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Public Statements

Oil Prices

Floor Speech

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Date:
Location: Washington, DC


OIL PRICES -- (Senate - April 24, 2008)

BREAK IN TRANSCRIPT

Ms. CANTWELL. Madam President, I thank the Senator from Vermont for his comments about what is a growing national crisis: the price of oil and the price of gasoline at the pump. I congratulate him for making many important points relating to this issue and where the Senate needs to go in trying to address it. So I look forward to working with him on his ideas and many of the other ideas my colleagues have to try to give consumers some relief at the pump.

I think many consumers already have either turned on their televisions or seen through the impact of going to the gas station themselves that at $118 a barrel for oil, they are paying at least $3.56 a gallon for gasoline and more for diesel.

But what is important to understand about this is that oil futures--which is an indication of the price of oil and impacts the physical market's price of oil--are going to be over $100 for several years, including probably until 2015. That is, the marketplace has already decided it is buying oil at over $100 until 2015. So that is going to keep the price of oil high at over $100 and it is going to continue to have a significant impact and it is something we need to take into consideration.

Now, we have heard a lot of debate on the floor this morning about this issue and what the cause of it was. There have been a lot of accusations by a lot of different people saying: Here is what we think the problem is.

Well, I wish to go through a couple things I want to make sure our colleagues understand is not the problem or not the solution.

First of all, we had people talking about how this was all about more supply, and that if Democrats had not opposed drilling in the Arctic Wildlife Refuge, somehow today we would not have this problem, we would be sitting here without any kind of oil problem.

Well, I wish to remind people that the Energy Information Administration--our own Federal Government agency--did an analysis of drilling in the Arctic National Wildlife Refuge and said that:

Drilling in the Arctic National Wildlife Refuge would only reduce gasoline prices by a penny per gallon, and only in twenty years when drilling is at or near peak production.

That would be when it was at peak capacity. So hardly where we are today--at $118 a barrel--would that have had a significant impact on the prices we have today.

We also heard people say this was about environmental regulations, that somehow environmental regulations had caused this problem.

Well, let's hear from the oil company executives themselves. This one, Shell's CEO, said:

We are not aware of any environmental regulations that have prevented us from expanding refinery capacity or siting a new refinery.

So here are oil company executives saying they do not know of any environmental regulations. I think this was testimony before the Senate--one of our committees. So, obviously, their oil company executives are saying that is not what the problem is.

They also said environmental regulations are not stopping refinery expansions. So they were clear, testifying, again, before the Senate:

At this time, we are not aware of any projects that have been directly prevented as a result of any specific Federal or State regulation.

So you cannot stand on the floor of the Senate and blame regulations or environmental issues for not doing something that would impact the price of oil today. It is not true. These are CEOs, these are people in the business, and they are basically saying: No, that is not the effect.

We have one more from BP who said that it also was not stopping them from doing anything:

We do not believe that any Federal or State environmental regulations have prevented us from expanding refinery capacity or siting a new refinery.

So here is the oil industry itself saying that is not what the issue is, that is not what the problem is. They have not been back since this time period to claim any kind of Federal regulation or environmental issue.

So let's look at the other issue people talk about: inventory. Oh, there must be inventories related to that issue of the fact that you wouldn't allow us to drill in the Arctic Wildlife Refuge or that it is about these environmental restrictions and we couldn't build refineries.

Here is someone who is an oil analyst who on March 10 had this to say about inventories:

Gasoline inventories are higher than the historical average at this time of the year, so there is really no need to worry about supply being too tight.

So this is an oil analyst talking about the marketplace and basically saying: You can't say this is about tight supply as it relates to the fundamentals of supply and demand.

So is this just about supply and demand? Is it about that? Well, one individual from the Truckers Association basically just said a few weeks ago:

The oil market is no longer functioning on supply-and-demand fundamentals.

I don't blame the Truckers Association for saying that because they are on the front line of out-of-control diesel prices. When they see $4 a gallon for their diesel, it takes over $1,000 to fill up a typical tractor trailer, and they can't make enough money when they are paying that kind of a price. This year, they will pay $22 billion more--$22 billion more--for diesel fuel than last year's high prices. So don't think it is not costing Americans and costing industries that are based on transportation and profit margins that are very low.

