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Hearing of the House Select Energy Independence and Global Warming Committee


Location: Washington, DC


REP. JOHN LARSON (D-CT): Thank you, Mr. Markey, and thank you for conducting this hearing.

And thank you, gentlemen, for joining us today.

Let me start with saying that I believe that the laws of supply and demand, especially as relates to oil, are completely broken and malfunctioning. I'd like to know your opinion on this. I'd like to know whether you think that, in fact, speculators are driving up the cost and paper is to account for a number of the reasons that, let's say, senior citizens have to turn over their entire Social Security check in order to pay for oil that's delivered to their homes in the Northeast, and in as much as you receive ($)107 billion annually in taxpayer dollars, do you think that that's appropriate?

I believe that -- and the Independent Connecticut Petroleum Association is outraged over this -- rock-rib Republicans screaming that this whole situation has been nothing more than manipulation around greed, and they see it day in and day out with the customers that they are attempting to make deliveries to who are getting their homes foreclosed on, can't afford prescription drugs, can't afford to buy the food necessitated for their living, and yet are turning over their Social Security checks so that they can pay for their fuel. That's the kind of problem that we're in.

And lastly, with 3 percent of the reserves entirely in this nation, is it possible -- do you believe that we can actually drill our way to energy independence?


REP. LARSON: Thank you, Mr. Chairman.

And thank you, all the witnesses, as well for your testimony.

I'm going to make an assumption. I think it's pretty broad but pretty clear that your primary responsibility, your primary fiduciary responsibility, is to the shareholders of your companies. And when you make decisions based in the free enterprise system and in the marketplace, it's based on results for the shareholders. Is that a fair assumption? Is there anyone who would disagree with that?

When we make decisions, and a lot of our decisions are policy decisions based on the citizens that we're sworn to serve, and there was a lot of testimony -- very productive testimony, and thank you for that. But I want to get back to this whole issue of supply and demand.

In my district, the Independent Connecticut Petroleum dealers (sic) Association is saying that whole system has gone amok. The laws of supply and demand are not operating on the street, as you were alluding to, Mr. Hofmeister. I understand in general what you're saying, but in the instance particularly of oil and gas, we've seen this speculation. We see people that do not either receive or store oil but are pushing paper forward and causing the artificial rise in price of oil. Do you agree with the Independent Petroleum Council (sic), or are they way off base here?

We'll start with Mr. Simon, and we'll go right down the line.

MR. SIMON: When you look at the fundamentals of our business, Congressman, the supply/demand fundamentals, our assessment would be the price should be somewhere around ($)50, $55 a barrel. There is a disconnect. To me, there are three factors that contribute to that. One is the monetary issue, the weaker dollars we've already talked about. The other is geopolitical political risk. And the third, we believe, is speculation. And you could probably break that into three parts, and it's 30 to 40 percent of --

REP. LARSON: Do most of you agree with that assessment, or would you alter your assessment? Most of you would agree with those three factors? I would agree with those three factors.

What would do about the speculators?

MR. ROBERTSON: I think the price of the dollar is part of it as well.

REP. LARSON: Okay. What would you do about the speculators?

MR. ROBERTSON: What would I do about that? I mean --

REP. LARSON: How do we get rid of the Jim Fisks and Jay Goulds of the crude oil? How do we stop this artificial fluctuation on of prices?

MR. ROBERTSON: Well, I agree with what was just said, that the main things that I think are driving the price of oil are the huge demand in the world, the reduction in spare capacity in the world, the price of the dollar --

REP. LARSON: Because of the economy, we've just witnessed that demand is lessening here; hopefully through conservation demand will lessen as well. And yet, we see --

MR. ROBERTSON: We're part of a world system, and --

REP. LARSON: We are part of a world system, but here in this country, responsible to our citizens. And how do we say -- as I said at the outset, how do you turn to the lady who has to turn over her entire Social Security check to pay for her oil bill? That the laws of supply and demand are in effect? How do we deal with the fact that people can in this system manipulate the price in such a manner that even through all of your good efforts, and then it has us saying to you in turn, hey, what do you need that tax cut? What are we spending -- what are we giving you a tax break of $107 billion for? People at Augie and Ray's in my hometown are asking that very question.

MR. ROBERTSON: We've chosen by our policy to be dependent on oil from overseas. That's our choice. We chose not to develop our own resources in this country. That was our choice. And the fact of the matter is, we are part of the world.

We are part of the growing demand in the world, and we --

REP. LARSON: But as long as it's more profitable, what incentive is there for you to develop alternatives as long as it's profitable and you're able to get the rates that are currently to get? And if you're sworn as a fiduciary responsibility to provide the greatest return for your shareholder, geez, I don't know, but it seems to me like, hey, if I was one of your shareholders, I'd be saying, you know, they're not doing a bad job; I'm getting a pretty good yield on my dollar here. But if I'm a citizen of this country, I'm saying, we're not making out so well here.

MR. ROBERTSON: Our shareholders only get return if the customers are being satisfied with a product. If we don't sell a product that our customers want, then our shareholders are going to lose.

REP. LARSON: This is a matter of customers not -- they don't have a choice here. When it's between heating your home or freezing to death, that's not much of a choice. You know, when it comes down to whether or not able to get back and forth to work, that's not much of a choice. It's what my grandfather says, "Trust everyone, but cut the cards." And someone in here, there is a disconnect. We need your help in trying to fix this disconnect. Mr. Stupak, who was here, who left, also has proposals that are taking about the manipulation of the market, I guess.

MR. ROBERTSON: We're doing our damnedest to fix this. We're spending as much money as our company can with the people that we have and the infrastructure that exists. We're spending as much as we can to produce energy for the people in this country and the people in the world. We don't know how to do anymore than that.

REP. LARSON: My time is up, but I'd be interested if you -- all of you -- could, in writing, I'd love to hear your opinions on whether -- what you would do to the speculative side of this market that distorts the entire market and your integrity as well.


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