Oil and Gas Prices

Floor Speech

OIL AND GAS PRICES -- (Senate - May 12, 2008)

Ms. KLOBUCHAR. Mr. President, despite a little snow the last few weeks, spring is finally arriving in Minnesota. In fact, we had our fishing opener this weekend. It is the time of year when people start going up north. They have their cabins up there. It is not exactly extravagant, but that is their vacation place and that is where they spend a lot of their summer.

A lot of my constituents have been calling our office saying they don't know if they can afford to go up north this summer. Worse than that, we have had many people who drive trucks for a living, who have long commutes to work, who are concerned about even keeping up with their jobs. You can see why. The oil and gas prices have tripled since 2002: Minnesota, $3.49 per gallon; in the United States, gas prices are at $3.66 per gallon. You can see why the truckers are upset with diesel at $4.15 per gallon and oil at $122 per barrel.

I have to pause for a moment to say I have been coming to the Senate floor to address the price of oil for a number of weeks now and it continues to astound me that every time I speak, the prices have gone up even more, and there appears to be no relief in sight. We look at the skyrocketing gas prices in Minnesota where they have gone from about $2.90 up to $3.62 in only 3 months. This is astonishing, and it is even more astonishing that this administration continues to do nothing; that the attitude seems to be this is what is happening, this is what the market says.

I believe there are things we can actually do, of course, in the long term but also in the short term. I don't believe we can continue to do business as usual. I have heard from farmers who are having a hard time making ends meet, even with the high commodity prices, because the cost of their inputs such as diesel fuel for their farm equipment and fertilizer made from natural gas have spiraled out of control. I have heard from people who are having a hard time heating their homes and going on with their lives.

The high price of energy has inflated the price of everything from groceries to transportation to home heating. We had a hearing in the Joint Economic Committee a few weeks ago about the price of food. There are a number of factors at play there, including the low value of the dollar and the export market; including the weather; including some of the demand for biofuels, although that was put as a relatively small factor. But one thing that was mentioned time and time again was the cost of transportation.

In cold northern States such as Minnesota, where people have to pay off large heating bills, this is the time of year they do it. Some of them put it off until now. They are too afraid of thinking about paying their bills for next winter. Middle-class families are struggling with the high cost of health care and college education, and they can't afford the price of gas, especially in our rural areas. You look at the fact that there really haven't been any wage increases or the wages have been stagnant and, in fact, have been going down; you add that to the increasing expenses with the price of gas up about $1,000 or $2,000 a year, depending on how much you drive. For a middle-class family, health care is up something like $1,500 a year; appliances are up, telephone service is up. It comes to about $5,000 extra a year that the middle-class families are expending in the last 8 years.

Not a day goes by that I don't hear about this kind of struggle from my constituents, so it is hard for me to understand how our President seemed so taken aback recently when someone asked him about $4-a-gallon gas. This was on February 28, 2008, not too long ago, and the President said:

You're predicting $4 a gallon gasoline? That's interesting. I hadn't heard that.

The fact is it is not just interesting to the people of my State; it is, in fact, a budget buster for too many people in my State. This administration has failed to provide Americans with a meaningful energy policy that would provide relief from high gas and energy prices.

This country needs a bold energy policy for the future--not little gimmicks, not little ideas that maybe give you an extra 20 bucks. This country needs something more than someone who is going to say it is interesting. We need a policy that will stabilize prices and give consumers more alternatives, reduce our dependence on foreign oil, and provide us with the next generation of home-grown biofuels.

Brazil has achieved energy independence. They have done it with sugarcane. It is easier to do, but they have done it. They basically leapfrogged our country because their government had the foresight to put a policy in place that pushed the development of biofuels. They have their own oil, but mostly they have their own biofuels.

We can do this; we just need the will. We need to pursue a forward-looking energy policy with the same sense of urgency we used to put a man on the Moon nearly 40 years ago.

