[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
U.S. POLICY TOWARD OPEC
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HEARING
BEFORE THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, MARCH 1, 2000
__________
Serial No. 106-132
__________
Printed for the use of the Committee on International Relations
Available via the World Wide Web: http://www.house.gov/international
relations
______
U.S. GOVERNMENT PRINTING OFFICE
66-052 CC WASHINGTON : 2000
COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa TOM LANTOS, California
HENRY J. HYDE, Illinois HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey ENI F.H. FALEOMAVAEGA, American
DAN BURTON, Indiana Samoa
ELTON GALLEGLY, California MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California ALCEE L. HASTINGS, Florida
PETER T. KING, New York PAT DANNER, Missouri
STEVE CHABOT, Ohio EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South BRAD SHERMAN, California
Carolina ROBERT WEXLER, Florida
MATT SALMON, Arizona STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York JIM DAVIS, Florida
TOM CAMPBELL, California EARL POMEROY, North Dakota
JOHN M. McHUGH, New York WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina BARBARA LEE, California
PAUL E. GILLMOR, Ohio JOSEPH CROWLEY, New York
GEORGE RADANOVICH, California JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
Richard J. Garon, Chief of Staff
Kathleen Bertelsen Moazed, Democratic Chief of Staff
Francis C. Record, Senior Professional Staff Member
Marilyn C. Owen, Staff Associate
C O N T E N T S
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WITNESSES
Page
The Honorable Bill Richardson, Secretary, Department of Energy... 16
APPENDIX
Prepared Members' Statements:
The Honorable Benjamin A. Gilman, a Representative in Congress
from New York and Chairman, Committee on International
Relations...................................................... 46
The Honorable Sam Gejdenson, a Representative in Congress from
Connecticut.................................................... 49
The Honorable Paul Gillmor, a Representative in Congress from
Ohio........................................................... 52
Prepared Witness Statements:
The Honorable Bill Richardson, Secretary of Energy............... 54
Additional statements and materials submitted for the record:
Joint Statement between Venezuela's Minister of Energy and Mines,
Ali Rodriguez, and U.S. Secretary of Energy Bill Richardson
dated February 29, 2000........................................ 58
Joint Statement of the Kingdom of Saudi Arabia's Minister of
Petroleum and Mineral Resources, Ali Al-Naimi, and U.S.
Secretary of Energy Bill Richardson............................ 59
Communique between the Minister of Oil of the State of Kuwait and
the Secretary of Energy of the United States of America dated
February 24, 2000.............................................. 60
Joint statement between Norwegian Minister of Petroleum and
Energy, Marit Arnstad, and U.S. Secretary of Energy Bill
Richardson dated February 27, 2000............................. 61
Inserts for the record:
Insert A, concerning steps Department of Energy has taken to spur
domestic oil and gas production................................ 62
Insert B, concerning capacity figures as rough estimates by EIA.. 64
U.S. POLICY TOWARD OPEC
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Wednesday, March 1, 2000
House of Representatives,
Committee on International Relations,
Washington, D.C.
The Committee met, pursuant to notice, at 10:10 a.m., in
room 2128, Rayburn House Office Building, Hon. Benjamin A.
Gilman (Chairman of the Committee) presiding.
Chairman Gilman. The Committee will come to order. I am
very pleased to convene this hearing on our United States
policy toward the Organization of Petroleum Exporting
Countries, OPEC, and want to extend a hearty welcome to our
witness, Energy Secretary Bill Richardson, whose long,
distinguished track record of public service in both the
legislative branch and the executive branch is to be commended.
We understand that Secretary Richardson has been
particularly heavily traveled over the past few weeks, with
numerous meetings with the oil-producing nations and non-OPEC
energy officials. In light of his arrival late last night, we
are particularly pleased that he could be with us this morning
to share his observations and his conclusions on his most
recent round of energy diplomacy.
We are fully aware of the challenges facing this Secretary
and the Clinton Administration, and they will not be readily
overcome. Thousands of households and businesses across New
York State and New England and elsewhere are facing sky-high
fuel bills that they can't afford to pay in many instances, and
many of our citizens on fixed income are choosing between
eating and staying warm. It is impacting our economy.
Today we are trying to find some answers for our
constituents and for the millions of Americans who are
demanding to know why the Administration sat idly by as the
nations of OPEC and its major oil-exporting allies raised
prices from $11 a barrel in December 1998 to a high of $30 a
barrel today. Over a year transpired.
A hearing on OPEC and the Northeast energy crisis on
February 10th before this Committee clearly demonstrated that
OPEC's goal of reducing its oil stocks was the major reason
behind large-scale price increases for heating oil and diesel
oil stocks. They have manipulated the oil price in our Nation.
The transportation infrastructure of our Nation is under
severe stress, as tens of thousands of small and medium-size
trucking firms throughout the Northeast and throughout other
areas in our Nation are on the verge of bankruptcy because of a
$2-per-gallon diesel oil price, absorbing 20 percent or more of
the entire operating budget of each of these firms.
