same time last year.
So Mr. Chairman, I am not blaming speculators for these
sharp increases in gas prices, but I do believe it is worth
examining this issue more closely to better understand the role
that speculation played in impacting the price at the pump.
Mr. Chairman, with that I yield back the remaining time
that I might have.
Mr. Whitfield. Thank you, Mr. Rush.
At this time I would like to recognize the chairman of the
full committee, Mr. Upton, from Michigan for a 5-minute opening
statement.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Thank you, Mr. Chairman.
Let us face it. There are many factors that contribute to
the high price of gas. Some, like Middle East instability and
rising global demand, are largely outside of the Federal
Government's control. For that reason, it is absolutely
critical to get right those things that we can control. None of
America's pain at the pump should be self-inflicted, which is
why we need to do more to increase domestic and North American
oil supply, and to streamline the Federal regulatory burden on
gas.
At last weekend in my district, gas prices averaged 3.99 a
gallon. Though the President has begun to say some of the right
things about high gas prices, he continues to do all the wrong
things as well. In fact, the President's approach has not
changed since he took office in January of 2009. Gas was about
$1.85 a gallon back then, and one of the President's first
initiatives before Deepwater Horizon was to cancel many of the
oil leases on Federal lands. And his 2012 to 2017 offshore
leasing plan re-imposes the moratorium that Congress and the
White House lifted back in 2008. But the administration's
hostility towards domestic drilling has not changed, only the
rhetoric has. The President now boasts that domestic drilling
is up, but he neglects to mention that the increase is due to
the production on private and State-owned lands where Federal
regulators have little or no power to block drilling.
Production actually declined on Federal lands from 2010 to
2011, and the administration has offered up no policy changes
that would reverse that disturbing trend.
Some in D.C. claim that producing more domestic oil won't
make any difference in prices, but the American people know
better. American people also know that when it comes to
Keystone XL pipeline expansion, they would allow more Canadian
oil to reach the American market is a good thing. Compare the
rejection of Keystone to something that the President did
approve last June, tapping SPR for 30 million barrels. However,
SPR is not a new supply of oil, it is a stockpile previously
set aside for an emergency, and it can only be tapped for a
short while and then would need to be replenished, which the
President hasn't, by the way. In contrast, Keystone would
represent a genuine addition to our Nation's oil supply, and
one that would last for decades rather than months.
Rarely has the contrast between a real solution and a
gimmick been more clear than this pipeline and SPR.
So some may scratch their heads and pretend that the
closure of several East Coast refineries is some kind of
mystery, but it is no mystery to me that existing and
anticipated future regulatory costs are a key contributor. At
the very least, we need to hold the line against additional
regulations likely to raise the cost of producing gasoline.
[The prepared statement of Mr. Upton follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Upton. I would yield the balance of my time to Mr.
Barton.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Mr. Chairman, thank you for yielding. Let me
simply say that Chairman Upton has just pointed out, gasoline
prices are going up. He said it was 3.99 a gallon in Michigan,
and in my hometown of Ennis, Texas, it was 3.58 a gallon, so
come to Texas and you will save 40 cents.
But that is still quite a bit more than it was when
President Obama became President. It was $1.80 a gallon 3 years
ago. For every penny a gallon, that is $1.4 million a day--
billion? Is it billion or million? Billion, OK. If the chairman
says billion, I am going to go with billion. But I am talking
on an annual basis, that is about $262 billion a year, and that
is too much.
So we look forward to hearing from our witnesses what we
can do to get prices down. I think it is obvious that part of
the solution is to drill more here in the United States. If you
are going to drill more, you need regulatory relief. You need
to use hydraulic fracturing for oil like we have been doing for
natural gas, and I think we can do that.
Mr. Barton. And with that, I will yield to----
Mr. Shimkus. You would rather yield to him than me.
Mr. Barton. I have to yield to seniority. Mr. Shimkus.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. I will try to go quick, thank you. Because I
want to ask questions, I want to get a few points off. The
renewable fuels standard which we passed, and really, it was
supported by both sides of the aisle, has been very, very
successful. Ten percent of our Nation's gasoline supply is now
through renewable fuels. You know, just talking about the
mixing of E-10 or E-15, that is lowering the rate, and we have
to remember that the tax credit is gone. So for my colleagues
who don't like this, we don't have a blenders tax credit
anymore, and it is still competitive and it is a source of
success. A gallon of ethanol is currently selling for nearly a
dollar less per gallon than a gallon of gasoline. American oil
demands have decreased, and national import dependence has
fallen from 60 percent to 45 percent.
And I will end and yield--I don't have much time, Doc, so
ethanol provides gasoline refiners with a cost effective source
of octane with an octane rating of 113. Research octane number.
I apologize, Dr. Burgess. I yield back my time.
Mr. Whitfield. Gentleman's time is expired.
At this time I recognize the gentleman from California, Mr.
Waxman, for a 5-minute opening statement.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Mr. Chairman, today this subcommittee examines
the issue of rising gasoline prices.
We have seen this movie over and over again for the last 30
years. Gasoline prices go up, politicians make false promises
about how they will bring prices down, and nothing gets
accomplished.
We have seen it with the push to open our coastlines to
more drilling. There is no moratorium. In fact, 74 percent of
the coastline is now being leased for drilling, primarily in
the Gulf of Mexico, unlike the statements we have heard so far.
We have seen it with the enactment of legislation to promote
refineries in 2005. Still prices rise.
Now the Republican mantra is that we need to ``drill, baby,
drill.'' This slogan may sound good, but it is based on a
complete fiction.
We are drilling more, but prices are still going up. U.S.
crude oil production is the highest it has been in 8 years, and
the U.S. has more oil and gas drilling rigs operating right now
than the rest of the world combined. Net oil imports as a share
of our total consumption declined from 57 percent in 2008 to 45
percent in 2011, the lowest level since 1995.
We need to face reality, and the reality is that oil prices
are determined on a global market. Now matter how much we
drill, our gasoline prices are going to rise if there is a
crisis in the Middle East, labor unrest in Nigeria, or any of a
host of other factors we can do little about.
There is only one way we can protect ourselves from the
impacts of rising oil prices: We need to reduce our dependence
on oil.
There are no short-term solutions. There is no silver
bullet. The effects of a short--of releasing oil from the SPR
could be short-term, as it has in the past, if we are working
with other countries to accomplish that goal. We need to invest
in clean energy to diversify and reduce our energy use.
The President has taken important steps. He has acted to
cut the emissions of cars and trucks, doubling the fuel
efficiency of our fleet. As a result, our dependence on oil has
declined. But he needs our help. Oil companies are making
record profits, yet they are still getting $4 billion in
subsidies from taxpayers each year.
We can't afford to take money from taxpayers struggling to
pay their mortgages and fill up their tanks and hand it to oil
companies making billions in profits. That is why we need to
repeal the oil subsidies and use the money to develop sources
of clean energy that reduce our dependence on oil.
Today, we are going to hear a lot of the same old
unsupported claims. The American Petroleum Institute will tell
us that we can bring down global oil prices by drilling more in
the United States. That is the line we are hearing from the
Republicans.
The refiners will tell us to help consumers, we need to
send a ``message to the market'' by producing more oil in the
United States.
The National Association of Convenience Stores will say
that making ``an announcement of a long-term commitment by the
United States to increase its contributions to the
international crude oil market could help calm some of the
inflationary influences in the futures market.''
These claims have no foundation in reality. My staff
contacted some of the Nation's leading energy economists. They
told us that the so-called solutions we will hear today from
the oil industry will not reduce our gasoline prices.
John Parsons, an economist at MIT, one of the Nation's
leading experts on the oil markets, told us ``that the industry
claims are not remotely plausible'' because drilling more will
have ``at best a miniscule impact on gasoline prices.''
Oil industry expert Phil Verleger told us that announcing
more production would have ``no impact, zero, on the current
price.'' He predicted that the people who buy or sell oil would
simply ridicule these recommendations as a plan for reducing
gasoline prices.
The President said it best when he said, ``Anyone who tells
you we can drill our way out of this problem doesn't know what
he or she is talking about, or isn't telling you the truth.''
This committee has a responsibility to set the Nation's
energy policy. We should start by facing facts, listening to
experts, and crafting policies that would reduce our dependence
on oil.
Yield back my time.
Mr. Whitfield. Gentleman's time is expired. That concludes
the opening statements, and so at this time I would like to
introduce our witnesses this morning.
First we have Mr. Robert McNally, President of the Rapidan
Group. We appreciate your being here. We have Mr. Jack Gerard,
President and CEO, American Petroleum Institute. We have Mr.
Charles Drevna, President, American Fuel and Petrochemical
Manufacturers. We have Mr. Chris Milburn, owner of CarbM
Trucking. We have Mr. Daniel Weiss, Senior Fellow, Center for
American Progress, and we have Mr. Michael Breen, Vice
President, Truman National Security Project, and we have Mr.
John Eichberger, Vice President of Government Relations, NACS.
We appreciate all of your being here and we look forward to
your testimony on this very important subject of increased
gasoline prices.
So I am going to be calling, beginning with Mr. McNally, on
each one of you and you will be recognized for 5 minutes for
your opening statement. There is a little instrument there on
the table and when your time is up, it will say red. It will be
red, so that means your time is up.
So Mr. McNally, we look forward to your testimony and I
recognize you for 5 minutes.
STATEMENTS OF ROBERT MCNALLY, PRESIDENT, THE RAPIDAN GROUP;
JACK N. GERARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN
PETROLEUM INSTITUTE; CHARLES DREVNA, PRESIDENT, AMERICAN FUEL
AND PETROCHEMICAL MANUFACTURERS; CHRIS MILBURN, MEMBER, OWNER-
OPERATOR INDEPENDENT DRIVERS ASSOCIATION; DANIEL J. WEISS,
SENIOR FELLOW AND DIRECTOR OF CLIMATE POLICY, CENTER FOR
AMERICAN PROGRESS; MICHAEL BREEN, VICE PRESIDENT, TRUMAN
NATIONAL SECURITY PROJECT; AND JOHN EICHBERGER, VICE PRESIDENT,
GOVERNMENT RELATIONS, NATIONAL ASSOCIATION OF CONVENIENCE
STORES
STATEMENT OF ROBERT MCNALLY
Mr. McNally. Chairman Whitfield, Ranking Member Rush,
members of the committee, thank you for the opportunity to
testify to you today. I have spent the bulk of my career
analyzing energy, oil markets, and economic policymaking, and
served on the White House National Economic Council and
National Security Council between 2001 and 2003. I am an
independent analyst. I do not represent any entity, and the
views I express here today are my own.
The subject is rising gas prices, but let us step back and
note, this is the sixth big run up in gasoline prices in 7
years. For most Americans, from the 1970s until about 2005,
following the price of gasoline was like riding the Disney
World ride It's a Small World: shifting, but basically an
unremarkable experience. Since 2005, it has felt more like
Space Mountain: unpredictable, scary, gut-wrenchingly volatile.
This ride is no fun for our families and for our businesses.
They are confused and angry and deserve to know why prices have
been rising and gyrating so much.
Let me come right to the point. Gasoline prices are rising
mainly because crude oil prices are rising. Crude oil accounts
for over 2/3 of the cost of retail gasoline. So far this year,
crude oil is up 14 percent, gasoline prices are up 16 percent.
Crude oil prices are rising because the global market in which
they are formed is tight. Official data reports show that
global demand is at historic highs and still soaring, supply
has been disappointingly small, commercial inventories outside
the United States are low, supply interruptions have occurred,
OPEC's spare capacity is much lower than officially estimated
just months ago. On top of that, this year a rash of refinery
closures in the Northeast, the U.S. Virgin Islands, and Europe,
and tension surrounding Iran's nuclear program are contributing
to high gasoline oil price strength, respectively.
It is crucial to understand that oil prices naturally
gyrate sharply when demand and supply are unbalanced. To
suppress this national volatility, throughout history oil
producers have held back production in spare, called spare
capacity. Spare capacity is held back from fields that can be
quickly tapped to act as a shock absorber when demand is strong
or disruptions occur to avoid the need for wild price swings.
Since the 1980s, OPEC has used spare capacity to stabilize
prices, but over the last 7 years, OPEC's spare capacity has
eroded and they can no longer do the job. The reason is a mix
of veracious, relentless oil demand growth in fast-growing Asia
and the Middle East on the one hand, and disappointingly small
net oil production oil growth on the other. While experts
differ, many see this strong demand, weak supply, tight spare
production capacity lasting for the foreseeable future. If so,
crude oil prices will continue gyrating wildly, and as go crude
oil prices, so go gasoline prices.
As many have said, there is no silver bullet or short-term
solution for our predicament. Using the Strategic Petroleum
Reserve to smooth gasoline prices, absent a severe supply
disruption, would be deeply unwise and counterproductive. The
SPR and the Department of Energy are not well-suited to
stabilizing global oil prices. Reserves are too small relative
to market flows, information is too poor, and SPR interventions
would be politicized. If Washington sold SPR oil every time
gasoline prices rise, we will end up with no SPR, more volatile
prices, and less protection against supply interruptions.
Now 7 years into the Space Mountain era of gasoline prices,
it is time to get beyond the blame games and on with solutions.
Yes, OPEC, oil companies, investors, EPA, consumers,
geopolitical trends and events, central banks, poor data,
subsidies, all these factors have and will play a role in the
world's enormous and complicated oil market. But the real
reason for gyrating oil prices is a tidal wave of new demand
outside the United States that is colliding against an oil
industry struggling to increase oil supply enough to meet it.
These are iron laws of economics, and we will have to live with
them. It is past time to enact easy, common-sense steps like
improving data or bolder ones, such as vastly increasing
domestic and international energy supply, moderating demand,
strengthening our resilience to oil price gyrations. We should
act quickly and resolutely as if our jobs, our standard of
living, and national security depended on our success. Taking
counsel from President Lincoln, who said in regard to a
different crisis ``The dogmas of the quiet past are inadequate
for the stormy present. The occasion is piled high with
difficulty. We must rise to the occasion. As our case is new,
so must we think anew and act anew.''
Thank you.
[The prepared statement of Mr. McNally follows:]
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Mr. Whitfield. Thank you, Mr. McNally.
Mr. Gerard, you are recognized for 5 minutes.
STATEMENT OF JACK N. GERARD
Mr. Gerard. Thank you, Chairman Whitfield, Ranking Member
Rush, and members of the subcommittee. Thank you for inviting
me here today to speak to you about the rising cost of fuel.
Americans are understandably frustrated by rising fuel
costs, which is the direct result of weak energy policy.
America is energy-rich, yet too many talk like we are powerless
to do anything but watch global events drive energy costs
higher and that there are no solutions.
Members of the committee, that is just not so. With sound
policy and bold leadership, we can put this country's vast
resources to work to literally change the energy equation.
Gasoline prices are climbing primarily because of the cost
of crude oil, which accounts for 76 percent of the price at the
pump. The market forces driving crude higher are challenging,
but America doesn't have to be held captive to them. We have
choices. By increasing access to North American energy, we will
help put downward pressure on prices. Supply matters. That is
not just API saying so, it is others who have called on the
Saudis to produce more, others who have called on other
sources, such as the Brazilians, and yet others who recognize
supply matters by calling for release from the Strategic
Petroleum Reserve. This is not a long-term energy strategy.
Government estimates say we will still get more than 55 percent
of our energy from oil and natural gas over the next 2 decades,
57 percent of which currently comes from outside the United
States. The question is whether we produce that energy here or
rely on less stable sources in the future.
With actions today, over the next 2 decades we could add
the oil and natural gas equivalent of 10 million barrels a day.
The markets would see that America plans to be an energy
leader, not a follower, and American consumers would see that
help is on the way.
But current policies block this vision. The call for an
``all of the above'' energy approach sounds good, but we are
seeing actions that hinder oil and natural gas development. The
administration says one thing, does another, and sends mixed
signals to the marketplace. The administration says it is for
more oil and gas, but rejects the Keystone XL pipeline, which
would bring 800,000 barrels of oil per day. It says it is for
boosting domestic production, but new leasing and the number of
new wells on Federal lands are both down. Its latest offshore
plan keeps 87 percent of these areas off limits, and the Gulf
of Mexico production is forecast to be down nearly 21 percent
in 2010. The administration says it is for natural gas, but 10
Federal agencies are now considering new regulations that could
needlessly restrict our ability to produce here on own shore.
It calls for all of the above, but then threatens companies
that could lead on energy with an $85 billion discriminatory
tax increase.
Mr. Chairman, this is sending the wrong message and must
change. Soaring production on State and private lands should be
our model. Shale plains in North Dakota, Pennsylvania, and
Texas are game changers, creating jobs, helping consumers, and
producing record levels of oil and natural gas. We need that
model nationally. Bold action that says we are serious about
energy, action that will actually increase supply.
With the right policies and with strong resolute
leadership, we can secure our energy future instead of
surrendering to outside forces. The President has an
opportunity right now to signal the markets and help put
downward pressure on fuel prices by showing we are serious
about developing our own vast resources. Our industry will help
re-urge the President to act now.