In the long term, that is going to mean making strategic decisions in research on hybrid cars, new solar technology, cellulosic ethanol, and other forms of energy from biomass. It is just around the corner. We know that. Chevy is coming out with the Chevy Volt which gives you 30 miles, by plugging your car in every day and then it converts over to biofuels. That is 2 years away. We have new solar technologies. We have cellulosic ethanol right at the University of Minnesota where groundbreaking research is being done. We can do this.

We need better fuel efficiency for our cars and trucks. As the Presiding Officer knows, this Congress was the first Congress since I was in junior high to increase the gas mileage standards for new cars and trucks by 10 miles per gallon. We can do more. We also need a renewable energy standard such as we have in Minnesota where we simply basically are going to provide 25 percent of our energy, our electricity, from renewable sources by the year 2025. That was a bipartisan agreement in our State--the Republican Governor, Democratic legislature, nearly unanimous, supported by our biggest electricity company itself, which took even a higher standard--30 percent--for itself.

These are long-term solutions. I believe very strongly they are important and they are the future and we need to pass them. But there are also things we can do in the short term about high gas prices that could bring immediate relief to the families in my State and across this country. That is why I am proud to cosponsor the Consumer First Energy Act, which Majority Leader Reid introduced last week. There are 20 cosponsors, 20 Senators who are already on this bill. The bill attacks high gas prices from five different angles, all of which are achievable in the short term.

The first thing, and the thing I have heard most about when I talked to people in this business, is the role that market speculation is playing in today's price of gas. The administration likes to tell us high gas prices are just a simple case of supply and demand, and more people are driving, so the price of gas goes up. But that answer doesn't hold true any longer. Look at what the oil executives have been saying. On October 30, 2007, the CEO of Marathon Oil said:

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

That is the CEO of Marathon Oil on October 30, 2007. I think he might know what he is talking about. Then a more recent quote, on April 11 of this year, by the CEO of Royal Dutch Shell, who said:

The [oil] fundamentals are no problem. They are the same as they were when oil was selling for $60 a barrel.

On April 1 of this year, senior Vice President of ExxonMobil said:

The price of oil should be about $50 to 55 per barrel.

If oil should be roughly at $50 or $60 a barrel, given market fundamentals, why is it trading at $118 per barrel? If supply and demand doesn't explain the high price of gas, what does? According to the experts, there is a frenzy of unregulated market speculation in the oil futures market that is driving prices to record highs.

I wish to share a quote from an energy market analyst with Oppenheimer, who recently was named by Bloomberg as a top-ranked energy analyst in the country. He said:

I am absolutely convinced that oil prices should not be a dime above $55 a barrel. Oil speculators include the largest financial institutions in the world. I call it ``the world's largest gambling hall.'' It is open 24/7. It is totally unregulated. This is similar to a highway with no cop and no speed limit and everybody is going 120 miles per hour.

That will be reassuring to the people calling our office because they cannot afford to go up to the lake this summer. ``The world's largest gambling hall.'' Why are these trades in a commodity as vital as oil--at a time when we are in a very fragile situation internationally and we are doing business with countries we would rather not deal with, why is this commodity, oil, unregulated? In 2000, there was a provision inserted into the Commodity Futures Modernization Act that exempted electronic energy trades from Federal regulation. In the absence of oversight, what was once a small niche market became a booming industry, attracting a rampant speculation from hedge funds and investment banks, the largest financial institutions in the world. Oil and natural gas prices became volatile.

That provision has come to be known as the ``Enron loophole'' because it made possible the many abuses that triggered the western energy crisis and cost the economy $35 billion and nearly 600,000 jobs.

The Federal Government has a critical role to play in conducting aggressive oversight of changing energy markets. Any prosecutor--and the Presiding Officer knows from his past work as a prosecutor--can tell you that good laws are not enough; you need good enforcement. History has shown us that when enforcement is lax, consumers ultimately pay the price. The Consumer First Energy Act addresses the problem of market speculation by stopping traders from routing transactions through offshore markets in order to get around limits on speculation put in place by U.S. regulators. Specifically, the Intercontinental Exchange, or ICE, in London allows trading in American oil futures, gasoline and home heating oil, with far less stringent reporting requirements than what is required here at home. This has driven a lot of speculation offshore and out of reach of our regulators.

