Domestic Oil
Floor Speech
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Mr. GARAMENDI. Thank you very much, Congresswoman Speier, and thank you for bringing this very, very important issue to the attention of the American public this evening as we spend this hour talking about gas prices in the United States.
I was really struck by the charts that you put up. Wow. But they tell us that the story is we don't pump oil in America. Not so. We do. We really do. And they tell us that we're going in the wrong direction. But if you take a look at those charts, we're actually producing more and more energy. Today, in the Resources Committee, on which I have the honor of sitting, we had a debate about this. And our Republican colleagues were saying that we're not producing as much. And so we show them the energy institute's statistics, and they say they're wrong. That's an independent agency and they collect the statistics, and in fact they're right. And your charts clearly pointed out that we are in fact making it in America.
This is my favorite chart. This is what I'm often on the floor talking about: Manufacturing in America and making it in America. It's not often that we take this subject of making our energy in America, building an American energy machine, one that will supply the energy that our Nation needs to meet a growing economy and the needs of our society.
So very, very much what we're talking about here is making it in America. There are so many different pieces to this. I'm going to just bring up two of those, and then we'll carry on our dialogue here.
First of all, conservation. I think you're going to talk about this a little later--about automobile conservation, the gasoline in automobiles, which is very, very important, but there's so much other conservation that we must be doing in housing, in commercial buildings, in this building. This building is over 150 years old. We've got serious lack of energy conservation here within the Nation's Capitol.
But if we carry on a major effort on conservation, we will reduce our expenses and simultaneously make the available energy--the energy that is currently available--much more widely available and at a lower cost because of the market forces. So conservation is absolutely critical not only in oil and gas but in all of the other energy that we consume in this Nation.
Now the second thing, and then I'll circle back around quickly, is what I call substitution. We can substitute energy forms for oil, and in doing so, increase our domestic availability for oil--and that's diesel and gasoline. And in the substitution we also reduce our importation of oil. So substitution is really important.
So what is substitution? Well, substitution is going electric. We can go to electric cars, go to hybrids, which are a combination of electric and gasoline. There are many different ways on the transportation sector. But oil is also used in the production of electricity. Natural gas is the big thing today, and it is a wonderful substitution for coal. And we'll come back to that.
Finally, biofuels. The point I want to do here leads me to this little chart that I've used before, and it talks about where your tax money is going. Where is your tax money going? Well, I'll tell you that about $5 billion of your tax money every year goes to the oil industry. It goes to the oil industry to provide a subsidy that's now been in place for more than a century. And in doing so, it worked. That subsidy worked. It created one of the wealthiest--not one of--the wealthiest industry in the entire world. That's the oil industry. And, again, I know you're going to pick this up and carry it a little bit further.
But just here, our subsidies, our tax dollars handed over $5 billion a year to the Big Five, who earn billions and billions of dollars of profit every quarter. Why do we continue to do that when we really starve the substitutions?
You look at here, this is the biofuel area. This is the green technologies--wind, solar energy, biofuels. This is ethanol down here. You just compare this. The subsidies from $70 billion a year going to coal and oil, that's well beyond the Big Five. And over here on this
side we're talking about some $12 billion. And down here, some $16 billion a year.
So what's happened is that your tax money continues to subsidize oil and coal and just a little teeny, tiny bit on the substitutions, where the opportunity for real energy independence will exist. So we should keep this in mind as we look at how we use your tax dollars.
Now there's a huge fight going on here in the Congress, appropriately so, about changing this substitution; that we ought to stop subsidizing the oil industry, put some of that money over here into the substitutes, that is the green technologies, and into paying off our deficit or taking care of our seniors and our sick. There's much, much more to be done on that.
I would love to see your charts and we'll get into this in some, hopefully, elegant way.
Ms. SPEIER. The next chart that we're going to put up is one that you'll find particularly interesting. This is the Big Five oil companies and how much money they made just in 2011. As can you see, $137 billion last year--a 75 percent increase in the profits over the year before. And as you can see each of them: ExxonMobil, 31 percent increase; Shell, a 54 percent increase; BP, 114 percent increase; Chevron, 42 percent increase; ConocoPhillips, 9 percent increase.
These companies are doing extraordinarily well and yet we're still giving them $5 billion in subsidies.
I guess the question I have for you, Congressman, is one of the things that we're told by the industry often enough is that if you take away our subsidies, the cost of gas at the pump is going to go up. And what is the answer to that question?
Mr. GARAMENDI. Well, you have another chart there that showed the oil that is pumped and the price of gasoline. Congresswoman Speier, you used this before. And you asked me: If we take away the subsidies, will it increase the cost of gasoline? The answer is, categorically: No.
First of all, it is an international market that sets the price of gasoline. I should add one little caveat to that. International market and speculation. And I'm going to come to the speculation in a little bit.
Anyway, the international market sets the price of gasoline that these Big Five companies buy and the value of the oil that they extract. So the barrel of oil is set internationally. Now if it's set internationally and you take out the speculation, it remains fairly constant. Here's the production. And it has gone up, but it's been rather steady over this period of time.