Thank you very much, and I look forward to answering your
questions.
[The prepared statement of Mr. Gerard follows:]
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Mr. Whitfield. Thank you, Mr. Gerard.
Mr. Drevna, you are recognized for 5 minutes for an opening
statement.
STATEMENT OF CHARLES DREVNA
Mr. Drevna. Chairman Whitfield, Ranking Member Rush, and
Chairman Upton, Ranking Member Waxman, thank you for giving me
the opportunity to testify at a very critical hearing here
today. I am Charlie Drevna, and I serve as President of the
AFPM, the American Fuel and Petrochemical Manufacturers.
We are a trade association that was just recently known as
NPRA, the National Petrochemical Refiners Association, until
early this year, who represent the high tech American
manufacturers who use oil and natural gas to make almost all
the fuels, heating oil and petrochemicals used in our Nation
today.
As has been stated previously and is absolutely 100 percent
accurate, current gasoline prices are primarily driven by high
global crude oil prices. The cost of crude accounts for 76
cents of each dollar that consumers pay for gasoline. That is
followed by an average of taxes at 12 cents. Next comes
distribution and marketing at 6 cents. That leaves refining
just 6 cents on every dollar to pay wages, run the refinery in
a safe and efficient manner, and produce the fuels that
Americans need and deserve. So refiners don't set the price of
oil any more than automakers set the price of steel or bakers
set the price of wheat. Oil is an international commodity that
trades in a free market.
Now historically, the best mechanism to address high crude
prices has been to increase global oil supply. When we have
done this as a Nation, we have sent that message that the U.S.
is serious about meeting our energy and national security
needs. American companies could increase the supply of crude
oil in two ways. First, the Federal Government would allow
increased production of oil in the United States and off our
shores. As Mr. Gerard so stated, we are not an energy-poor
Nation. We are an energy-rich Nation who lack the political
will to develop our own natural resources and to provide
consumers with the products they need at a reasonable cost.
Second, President Obama should approve the construction of
the Keystone XL pipeline to bring Canadian oil refineries to
the U.S. Gulf Coast.
I recently saw a clip on TV, a member of Congress talking
about the SPR, and that equated it to Kryptonite in that the
SPR was like Kryptonite to the cost of oil. Well, I am not so
sure about that, but I am sure that we do have a strategic
reserve. Unfortunately, it is locked up. It is locked up off
the shores of the Atlantic, it is locked up off the Eastern
Gulf, up through the Pacific and all the way through Alaska. It
is locked up on Federal lands. It has been locked up for over
30 years, and the critics will say well, it is going to take a
lot of time to develop. It is going to take 4 years, it is
going to take 4 more years. Well, if we had that same
mentality, we wouldn't have the Transcontinental Railroad, we
wouldn't have the Hoover Dam, we wouldn't have the Golden Gate
Bridge or any other structure that was so needed in this
Nation.
So developing our own resources as well as our own natural
gas resources is going to produce jobs for American workers and
revenues for the government at all levels.
Today, our high crude prices and logistical constraints on
a movement of oil and fuel around the country are creating
challenges for both refiners and American consumers. In
addition, fuel manufacturers are hit with a regulatory blizzard
that threatens refinery operations in our Nation. These include
Tier 3 regulations to reduce sulfur in gasoline, greenhouse gas
regulations, lengthy permit regulations, and finally
requirements under the Renewable Fuel Standards involving
biofuels. Proposed new Federal regulations threaten to raise
the energy costs further for every American consumer, with
little or no environmental benefit. These regulations would
also threaten American jobs and weaken--further weaken our
economic and national security.
One bright spot on the horizon is our export of refined
petroleum products, primarily diesel fuel. Exports don't raise
gasoline prices; rather, exports bring billions of dollars to
America, preserve and create jobs, and strengthen our own
economy and reduce our trade deficit. Producing more oil and
natural gas right here in America, getting more from Canada and
reducing harmful overregulation can't take place overnight, but
they would give us our best shot at creating a secure and
stable energy supply to serve the American people. Doing these
things would also create a manufacturing renaissance, and more
American jobs.
Thank you again.
[The prepared statement of Mr. Drevna follows:]
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Mr. Whitfield. Thank you, Mr. Drevna, and Mr. Milburn, we
look forward to your testimony. You are recognized for 5
minutes.
STATEMENT OF CHRIS MILBURN
Mr. Milburn. Thank you. Good morning. My name is Chris
Milburn. I am from Hilliard, Ohio, and have been a professional
truck driver for close to a decade. I own my own truck and haul
retail merchandise while leased to a motor carrier. I am here
on behalf of the Owner-Operators Independent Drivers
Association, commonly known as OOIDA. OOIDA's approximately
150,000 members are small business truckers from all 50 States.
The majority of trucking in this country is small business, as
93 percent of our Nation's motor carriers own 20 or fewer
trucks. My testimony will focus on the impact that high energy
prices have on small business truckers like me.
I can assure that these impacts are not only very real, but
even more significant when you consider them in context with
the snowballing cost of regulations coming out of agencies like
the Department of Transportation and the Environmental
Protection Agency. Just last Monday, the average highway diesel
fuel was over $4 per gallon, an increase of 33 cents over 2011.
To give you some perspective, the average OOIDA member runs
their truck over 100,000 miles each year. At $4 per gallon,
annual fuel costs can be well over $80,000. When the price of a
gallon of diesel increases by a nickel, a trucker's annual
costs increase by $1,000. This results in an extra burden on
the small business trucker whose average annual income is
approximately 40,000.
Trucking is a hyper-competitive business, and each of us
operates on extremely thin margins, so any cost increase,
especially those related to fuel or regulatory mandates, has an
impact. For me, the impact of fuel costs is best shown through
the hundreds of dollars I pay to drive miles that I am not
directly compensated for. When price spikes occur, it becomes
much more difficult to manage our businesses. However, when
prices are not spiking, truckers can take steps to manage these
realities. Extra dollars spent on fuel means fewer dollars
available to put back into my business. Countless truckers over
the years have felt the pain of high fuel prices on their
businesses and have had to put off buying new equipment, or
worse. For many truckers, business income and family income are
basically one in the same. Money isn't available to put towards
what is important to their family, including basic household
expenses like mortgage payments.
OOIDA has long supported energy policies focused on
addressing the impact of energy costs on small business
truckers. OOIDA supports a comprehensive approach that combines
increasing domestic energy production with other efforts,
including greater market transparency, increasing the focus on
natural gas as a future energy source, and passing a new
surface transportation bill.
Let me talk a little about the role of domestic energy
production from the perspective of a small business trucker. In
the past, U.S. production has effectively served as a relief
valve by helping to mitigate price spikes. However, the
strength of that relief has decreased as regulatory roadblocks
have reduced domestic production on Federal lands and waters.
Impeding domestic production is something truckers find very
difficult to understand, particularly during these high energy
prices. Like most truckers, the cost of fuel is far and away my
largest annual operating expense. Trust me when I tell you that
no government agency is more motivated than I am to make
certain that I am running my vehicle as efficiently as
possible. I do not need government regulations telling me how
to operate efficiently or forcing me to buy a truck that meets
some prescribed government efficiency standard, but misses that
standard, the operating and efficiency standards I need for my
business.
Unfortunately, that is just what happened when EPA
completed the first ever fuel efficiency rule for heavy duty
trucks. This regulation ignores the collective knowledge of
millions of truckers, instead imposing technologies that work
for certain types of trucking operations on every one of our
Nation's trucking companies. EPA claims this regulation will
save each trucker tens of thousands of dollars; however, such a
claim is bordering on little more than junk science. There are
over 500,000 motor carriers, each running on varied terrain and
hauling varied cargo. For many, there is no way this
regulations mandates will result in any true fuel savings; yet
the only new trucks available after 2014 will be those that
comply. Those trucks will cost an additional $6,200 because of
these regulations. The truck I have today gets fewer miles to
the gallon and is $30,000 more expensive because of EPA
mandated emissions reduction equipment and today's diesel fuel
costs because of these mandates. We can no longer regulate
without recognizing the impact of regulations, and we cannot
view regulations as the end all, be all solutions to high fuel
prices.
Mr. Chairman, thank you for this opportunity to testify,
and I look forward to any questions.
[The prepared statement of Mr. Milburn follows:]
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Mr. Whitfield. Thank you, Mr. Milburn.
Mr. Weiss, you are recognized for 5 minutes for an opening
statement.
STATEMENT OF DANIEL J. WEISS
Mr. Weiss. Thank you, Mr. Chairman, Ranking Member Rush,
and members of the subcommittee. Thank you very much for the
opportunity----
Mr. Whitfield. I am sorry, I am not sure your microphone is
on, Mr. Weiss.
Mr. Weiss. Sorry. OK. Do I get the seconds back on the
clock? Just kidding. It is like the referee putting the time
back on a football game.
My name is Daniel J. Weiss. I am a senior fellow at the
Center for American Progress, which is a progressive think
tank.
The question is why are there high oil and gasoline prices
in 2012? There has been no major supply disruption at home or
abroad. Wall Street speculators are preying on commercial end
users' fears of such an interruption to drive up prices and
make a profit. An analysis by McClatchy Newspapers found that
these speculators are making nearly 2/3 of the trades compared
to 1/3 of the trades by end users of oil. The Washington Post
just yesterday found that ``Many analysts agree that trading
activity is pushing up oil prices over and above what supply
and demand would normally dictate.'' Last year, the CEO of
ExxonMobil told the Senate that the oil price was $30 to $40
higher than supply and demand would indicate.
Now this oil and gasoline price spike that we are
experiencing now is not a first time event. Fortunately, we can
better withstand its impact because of President Obama's
leadership. We are using the least amount of oil in 11 years
due to the vehicle fuel economy standards adopted in 2009. We
are also producing the most oil in at least 8 years, 13 percent
more since President Obama took office. If we could go to the
slide, that would be great.
[Slide.]
The U.S. has more oil and gas rigs than the rest of the
world combined. As you can see, the blue line at the bottom is
the increase in number of rigs, the red line at the top shows
that gasoline prices. And as you can see, even as the number of
rigs we have in operation has climbed dramatically, the price
of gasoline has also climbed. The--in addition, the Interior
Department reports that 3/5 of the leases for oil held on
public lands are undeveloped and there are also thousands of
leases in the western Gulf of Mexico that are held but
undeveloped. Fortunately, for the first time in 15 years, the
U.S. produces a majority of its oil, but because oil is prices
on the global market led by the OPEC cartel, more production
here does not lower prices and growing worldwide demand can
offset our lower consumption.
There are no quick fixes to reduce high oil or gasoline
prices. In 2008, President George W. Bush said ``If there was a
magic want to wave, I would be waving it to lower prices.''
President Obama agreed. ``There are no silver bullets short-
term when it comes to gas prices, and anybody who says
otherwise isn't telling the truth.'' He noted that the United
States uses 20 percent of the world's oil, but only has 2
percent of the reserves. Instead, an ``all of the above''
strategy is necessary and should feature investments in modern
fuel economy standards, alternative fuels, and public
transportation. Ultimately, we have to lower our dependence on
oil.
Reducing oil use saves families money. The next improvement
of fuel economy standards will reduce oil use by more than two
million barrels a day. Modern 2025 cars will go twice as far on
a gallon of gas, and will save their owners $8,000 and lower
gas purchases compared to 2010 cars. Additionally, Congress
should pass bipartisan bills to invest in electric passenger
vehicles and natural gas powered trucks, the bill sponsored by
Mr. Sullivan.
But instead of investing in such innovative technologies,
we fund $40 billion per decade in tax breaks for big oil
companies. Recipients include BP, Chevron, ConocoPhillips,
ExxonMobil and Shell, which made a combined profit of $137
billion in 2011 while they produced 4 percent less oil. In
2005, President Bush supported ending oil tax incentives. ``I
will tell you, with $55 oil, we don't need incentives for the
oil and gas companies to explore. There are plenty of
incentives.''
As Mr. Whitfield said earlier--Chairman Whitfield said
earlier, we need to provide immediate assistance to help
consumers. One way to do that for the short-term is to sell a
small amount of oil from the nearly full Strategic Petroleum
Reserve in coordination with sales from international reserves.
Past sales have lowered oil and gasoline prices every time,
even when the Congress under Speaker Gingrich in 1996 sold
reserve oil to reduce the deficit. Such a sale would burst the
bubble caused by Wall Street speculators driving up prices for
a quick profit. Additionally, the Dodd-Frank law includes
potent weapons to limit these speculators'' ability to dominate
the market, and it should be fully implemented and enforced.
One more thing about the Keystone pipeline. The State
Department found that building the pipeline would not have an
impact on crude oil supplies or prices.
Today's hearing on high gasoline prices is like the rerun
of a bad movie. It is up to you to change the ending. The
American people would give you a standing ovation.
Thank you.
[The prepared statement of Mr. Weiss follows:]
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Mr. Whitfield. Thank you. Mr. Breen, you are recognized for
5 minutes.
STATEMENT OF MICHAEL BREEN
Mr. Breen. Thank you, Chairman Whitfield, Ranking Member
Rush, members of the committee. Ladies and gentlemen, I am
honored to appear before you today to discuss this issue.
I come before you first and foremost as fellow citizen, one
deeply concerned about the future prosperity and security of
this great Nation. I serve as the Vice President of the Truman
National Security Project, a leadership institute dedicated to
forging strong, smart, and principled national security policy
for America. As a former Army Captain and an Iraq and
Afghanistan combat veteran, I am also proud to be one of the
leaders of Operation Free, a non-partisan nationwide community
of veterans dedicated to the common belief that our national
addiction to oil poses a clear national security threat to the
United States.
The veterans of Operation Free have seen the consequences
of our dependence on oil first-hand on the battlefield. As a
young lieutenant on my first combat tour, I served on an
isolated fighting camp in an area south of Baghdad known as the
``Triangle of Death.'' My unit was entirely dependent on daily
fuel convoys to power our generators and fuel our vehicles.
Recognizing this, Iraqi insurgents consistently ambushed the
convoys while my infantry company fought to protect them,
leading to almost-daily firefights we jokingly called
``fighting for our supper.'' The insurgents had recognized a
crucial weakness, one that our Nation shares, one that Osama
bin Laden once referred to as America's ``Achilles heel'': our
dependence on oil as a single source of fuel.
America sends over $1 billion per day overseas for oil. It
should not be a surprise, then, that oil is the single largest
contributor to our foreign debt, outpacing even our trade
imbalance with China. Worse, far too many of those dollars wind
up in the hands of regimes that wish us harm.
For every $5 rise in the price of a barrel of crude oil,
Putin's Russia receives more than $18 billion annually,
Chavez's Venezuela an additional $4.9 billion annually, and
Iran an additional $7.9 billion annually.
Today, our Nation remains locked in a high-stakes
confrontation with a volatile Iran. Iran's pursuit of a nuclear
weapons capability and support for terrorism are among our
gravest national security challenges. As we grapple with those
challenges, we must not forget that neither nuclear weapons nor
support for terrorism comes free. According to the CIA, over 50
percent, over half of Iran's entire national budget comes from
the oil sector. That is enough to pay for their nuclear
program, support for terrorism, and aid to despots and
dictators like Syria's Assad.
But Iran is not America's only oil-funded security threat.
Even Afghanistan's Taliban benefits from ever-increasing oil
prices. According to former Special Envoy Richard Holbrooke,
the Taliban's major source of funding is private donations from
individuals in oil-rich Iran, Saudi Arabia and other Persian
Gulf states. Opium is number two.
Congress must act to meet this danger in the only way that
makes sense, by developing a broad set of alternatives to oil.
As has been said frequently, there is no single solution, no
silver bullet, that can break oil's grip on our national
fortunes, but fortunately, Congress has silver buckshot in its
arsenal. We can and must aggressively pursue policies that open
a broad range of alternatives to oil.
This morning in North Carolina, President Obama is
announcing a ``Race to the Top'' challenge to encourage
communities across America to adopt advanced vehicles, building
infrastructure, removing regulatory barriers, and creating
local incentives. What is most exciting about this proposal is
that it embraces choice. Communities themselves are free to
decide if electric vehicles, natural gas, or alternative fuels
are the best for them. The administration has also proposed
improvements to the current tax credit for electric vehicles,
tax incentives for alternative fuel commercial trucks, and a
research and development grand challenge designed to bring down
the cost of electric vehicles. These proposals may not be
perfect, but they are certainly steps in the right direction,
and I hope that this Congress will work with the administration
to improve and expand upon them.
My earliest military training taught me to anticipate
threats and take action to defeat them. Our military leaders
understand this when it comes to the cost of oil, and our sole
dependence on this single source of fuel. This is a cost that
extends beyond the gas pump. It extends onto the battlefield.
So I respectfully conclude with a simple request: lead us.
Lead us in building an alternative energy economy that can
break our dependence on oil, and finally put Americans in
control of our own energy future.
Thank you.
[The prepared statement of Mr. Breen follows:]
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Mr. Whitfield. Thank you. Mr. Eichberger, you are
recognized for a 5-minute opening statement.