This bill will make those foreign trades in American oil and gasoline futures subject to reporting requirements so we can have a proper paper trail and keep track of what is occurring.

This bill would also require the Commodity Futures Trading Commission to increase the margin requirement for oil trades. A margin requirement, as you know, is the amount of money you have to put down if you want to buy and sell oil futures. The margin requirement is currently set by the exchanges themselves, which is like the fox guarding the henhouse. They have set the requirements so low it has led to this rampant speculation.

Some people believe this occurred because many speculators have taken money out of subprime mortgages, or the mortgage market, and put it into oil. The people in Minnesota want to know the people in Washington are looking out for them. I think the way we do that is by reining in some of this rampant speculation with this bill.

The bill also has requirements that will allow us to push on OPEC so they provide the oil they should provide. They are keeping it at an artificially low level. They are colluding to do that.

Yet, at the same time, our country is doing business with many of these countries. This has to stop, and we have to use the leverage we have to push OPEC to produce more oil.

Another part of the bill would ask that we temporarily halt putting oil into our Strategic Petroleum Reserve. This is estimated by energy analysts to bring in about 3 to 5 cents per gallon. They are 97 percent full. Yet our Government is purchasing oil at this incredibly high rate. This bill puts a temporary halt on that so we can put more oil on the market and, at the same time, not burden our country by buying it at this incredibly high rate.

Finally, this bill does something we have been trying to do for years: It takes the oil giveaways and puts them in the hands of those who can actually produce renewable energy. As you know, we came so close to doing this in the past. We were one vote short of blocking the filibuster--a tool the other side has used 68 times now, a record number. We were one vote short of taking $17 billion, over a 10-year period, and putting it into the hands of basically the people of this country, to say there is a better way. Instead of investing in the sultans of Saudi Arabia, we can put our investments in the farmers and workers of this country. If Brazil can do it with sugarcane, we can do it with residue from logging or hybrid cars or with hydrogen fuel cells. We can do it with cellulosic ethanol, the next generation of biofuels--but not if we are unwilling to talk about how we do it, which is put our money where our mouth is, which is to take the giveaways the oil companies have been enjoying for so many years, while seeing record profits, and putting it in the hands of the future.

That is what we are asking this Senate to vote on tomorrow. I can tell you that if you ask the people in Minnesota--whether they are Democrats, Republicans or Independents or whether they are from the Twin Cities or the Iron Range of Minnesota or southern Minnesota--they want to go the next step. They are bold. They figure if we can put a man on the Moon, we can do this. This is why I support this bill. This is our future.

I am very proud to be a sponsor of the bill, and I hope this Chamber is willing to do something tomorrow different than what we have done in this area of energy before. We have taken steps and increased the gas mileage standards, but this is our opportunity to be bold and to respond to the people of this country who are not looking for gimmicks but they are looking at us to do something. We know we can do a long-term solution, research and development, and the transitioning to green jobs. We can do the transition to cellulosic ethanol and put the money there.

In the short term, we need to get rid of this idea that Government should put up our hands and let this keep going, while the rampant speculation goes on and on. We need to place stronger limits on market speculation; temporarily suspend deliveries of oil into the Strategic Petroleum Reserve; put a stop to the oil company giveaways; enact the windfall profit tax, which I know is different than proposals in the past. It kicks in when oil companies are not truly investing in renewables or adding to its refineries and production. And then we have to put that pressure on OPEC.

These are the kinds of short-term, bold measures the people of this country are looking for. So tomorrow we have our chance. I implore my colleagues to join us. Let's get this done and do something real for the people of this country.

I yield the floor and suggest the absence of a quorum.

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