Oil prices today are higher than at any time since the
Iraqi invasion of Kuwait a decade ago. Earlier this week it was
reported that average gasoline prices across our Nation have
risen 6 cents over the past 2-week period, the largest such
increase since the 1990 period. We are up to prices per gallon
of over close to $1.50 in my region alone.
Production cutbacks decreed by the producer cartel, the
Organization of Petroleum Exporting Countries, OPEC, has caused
worldwide stocks, including those of our own Nation, to be
drawn down to severely low levels. This imbalance has resulted
in the sharp climb in heating oil and diesel prices over this
past year.
As our dependency on foreign oil has increased over the
past decade, the Administration has fallen short thus far in
its efforts to persuade OPEC and non-OPEC nations alike to
moderate their aggressive policies designed to punish oil-
importing countries like our own.
Several key oil-producing nations relied on our country's
military for their protection in 1990 and 1991, and those
nations in the Persian Gulf still depend on us for their
security, but in the view of this Member, a continuation of
those present policies put in place at the meetings of OPEC
ministers in March and September of last year threatens our
relationship, a relationship that many of the OPEC nations
presently enjoy with our Nation.
Over the past several weeks, my offices in New York State
and here in Washington have received numerous calls and letters
asking us how it could be that the very nations we helped in
their hour of peril are repaying us with this sky-high energy
bill and shocks to our economy that are still being felt
throughout the Northeast and the rest of our Nation.
Last month I received one such impassioned letter from two
of my retirees, William and Mary Nickels of Warwick, New York,
who are trying to make ends meet on a fixed income. They are,
like many Americans, tired of our excuses and expecting answers
from all of us, and I quote from their letter:
``Similar to the 1970's, when OPEC held us hostage to their
demands, our local fuel supplier has raised the price of home
fuel to exorbitant levels. True, we realize . . . harsh weather
has struck the Northeast; but what caused this to go unnoticed
by our government? Wall Street is booming, but retired
individuals such as ourselves must make harsh decisions daily
relative to the spiraling cost of . . . home heating oil and
gasoline. If there is a real shortage of home fuel oil, why
hasn't our President or Congress released some of the country's
reserve supply to counteract this tyranny? . . . Now this aging
veteran is calling upon you to take the initiative and solicit
Congress to do the right thing, namely, to bring home fuel oil
prices down to a reasonable market level.''
Later today I will be introducing legislation entitled the
Oil Price Reduction Act, which will begin to respond to the
kind of questions and concerns that I see from the Nickels
family in Warwick and from millions of other Americans across
the Nation. I am inviting my colleagues to join with me in
cosponsoring this legislation requiring the President to cutoff
assistance, cutoff arms sales to those members of OPEC and
other major net oil exporting countries which are determined to
be engaged in oil price fixing to the detriment of our Nation's
economy.
Specifically, my bill requires the President, not later
than 30 days after enactment, to send the Congress a report
containing a description of our security relationship with each
OPEC member and any other major net oil exporter, together with
information about our assistance programs and government-
supported arms sales provided to those nations.
That report would also include a determination by the
President to the extent that any of these countries is engaged
in oil price fixing, and would further require the President to
subsequently reduce or terminate or suspend any assistance or
arms sales to that nation determined to be fixing oil prices to
the detriment of our economy.
It further requires continued diplomatic efforts by our
Nation to convince all major net oil exporting nations that
current price levels are unsustainable and will cause
widespread economic harm in oil-consuming and developing
nations.
This bill is straightforward in its objectives, and should
give the Administration and our Secretary ample time in its
ongoing energy diplomacy, and also enable OPEC member states to
take decisive actions in turning on the spigot, increasing
production levels sufficiently to bring prices down to
sustainable market levels.
Before turning to my colleagues for their opening
statements, I would like to ask unanimous consent that the
record remain open for a period of 5 days for incorporating any
additional relevant materials and statements related to the
ongoing energy crisis. I am pleased to recognize the Ranking
Member of our Committee, Mr. Gejdenson.
Mr. Gejdenson. Thank you, Mr. Chairman.
Mr. Secretary, good to see you again. You probably wish you
were back at the U.N. these days, with this little tussle in
front of us.
When you were a House Member, you used to go around
rescuing Americans who were held hostage. Today you might say
we are all being held hostage, and I think the situation here
gives you an opportunity to provide a rescue for the general
public. I know there is nobody in government service who has a
better sense of how to deal with these issues.
I am glad to see that, in today's Wall Street Journal,
apparently we are now looking at opening up SPRO, the Strategic
Petroleum Reserve, but I have to tell you I think we should
have done it a long time ago. While a poker game may not always
be the best analogy of life, if we don't ante up, there is
really no incentive here for these other countries to increase
production.