STATEMENT OF JOHN EICHBERGER
Mr. Eichberger. Thank you, Mr. Chairman. My name is John
Eichberger. I am with the National Association of Convenience
Stores.
Convenience stores sell about 89 percent of the gasoline at
retail in the country through 121,000 stores. Of those 121,000
stores that sell fuel, 58 percent are single store companies,
true mom and pops. What I want to talk about a little bit is
how retailers set prices, and basically I describe it as it is
truly a street fight. Retailers look at competition, they look
at their cost. We post our prices on 20-foot signs. Customers
can shop for the best value driving 45 miles an hour without
even stopping. We did a survey earlier this year that 40
percent of consumers will drive 5 minutes out of their way to
save as little as 3 cents a gallon. That means that retailers
have to figure out the best price from a competitive standpoint
to sell fuel.
In our industry, 2/3 of our overall sales are fuel related.
Three-quarters of our profit, however, comes inside the store,
so we need to set prices that attract customers to our
facilities, and then figure out ways to get them inside the
store to sell them items where we make more money, such as
coffee and sandwiches.
We also have to pay close attention to cost, however. In
2011, we calculated the average cost to sell a gallon of
gasoline is about 17 cents. That means we need to mark up our
fuel about 17 cents just to break even. Unfortunately in 2011,
the average margin was actually 18.2. The average retailer is
making 1.2 cents per gallon in 2011. But even that is difficult
sometimes because the cost of wholesale fuel changes rapidly,
several times in one day. Because each retailer incurs
different costs, if a retailer gets a 10-cent increase today,
they might not be able to pass that along to their customers
immediately because the competition won't allow them to, so
they eat some of that increase and they lose margin going up,
and they try to recover when the prices come back down, but the
pricing decisions are constant among all retailers at the same
time. They are fighting for that customer every single day.
Our wholesale prices are heavily dependent on crude oil.
Both products are traded on the open market, and as has been
mentioned many times today, speculative investment into these
commodities markets has an inflationary influence on the price
that we pay. Any type of indication of what future supply and
demand may have can change the way traders bid the price up or
down, and that affects the price consumers pay at the pump.
Right now we know oil is making about 75 to 80 percent of the
retail price of gasoline, and that needs to be addressed.
So a couple things that I think we can do to help address
the issue, unfortunately, retailers don't have a whole lot of
flexibility. Our margin right now this year so far is averaging
3.6 percent. There is not a whole lot of room to maneuver to
give customers a better deal at the pump. They are trying,
though. A lot of customers--a lot of retailers are offering
discounts to customers to entice them to come to their stores.
Our goal is to give them the best value at the pump so they
will buy more products inside the store.
But there are some things I think Congress can do, and Mr.
Waxman mentioned in my written statement, I do believe that if
we increase international supplies of oil, domestically and
internationally, that will have an effect on traders and
hopefully will bring prices down on the market to benefit
consumers. I also think we need to take a careful look at our
regulatory structure. Whether a regulation being proposed and
considered is beneficial to the environment, to consumers or
not, it is going to have a cost and we need to recognize those
costs will be passed on to customers. So as we are thinking
about regulatory structures, let us think about how we can
accomplish our objectives in the least costly manner possible
at the benefit of our customers.
And finally, I think we need to really think about
harmonizing our fuel regulations. We have great objectives. Let
us reduce our dependence on oil, improve efficiency, become
more energy secure, benefit our customers with lower prices.
Unfortunately, we don't always take our regulatory proposals
and balance them and coordinate them. For example, the current
proposal to increase CAFE standards takes about 54.5 miles per
gallon. A great objective, however, I took a look at EIA's
projections on a more modest CAFE proposal. If you compare that
to the Renewable Fuel Standard, in 2022, we are supposed to
bring 36 billion gallons of renewable fuels to the market. If
we have a more modest CAFE proposal, to make that happen we
have to include 37 percent of every gallon of gasoline is going
to have to be renewable. Unfortunately, my stores are not
capable of selling that type of product. If we have to replace
all of our tanks and dispensers, the cost is going to be about
$22 billion. Not to mention EIA projects that the only vehicles
right now that can run on that fuel are flex fuel. In 2022,
they are only going to be 15 percent of the market. We have two
policies that from a logical perspective may make sense, but
together they can't work together. We need to really think
about a comprehensive coordinated fuels policy. How do we
obtain our objectives in a way that makes sense? Let us get
these projects to market, let us reduce our dependence, improve
our efficiency, help the customer at the pump, and let us do it
in a smart way. That is going to take a fresh approach to
regulatory standards and objectives.
I thank you very much for your time.
[The prepared statement of Mr. Eichberger follows:]
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Mr. Whitfield. Thank you, Mr. Eichberger.
At this time I recognize myself for 5 minutes of questions.
We do appreciate the testimony of all of you.
Whenever we talk about gasoline prices, we get into this
inevitable discussion of moving to new technology versus the
internal combustion engine, and the basic question comes out to
be, in my view, how much can the Nation afford? You cannot just
snap your finger and move to new technology very quickly. And I
know, Mr. Weiss, the topic of today's hearing is about gasoline
prices and what do we do to get these prices down. And we are
not talking about, you know, 25 years from now or 30 years from
now, although that is important in the long run. But I was
reading, for example, that your organization called for a tax
at $9.50 per barrel on imported oil. Now obviously that would
raise gasoline prices, so why would your organization be
advocating that?
Mr. Weiss. Well first, Mr. Chairman, the proposal is
designed to provide money to rehabilitate our crumbling
infrastructure here, particularly highways and public transit
systems. Doing both of those things will actually reduce oil
use here.
Second, we could phase in a proposed oil import fee over a
few years so the impact on gasoline prices would be relatively
minimal, compared to these swings that we are seeing today, and
we take those funds and invest in infrastructure, then we will
actually be saving consumers money in the long run.k
Mr. Whitfield. But you think you could put this tax on and
have a very small increase in actual gasoline prices, is that
your----
Mr. Weiss. The rule of thumb is every $10 increase in the
price of oil is a quarter or 25 cent increase in the price of
gasoline. So if you phased it in over, say, 3 years, you are
talking about adding 8 cents to the cost of a gallon of gas at
a time where you will be helping consumers save more by
increasing their fuel economy by having roads that aren't
crumbling, avoiding detours for bridges that are out, helping
transit systems which are----
Mr. Whitfield. Let me ask you another question. I know you
are advocating removal of any tax breaks for oil companies. Now
are you also in favor of removing any tax breaks for wind
power, solar power, electric cars?
Mr. Weiss. Well as you know, Mr. Chairman, in this country
we have a long history of providing assistance for emerging
industries, starting--going back--as far back as the railroads,
the internet, radios, television. What we are proposing--may I
finish, sir? We are proposing that we help these emerging
industries like wind and solar. Some of these tax breaks for
the oil industries are nearly 100 years old.
Mr. Whitfield. Do you realize we have spent millions of
dollars and many of these companies have already gone bankrupt,
and I don't think that that is protecting the taxpayer dollars.
Mr. Gerard, one question I would like to ask you, when Al
Gore was in the U.S. Senate he used to talk frequently that the
U.S. possesses only 2 percent of the world's proven oil
reserves, and as far as I know, Al Gore was the first person
ever to use that figure. There is a difference in proven and
unproven reserves. Now when we talk about the U.S. only
possesses 2 percent of the world's proven oil reserves, what is
the difference in that and unproven?
Mr. Gerard. I can only assume he uses that particular
number to suggest or imply that we have little oil in this
country.
Mr. Whitfield. Right.
Mr. Gerard. Let me say, first and foremost, we have vast
resources here in the United States. In fact, for the past 30-
plus years, we have had 85 percent of it off limits so we can't
even go out and define, look for it, and identify it. Look at
the situation in North Dakota today. Five years ago we thought
we had 100, 200 million barrels of oil there. Today it is
estimated to be somewhere between 14 and 20 billion barrels of
oil under the State of North Dakota. So there are vast
resources here in this country.
The term that is being used is a very technical term
showing only those that have been proven by drilling, so it
shows 2 percent. Even the EIA, the Department of Energy
recently said our reserve--our estimated reserve is at least 10
times that, but when you go beyond that, our experience in the
Gulf of Mexico, for example, we have developed and produced
eight times what was estimated to be there early on. Give us
the opportunity. We will invest our risk--we will risk our
capital. We can produce a lot of energy in this country by
Americans for Americans. We have vast resources.
Mr. Whitfield. Thank you. My time is basically expired, so
Mr. Rush, I recognize you for 5 minutes.
Mr. Rush. Thank you, Mr. Chairman.
Mr. Weiss, a growing number of people are concerned that
Wall Street speculation is also playing a role in driving up
oil and gasoline prices. What is your thoughts on this and how
concerned should we be about speculation driving up the price
of oil?
Mr. Weiss. Thank you, Mr. Rush. I think we should be very
concerned. The evidence is fairly strong that Wall Street
speculators and not commercial end users, like Mr. Milburn, for
example, are the ones that are driving up prices. The
Washington Post reported yesterday that there was an analysis
by the Federal Reserve Bank in St. Louis that determined
``Financial speculative demand shocks were responsible for at
least 15 percent of the huge run up in oil prices between 2004
and 2008.'' And there is a whole host of other studies that all
point in that direction. The Dodd-Frank law does provide tools
to the Commodities Future Trading Commission to help reign in
Wall Street speculators, but those tools have yet to be
implemented and we should urge the agency to do so.
Mr. Rush. Are there any other actions that we can take to
reduce the impact of speculators?
Mr. Weiss. I think the most important one is to have CFTC
set position limits for Wall Street speculators, which really
limits them to a certain amount of oil they can hold. They
worked on their part of this rule, but they have to work out
some definitions with the Securities and Exchange Commission,
which to my knowledge hasn't happened yet. They are planning on
implementing the rule sometime next year. I believe that we
ought to urge that they speed up the implementation of that
rule.
Mr. Rush. Twenty percent of the world's oil is consumed by
this Nation, and we only have 2 percent of the oil reserves in
the world. We are not going to be able to drill our way out of
this problem, as the President has said many, many times. We
are producing more oil now than we have in years, but gasoline
prices are continuing to go up. Is there any reason to believe
that drilling more would result in lowering gasoline prices?
Mr. Weiss. Well first, I believe that responsible drilling
is a very important component of our energy policy, because the
more we produce here, the less we have to import, the more it
helps our balance of payments and you can recycle those dollars
in the U.S. instead of sending them overseas. It is unfortunate
that in the Department of Interior, for example, just found
that 3/5 of the leases for onshore oil production that are held
by oil companies are not being developed. There are thousands
of leases in the western Gulf of Mexico that oil companies hold
that are not being developed. In fact, the Energy Information
Administration found that 75 percent of the offshore oil and
gas in the lower 48 States is already open for development, so
we have got the oil resources there. Let us develop them in a
responsible way. By the end of this year, we are going to have
more rigs in the Gulf of Mexico than we had before the BP oil
disaster occurred in 2010.
So we are making progress in that regard. Let us use our
existing leases that oil companies hold but they haven't
developed yet.
Mr. Rush. Well let us get moved to what I will consider
some real--some of our realities. You said that the fear of
disruptions of oil production in the Middle East creates the
price of oil, just the fear of it. Can you explain the--that
relationship? How does fear increase the price of oil and cause
potential disruption?
Mr. Weiss. Sure. Well commercial end users like, for
example, Mr. Milburn and people who are truckers, need to have
oil to power their vehicles and we need it to power our
economy. If people believe there is going to be a supply
disruption, then they will bid on contracts to lock in a
certain price now. Once that happens, then other people say
wow, the price is going up, I better lock in my contract now
before the price goes up any further. And then somebody else
says well, you know, Mr. Milburn just locked in his price, I
better lock in my price too. And that process leads to sort of
an inflationary psychology. And what--it is being driven not by
commercial end users, it is being driven by Wall Street
speculators who are making 2/3 of the trades right now.
Normally commercial end users make about 2/3 of the trade and
Wall Street speculators make about 1/3. Now it is the opposite.
Mr. Whitfield. Gentleman's time is expired. At this time I
recognize the gentleman from Illinois, Mr. Shimkus, for 5
minutes.
Mr. Shimkus. I love this committee. I love this
subcommittee. I have so much anxious questions. I will try to
be calm, but if fear drives up speculation--you know how you
drive the stake in the heart of a speculator? You flood the
market with commodity product. I mean, everyone talks about the
risk taker when they make profit because they bet right. No one
talks about the risk taker when he bets wrong and loses
everything. You know how you flood the market with oil? You do
Keystone XL pipeline. You send an immediate signal to the
country--thank you, my fans--you send immediate signal to the
country that we are going to open up the third largest oil
reserve on earth to the U.S. market. You think that doesn't
affect the speculators? It will scare the bejeebers out of
them, and those who take in big positions now will lose their
shirt. And that is how you do it.
Then we can talk about the OCS. Another point, just because
you have a lease doesn't mean there is oil underneath there.
You have to look for it. It takes capital expense. And one more
thing, because I am from southern Illinois and we drill for oil
in southern Illinois, little marginal wells, great prices. We
are doing it right now. I am tired--I am really tired of this
attack on drilling, because my little mom and pop drillers, all
they want to do is if they don't hit the well, they want to
record that as an expense. That is all this tax break for big
oil is. If they don't hit, they don't count it as an expense.
You can write it off as a business expense if you drill and you
don't hit the oil. That is all it is. Now multiply that to a
multi-national corporation, it is the same thing. If they go
deepwater drilling and they don't hit, should they not write
that off as a business expense? Sure they should. Just like my
mom and pop should do it locally. All right, I got that off my
chest. Thank you.
Secretary Chu said we want European gas prices. You know
what they are right now? March in London, 8.17 a gallon. That
is going to take us off--this hearing is about gas prices, and
this administration from day 1 says we want high gas prices.
Guess what? They are going to get it. The President was asked
yesterday. Oh, I don't want high gas prices now because I am up
for reelection. You know, what was the unsaid part of that
statement? But I don't mind if they go up after the election.
That is the untold part of his response because as we know, the
secretary--which we will get a chance to talk to him next
week--wants European gas prices for a lot of reasons that we
have addressed before.
Let me talk to Mr. Breen a while, because really, the thing
that brings us together is really the debate. We are all about
energy security, we are all about decreasing our reliance on
imported crude oil. Twenty percent still comes from the Middle
East. We have got Iran, we have got the Strait of Harmuz, we
know we deployed there. Mr. Engel and I have a bill called the
Open Fuel Strategy which makes the basic premise, let us break
the monopoly of crude oil and a liquid transportation fuel, and
let us allow the individual consumer to make a choice on their
liquid transportation at the pump. What do you think about
that? Have you looked at that bill?
Mr. Breen. I can't say I have, sir, but in principle, that
sounds great to me.
Mr. Shimkus. Yes, and I would encourage you to look at it.
We have got a lot of great national security guys looking at
it. It would be--it would bring all comers--all we got to do is
get the liquid blend. My friend from the convenience stores,
obviously we have some issues, but once we get the blend, then
free the consumer. The monopoly is crude oil. Bring all comers
to the liquid transportation market and then compete, and let
the consumer--let them fight for the lower price. I have done
that before. I drive a flex fuel vehicle. I--when I get a
chance, I pump E-85 into that baby. But there was a time I
drove up and the E-85 was actually more than conventional
unleaded. Being the conservative fiscal Republican that I am,
guess what I did? I filled up on the unleaded regular. I wasn't
going to subsidize it. Get the competition. What is the problem
with this, John?
Mr. Eichberger. The only issue we have with alternative
fuels is one, do the customers want to buy them, and two, can
we lawfully sell them?
Mr. Shimkus. Yes, talk about lawfully sell them.
Mr. Eichberger. Lawfully sell them, we talk about E-15, for
example. We have to have equipment that is certified as
compatible with that equipment--with that fuel or we can't sell
it. We are grossly negligent, we are violating a bunch of
Federal laws. If we sell it to a customer and they put it in a
car that is not permitted to use that fuel, we can be held
responsible with a Clean Air Act violation, $37,500 fine, and
we could be responsible for voiding a warranty or damaging an
engine. Those are things that need to be resolved if we want to
bring these new fuels to market.
Mr. Shimkus. Thank you, Mr. Chairman. I am going to
encourage my colleagues to talk to me about a way to fix that
problem.
Mr. Whitfield. At this time I would like to recognize the
gentleman from California, Mr. Waxman, for 5 minutes.
Mr. Waxman. Thank you, Mr. Chairman.
This recent spike in oil--gasoline prices is just too
familiar. We have been there before. If you want to fix a
problem, I think we have to figure out the diagnosis correctly.
You can't cure pneumonia by treating a broken leg. The
fundamental problem isn't that we are not drilling enough or
even that we are too inefficient. In my view, the fundamental
problem is the United States is heavily dependent on a single
commodity, oil, and we don't control the vast majority of the
oil supply on most of the oil demand. Oil prices are set in the
world market, which means that we--even if we produce as much
as we consume, we would still have to pay the world market
prices for crude. Does anyone on the panel disagree that as
long as the U.S. is heavily dependent on oil, we will be
vulnerable to price volatility in the global oil market?