The subsidy is to encourage the production of oil. Well, they've had the subsidy and so the production has been rocking along here. The price of oil is set internationally. What explains this enormous variation in the price of fuel at the pump? Well, it's not production. That's from here. Is it the subsidies? The subsidies are a very, very small part. You're looking at a $137 billion total profit. The subsidy is $5 billion. So it's inconceivable that the subsidy has much to do with the bottom line, other than adding $5 billion, which would be, I guess, if you took the subsidy out, it would be $132 billion. Oh, my, let's whine about that. I don't think so.
So the subsidy doesn't have much to do, if anything, with the price of gasoline. The price of gasoline, however, is set by those companies. And that leads directly to that bottom line there--this $137 billion. They choose to set that price.
Now what are we going to do about it? Well, take the subsidies back and begin to move away from dependence on oil, whether that's imported oil or oil that is pumped out of the ground here in the United States, and move to these alternatives.
Move to the alternatives, electricity and natural gas and the biofuels. All of those will further reduce the demand for oil which will bring down the cost of a barrel of oil within this country and around the world and, in so doing, allow us to have a lower gasoline price; and to do that, capture the subsidies. It's not going to increase the cost of a gallon of gasoline at all.
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Mr. GARAMENDI. The speculation issue, this morning we had a fellow from the Connecticut Petroleum Retailers Association come in and talk to us about speculation. You and I didn't have enough time to put this together, we talked about this beforehand, because we were both taken by the information he provided. It is really not new information, but it is very interestingly put on the issue of speculation. Forgive me, general public and forgive me, Ms. Speier, but I just decided to put this together on the back of this Make It in America chart because America was taken to the cleaners in 2008.
This is what happened to the price of a barrel of oil in 2008. Now keep in mind in 2008 the wars were going on, but there was no real change in the wars. In March of 2008, a barrel of oil cost $70 a barrel in the United States, and I guess worldwide also. So March of 2008, it was $70 a barrel. Nothing happened, no big change. The Straits of Hormuz were not shut down; Venezuela and Nigeria and other countries continued to pump oil, as they had before.
But between March of 2008 and July of 2008, what's that, 4 months, 5 months, the price went from $70 a barrel to $147 and gasoline was very close to $5 a gallon. So oil went from $70 to $147--doubled, doubled in price--in just a period of time from March, April, May, June until July of 2008. And then the speculators broke and the price plummeted between July to November to $32 a barrel.
Now this has nothing to do with the production of oil around the world. It has nothing to do with major international crises of any kind. Obviously, we had a problem in the United States with our economy; but the consumption of gasoline remained about the same, but the price of a barrel of oil doubled and then in the same
year, July to November, plummeted to $32 a barrel.
If there is ever, ever a situation that says somebody is speculating in this market, it's this extraordinary change that occurred over a period of time from March to July to November. And there's no supply and demand, no international crisis that could even begin to explain this extraordinary shift in prices. It is, I think, beyond a doubt that all of this, this was the great gasoline crisis of 2008, was caused by speculation. Now, we need to do something about that.
Here is an issue before the House of Representatives, and every day somewhere in the buildings here in Washington there are a group of Republicans that are doing their level best to eliminate the one law that we have been able to put in place to control speculation. This is the Dodd-Frank legislation. The Dodd-Frank legislation has very powerful tools to control speculation. And you can draw your own conclusions why our Republican friends would try to torpedo, to end, to eviscerate the Dodd-Frank legislation so that the speculators can continue this kind of activity.
Now, keep in mind that this is not ending. If we go to 2010, 2011, the current period, my guess is that we would see something similar to this kind of speculation. So the Dodd-Frank legislation is the only tool we have available today to deal with speculations such as occurred in 2008 and is in all likelihood continuing today.
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Mr. GARAMENDI. I was there for that, and I was struck by the very same statistic. As you look at what happened then, $10 here, a doubling in price. Consider for a moment what it would mean to somebody that had purchased back here in March a million barrels of oil at $70 a barrel, and they come up to July, that million barrels of oil has doubled in value. So this is why speculation occurs. It occurs because somebody by playing the market, by speculating, is able to make a vast sum of money.
There's the other side of that coin--somebody lost a vast sum of money coming down here. But the American public, however, was the single biggest loser in all of this because as that went up, the price at the pump also went up, and Americans paid more and more for the price of gasoline. It was about $5 a gallon when it came up here. And it didn't go down from $147 to $32; that proportion didn't happen. It did drop from near $5 down to $3.50, in that area.
So the American public was stuck with an exceedingly high price which continues to this day, which leads to those extraordinary profits which you were showing just a few minutes ago. Now, I'm not saying the oil industry was involved in the speculation; but I will say this, the oil industry benefited from the speculation that left a very high price for oil into the future. This didn't last very long. This went back up to $70, and today it's over $100 a barrel.