We know there is more to this issue than what people have talked about here on the floor this morning. But let's look at what is really going on and whether this price is justified. Let's look at that.

Again, I think a great source to understand whether this price is justified--that is, whether there is something else going on in the marketplace--is the oil company executives themselves because if they are saying oil shouldn't be at $100 a barrel, then why should it be at $100 a barrel? If those in the industry are even claiming it shouldn't be at this price, then something must be wrong and we should act to correct it.

But here is the CEO of Marathon Oil who basically said:

$100 oil isn't justified by the physical demand in the market.

That is an oil company executive owning up to that, just saying right upfront that it is not about the fact that oil should be at $100 a barrel.

Let's look at what some other CEO said, this one the CEO of Royal Dutch Shell, who just recently, on the 11th of this month, basically said that oil fundamentals are no problem, meaning that is not what the issue is. It isn't basically supply and demand. They are the same as they were when oil was selling for $60 a barrel. What he is saying is that the fundamentals in the market are the same as when they were $60 a barrel, so there is no problem with supply and demand.

Let's look at another executive from an energy company. I like this because he actually just recently testified before the House of Representatives and just spit it right out. He just said it plain and simple. He said that the price of oil should be about $50 to $55 per barrel. That is an oil company executive this month testifying before a House committee saying that is what the price of oil should be.

Now, I ask my colleagues, what are we going to do about this situation when even the oil company executives are testifying--in this case, under oath before Congress--and basically saying there is no justification for this price? What are we going to do? Are we going to just sit by and do nothing? We have people in the marketplace who are urging us to do something.

This is from an energy analyst who basically was just quoted as saying: Unless the U.S. Government--the U.S. Government--steps in to rein in speculators' power in the market, prices will just keep going up. That is an oil industry analyst. That is what he is saying.

Everybody wants a functioning market. Functioning markets mean there is transparency, there is not manipulation, it is working well, people can trust the outcome, and people can make investments knowing that someone isn't gaming the system. That is what a functioning market is. It is clear that this individual is saying they are not sure there is a functioning market, and they are basically saying that unless the U.S. Government steps in to rein it in, we are going to have a problem.

We have seen this before. We saw this with the Western energy crisis in electricity. We saw the market go crazy and people stand by and say: Oh, you know what, you didn't build enough capacity; the environmentalists stopped it; this and this was wrong, and that is what the problem was. Well, during that time period, guess what happened. We lost nearly 600,000 jobs, and there was a $35 billion drop in economic product. For us in the Northwest, it cost our economy billions of dollars, and we are still recovering from it. So now is not the time to sit and point fingers that this is about some PAC environmental problem or regulation or ANWR; this is about taking testimony from individuals and standing up and deciding what we are going to do to protect our consumers.

My colleague from Vermont mentioned a few things, and I wish to mention a few things, also, because I think there are four or five things we should be doing right now to help consumers. This is a crisis. It demands a response by the Federal Government. Some of these powers exist within the Federal Government now, some of them we are working on, but we need to be aggressive about protecting our consumers.

The first one my colleague from Vermont mentioned was closing the Enron loophole. Now, many people may not understand what closing the Enron loophole is, but just to give my colleagues a little refresher, this debate has been going on basically since shortly after 2000 when Congress gave a loophole to electronic trading of energy. Basically, what that loophole meant is they didn't have to have the same kind of transparency; that is, we don't have the ability to look at the books and see whether somebody manipulated the price or was doing something untoward in the marketplace. We gave them an exemption.

Since that time, Senator Feinstein and then more recently Senator Levin, myself, and others have been trying to close that Enron loophole. We have been trying to close that Enron loophole for over 4 years now. If anybody wants to say there is any responsibility here about what Congress hasn't done and it has impacted the price of energy, then people ought to look at their voting record and see whether they voted to close the Enron loophole because that is part of this problem.

In addition, we should require oversight of all oil futures; that is, why are we saying oil futures somehow are less important than any other commodity we trade on the futures market for NYMEX or for the Chicago Mercantile Exchange? They have reporting requirements. Federal investigators can go and look at their books and see whether somebody can manipulate the market. They have that. But, no, we are letting some of these oil futures which impact the price of today's oil--as I said, from now until 2015, people are purchasing oil futures at over $100 a barrel, which means that is going to be a market indicator for what the physical price will be. We need to be having oversight of oil futures.