Well, I want to ask Mr. Weiss, it has become a Republican
mantra that the solution to high gas prices is more domestic
production. Do you agree with that notion, and if not, why not?
Mr. Weiss. Thank you. No, I don't agree with it. I think
more drilling is an important piece for our national security
as we talked about, but it is not going to solve high gasoline
prices in the way that you--for the reason you just described.
I think what we need to do is begin to invest in alternatives
like electric vehicles. Mrs. Biggert of Illinois has a bill
that would help create infrastructure for recharging. I believe
that is what the President will be talking about today.
Mr. Waxman. Well the question that I really wanted you to
answer is if we had more domestic production, would we have
lower gasoline prices?
Mr. Weiss. No, we would not.
Mr. Waxman. And the reason we would not?
Mr. Weiss. Because as you noted, oil prices are set on the
world market. The price of oil is about 78 percent of the price
of gasoline right now, and it is too easy for any of the OPEC
countries to change their production in order to keep the price
at a certain level. In fact, the Saudi oil minister in January
said that they thought an ideal price for oil was $100 a
barrel. Presumably, they will take actions to try and keep that
the case.
Mr. Waxman. So if we produce more oil in the United States,
it won't make a difference to the world price if the OPEC
cartel decides to reduce the supply?
Mr. Weiss. That is correct.
Mr. Waxman. Some countries, like Canada, produce more oil
than they can use. We are talking about if we can get self-
sufficiency on oil, but they have more than self-sufficiency.
They produce more oil than they use, and they are still subject
to the world market and they suffered from gas price spikes
just as we do.
Under President Obama, U.S. oil production is the highest
it has been since 2003. You wouldn't know it from some of the
comments that were made, but gas prices are still spiking. The
idea that our problem is insufficient oil production is a
fantasy, and I believe it is a very dangerous fantasy.
Mr. Breen, you are an expert on national security. Do you
think that just focusing on production is a dangerous approach?
Mr. Breen. Yes, sir, I do.
Mr. Waxman. And why?
Mr. Breen. Because as you said, it doesn't change the
overall dynamic, and more importantly, it doesn't change our
single source dependence. As long as we need this fuel for 95
percent of our transportation sector and virtually all of our
military operations, we are stuck with whatever the market
does.
Mr. Waxman. Mr. Weiss, what progress have we seen from
President Obama in reducing our oil dependence?
Mr. Weiss. We have made great progress in reducing our oil
dependence. We are using less oil than at any time since
February of 2001, and that is even as our economy is
recovering. It is due to the oil--I am sorry, the fuel economy
standards put into place by this administration that was signed
into law by President Bush. The fuel economy standards that the
President put in place in 2009 were originally signed into law
by President Bush in 2007. They are starting to have impact on
reducing oil consumption and that effect will only grow. By the
time the final standards are implemented in 2025, cars will go
twice as far on a gallon of gas and we will save over two
million barrels of oil a day.
Mr. Waxman. Mr. Breen, the President has called for
eliminating the $4 billion in tax breaks for oil companies, and
instead investing it in alternative energy. Would this improve
our economy and national security?
Mr. Breen. Sir, I believe it would improve our national
security in that it would incentivize alternatives. Again, the
fact that we are stuck with this single source of energy for
all of our needs with military and civilian is a huge national
security weakness that Iran and others exploit daily.
Mr. Waxman. The top five oil companies earned $137 billion
in profits last year and gas prices are rising. We have an
economic and national security imperative to reduce our
dependence on oil, and we are in a tight fiscal situation. I
think the President is right. The last thing we should do right
now is give the oil companies $4 billion a year in tax breaks.
Mr. Whitfield. The gentleman's time is expired. At this
time I recognize the gentleman from Texas, Mr. Barton, for 5
minutes.
Mr. Barton. Thank you, Chairman Whitfield. I would like to
ask Mr. Gerard if he knows what the peak production per day of
U.S. oil production has ever been?
Mr. Gerard. I don't have that with me, Congressman. I would
be happy to get it for you.
Mr. Barton. Is there anybody in the panel that knows?
Mr. Weiss. I think, Mr. Chairman--again, this is--I am glad
we are not sworn in. I don't want to be held to this.
Mr. Barton. This is not a trick question.
Mr. Weiss. I believe it is somewhere around 10 or 11
million barrels per day.
Mr. Barton. Yes, and we are--the latest number I have is
that we are producing about 5-1/2 million barrels of oil
production per day right now. That is as of 2010, and that is
obviously 2 years old, so it may be a little bit higher than
that.
Mr. Weiss. It is about--excuse me, sir. It is about--almost
six million barrels a day now. It is about 5.9, I believe.
Mr. Barton. So we are at six today, which the trend is up.
We have been as high as 10 or 11. We are consuming--my number
that I have in my mind is about 20 million barrels a day, it is
probably less than that. What is it now?
Mr. Drevna. Closer to 18.
Mr. Barton. Eighteen. So we have got imports going down,
which is a good thing. We have got domestic production going
up, which is a good thing, but we are still importing quite a
bit. And most of us on the Republican side do believe that a
robust domestic drilling program would significantly improve
production, especially if we do not over-regulate hydraulic
fracturing, which is now being used for oil production as well
as for natural gas production. I am told that all, all of the
oil wells that are being drilled up in North Dakota are
hydraulic refractured. Is that correct?
Mr. Gerard. Clearly the majority of them are.
Mr. Barton. They are, so what is a reasonable estimate of--
if we changed our policy to actually lease in a timely fashion
and drill in a normally regulated fashion on Federal lands as
we have been doing on private lands, how much additional oil
production per day could we reasonably expect in the United
States, including Alaska and OSC, say in the next 4 or 5 years?
Mr. Gerard. Well, a lot of it would depend, Congressman,
based on the permit process. Back to the earlier comments about
the leases not being used, today in the typical leasing process
from the point of acquiring a lease to getting to the point of
drilling is somewhere between 3 and 7 years. So you are going
to have to look at the permitting process. Earlier it was
commented that we have idle leases today. Let me tell you about
one so-called idle lease. It is a lease in Alaska today that
has been in place for 5 years. The company has spent $4 billion
on the lease. They haven't drilled one hole yet.
Mr. Barton. I think that is the Shell----
Mr. Gerard. It is the Shell.
Mr. Barton [continuing]. And I think we are finally going
to get to drill some this summer. I am told that.
Mr. Gerard. Well let me correct that, if I can. Not to take
your time, but what has happened recently is because they have
a 475-page oil spill response plan that has been filed, they
only have a 3-month window to drill. They are fearful somebody
is going to litigate that question and take them through the 3
months window, thus putting them into the sixth year of this
lease, which by this administration is defined as an idle
lease. So a week ago they essentially sued themselves to try to
get a judge to declare the oil spill response plan was
sufficient so they could have certainty that this summer during
the drilling window they could drill. That is the problem.
Mr. Barton. On Federal lands, the number that you just gave
is 3 to 7 years.
Mr. Gerard. Correct.
Mr. Barton. Does anybody refute that? I mean, that is a
pretty wide range, but even at that, 3 years, compare that with
what it would take to get a lease on private lands approved in
Texas. How long would that take?
Mr. Gerard. I will defer to other Texans here who say a
week, but----
Mr. Barton. Well I am told 2 days.
Mr. Gerard. Typically it would be considerably less, and it
is focused on moving the process so we can produce the
activity.
Mr. Barton. Which is best for domestic oil production, a
permitting process that takes weeks or a permitting process
that takes years?
Mr. Gerard. Clearly one that takes weeks.
Mr. Barton. OK, I yield back, Mr. Chairman.
Mr. Whitfield. Thank you. At this time I recognize the
gentlelady from California, Ms. Capps, for 5 minutes.
Mrs. Capps. Thank you, Mr. Chairman, and thank you to each
of our panelists for your testimony today.
Mr. Breen, I will start with you, and thank you as well for
your military service to our country.
Mr. Breen. Thank you, ma'am.
Mrs. Capps. Operational energy accounted for 75 percent of
the military's total energy costs in 2010. Despite the increase
in power saving technologies, the Pentagon remains tethered to
oil, as you said, and continues to pay the price for our
dependence in dollars and, of greatest concern, in lives. The
Pentagon knows this is a serious problem. Last year it released
an operational energy strategy to transform the military's use
of energy, and the President's fiscal year 2013 budget request
includes new support for alternatives. As a member of the
bipartisan Defense Energy Security Caucus, I strongly support
the goals of the administration in this area.
So I want to ask you about the need for the Pentagon to use
less energy and develop new clean energy technologies,
especially as we try to reign in the budgets and become a more
effective fighting force. My first question is what can the
Pentagon do for clean energy?
Mr. Breen. Thank you, Congressman Capps, and thank you for
raising this issue because I think it is critical to these
hearings.
The Pentagon can do a lot. Every time there is a $10
increase in the price of a barrel of oil, it costs the
Department of Defense about $1.3 billion. That is about the
weapons budget for the Marine Corps. That is a huge amount of
money. It also costs, as you mentioned, lives. About 50 percent
of the convoys that traversed Iraq and now traverse
Afghanistan, those dangerous roads, carry fuel. One in 24 of
those convoys ends in an American casualty. This is a very
costly business, moving this fuel around the battlefield.
As the largest consumer of energy in the Federal
Government, the Department of Defense can and is doing quite a
bit. The U.S. Navy, for example, is committed to reducing
petroleum use by 50 percent by 2015, with a goal of 40 percent
of total energy consumption from alternative sources by 2020.
We talk about alternative fuel mixes in cars. The Navy is
flying the Green Hornet. It is an F-18 high performance strike
fighter. These things go twice the speed of sound. They are
flying it very successfully on a 50 percent blend that is 50
percent jet fuel and 50 percent of it biofuel derived from the
Camalina plant. So if you can do that with a supersonic strike
fighter, I am sure you can do it with a car.
Mrs. Capps. So conversely, you just--do you want to give
another example of what clean energy can do for the Pentagon?
Mr. Breen. Absolutely, and this, again, extends to fuel and
it extends to other things. There is a sort of famous story of
one of the Marine Corps senior leaders travelling through
Marja, a very contested area in Afghanistan, and taking a
photograph on his cell phone of an Afghan man who had a tiny
little solar panel outside of his hut, and he sent that back to
the Pentagon. He said why is this guy kicking our butts? He is
self-sufficient on energy and we are relying on fuel convoys.
It is a major issue for operational forces out there in the
field.
Mrs. Capps. Thank you for answering the question so
thoroughly. This relationship is a win-win. Clean energy
solutions make our military more effective. They save war
fighter lives, and the DoD procurement drives the American
clean energy economy. So I appreciate your being on the panel
today.
Mr. Weiss, thank you also for your testimony. As Mr. Breen
told us, our national and economic security will be
strengthened by the military's increased use of clean energy
technology. Can you please tell us how increased use of clean
energy technologies are going to benefit American families and
businesses, and help us prevent these fluctuating oil prices?
Mr. Weiss. Thank you for your question, Representative
Capps. I think that these investments, first of all, in these
new technologies create jobs. American--the American economy
and the American manufacturing economy has always benefited
from innovation. We need to continue to innovate n the
transportation field by technologies like the Chevrolet Volt,
which is the first plug-in hybrid electric vehicle that is
commercially available, and it is important to remember there
has been a lot of talk about the Volt, but in fact, the Volt
combined with the Nissan Leaf in 2011 sold twice as many cars
as the Prius did in its first year. It takes time for every
technology to be developed and commercialized and then see the
price come down. So I think those are the kinds of benefits
that we will see.
I also believe, as Mr. Breen was talking about, the
development of non-oil based fuels for the military will
eventually have commercial application, whether it is for
commercial aviation or as a fuel for transportation. I think
that is very important as well.
One difficulty we have right now is that with--we have flex
fuel vehicles that use the fuel E-85 that is only available in
about 2,000 service stations out of about 160,000 nationwide.
Mrs. Capps. Thank you very much. I yield back the balance
of my time.
Mr. Whitfield. Mr. Breen, you know, you mentioned the Green
Hornet, which is absolutely true and it is good that they are
doing that, but that fuel is costing over $70 a gallon right
now that they are using in the Green Hornet.
At this time I recognize the gentleman from Texas, Dr.
Burgess, for 5 minutes.
Mr. Burgess. I thank the chairman for the recognition, and
let me just say, because the President came out yesterday and
said he wants to improve efficiency energy use in this country
by the use of efficiency, and I agree with that. I was an early
adopter of the hybrid technology early in the last decade. I
didn't buy it so much because gas was expensive, because back
then it wasn't. I really bought it for that sense of moral
superiority I had when driving on the road, and it continues to
this day.
Just like Mr. Shimkus, I got to get some stuff off my
chest. Look, we had a hearing in this committee June or July of
2008. It lasted all day. We had all kinds of people here. In
fact, we had Walter Luken, who at that time was the acting head
of the Commodity Futures Trading Commission, and I kind of wish
we had Mr. Gensler here today to ask him some of these
questions about the great things he is doing with the Dodd-
Frank regulations, because I haven't seen them. However, one of
the things we heard that day over and over again was that part
of the problem with speculation was that the perception was the
market was very tight. And although there might be some
additional supply here and there, there was growing concern
because of the worldwide demand and that tightness led to the
proper environment for speculation to make a difference. And we
were also told, just as we have heard I think here today, it
was 4 to 7 years to go from drilling to production of product
that could be sold, so my question today would be if we had
made some decisions about production 4 years ago, we might be
reaping the benefits today. And if President Clinton had not
vetoed drilling in Anwar in 1996 or 1997, we would have the
benefit of that product today, and in fact, we would be selling
it at a higher price than was available in '96 or '97, and that
would help our balance of trades. So I think I would be all for
that scenario.
Let me just also say as a consequence of that hearing on
speculation, I have done a lot of looking into this in the time
since then, and I do believe that it is possible to manipulate
markets. After all, I grew up in a time when the Arab oil
embargo was in effect. I remember the cold showers of '73 and
'74, but that was an attempt by a sovereign nation to influence
political decisions in our country by manipulating the price of
oil. I don't know if it is widely reported, but I think it was
the collapse of natural gas prices that led to the collapse of
the Soviet Union in the late 1980s. So clearly, worldwide
events can be dictated by the cost of energy. As we heard
earlier today, without energy, life is cold, brutal, and short,
and expensive. So we don't want to go back to those times. We
want to have the energy available.
But I do want to ask our witness, Mr. McNally, I mean, your
brow was furrowed during some of the discussion that Mr. Weiss
was having, so I just wanted to give you a chance to expound on
that a little bit.
Mr. McNally. Thank you. I have to work on my body language.
I want to comment on the point that there haven't been
interruptions and the market is smooth and normal, and for some
odd reason gasoline prices have just suddenly leapt to all-time
highs. As President Obama said in his news conference
yesterday, there have been severe supply--some supply
interruptions. One he mentioned was Sudan. Recently the
Congress instructed the Energy Information Agency as part of
the sanctions bill in Iran to report on the supply inadequacy
of--the supply adequacy and the price of oil outside of Iran.
That report came from EIA last Wednesday, and let me just quote
one sentence or two. ``With respect to supply, the world has
experienced a number of supply interruptions in the last 2
months, including production drops in south Sudan, Syria,
Yemen, and the North Sea.'' Also they talked about demand, and
they said--about the market they said ``EIA estimates the world
oil market has become increasingly tight over the first 2
months of the year. Global liquids fuel consumption is at
historically high levels.'' So I guess I want to just correct
some facts there.
Mr. Burgess. And I am just pointing out in that
environment, the people who do deal with speculation--there are
people who do--that makes their environment much more favorable
to make money off of the buying of futures contracts when they
never intend to take delivery of the product. And I do wish
there were a way to make people eat their own dog food if they
make bad decisions. I would like to see the enforcement of
those contracts rather than allowing them to roll them over and
move that money down the road. I think there are some things
that I think Mr. Gensler could do, and for the life of me I
don't understand why he hasn't done them.
I have to ask one quick question. I think, Mr. Milburn, the
natural gas vehicles--I have got a Peterbilt plant in my
district. They make an off the line natural gas vehicle. I
noticed this morning that GE and Chesapeake are talking about
building some of the infrastructure that would allow more of
these vehicles to be used, not waiting on the Federal
Government to fund that project. Were you aware of that?
Mr. Milburn. In the trucking industry, compressed natural
gas is not a viable alternative at this time.
Mr. Burgess. But locally for like our bus market in Ft.
Worth, Texas, they run on compressed natural gas. I think the
Metro buses outside here----
Mr. Milburn. Yes, sir, that----
Mr. Burgess. So you can in certain applications?
Mr. Milburn. In certain--yes, sir, in certain applications
yes, it can be a viable alternative. For municipalities, for
smaller areas, but the range of compressed natural gas vehicles
in the class 8 markets today are not sufficient for us in our
operations.
Mr. Burgess. But now you have two private companies making
the investment to the infrastructure, and I would say that is a
good thing. Waiting on the Federal Government, we are broke. We
are probably not going to be able to help you.