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Mr. GARAMENDI. Well, I took a look at that before we began this hour, and I go, Oh, my, do I have to wait until 2025 to buy that vehicle? No, not really. There are pure electric vehicles that are available today that get not 54 miles per gallon but like infinite, by using electricity only. You can buy those. Unfortunately for me, in my district where a Saturday run around the district is 600 miles, it doesn't make much sense yet, but it's coming.
The battery technology is improving for automobiles. You can store that energy or take down that energy at night. This is part of the electric grid and the changes that are occurring in the electric grid all across this Nation. Given the low price of natural gas today--just over $2 per 1,000 Btus--we're seeing the electric utility industry shifting from coal to natural gas. As they do that shift, we get an enormous reduction in the carbon emissions--which is good for the environment and good for the climate change issue--and, simultaneously, we're able to then see a path to an electric vehicle, or at least a hybrid plug-in, hybrid electric vehicle. All very, very good. Biofuels will be part of that also.
So it's very, very powerful that we continue to increase. And let's keep in mind that there had been no increase until the Obama administration came in. I think it was over 20 years that the standards had been in place, and then President Obama came in and said, Listen, we need to move to conservation. And the result is the incredible savings.
I don't want to wait until 2025. Let's do something
about it today.
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Mr. GARAMENDI. I have a couple more things that I'll pick up along the way. Let me just share one of them, since we're on the gasoline issue.
You and I go back to our district every weekend. A month ago, 2 months ago, the rage was the price of gasoline. I was doing town halls. I knew you were also, and so I was doing some research about where the gasoline is and what it's being used for and what the cost was.
I came across a statistic from the Energy Information Institute that was absolutely surprising to me. The talk on the radio and on television and the talk radio and talk television was that we have this enormous shortage of gasoline, that the threat of a war in Iran was responsible for driving it up, and somehow problems in Nigeria or Venezuela--or wherever--were somehow shorting the market and that gasoline was in short supply. But the information, the statistics were exactly the opposite. There was a glut of gasoline in the United States, so much so--get this--so much so that the oil industry--Chevron, Exxon, BP, all of the rest--were exporting 28 million gallons of gasoline a day. At the same time they were exporting, they were driving the price up towards $5 a gallon.
And we go, wait a minute. What's this all about? You're telling me we have a shortage? If we have a shortage, why are you exporting 28 million gallons of gasoline a day? And from the information I've been able to obtain, it appears as though that export continues to this day--an export of 28 million gallons of gasoline a day out of the United States at the same time that the industry is saying, Oh, woe is us. We have a short supply. Well, if it's short supply, it's because they are creating it to the deficit and to the harm of the American traveling public who has to buy that gasoline.
Now, one other thing--and check me on this; I was trying to recall all of the information this morning--that in the last quarter of 2011 and the first quarter of this year, the United States, for the first time in--help me here, 40 years?
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Mr. GARAMENDI. --60 years was a net exporter of oil, a net exporter. We had achieved energy independence. We were exporting more than we were importing for the last quarter of last year and the first quarter of this year. I don't know if that's going to continue, but it flies right in the face of what the oil industry was telling us as the fake, false crisis of the spring occurred. My guess is it was speculation. My guess is it was greed on the part of the oil industry.
My solution is to end the subsidies, bring that money back and use it on the green technologies and conservation. My solution is to enforce the Dodd-Frank laws and to make certain speculators are not robbing the American people day in and day out. Those are two things we can do. And as you said earlier, we will continue to produce energy in the United States, and we'll Make It In America.
I thank you so very much. I do have another meeting. I'm going to have to run, but this is good. It's good to get the information out there. Thank you for bringing us together tonight.
Ms. SPEIER. Well, thank you, Congressman, for your great presentation and your passion around making it in America, which should be underscored, because one of the great things that happens in my district is a lot of innovation.
Tesla, which is an electric car company that is making it in America, building it right there in Fremont, has a showroom right outside my district. And a gentleman came in to test-drive the sports--the Roadster, which has a hefty price associated with it, but very fast.
Mr. GARAMENDI. Is this the one that goes a gazillion miles an hour in 5 seconds?
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Mr. GARAMENDI. I was going to head out the door, but your Tesla story caught me as I was about to leave.
The grid, we need to have a smart grid. This is one of the things that is in contention here. This is about energy research. Now, we need to understand, how can we make that grid smart enough and robust enough that we will be able to charge, on any given block, one, two, three, four, five, or six more homes at night?
To do that, we need to have research and understanding, not only on how we produce the energy in an environmentally sound way that reduces the carbon emissions, but we also need to know how to distribute that power and when it's going to be needed. That's called the smart grid.
Now, to do that requires research. It requires us to invest in research to understand how the grid works, how it can be improved, how we can create the efficiency in the grid, how that power can be distributed to where it is needed when it is needed. That takes money. The Federal Government has, over the last several years, provided that research money in the budget that we're debating here now. Well, we're not debating it. It actually passed.
The blueprint for the current budget from this House reduces the energy research in the United States. So it may be some time, if our Republican colleagues have their way about the energy research, before those three people will be able to plug that thing in at the same time at night.
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Mr. GARAMENDI. Thank you so very much.
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