We had a very interesting hearing about a year ago where a professor from American University, I think, came to testify, and he said: Is hamburger any more important than oil in America? Because he said that when you look at beef and how it is regulated and beef futures, there are things they have to report. There are transparencies in the marketplace. We require all of this of them, but oil, which is essential to our economy, we basically have given exemptions to. So we need to require oversight of all oil futures.

The third thing we need to do is have the Federal Trade Commission write rules for a law that we passed in 2007. This body did something. That is what people should be holding up today--holding up the fact that we did something to protect consumers. We wrote a new Federal statute basically which said that manipulation of oil markets was a Federal crime, that you couldn't have any manipulative devices or contrivances that manipulated the price of oil. Now we are sitting around waiting for the FTC to implement that rule.

Now, some people think: Well, maybe there is not manipulation in the marketplace. I want to give three examples which have happened recently, all in the last few years. They have been the result of having new statutes on the books, but we certainly need to have this regulation implemented. One of those examples was British Petroleum. The company must now pay approximately $373 million in part for conspiring to corner the market and manipulate the price of propane carried through the Texas pipeline. So there is an example of where regulators got on the job. Similarly, in 2006, a manipulative scheme to game a natural gas market by a now defunct hedge fund cost consumers upwards of $9 billion, and in July of last year, Marathon Oil agreed to pay a $1 million fine to settle charges that Marathon Petroleum Company, a subsidiary, attempted to manipulate the crude oil prices in 2003.

So these are incidents of manipulation happening. We have an industry that is saying it is not about supply and demand and the price should really be anywhere from $50 to $60 a barrel; it shouldn't be at this price. We need the Federal regulators to do their job.

The fourth thing we need to do: Having gone through this with the incredible crisis of electricity, we learned we have various agencies with various oversight, and the Department of Justice did something very wise during that time period. It created the Enron Task Force. It created an Enron Task Force to coordinate all the agencies that could help them in the investigation of the manipulation and corruption and fraud that was perpetrated by that company. It worked well. That President's corporate task force on fraud exists within the Department of Justice today.

My colleague from Washington, Congressman Inslee, and myself wrote to the Department of Justice and President Bush on Monday calling for a Department of Justice oil market fraud task force. We believe it is time to bring DOJ into the picture to be aggressive in working with the CFTC, the FTC, the SEC, the Federal Energy Regulatory Commission, and any other Federal agency to be the policeman on this beat and make sure oil markets are not being further manipulated.

The last thing we need to do is to make sure price gouging is also not occurring. Now, we had language in the 2007 Energy bill on this issue. I like this language because it is based on language that 28 States have now that in the case of an emergency, when prices have gone out of control, it gives the President the ability to declare an emergency and to deal with those prices. We may be getting to that point. We may be getting to the point where we listen to these oil analysts who are saying these prices are going to just keep going up unless the Federal Government does something, and then I think we are going to have to do more than this. But at least we need to do these four things--and I say hopefully pass this fifth one as well--to make sure we are giving all the tools to the administration to protect consumers.

My colleague from Vermont said it well. This is about what are we going to do to protect consumers. There are a lot of things that have been happening since our economy took this more significant downturn. I would say it is a significant downturn because no one can sustain these oil price impacts across our economy. Yes, there are other things such as housing, but this is having a significant impact. But if you look at some of the solutions we have done so far, whether we are talking about housing or in the banking industry, we have done a lot for the big organizations. This is about doing something to protect consumers on price.

I hope my colleagues will take this list seriously as we propose legislation, and I hope all of my colleagues will join in the Department of Justice starting this investigation. If you look at their Web site, they will tell you when they started the President's corporate task force on fraud, particularly relating to Enron, and they started making sure traders and others knew they were going to lose their livelihood and their profession if they manipulated the market, people started getting serious about their actions.

At $118 a barrel, we have to send a message by the enforcement agencies of the Federal Government that we are going to get serious about challenging manipulative activity as it relates to oil prices and that we are going to do our job and we are going to demand that the Federal Government have a cop on the beat when it comes to high oil prices.

Mr. President, I yield the floor.


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