Mr. Whitfield. Gentleman's time----
Mr. Burgess. But I would look to the private sector to do
this.
Mr. Whitfield. Gentleman's time is expired. At this time I
recognize Mr. Gonzalez of Texas for 5 minutes.
Mr. Gonzalez. Thank you, Mr. Chairman.
I know we led off with opening statements and everyone in
this room heard about the gas fight during the Obama years of
his presidency. But I guess I need to ask, who was President on
December the 17th, 2001? It was George W. Bush. The price of
gasoline for that week was $1.04. Who was President on July 7,
2008? George W. Bush. Average weekly price of a gallon of gas,
$4.05. Neither President Bush nor President Obama can really
control the price at the pump, and I wish we would just
acknowledge that. The issue is not that we have not found
greater resources and because of technology we can draw more
product out of the ground. That really shouldn't be the issue.
The issue should be is how do we free ourselves from market
manipulation that is going to continue, world markets, emerging
countries that are going to be our biggest competitors.
Mr. McNally, you must admit that if you own the oil, you
have the contract, and you are out there in the marketplace to
sell it, it is going to go to the highest bidder. It is that
simple. If you have a customer in the United States that is
paying only a dollar for something but you can sell it to
someone outside our boundaries for $2, you are going to sell it
for $2. Those are market principles. Those are free market
forces working, and we all agree with that. It is going to
continue as long as we continue to say just produce more
product, continue dependency on it. This is not about
dependency on fossil fuel that we are importing; this is about
dependency on fossil fuel, period. When we started this debate,
we always had it in the context that fossil fuel-based
transportation fuel was transitory in nature, that we were
transitioning to something else. We have stopped, for all
intent and purposes, and the problem with what we are
discussing today, it gives a false sense of security that if we
continue this, just because there is more supply, that
everything is going to be all right. I don't believe that. It
is a transition fuel, but I believe that it is going to be a
number of years that we are going to be still dependent on
fossil fuel for many, many reasons.
Now, we can't control this. Not the United States, not our
domestic producers, not our Canadian friends, not our Mexican
friends, all in North America. The Saudis couldn't do it in
2008. Mr. McNally, you know what I am talking about, because
President Bush asked, increase production and the Saudis said
we will do it, and they did. But then they said hey--in all
those cables that came out later, what did they say? Hey, it is
not about supply, it is about speculation. And we better do
something about how this is being controlled and who owns it,
and how they are determining the price. We are not going to
stop that. I don't see that it is going to stop, and I know
that Dodd-Frank and the commodities futures and such--I don't
think we are going to stop it, because market forces are market
forces. Fiduciary duties to investors will always remain the
same. You will sell it to the highest bidder.
Mr. Drevna, if you are going to tell me that because it is
based in the United States that somehow--and it should be
cheaper because transportation and other costs, and if you have
a competing bid that is higher, that you are not violating your
duty to your investor or to your shareholder, we have got
problems. So I have got 1 minute, just yes or no, and I am
going to ask this to the entire panel. Do you believe that this
country should continue to rely on fossil fuel-based
transportation fuels, that is, for the next 25 years before we
make any real progress? Yes or no.
Mr. McNally. I believe we will, not that we should, but we
will.
Mr. Gerard. Sixty-two percent of our energy today is oil
and gas. The administration will tell you 57 percent of our
energy in 2035 will still be oil and natural gas.
Mr. Drevna. Mr. Gonzalez, 60 percent--57 to 60 percent of
the crude oil that we use in this country is imported. We do
not export crude oil. We get crude oil from a number of
sources. Let us get it from our own country. Let us keep the
American refineries working with American jobs, exporting and
supplying our own costs consumers.
Mr. Gonzalez. I think we exported a tremendous amount of
refined products last year.
Mr. Drevna. Well, refined products, sir, refined product,
not crude oil.
Mr. Gonzalez. Well, you know, to the customer, it is called
gasoline and that is a refined product.
Mr. Drevna. But we don't----
Mr. Gonzalez. And I am really wondering how I explain to my
constituent that we are exporting a tremendous amount of it,
and yet, we are still charging them $4 a gallon for the refined
product.
Mr. Milburn. May I answer that, Mr. Gonzalez?
Mr. Gonzalez. We will discuss this a little later, Mr.
Milburn.
Mr. Milburn. Thank you.
Mr. Gonzalez. I just want to know if you guys see the next
25, 30 years going down the road that we are going down now.
Mr. Milburn. I do, sir, and until such time as technology
can provide me with an alternative-based fuel that is not going
to drive up the cost of my truck and my operations, I am still
going to have to rely on diesel.
Mr. Weiss. With the kinds of investments that are suggested
by Representative Biggert's bill and Representative Sullivan's
bill for electric gas and natural gas trucks, I believe that
no, we will not be entirely reliant on oil for our
transportation system.
Mr. Breen. Sir, I think it would be a tragic national
mistake if we were still reliant. Our military leaders are
doing everything they can to get us off of this stuff, and the
rest of us should follow suit.
Mr. Eichberger. Diversification will happen, but it is
going to take a very long time. In the interim, petroleum is
going to be the source of transportation.
Mr. Gonzalez. Thank you very much. Thank you, Mr. Chairman.
Mr. Whitfield. At this time I recognize the gentleman from
Texas, Mr. Olson, for 5 minutes.
Mr. Olson. I thank the chairman and welcome to the
witnesses. Thank you all for coming and giving us your time and
expertise.
Being a former naval aviator, it is a pleasure to see
someone else who has worn the uniform of our country. And Mr.
Breen--do I call you Mr. Breen, Captain Breen, Major Breen?
Mr. Breen. Just mister these days, sir.
Mr. Olson. Mister these days, OK, sir. My first question is
going to be for you, Mr. Breen. Throughout your written
testimony, you frequently use the term ``dependence upon a
single source of energy, oil,'' and you mentioned countries
that don't like us to benefit from our dependence on foreign
oil. You specifically mentioned Russia, Venezuela, Iran--
although I know you know that we don't get any oil directly
from Iran--but you didn't mention Saudi Arabia, even though
one-half of our foreign imports come from Saudi Arabia. My
question for you is what about Canadian oil?
Mr. Breen. That is an interesting question. Sir, as you
say, it is----
Mr. Olson. I got a little bit more, here we go.
Mr. Breen. OK.
Mr. Olson. Little--we are pilots, you know, we----
Mr. Breen. I should have brought my glasses to the hearing.
Mr. Olson. This is the Keystone XL pipeline, and as you
know, the Keystone XL pipeline will create 20,000 jobs, bring
800,000 barrels of oil to the United States, the Gulf Coast
area where I represent. Canada has been one of our greatest
allies. You were there. You know that they lost almost 400 of
their soldiers fighting beside us against the war in Iraq and
Afghanistan, fighting the war against terror. In recognizing
these facts, last week the administration announced that they
were not going to oppose the construction of the first portion
of this pipeline from the farms here in southeast Texas, my
home, Port Arthur/Houston, up to Cushing, Oklahoma, this part
there. And Jay Carney had a great quote when they announced
what they were doing. He said ``Moving oil from the Midwest to
the world-class, state-of-the-art refineries on the Gulf Coast
will modernize our infrastructure, create jobs, and encourage
American energy production.'' And so my question for you is, Do
you support the administration's decision to go forward with
this part of the pipeline? Yes or no answer, please, sir.
Mr. Breen. Sir, I don't have an opinion on it because it is
not going to change the global price of oil, and that is my
biggest concern. Based on the information I have seen, the
dynamic is fairly ironclad. U.S. demand is fairly static, U.S.
production is up, but global demand driven by China and India,
which are never going to need less oil than they do now and are
ever going to need more, that demand is continuing to go up and
as long as it does, the global price goes up. As you said, it
doesn't matter----
Mr. Olson. I have to cut you off. I only have a little time
here, but one thing that concerns me most about your written
testimony is you never mention the purely domestic abundant
source of energy we have, natural gas used for transportation.
I mean, I want to--here you concluded your written statement
with this comment. ``I respectfully conclude with a simple
request: lead us in building an alternative energy economy that
can break our dependence on oil, ensure our future prosperity
and security, and finally put Americans in control of our own
energy future.'' Natural gas is the answer to your request. And
all these enhanced recovery techniques, directional drilling,
have changed the paradigm of U.S. energy.
I toured a UPS plant--facility in my home district in
Stafford, Texas. They got about 200 trucks there. About 40 of
them are being converted to pressed natural gas now. They
actually built a facility there to refuel them. The Clear Creek
School District, they are converting about 60 of their buses to
natural gas, again, built a 60-pump, for lack of a better term,
facility right there off of the Gulf Freeway to get the school
buses powered by natural gas. It is here. It is real. It is
clean. It is cheap. It is American. It gets us off foreign oil.
I am just concerned, was the omission of natural gas in your
testimony, was that an oversight?
Mr. Breen. No, sir, it wasn't. As you may recall, I
mentioned it in my oral testimony. I think one of the things
that is fantastic about the President's plan as he announced it
today is that it embraces choice, and one of those choices for
communities in this race to the top is exactly what you said,
compressed natural gas. There is also something in the plan the
President has put forward designed to create corridors for
compressed natural gas trucking to get us closer to the point
where Mr. Milburn and his colleagues are able to use that fuel
for longer and longer distance trucking.
So I mean, again, it is not a silver bullet solution, sir,
it is a silver buckshot, and I am in favor of just about
anything that is going to safely and cleanly give us choice.
Mr. Olson. Again, I appreciate--I notice that you did
include the comments about the President in your oral
testimony. I appreciate that.
I just want to ask one more question about some of the
comments that have been coming out of the administration that
some of my colleagues alluded to. When the President was
running for office, he made the statement that under his
policies, energy prices will necessarily skyrocket. Our current
sector of energy, when he was--that same time period, the quote
is that he said, ``Somehow we have to figure out how to boost
the price of gasoline to levels in Europe,'' which is about $10
a gallon. Recently Secretary of Interior Salazar said, ``I will
object to OCS drilling even if the price at the pump goes to
$10.'' Surely you don't support increasing the price of gas for
the American people to $10 per gallon?
Mr. Breen. No, sir, I think that would have a catastrophic
impact on our economy and also on our military operations, but
unfortunately--pardon me, Mr. Chairman, but unfortunately given
the fact that 95 percent of our transportation sector is still
reliant on that single source of fuel, if it goes that high we
are going to have ot pay unless we come up with alternatives.
Mr. Olson. Well, you are a man of intellect, I can see you
have a closed mind. Come on down to Texas, I would love to take
you around.
Mr. Breen. I would love to go, sir. Thank you.
Mr. Whitfield. The gentleman--at this time I recognize the
gentleman from Massachusetts, Mr. Markey, for 5 minutes.
Mr. Markey. Thank you, Mr. Chairman. We had been told by
the American Petroleum Institute in their TV ad campaign that
voters all over the country are voting for American energy, but
is American energy really what the American Petroleum Institute
is representing? The American Petroleum Institute tells us we
need Canadian oil from the Keystone Export pipeline to
strengthen our energy security needs. Maybe the institute
should be called the Canadian Petroleum Institute. But wait.
You don't even want to keep the Canadian oil here, since the
API says that my amendment to keep Keystone oil and fuels in
this country would make us just like North Korea. Does that
make the API the South Korean Petroleum Institute? We are told
by the API that the adoption of my proposal to keep Keystone
fuels here would cost us tax revenue, even though the oil is
headed straight to a foreign trade zone where it will be
refined and re-exported tax free. So maybe it should be called
the Cayman Islands Petroleum Institute. We are told by the API
in their TV ad campaign that eliminating the $4 billion in tax
subsidies big oil gets each year would send us back into a
depression, even though the big five oil companies spent almost
10 times that much buying back shares of their own companies in
2011. I guess that would make you the Wall Street Petroleum
Institute. We are told by the API in their TV ad campaign that
we could create one million new oil and gas jobs in the United
States, even though Exxon, BP, Shell, and Chevron made $546
billion in profits between 2005 and 2010 and cut 11,200 jobs in
the United States.
So what is the real story about the American Petroleum
Institute and its members? Big oil is cutting American jobs.
Big oil is fighting efforts to end their free oil and tax
holidays, and big oil wants to sell our oil and gas to the
highest international bidders, even if it means Americans all
over our country will pay more at the gas pump and more in
electricity each month. It isn't the American Petroleum
Institute. It is the World Petroleum Institute that you are
representing here today, the huge multinational corporations
who have no loyalties other than their shareholders, and I
appreciate that. I appreciate the loyalty to shareholders, but
it is not about American energy in the United States.
So let me begin. Mr. Gerard, earlier you said that API
supports energy produced by Americans for Americans. So let me
ask you, does the American Petroleum Institute support my
amendment to require that the oil from the Keystone pipeline be
kept in the United States for Americans?
Mr. Gerard. First, let me say, Congressman, I am thrilled
that you are watching our advertising, but I clearly have to
come up and spend a few more minutes with you to help you
better understand what it really means----
Mr. Markey. Do you want the oil from the Keystone
pipeline--do you support keeping it here in the United States
or allowing it to be exported? Yes or no?
Mr. Gerard. We strongly oppose your amendment, like the
majority of the committee did because it doesn't make economic
sense for the oil and gas industry anymore than it makes sense
for the farm community----
Mr. Markey. That is fine.
Mr. Gerard [continuing]. Or exporting Caterpillar or any of
the other products we make in America by America.
Mr. Markey. It is Keystone Export pipeline, just so we get
it down. Does the API----
Mr. Gerard. Well let us be clear that the experts will tell
you the vast majority of that will be consumed, refined in the
United States and will likely displace imports from Venezuela
and Mexico.
Mr. Markey. Does the American Petroleum Institute support
my bill to call a time out on any further approvals of
liquefied natural gas export terminals so we can keep all that
new natural gas from Marcellus, Barnett, and Utica here in
America for Americans and keep prices low here? Do you support
not having it be exported around the world?
Mr. Gerard. If we, just like in the case of gasoline today,
produce more than the market demands, exports are a good thing.
The President has called on us to double our exports in this
country----
Mr. Markey. It is going to raise----
Mr. Gerard. They create jobs, they bring billions of
dollars----
Mr. Markey. The Energy Information Agency says that it is
going to increase rates of natural gas----
Mr. Gerard. The positive free market thing to do----
Mr. Markey. How about the oil that we drill for off of--
under the Republican proposal that we voted on 2 weeks ago off
of the beaches of Florida and California and New England? If we
find the oil and gas there, my amendment said on the House
Floor keep that oil and gas here. How about the American
Petroleum Institute, keep it here or allow it to be shipped
overseas?
Mr. Gerard. The key is to add supply to the marketplace as
we talked about today, because it is supply that will change
the global economic dynamic and put downward pressure on the
price of crude oil, because it is the crude oil----
Mr. Markey. If you say drill here, drill now, there will be
less.
Mr. Whitfield. Gentleman's time is expired.
Mr. Markey. Drill here, ship there, pay more for American
consumers, and I just think everyone has to understand that the
gas and oil industry is interested in shipping out----
Mr. Whitfield. Gentleman's time is expired. At this time I
recognize the gentleman----
Mr. Gerard. Mr. Chairman, let me just say first, the
Congressman is wrong and I would be happy to come by and visit
with you about all that----
Mr. Whitfield. At this time I recognize the gentleman----
Mr. Gerard [continuing]. And educate you further. Thank
you.
Mr. Whitfield [continuing]. From Kansas, Mr. Pompeo, for 5
minutes.
Mr. Pompeo. Thank you, Mr. Chairman. You know, you can see
on this side it is--there are a lot of folks who just don't get
how the--we come to these hearing and hear folks try to repeal
the law of supply and demand. We hear folks who normally talk
about favoring exports trying to create enormous programs so
that Americans can manufacture here at low cost, fight low cost
energy sources for our manufacturing companies. And you see
folks on this committee who are arguing about all these Chinese
imports they don't like and we can't compete around the world
and we can't export, arguing we shouldn't export. It is a
stunning thing for those of us on this side to listen to.
I want to talk a little bit about this notion of
speculation, Mr. McNally. Every time--I will keep this simple.
Any time somebody goes long in a particular commodity, who is
on the other side? There is someone with an equal and opposite
position.
Mr. McNally. For every buyer, there is a seller.
Mr. Pompeo. And for every trade that there is a winner,
there must be a loser. And so we come and have these hearings
and we hear about speculation when the price of commodities go
up, but I have seldom witnesses--I am new, so I would not have
been part of this before--but I have seldom seen these hearings
when the price goes down. Would there be equal speculation
about folks trying to drive prices lower as well? I am confused
about why speculation is a one-way ratchet, according to at
least some who have testified here today.
Mr. McNally. I think the American public and members of
Congress are more concerned about rising prices, so they are
more concerned when prices are going up and people are buying
and they are less concerned when it is selling, so market
participants don't get the credit when contributing to downward
price movement or helping prices peak when they are rising.
But we don't have to take it from me. the IEA, the CFTC,
the EIA, officials at unbiased regulatory agencies with the
access to the information who have looked at this closely have
concluded that financial market participants have not been
distorting the price of oil.
Mr. Pompeo. I appreciate that.
Mr. Gerard, I want ot ask you, you are experienced in this
as well. Natural gas 2.50 at MCF, was 14, driven by
speculation?
Mr. Gerard. Well, what has happened, Congressman, as you
well know, in this country because on State and private lands
we are producing trillions of cubic feet of natural gas. There
have been recent announcements by a number of major
manufacturers who are going to bring jobs right back here ot
the United States because the market has driven the price of
natural gas down to where it is affordable, it is reliable, and
if we are allowed to produce it in this country it has multiple
implications for us, job creation, revenue to governments, and
energy security.
Mr. Pompeo. So supply and demand.
Mr. Gerard. Supply and demand.
Mr. Pompeo. So 2.50, that is not some boogeyman on Wall
Street or----
Mr. Gerard. In fact, Congressman, if I can, I don't want to
take your time, but there is an experience we had in July of
2008 that was alluded to earlier that we ought to go back and
look closely at. The price of crude oil drove to $145 a barrel.
Then President Bush announced the opening of the Outer
Continental Shelf and lifted the moratorium. The price of crude
oil over 3 days dropped $15 a barrel and continued to move
down. Markets are driven on a global basis by expectation. If
the market heard the President of the United States say I am
serious about producing my vast energy resources, you will see
an impact in the market.
Mr. Pompeo. Yes, I would agree with that. I would love to
see that from our President.
Let me talk for a second--Mr. McNally, you talked a little
bit about the Strategic Petroleum Release. We had one during my
time in Congress last year. To what effect?
Mr. McNally. The release you are referring to is the sale
of 30 million barrels announced on June 23 of 2001, and the
price of oil dipped for 4 days and then made a new high.
Mr. Pompeo. And the President continues to talk about an
additional release from the Strategic Petroleum Reserve. What
would your expectation be that would result from such a
release?
Mr. McNally. In my view, as long as the underlying supply
demand fundamentals remain tight and as long as the prospect of
a potential conflict remains with Iran, were we to release oil
now and achieve a day or two dip in supply, we would be
releasing cheap oil to traders who would buy it and expect a
profit from it later this year.
Mr. Pompeo. Great, not a very effective thing for folks who
are driving their cars around or Mr. Milburn, who has got to
drive his vehicle around and deliver product to consumers all
across the country.
I yield back the balance of my time. Thank you.
Mr. Whitfield. At this time I recognize the gentleman from
Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman.
Eddie, I want you to sit here. You know, for one thing let
me follow up my colleague from Massachusetts. Nobody is going
to build a pipeline from Canada to Texas and Louisiana to
export the oil. You know, we have the biggest refinery complex
between literally from the Mississippi River down to Corpus
Christi, Texas, and I know the pipeline is supposed to send in
maybe a million barrels a day. I currently represent five
refineries that need a little less than a million barrels a
day, and that is just in the district I represent. So it is a
huge amount and we want it, but we are not going to export that
oil. We do export refined products. Just because we export
steel--and I am sure my colleague from Pennsylvania loves that,
and I liked that when I used to have steel plants. We want
somebody else to buy our products that we make. So I don't want
to export the oil, I want to export the refined products or the
chemicals that we make from the natural gas. I would rather not
export natural gas. But if we can have the downstream jobs in
the chemical industry, then let us export those products. But
we still need to export natural gas because we had people in
'05 after we streamlined the Federal permitting for importing
LNG, now because of success in hydrofracking, we have so much
we need to export it. Because again, I have a lot of companies
that would really like to see that export market, and again, if
we can use it here, let us use it, but if we can't, let us help
our balance of trade with it.
Mr. Gerard, API claims that the oil and gas earnings are
typically in line with the rest of the U.S. industry, averaging
about 7 cents for each dollar of sales over the last 5 years.
Is that true?
Mr. Gerard. That is correct.
Mr. Green. Where did you get the information?
Mr. Gerard. We developed this information by the Bureau of
Labor Statistics. These are governmental numbers.
Mr. Green. Thank you. One of the concerns that I have is we
reconcile to push to eliminate the Section 199 as the
manufacturing deduction that allows all U.S. manufacturers to
take a 9 percent deduction on their costs while limiting the
natural gas industry to 6 percent. One of my arguments here is
that energy production is manufacturing. It is domestic
manufacturing. Why would we want to punish domestic energy
production by a lower percentage?
Mr. Gerard. I would hope we wouldn't, but that is what the
current law is. We are limited to 6 percent, and the
President's proposal suggests that that provision of the tax
code which is allowed to many other industries be repealed for
only the oil and gas industry. That is what he describes as a
subsidy. We get no subsidies in the oil and gas business.
Mr. Green. Again, natural gas is large companies that are--
energy companies are large companies that produce in the United
States, they employ United States citizens, and they are going
to--they are getting treated differently than other
manufacturing companies, and that is just not fair because a
few years ago we commissioned a poll on the Democratic side on
domestic manufacturing. We showed that in the South, the
support for domestic manufacturing was higher in the South than
it was in Ohio, Pennsylvania and those States. And somebody
said well, do we still have textiles in North Carolina? I am
not so sure about that, from the Mississippi River to Corpus
Christi, Texas, our manufacturing is refined products,
chemicals, and things that come from the energy industry. And
that is manufacturing. Those jobs pay just as good as anywhere
else, and I don't think they ought to be punished.
Mr. Drevna, you talked about anticipated Tier 3 regulations
affecting the sulfur content in gasoline would increase the
cost of refining, could result in smaller, less profitable
refineries shutting down. Could you elaborate on this? And I am
asking because I know my colleague from Pennsylvania is
concerned about the two near Philadelphia shutting down. We
have actually expanded ours in our district. Can you talk about
that?
Mr. Drevna. Yes, sir, Congressman Green. Thank you.
Tier 3 gasoline would take the current sulfur level of
gasoline from 30 down to less than 10, another 90 percent
reduction. We have already spent $9 to $10 billion in taking 90
percent out of the gasoline in Tier 1 and Tier 2 from over 300
down to 30, and it cost, like I said, $9 billion to $10
billion. The additional 90 percent would cost upwards of $20
billion to get those last little bits of molecules that don't
want to come out. The question is why? The question is what is
the net environmental impact on taking it down, and our
analysis says it is nil, because autos are already marketing--
20 different brands of autos are already marketing their
product under Tier 2 gasoline as a Tier 3 vehicle because of
how the engines are made. It goes back, Congressman Green, to
the conflicting regulations that we see and how costly they are
ultimately to the consumer. We are going to lower sulfur more
at an unprecedented amount of dollars; therefore, we are going
to make--raise CO2 emissions at the refinery because it is a
heck of a lot of a more robust treatment that you need to get
those little bit of sulfur molecules out, and then the EPA is
going to turn around and say well we got to lower greenhouse
gas emissions. Well we are in this----
Mr. Green. Let me interrupt you so I can get one more
statement in to Mr. McNally. The President took the 30-year
moratorium off of the Executive Order in June of 2008. A
Democratic Congress in September took the 30-year moratorium
off the Department of Interior for exploration in Outer
Continental Shelf. So we have a bipartisan support for more
domestic exploration, and that is part of our problem. We need
more supply. But if you drill an oil well in your backyard,
believe me, you are going to want $100 a barrel because you are
not going to sell it any cheaper, but we do need to get more
supply to the market.
Mr. Chairman, I know my time is up.
Mr. Whitfield. At this time I recognize the gentleman from
West Virginia, Mr. McKinley, for 5 minutes.
Mr. McKinley. Thank you, Mr. Chairman. I have got a series
of questions, maybe building back a little bit just quickly on
the thing Mr. Barton was talking about. There is a chart that
talks about how production is down but prices are up. Back in
1985, we were drilling--producing about nine billion--nine
million barrels a day and we were paying $1.34, now we are at
5.3 million and the price is 3.79, so I think he is on to
something there. But more importantly is I am trying to
understand, all of you began your remarks, a lot of you talked
about speculation. I am trying to understand the role of
speculators. Is this a recent phenomenon, these speculators, or
just in the last 3, 4 years? Mr. McNally, can you just touch on
that briefly? Is this a recent phenomenon? Have speculators
been able to buy into the oil market for longer than 3 years?
Mr. McNally. Yes, sir, starting in the early 1980s we
shifted from what we called a posted price for oil to pricing
it in the futures markets in the New York Mercantile Exchange,
and that futures market is composed of physical participants,
producers of oil, users of oil like airlines, and----
Mr. McKinley. Thank you, because am curious about this
because I went back and looked at what crude--what happened to
crude during the four events that I looked at, the Iran/Iraq
wars, back in '81 and '87, and when you look at that and the
net effect of that time from begin to the end, actually price
of crude dropped up. During the seizure, when we had that
crisis that was there and it was on the front page of every
American paper about our 53 Americans seized in Tehran, crude
didn't increase. During the Gulf War, it went about $10 a
barrel. And during the Yom Kippur War, it went about $22, so
going back to what was remarked was if you look at those
numbers, you are only talking about 25 cents--I shouldn't say
only, but that is an increase. How do we get from--where was
it, $1.85 at the beginning of this administration to now at
3.79 if crises of global magnitude are only having 25 cents?
Mr. Milburn. Mr. McKinley, may I interject here?
Mr. McKinley. If you could.
Mr. Milburn. Regulation in the trucking industry by the EPA
has driven up our costs on a gallon of diesel fuel. Eight years
ago when I started driving a truck, we didn't have the ultra
low sulfur diesel that we do today. You know, we are less than
15 parts per million on the ultra low sulfur diesel versus the
old regular diesel. Back then, diesel was 30 cents a gallon
less than a gallon of gasoline. Today, on the street, diesel is
over 30 cents a gallon higher than a gallon of gasoline.
Mr. McKinley. If I could recover my--I concur with what you
are saying. I am just saying I think that speculation has been
used as an excuse perhaps. Are they a player? Of course they
are, but are they that dramatic when you look at the sheer
numbers of it? I am not so sure. I think the regulations and
other--but let me pose a question that is more hypothetical.
If we produce no oil in America and we refine nothing, what
we will be paying in America for our oil and gas? Ten dollars,
what they are paying in Europe?
Mr. Drevna. That is--a hypothetical is difficult to answer.
What--we would be producing nothing in America because mostly
everything we produce begins with fuel, begins with energy,
begins with petroleum products.
Mr. McKinley. Why is this administration making it so
difficult? If we understand that if we don't produce anything,
if we didn't drill at all, we are probably going to pay 9 to
$10, but if we drill, then we have problems. Look during the
Keystone pipeline discussion. How many people--and you heard
the amendment that was offered. We don't want any of it to go
overseas, it is only to be consumed in America. Are we not in a
global market or not?
Mr. Drevna. That is the fallacy of the argument,
Congressman McKinley, is that we are in a global market but
there are certain folks who say well, we can do something
different within our own market. Maybe one admits we are in a
global market, but we are going to have some different kind of
economic system in our market. It simply doesn't work that way.
As Congressman Green pointed out, you know, exports for us are
a major part of it, keeping American jobs and American workers
here are a major part of it.
Mr. McKinley. Well let us just close--I have 18 seconds--17
seconds left on it. If we did--go back to that premise, that
hypothetical. If we drilled none, and that is what I think this
administration would like, to wean us off our fossil fuels--if
we did not drill in America, what would be the cost of gasoline
in America?
Mr. Drevna. The cost I can't----
Mr. McKinley. Project.
Mr. Drevna. I could just project that China, India, Russia,
Brazil would be ecstatic.
Mr. McKinley. Would be what?
Mr. Drevna. Ecstatic.
Mr. McKinley. Pretty sure, because why? We would be paying
$10 a gallon?
Mr. Drevna. If not more.
Mr. McKinley. OK, thank you.
Mr. Whitfield. Thank you, Mr. McKinley. At this time I
recognize the gentlelady from Florida, Ms. Castor, for 5
minutes.
Ms. Castor. Thank you, Mr. Chairman, thank you, gentlemen,
for being here today. I represent the State of Florida and we
are very sensitive to gas prices because we are a large State.
We are a very dynamic State, and we are very spread out. But
also because our economic is integrally tied to travel and
tourism. It really ticks people off at home because it seems
like every year at spring break or the summer driving season
there is some racket because of gas prices go up, and people,
our neighbors and businesses, they are very sophisticated. They
understand there are things that are outside of their control
or the government's control. For example, the explosion of
demand across the globe, particularly from China, you know,
they don't have much control over that, or term oil in the
Middle East that complicates the market. But there are some
things that are within our control that they expect us all to
focus on and work together on. One is domestic production, and
when you explain to folks now that the United States is a net
exporter, they are very surprised because for decades and
decades and decades we have relied on imports. So that is very
positive there, you know. The number of oil rigs operating in
the United States has quadrupled in just the past 3 years.
There are more rigs operating in the United States than in the
rest of the world combined, and we are sensitive to that in
Florida because we--while we support domestic production, we
want it to happen in the right places and with the appropriate
safeguards.
What else is in our control? Fuel economy. This--we didn't
make much progress in the '80s and '90s, but boy, are we on the
right track now to put some dollars back into the pockets of
our hardworking families because what we have done and the
Obama administration is built upon now is our direction to make
sure that cars achieve 54 miles per gallon by 2025. That is
very positive for families. In fact, a member of my family
bought one of these vehicles. He gets 50 miles per gallon, and
I know Mr. Eichberger, you don't appreciate, he is driving by
your stores and enjoys doing that, no matter what price is
posted. Fifty miles per gallon. And so we have got to continue
to boost that and encourage that.
What else is in our control? Speculators. They--people just
know that they are being taken for a ride, that there is
significant market manipulation, and Mr. Weiss, I am going to
ask you to explain to us the difference between the folks that
should be in that market because they control oil, but there
are people outside of the oil markets who get in and take these
prices up for a ride and it is costing all of us.
The other thing that is in our control that we have got to
take action on is the--is don't ask consumers to pay twice.
Don't ask us to go to the gas pump and pay and then when we
file our taxes, we have to pay $4 billion more every year to
the oil and gas companies. That is not fair. That is not fair
the five largest oil companies made over $137 billion in profit
last year, and with our debt and deficit or the things we can
do with $4 billion annually, we have got to turn this around.
I would like, Mr. Weiss, also--secondarily, ask what--if we
took that $4 billion, what is the best bang for the buck if we
took a significant portion of that and plowed it into--you tell
me, diversification, alternative fuels, doing more on fuel
economy, unleashing the good old American know-how and
technology to get us off this long-term oil addiction.
Mr. Weiss. Well those are a lot of questions. I will do my
best.
When it comes to speculation, there is basically two kinds
of people in the market. Commercial end users like in airlines
or refinery or an oil company that take physical possession of
the product when the contract is due, and then there are Wall
Street speculators, money managers, pension funds, hedge funds
that are there just trying to make a profit by guessing whether
prices are going to go up or down. Traditionally, according to
a study by McClatchy, traditionally the end users, commercial
users are about 2/3 of the trades and the Wall Street
speculators are about 1/3. We saw in last year it has been
reversed. About 2/3 of the trades are now Wall Street
speculators and 1/3 are end users. That is one of the signs
that they are involved in the market. In addition, Mr. McNally
talked about a report that the CFTC did in the summer of 2008
that said there was no speculation involved in the record oil
prices. Well that was a draft report. The final report which
came out in 2009 said, in fact, there was, and there is a whole
host of studies, at least a dozen, that I could send the
committee for the record if you are interested, that list--that
suggest that speculation did play a role, including one by the
Federal Reserve Bank of St. Louis that the Post just reported
about yesterday.
Mr. Whitfield. Thank you. At this time I recognize the
gentleman from Virginia, Mr. Griffith, for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman. I just have to say
coming from coal country that nobody has mentioned coal. There
are ways that we can use coal to increase our fuel. I like to
talk about the four D's: drill, which we have talked about a
lot today; dig, which includes our coal resources. We are
number one in the world. Let us not forget we have got it.
Discover, which of course, includes, you know, finding new ways
to use new technologies and use old fuels and new technologies
as well, which our universities and think tanks should be
working on, and last but not least, we have also heard today
about deregulating, which means the EPA has got regulations
coming out of our ears that affects every sector of our market
and we are consistently seeing problems.
And along those lines, Mr. McNally, could you tell me, is
there one regulation in particular that is so onerous, so hard
for business in your area or your field to deal with that is
preventing or limiting production or increasing employment? Can
you name me one?
Mr. McNally. Well I am just in the research and analysis
business, but I would think--and my friends in the industry can
speak perhaps better, but I think the biggest concern or two
really, one would be that the government is going to stand in
the way of infrastructure projects that are needed to get
investment in domestic oil and gas production, and the second
would be uncertainty about regulation of hydraulic fracturing
going forward. That is probably one of the biggest concerns I
think industry has about investment.
Mr. Griffith. All right. Mr. Gerard, did you have some
thoughts on that?
Mr. Gerard. Very quickly I would just add three things. The
first one is access itself. That is a decision on the part of
the administration. They can make it today. The second one is
the lag time in permitting that Congressman Barton talked
about. If you are given access and you can expedite that
permitting process, it will happen quickly. The third one is,
which goes back to the comment the Congresswoman made earlier,
there is always talk about subsidies the oil and gas business
for taxation. We get no subsidies from the tax code, but more
important than that, today's hearing is on gasoline prices.
Congressional Research Service has looked at the proposal, the
President's proposal, to discriminate against our industry and
repeal those standard business deductions that we receive and
concluded that it would have the effect of decreasing
exploration, development, and production while increasing
consumer prices and possibly increasing the Nation's dependence
on foreign oil.
Mr. Griffith. So what you are saying is that third D,
discovery, which would also include exploring, would go down
and prices would still go up?
Mr. Gerard. It is a net adverse hit to our ability to
impact the price of gasoline the Congressional Research Service
views.
Mr. Griffith. All right. Let me ask you, Mr. Breen, if I
might for a second. It has been said that 70 percent of
American casualties in Iraq and Afghanistan have been sustained
on logistical missions, i.e., convoys. If our troops had more
energy efficient generators, batteries, and vehicles without
any deduction in safety or functionality, we can lessen the
amount of required supply missions and reduce our troops
exposure to attack. Such advancements are obviously positive,
but if we convert, as I think I heard you suggest, if we
convert our military vehicles and aircraft to biofuel, such as
the Green Hornet in your testimony highlights, what is the
difference between a convoy that transports ethanol and one
that transports diesel or GPA, except that the ethanol products
are far more expensive for the American consumer, and in this
case, for the Pentagon?
Mr. Breen. Well, sir, you mentioned fuel convoys which is a
facet of life in a counter insurgency environment where you
have isolated forward operating bases. This is one of the ways
the military posture is different from our civilian posture. On
those forward operating bases, we require----
Mr. Griffith. So you are saying it is safer to do ethanol
than it would be to do gas?
Mr. Breen. No, sir, I am saying that we require liquid
fuel, be it ethanol or whatever else, to fuel generators to
generate the power on those bases, as well as to fuel the
vehicles, so there is a huge push in the ground forces to move
to solar, wind, and other renewable technologies. You don't
have to move any kind of solid fuel.
Mr. Griffith. So then your testimony about the Green Hornet
would be slightly off. You are talking about going to some
individual solar items, because----
Mr. Breen. In the ground force, sir, but the Navy, for
example, highly interested in making sure that it can use a
diverse set of--the Navy wants to be sure that if the supply of
liquid crude oil is disrupted for whatever reason, the Iranians
close the straits, that the Navy, which is a huge liquid fuel
user, can----
Mr. Griffith. In the futures market--let me ask Mr.
McNally, if the futures market was occupied solely by physical
consumers of oil, what would the result be?
Mr. McNally. The market wouldn't function because physical
consumers of oil need to transfer price risk to those willing
to take it, by definition, people who are willing to speculate,
and if they didn't have the speculators or financial market
participants, the market wouldn't function. It would be much
less efficient and prices would be more volatile.
Mr. Griffith. And of course, a lot of us don't have natural
gas that comes to our homes and we can't use it--I think Mr.
Milburn, you testified that it wasn't good for trucking
probably because there is not a supply network set up where you
can stop and get more CNG. I know that in my neighborhood, even
though I live in the largest city in the newly configured Ninth
Congressional District of Virginia, I don't have natural gas
coming to my house. Mr. Eichberger, who used to be a proud
constituent of mine in the Ninth Congressional District of
Virginia, used to live in the Reiner area, did you have natural
gas in that county, which is the largest county in the Ninth
District?
Mr. Eichberger. We were 100 percent electric.
Mr. Griffith. Yes, which is based on my favorite, coal, in
that area. You can't have electricity without coal, and that
raises prices up. It just looks like to me that this
administration has an ``all of the above'' policy to raise the
cost of energy on all of the above.
Thank you, I yield back.
Mr. Whitfield. Thank you. At this time I recognize the
gentleman from Pennsylvania, Mr. Doyle, for 5 minutes.
Mr. Doyle. Thank you, Mr. Chairman.
I have been in Congress long enough that to see a hearing
called ``Rising Gas Prices,'' this is, you know, deja vu all
over again. We go through this from time to time, and sometimes
listening to my friends talk about the Obama administration, I
feel like I am living in an alternative universe, that somehow
there is some magic wand that Newt Gingrich is going to wave
and we are going to have $2.50 a gallon gasoline. I think it is
time we just stop BS-ing the American people. In Pittsburgh,
people I represent have highly refined BS meters, and they are
going off loud and clear with all this talk about gasoline
prices.
Can we just agree on one thing? A barrel of oil that is
made--that is produced in Venezuela costs the same amount of a
barrel of oil that comes out of the ground in Texas. It is a
world commodity. We don't control the price. We don't control
the price. People seem to think in this country that if you get
oil out of American soil, that somehow we get a discount on it.
Well is it not American's oil. Once an oil company buys that
lease, it is Exxon's oil. It is their oil and they are going to
sell it for the best price they can get it. Now that is just a
fact of life, and if most of the price of a gallon of gasoline
is the cost of the crude, then it is what it is going to be. It
is a world market. People talk about natural gas. Natural gas
isn't priced on the world market, OK? It is $2.50 at MCF here.
That is not what it is selling for in other parts of the
country, which is why we would like to export some of the
excess natural gas so that there can be better profit margins
and we have the supply to do that. But let us quit BS-ing the
American people that there is some magic wand or some policy
that Congress or any President, Democrat or Republican, can do
to affect the price of a world priced commodity.
We were a net exporter of gasoline last year. The price of
gasoline didn't go down. We can produce all the oil we want in
this country and all the cartel over there has to do is turn
the spigot down a little bit and they will keep the price
wherever they want to keep the price. So let us just quit BS-
ing the American people that there is some way to control the
price of a barrel of oil, and if we drill more in this country
that somehow it gets cheaper. I mean, if you want to talk about
let us not be dependent on buying it elsewhere and you want to
increase the supply domestically, that is a valid statement. I
mean, you can talk about that, but let us not talk about it in
the context of prices of gasoline. We talk about the price of
gasoline in Europe being $10 a gallon. They put taxes on top of
their gasoline. The oil isn't more expensive over in Europe.
They put tax on it so people will drive smaller cars. They use
mass transit, they use trains. We built the interstate highway
in America. We love our automobiles. OK, we are different than
over in Europe. There is not going to be $10 a gallon gasoline
in the United States of America. Just quit making the American
people believe there is some fix to this.
This young man has hit the nail on the head. What they want
from us and from the President is some vision and some
leadership about the future. The future of our country is to
get us off of this addiction to oil, to start to transition to
natural gas vehicles and eventually to battery technology where
we don't use any fossil fuel to power a car. When we got a
battery that will take a car 400 miles before you have to
recharge it, that is going to change the whole world. That is
going to change our policy in the Middle East, and that is
going to allow us to quit sending young men and women like Mr.
Breen overseas to fight for all this oil that is so precious to
us. That is what the American people want from us, some
visionary leadership from their President and their Congress,
not this constant BS that there is somehow you can make
gasoline $2.50 a gallon before the presidential election in
November.
So let us just quit this kind of talk and let us be real
with the American people, and let us talk about how we invest
in the future for our kids and our grandkids to make a
difference. There is a Chinese proverb that says ``The best
time to plant a tree is 20 years ago. The next best time to
plant a tree is today.'' What this Congress ought to be talking
about is what we can do today for generations 20, 30, 40, 50
years from now so that our grandkids aren't sitting in a
congressional hearing room having the same conversation that we
had in 1970, that we had in 1980, that we had in 1990, when
these prices start to fluctuate up and down. That is what the
American people need from us.
Well, I just took 5 minutes on my soapbox, Mr. Chairman,
and I am sorry about that. I would like one question, if one
witness can answer.
I do have a concern about these refineries in Eastern
Pennsylvania shutting down. Pittsburgh uses a special blend of
gas in the summertime that is not made anywhere else that I am
aware of, except at these three refineries near Philadelphia,
and they are about to close. I would like to ask Mr. Drevna,
the refinery person, is there any other refineries that make
that kind of gas currently or is there a refinery that could
ramp up to make that kind of gas to meet the needs of some of
the communities in the Northeast, and specifically in Western
Pennsylvania, that are going to be in a bad situation if these
three refineries in Eastern PA absolutely do shut down?
Mr. Drevna. The answer to your question is no, there are no
other refineries in an immediate area that can make the 7.2
pound gasoline. It is the summertime gasoline.
Now I understand just as recently as yesterday, Congressman
Doyle, that Pennsylvania legislature passed a bill that would
lift that 7.2 and go to a 9.0 RBP. It wouldn't be summer
gasoline. I understand the governor might--probably will sign
that. Now problem being is EPA is going to have to bless it,
and that--the reason why there is that gasoline there is that
Pittsburgh, my hometown, by the way, would--did not need to go
all the way to the more and more expensive RFG, reformulated
gasoline. So over time, it was a better deal for the folks in
Western Pennsylvania. You are right, with the unfortunate
shutdown of those refineries and all the heartache that comes
with it, but I--if we can start now, because we have got to get
that stuff into the pipeline by, you know, probably May so if
we could start now and get EPA to help the State of
Pennsylvania, to help those refineries in Ohio and West
Virginia to get that gasoline there, it will be fine.
Mr. Whitfield. At this time I recognize the gentleman from
Louisiana, Mr. Scalise, for 5 minutes.
Mr. Scalise. Thank you, Mr. Chairman. I appreciate you
having this hearing on the rising price of gasoline. I know it
is a concern of many not only constituents of mine, but of my
colleagues all across the country. It is a problem that is
facing many families that are holding them back from being able
to do the things that they do to enjoy the quality of life that
they had. It is hurting our job creators in the abilities that
they have to hire more people in this country, and yet, when we
look at why we got here, there are some people that just want
to act like policy has nothing to do with it, like supply and
demand doesn't exist in a free market.
And so, you know, what I first want to point out is those
of us that have supported an ``all of the above'' energy
strategy for a long time and this House has passed many bills--
in fact, Mr. Chairman, you brought a number of those bills
through this subcommittee that we have passed through the House
and are sitting in the Senate that would increase the supply,
not just of oil, of natural gas, coal, nuclear power, and yes,
wind and solar as well. But addressing each of those in a
realistic way that allows America to utilize our energy
resources that are here that are currently blocked by Federal
policy. And you know, for people to just ignore that when the
President shuts down supply, that somehow that has no effect on
cost, then maybe they didn't take basic economics. But it
absolutely does, and I know a few of our panelists have talked
about this.
I want to start by going through the record, and let us
just talk about where we are with gas prices and look at the
statements that the President himself made. You know, back in
2008 Barack Obama said that he would prefer a ``gradual
adjustment to near $4 a gallon gasoline.'' President Obama said
this. He said it when gasoline was about $1.80 a gallon. The
President got his wish. He asked for $4 a gallon gasoline. He
said he wanted it. He has implemented policies to get us there,
and now that the price is there and people across the country
are furious with the price, the President is trying to blame
somebody else, and it is some speculator. You know, we don't--
we need to open up the Strategic Petroleum Reserve or the
President is the most energy-producing President in history. It
is a disingenuous statement when you look at the fact that oil
production on Federal lands is actually down, down by more than
10 percent. Lands where the President actually has control
through his regulators, that production is down. Where it is up
is on private lands and many States like North Dakota where
they have used hydraulic fracturing and new technologies to get
oil in other areas, and the President is trying to shut that
down, too, ironically. So on one hand, he is trying to take
credit for something that he has no control over, but he is
trying to control it through the EPA and shut it down.
Fortunately, he hasn't been successful and in fact, we passed
legislation to block the EPA from shutting it down. The
President's own energy secretary, the President's own energy
secretary says ``Somehow we have to figure out how to boost the
price of gasoline to the levels in Europe.'' Well, he figured
it out and we are getting there. And people are furious with
the high price that they imposed. The Obama administration did
this. I mean, you can look at the price of gasoline and you can
track that the President has gotten what he wanted. It is just
now he is getting the heat for it. People are furious that the
President got his wish of $4 a gallon gasoline that we are
approaching, and so now he is trying to shift the blame.
But look at the record. The permatorium in the Gulf of
Mexico, we have seen it directly in Southeast Louisiana. After
the Deepwater Horizon explosion, the President imposed a
moratorium on drilling that actually went against the advice of
his own handpicked safety experts. The President's handpicked
experts said don't impose a moratorium, it will actually
decrease safety in the Gulf. And what happened? The President
did it anyway and still to this day, there is a permatorium
where it is almost impossible to know what the rules are to get
a permit. So what happened? We have seen a dozen deepwater rigs
leave not only the Gulf of Mexico, leave the country. Over
12,000 jobs, American jobs have left the country because of
that one decision by President Obama that went against the
advice of his own safety experts. So how is that policy working
out? Look at lease sales. In the President's lease sales that
he recently issued, over 50 percent of the Federal lands that
were getting ready to come open for exploration are closed now
by President Obama, and the price keeps going up. If you look
at Keystone XL, we were going to be able to get a million
barrels of oil a day from a friend. Canada is a great friend of
America, great trading relationship. The President said no, not
only to that Canadian oil that now we wouldn't have to get from
these Middle Eastern countries who don't like us or Venezuela,
but he said no to 20,000 jobs. China wants the oil, so China is
going to get the oil because President Obama said no. And the
price keeps going up.
And you wonder, after all of these things happen, what is
their answer? The President's latest answer now, it looks like
they are going to try to go down that road of tapping a
Strategic Petroleum Reserve again. When they tried it the last
time it didn't work. It is there for national emergencies. The
Strategic Petroleum Reserve is not a bailout fund for President
Obama's failed policies.
So Mr. Gerard, I know you had given some good comments on
this. If I could just get your take, you know, as you talked
about how markets drive expectation. As all of these policies
that President Obama to shut off so many areas of Federal
energy have now taken an impact. Has that had an impact on
price?
Mr. Gerard. Absolutely. The market is driven by expectation
and there tends to be a lot of focus here, particularly today
on the Middle East question and Iran and the Straits of Harmuz.
The reality is that global demand coming out of China, India,
and elsewhere, but the rest of the world also looks at the
United States. When they see policies, they understand the vast
resources we are sitting on, but when the policies
fundamentally discourage those and there is no expectation in
the marketplace that we are ever going to bring serious
production to bear, and that all gets accounted into the price.
So today, one of the reasons the price is being driven up is a
lot of people believe that the United States won't take action.
That is why we said if we call on the President to send a
strong signal, we are not going to let this happen. We hear a
lot of talk about well, let us quit talking about drilling for
oil. We have been 40 years in the country and we haven't had a
policy of drilling for oil. Why don't we try it once? We have
tried everything else. Let us produce our own resource. Let us
do it by Americans for Americans. It is in a global
marketplace. The price is determined by the price of crude oil.
But we put crude oil into the marketplace and it has downward
pressure on that price. It is pretty fundamental, it is
Economics 101, and we just can't seem to get ourselves there.
Mr. Scalise. Thank you. I yield back, Mr. Chairman.
Mr. Whitfield. At this time I recognize the gentleman from
New York, Mr. Engel, for 5 minutes.
Mr. Engel. Thank you. Thank you very much, Mr. Chairman. I
listened to a lot. You know, it is such nonsense to try to
point the finger politically at the President of the United
States and say that there is rising gasoline prices because of
him. As some of our colleagues pointed out before, you could
look at when President Bush first came to office and when he
left, and prices doubled and tripled and quadrupled. So it is
just nonsense. Everybody knows that there are all kinds of
pulls and tugs in China and India and other countries forcing
things, changing the prices because of it. You know, we can
tinker at the edges and we can try our best and we can do it
from our different perspectives, but to say it is the
President's policies is just poppycock, as far as I am
concerned.
I would rather focus on a few bipartisan things. Our
colleague, Congressman Shimkus, earlier mentioned our bill, his
bill and my bill, the Open Fuel Standard, H.R. 1687, which
requires new automobiles to be alternative vehicles capable of
operating on another fuel in addition to or instead of
gasoline. Any type of fuel would qualify, natural gas,
electricity, biodiesel, hydrogen, alcohol-based fuels, or
anything else. And the beauty of this bill, which I have been
sponsoring for a number of years, is that it would open up the
marketplace so that other fuels could compete with gasoline.
Any other fuel on the market can decide. When I was in Brazil,
when you pull up to a refueling station you can choose to put
methanol, ethanol, or gasoline into your vehicle. It is
competition. Competition helps drive down prices. You can base
that choice on cost or whether the fuel is produced
domestically, or whatever criteria the consumer chooses. So I
think we should have a similar choice. We could have flex fuel
vehicles in this country for $100 or less per car, and I think
is it criminal that we are not doing it. So that is what the
Open Fuel Standard Act would provide, it would provide a
choice.
I would like permission to submit for the record two
studies. One is the interdisciplinary study from the
Massachusetts Institute of Technology called ``The Future of
Natural Gas'' from June 9, 2011, which finds that the
conversion of natural gas to methanol would provide a cost
effective route to manufacturing an alternative or supplement
to gasoline. Methanol can also be produced from other fossil
fuels or from renewable resources such as agricultural
products, municipal waste, and biomass. And I would also like
to submit for the record a CAN report entitled ``Ensuring
America's Freedom of Movement: A National Security Imperative
to Reduce U.S. Oil Dependence,'' October of 2011, which notes
that a light duty tri-flex fuel vehicle running on methanol,
ethanol, and gasoline would be an effective and cost efficient
way that could greatly reduce our dependence on foreign oil.
[The information is available at http://mitei.mit.edu/
system/files/NaturalGas_Report.pdf and http://www.cna.org/
sites/default/files/MAB4.pdf]
I also want to note that the 2012 Work Truck Show is going
on in Indianapolis just this week. General Motors is
introducing two new bi-fuel compressed natural gas and regular
petroleum gas-powered trucks, the 2013 Chevrolet Silverado and
the 2013 GMC Sierra 2500 HD. Both of these vehicles can burn
either fuel, and GM promises that the on-the-go switch between
the different fuel types is seamless. I really want to mention
that.
I also would like to ask a couple of quick questions on
behalf of the travel and tourism industry. The impact of rising
gasoline prices is really felt by industries like the travel
and tourism industry. It is enormously sensitive to high gas
and energy prices. I am wondering if some of the panelists can
comment on that. Fifty cents rising in gasoline since December;
the estimates are that a 50-cent increase in gasoline prices in
1 year translates to a $70 billion impact on the economy as a
whole, so I would like any one of the panelists to comment on
that, and also to comment--we have tinkered around the
Strategic Petroleum Reserve and the risk of opening it up to
address the problem now. I would like anyone who cares to
comment on this.
Mr. Milburn. Mr. Engel, in the trucking industry our diesel
fuel costs have a direct impact every day on the whole economy.
We are transporting goods and materials across this country
every day. You weren't here for my opening testimony, but the
regulations regarding the new fuels is going to add $6,200 to
the cost of a new vehicle for me. With the increase in fuel, I
cannot afford to keep putting back money to replace my truck,
which is currently 3 years old and has over half a million
miles on it, by 2014 with the new standards that the EPA is
requesting. But when I am out here every day driving and
transporting goods and services, it has a direct effect upon
the economy and raising inflation and the cost of everything we
do out here. The suit you are wearing, the car you are driving,
we all haul it.
Mr. Engel. Let me just--I know I am running out of time.
Mr. Milburn had his hand up.
Mr. Weiss. Thank you, and your question about the Strategic
Petroleum Reserve----
Mr. Engel. Weiss, I am sorry.
Mr. Weiss. That is OK. I knew who you meant. I know we are
both very good-looking fellows, so it easy to mix us up.
There was a misstatement made earlier. In fact, the price
of oil dropped 17 percent from the day that the President
announced the sale on June 23 to the day that the last barrel
of oil was sold on September 30, and the price of gasoline
dropped almost 6 percent during that same time, or about 25
cents a gallon. So in fact, selling 30 million barrels of oil
last year of our reserves and 30 million barrels of our ally's
reserve, putting that on the market did actually reduce prices
during that time.
Mr. Drevna. Mr. Engel, thank you. As comment on that, yes,
the 30 million barrels we put out in that little bit of
timeframe was about 9 hours worth of oil on the global market.
Imagine what would happen if we opened up more resources, if we
got off the 60 percent of imported oil that we are now to use
our own and use Canada's. That is number one.
Number two, you talked about your free choice--your free
fuel, free car act. It would be free if we--if the refiners
weren't obligated parties to a mandate. So you can't say
something is free if we are mandated to use 36 billion gallons
of non-free kinds of fuels. So we would be more than willing to
talk to you about how this would work, but let us keep the
consumer in mind and let us keep the free market in mind. So if
we are going to do something that is based on a free market,
let us have free market in competition, and it ultimately will
help the consumer.
Mr. Whitfield. Gentleman's time is expired. At this time I
recognize the gentleman from Oklahoma, Mr. Sullivan, for 5
minutes.
Mr. Sullivan. Thank you, Mr. Chairman, and my first
question is to Mr. Gerard.
Mr. Gerard, the President stated in the State of the Union
address, he called for increased American made energy
resources. But as we know, actions speak louder than words. At
the same time, he is calling for more oil and gas. His
administration has 10 different Federal agencies considering
ways to overregulate hydraulic fracturing, the process we use
to get tight oil and natural gas out of the ground. Some of
these agencies looking to potentially take hydraulic fracturing
regulation from the States, where it belongs, including the
Department of Energy, EPA, and the Department of Interior. Do
you have any concerns that this administration will make
hydraulic fracturing economically prohibitive to drill oil on
both public and private lands, and can you go into how
hydraulic fracturing can increase the supply of oil in America?
Mr. Gerard. Yes, we are very concerned by what is going on
at the Federal level. As you know, hydraulic fracturing has
been around for 60 years. We have drilled over a million wells
with this technology. We have improved it greatly. The
technology is advanced. And today--and going back to Mr.
Engel's point earlier when he was talking about natural gas
vehicles, all that is made possible in the United States today
because of the vast supply of natural gas. It is a game
changer. It literally changes the energy equation in this
country, so we are very concerned about what we see going on
within the administration.
A week or so ago EPA Administrator Jackson commented, she
said well, the States are doing a good job of regulating. Well,
they have been there for many, many years. The governors think
they are protecting their land, their water and their people
very well. Our greatest concern is the Federal Government is
now going to come in and overlay yet another layer of
regulation to duplicate, conflict, or to crank down our ability
to produce these vast resources here in the United States.
As you mentioned today, there are 10 Federal agencies
looking to regulate natural gas. Now we have got the Center for
Disease Control, we have got the Army Corps of Engineers, we
have got the Department of Agriculture. All these you probably
haven't thought of before are looking to regulate hydraulic
fracturing in one way or another. So it is a very serious
consideration.
The other thing I would add, in talking to governors around
this country, those in North Dakota, Pennsylvania, and
elsewhere that have seen this vast change, in the last 18
months we have created 83,000 jobs in the State of Pennsylvania
as a result of these newfound preferred technologies to produce
natural gas. Governors are very worried the Federal Government
is going to come in and overlay another level of regulation
that will discourage this production. Over the next 5 years, if
we are not allowed to use natural gas, it will by and large
take off the table 45 percent of our gas production, 17 percent
of our oil production by stopping the use of that proven
technology.
Mr. Sullivan. And you mentioned that we have done fracking
for 60-some odd years. I believe there are probably over a
million fracks, I believe.
Has there ever been one instance, Mr. Gerard, that you can
point to that it has ever gotten into groundwater?
Mr. Gerard. There are zero confirmed cases of groundwater
contamination after 60 years of hydraulic fracturing over a
million wells.
Mr. Sullivan. Why do you think that we have done it for--it
is not a new technology. We have done it for a long time. Why
all the sudden all this talk about it is so bad?
Mr. Gerard. Well it tends to be heavily driven by those who
would prefer to move us off of fossil fuels and specifically
off of natural gas and oil.
Mr. Sullivan. Thank you very much.
Mr. Drevna, my next question is for you. President Obama's
Executive Order 13563 required agencies to look for existing
regulations that could be streamlined or repealed. Has EPA done
this for refinery regulations? This is a three-part question.
The Executive Order also requires agencies to look at the
cumulative burden of regulations, which would seem particularly
important for refiners which have been subject to a very long
list of EPA measures. Has EPA looked at the cumulative burden
on refineries? The Executive Order also urges agencies to take
pains to minimize the cost of new rules and ensure that the
benefits justify the costs. Do you see evidence of this at the
EPA?
Mr. Drevna. In short order of the three questions, no, no,
and no.
Now if I may be permitted to expand upon that somewhat, not
only have they not, you know, looked at regulations that have
impacted refiners and ultimately the consumer, which I think
this hearing--I hope this hearing is about, it is the fact that
they are giving us conflicting regulations. They are piling
more on. I mean, you look at what we have to do, Congressman,
on the Renewable Fuel Standard, so we are blending more and
more in and we are at a point now where we are going to have to
make a decision. Do we comply with ISA 07, or do we protect the
consumer?
And then we are asked to lower--I mean, to have better CAFE
standards. That is a good thing, but so we are blending more
stuff into gasoline that gets less mileage. And then we are
asked to take more sulfur out that increases--at a cost, and
then we are going to increase CO2. So you wonder why we are,
you know, running around in circles as refiners. Just say wait
a minute, has anyone gotten out of their own little vacuum here
and looked at the overall impact of all these regs and how they
are conflicting?
And just to go back a little in history, I testified in
2008 in February--I mean, the ink wasn't dry on ISO 07 that
Senator Bingaman was holding a hearing on oversight on that
bill, and you know, of course Tier 3 wasn't on the table at
that time, but at that time we testified and we said Senator,
which one of these bills, which one of these things do you want
us to comply with? And then now we have EPA talking about well,
it is OK to use E-15 in automobiles, except the automobile
folks are saying oh, no way. We are not going to warranty
those. It is OK to use, you know--we have to blend nine million
gallons of something called cellulosic ethanol that doesn't
exist, you know, and you wonder why refineries are scratching
their heads right now, and that--so the answer is no. We need
the EPA to really take a long, hard look at what the President
said and act in earnest to try to work with us to figure out a
path forward out of this thing. Right now we keep running into
brick walls.
Mr. Sullivan. Thank you very much.
Mr. Whitfield. The gentleman's time is expired. At this
time I recognize the gentleman from Colorado, Mr. Gardner, for
5 minutes.
Mr. Gardner. Thank you, Mr. Chairman, for holding this
hearing today, and thank you as well to the witnesses for their
time and thoughtful comments.
Just a couple of questions. I heard Mr. Weiss say that the
Strategic Petroleum Reserve had an impact on price, and I can't
help but thinking the minority leader has talked about
increasing--you know, tapping or drawing down the Strategic
Petroleum Reserve. We have heard others say that they want to
tap into the Strategic Petroleum Reserve. Now my guess is that
is for a very simple reason. People would tap into the
Strategic Petroleum Reserve because of supply and because of
price, and the economic argument says that if you increase
supply, if you increase the amount of oil that comes out of the
Strategic Petroleum Reserve, then it has an impact on price. It
was said here at this committee hearing, that it impacted
price. Well that in itself is an argument for increased supply.
So all this argument that supply doesn't matter is defeated by
the argument that the Strategic Petroleum Reserve had an impact
on price.
So the answer is before us. If we increase domestic supply,
then it will impact price and it will reduce the price, just as
the tap of the Strategic Petroleum Reserve did, so that is
pretty obvious.
Mr. McNally, is that an incorrect analysis?
Mr. McNally. No, you are right. Increasing supply does
reduce the price. In the case of the SPR, though, it bought us
4 days in 2011, and we did a little better in 2000 when 60 days
before the election, President Clinton invited Al Gore to
announce a stock draw, over the objections of his Treasury
Secretary and the Federal Reserve chairman. That was a little
better, that was 12 days, but it is short-term. What we really
need is to increase production and supply over the long term.
That will have a permanent effect.
Mr. Gardner. And because as the Strategic Petroleum Reserve
drawdown suggested, supply had an impact on price.
Mr. McNally. Correct.
Mr. Gardner. And so if you have more supply available in
the United States, whether it is domestic drilling, whether it
is the Keystone XL pipeline, whether it is using the oil
developed through Niobrara oil formations in Colorado, that
increases supply and will have an impact on price.
Mr. McNally. Correct.
Mr. Gardner. Thank you. And so the question I have then is
do you think it is wise to access the Strategic Petroleum
Reserve now or increase our domestic supply?
Mr. McNally. I think--well, it is better to increase our
domestic supply for the long term, but as we have been saying,
there is no short-term solution to the prices we have right
now. It would have been nice to have had the 700,000 barrels a
day that would have flown to our Gulf refineries through
Keystone by now, because we could have said to our Saudi
friends, our Kuwaiti friends, we don't need that 700,000
barrels a day, please send it to China and India, because we
are asking them to lower their imports of Iranian crude. That
would be nice, but we can't fix that overnight.
Mr. Weiss. Mr. Gardner, can I address that since, you----
Mr. Gardner. Actually I have a couple of questions for Mr.
McNally. Thank you.
What are the signs of true market manipulation by
speculators, and then just a follow up question to that,
historical examples that exist in oil companies or oil and
other commodities?
Mr. McNally. Traditionally in order for speculators to
distort prices, they have to manipulate or hoard physical
supply. There have been cases in the past, Mark Rich, et
cetera, where physical people bought the actual commodity, hid
it somewhere, took it off the market, and then went along the
futures and squeezed people, and we police very carefully for
that. There was no evidence anywhere that we saw a hoarding of
inventory or some indication that either OPEC or some private
company was hoarding oil prices were rising--as oil prices were
rising into 2008 and even now, as I mentioned, inventories are
actually very low and spare capacity is tight. It is the
absence of inventory hoarding which I think convinces the
independent unbiased experts have looked at this, including
myself as a private market analyst, that there is no distortion
going on.
Mr. Gardner. Thank you.
Mr. Milburn, a couple of questions for you. You mentioned
talking about some of the regulations and the impact those
regulations are having on the price of diesel. They have
increased the price of diesel fuel, is that correct?
Mr. Milburn. Significantly.
Mr. Gardner. And you are not able to get as many miles as
you were per gallon of diesel because of regulations?
Mr. Milburn. No, sir. Prior to the advent of the ultra low
sulfur diesel, which I talked about earlier, the trucks were
actually getting better fuel mileage. The ultra low sulfur
diesel has reduced the lubricity of the diesel, causing, you
know, more wear and tear on the engines, and yet we are talking
about going to compressed natural gas for a future energy
source, but we are not there yet. That compressed natural gas
engine for Class A trucks is going to be able to do the job
hauling, in your State of Colorado, up the Rocky Mountains. We
are going to need the power.
Mr. Gardner. And Mr. Milburn, are you using--if there was
something else available that was as affordable--actually less
cost than gasoline or diesel that was equally available, that
you could go to any convenience store and find, would you use
that?
Mr. Milburn. If it----
Mr. Gardner. If it was efficient for your----
Mr. Milburn. If it was efficient for my trucking operation,
yes, I would.
Mr. Gardner. And so you are not just using oil for the sake
of using oil?
Mr. Milburn. No, sir. You know, OOIDA's position is that we
want to see further use----
Mr. Gardner. But it is the most economical thing that you
have right now, which----
Mr. Milburn. It is right now.
Mr. Gardner [continuing]. Is why we need to----
Mr. Milburn. Plus the compressed natural gas stations are
not en route. There is one in Baytown, Texas. That is the only
one that I know of at this point, is in Baytown, Texas, for
commercial trucks.
Mr. Gardner. Mr. McNally, if I could ask you one final
question. The Rocky Mountain region, we have seen consumers
paying 50 to 54 cents less per gallon in the Rocky Mountain
region because of the availability of West Texas Intermediate.
What would happen if others had--you know, I guess what I am
asking is how--if we had a better balance of West Texas
Intermediate or of some of the supplies, what would happen
around the country?
Mr. McNally. The Energy Information Administration has
noted because the Rocky Mountains, what we call Pad 4, is
relatively self sufficient in refining, it has been able to
enjoy the lower crude prices and have lower gallon gasoline
prices. Everywhere else though in the Midwest, consumers are
not enjoying the benefit of the glutted crude. Refiners who are
in the Midwest are unable to gorge on low price crude and so
world gasoline prices are doing very well. Canadian producers
and U.S. producers, not so well, but American consumers outside
of the Rocky Mountain region really haven't seen any benefit,
and when that distortion is removed and that oil flows, they
won't see prices----
Mr. Gardner. So once again, a supply issue?
Mr. McNally. Yes, sir.
Mr. Gardner. Thank you.
Mr. Whitfield. Thank you. Well, that----
Mr. Rush. Mr. Chairman?
Mr. Whitfield. Yes?
Mr. Rush. Mr. Chairman, I have a unanimous consent request.
One, that I have two letters here that I spoke of in my opening
statement. One is to the chairman of the Commodities Futures
Trading Commission dated March 1, 2012. It was sent by me to
Chairman Gensler. I want that introduced into the record. I
request unanimous consent that that be introduced into the
record.
Mr. Whitfield. Without objection.
Mr. Rush. The second is a bicameral letter dated March 5,
2012, to the entire Commission, and I would like that
introduced into the record.
Mr. Whitfield. Without objection.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. My last unanimous consent request is that Mr.
Weiss indicated that he had--he indicated in his testimony or
during his testimony that there was a report, a 2009 report by
the Commodities Futures Trading Commission. I would like to, of
course, through the Chair, get that and have that entered into
the record, and any additional reports that you might have
also, to get those introduced into the record.
Mr. Whitfield. Without objection. Does anyone else have a
document they would like to submit for the record?
Well that concludes today's hearing, but we will keep the
record open for 10 days in case someone feels moved to submit
additional information. I want to thank all of you for taking
time to be with us today to explore this important issue of
gasoline prices and the impact on our economy.
And with that, the hearing is concluded. Thank you.
[Whereupon, at 1:30 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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