All of us, I think, can tell you the kind of devastation it
is bringing to individuals. From the individuals on Main Street
even to Mr. Greenspan, they recognize this poses an important
and dangerous threat to our economy. We have got, thanks to
this Administration in very large part, the longest sustained
economic growth I think in the history of the country,
certainly in the history of keeping records on these things. If
you look at the impact of previous oil embargoes, you know the
kind of economic disruption that occurs there.
Now, with heating oil there is a particular problem. No
Energy Secretary or State regulator would allow an electric
utility or a natural gas utility to get in a position where
homeowners were put in danger.
But what happens with heating oil, which is how 65 percent
of my constituents heat their homes, is if there is a cold
snap, the natural gas pipeline turns off a lot of their
commercial customers who have interruptible service. So just as
we were sitting there with the shortest supply ever, just as we
were sitting there with cold weather increasing demand, the
impact on another energy system, natural gas, forced commercial
customers to increase the demand on heating oil.
Now, we have introduced legislation that would establish a
Northeast Reserve. I think that makes sense. I think we ought
to look at demanding that wholesalers have an adequate supply
and reserve, as well. These people profit in our region. It
makes sense not to leave us in the kind of situation we were in
this year, where even an average winter would have left our
homeowners in deep trouble.
Now, if you look at what we have done in the past, when we
had the Gulf War and there was a sudden rise in crude oil
prices, we got the Administration then to go into the Strategic
Petroleum Reserve. We had a significant, $10-a-barrel drop
almost overnight, just by the fact that they said they would do
it, in the price of crude oil. What we have seen up to date now
in heating oil is going to be replayed in gasoline.
Again, if you are the OPEC nations, you are sitting there
looking at working less hours in a sense and making more money.
Why would they change that policy?
Now, I think the Chairman's proposal is an intriguing one.
I think it doesn't work unless we make it multilateral, and
clearly the impact is not just on the United States. All of our
Western allies are in the same situation, all the developed
nations.
I want to take one moment to say that Congress is partly at
fault here. When this Administration, time after time, has
tried to increase the efficiency of our automobile fleet; when
this Administration, with your and the President's leadership,
has tried to take initiatives on energy conservation, this
Congress has stood in the way. As a matter of fact, it is my
understanding that in congressional legislation they prohibited
you from even looking at ways to make the American automobile
fleet more efficient. Now, that is a mistake that this present
Congress has made, and they ought to be called to task for it.
As a friend and somebody I have great respect for, I am
trying to get this message across as gently as I can, but your
actions are needed here. I think you would be a lot more
effective in talking to the OPEC members if you had your hand
on that spigot and you were in the process of turning it on,
because nothing will get their attention like dumping some of
this crude.
Now, the average cost of the crude that you have in the
Strategic Petroleum Reserve is about $3 a barrel less than what
the market price for crude is right now. I know this would be a
shocking thing, but if you sold some of it, you would actually
be making a profit for the government; and if you drove the
price down, you would be able to buy it back at a lower price,
thereby increasing profits for the U.S. Government, which
wouldn't be a bad thing, either.
Sixty-five percent of the country is dependent on truckers
that use diesel fuel to bring them their products. When you
look at the price of gasoline, which is already starting to
increase markedly across the Nation even before the summer
driving situation, we have really got to act here. I think at
the beginning of the heating oil crisis the response was that
it takes too long for this stuff to get in the pipeline. I
think the leveraging effect of saying we are going to start
dumping crude into the marketplace will do a lot more to get
the Saudis' and the Kuwaitis' attention than almost anything
else we can do.
As I said at the beginning of my statement, you did an
awfully nice job rescuing Americans who were held captive in
unfriendly nations during your time in Congress. We want to see
you as effective in the executive, rescuing the American
economy and the people from this crunch that we have been put
under by the OPEC nations. It is great to have you here.
Chairman Gilman. Thank you, Mr. Gejdenson.
Any other Members seeking recognition? Mr. Rohrabacher.
Mr. Rohrabacher. Thank you very much, and welcome back,
Bill.
Only my good friend Mr. Gejdenson could do the stretch, the
great stretch in his analysis that would end up blaming the
Republican Congress for this dramatic increase by our not
stressing conservation. Now, just a note, Mr. Gejdenson: This
isn't a problem of demand. What we have got is a manipulation
of supply.
Mr. Gejdenson. Will the gentleman yield?
Mr. Rohrabacher. I certainly will.
Mr. Gejdenson. I think you are right. There is no question
that the fundamental issue is supply, but if we had less
demand, it would have the same impact on the imbalance. I think
you would probably be on my side on this and agree with me that
Congress has prohibited the Administration from looking at ways
to increase the CAFE standards for automobiles.
Mr. Rohrabacher. Reclaiming my time, actually I don't agree
with you on that, but I would say that it would be--I would
expect that, if Congress wasn't controlled by the Republicans,
that you might not be blaming the Republicans at this time in
order to deflect the fact that we have an Administration that
has had policies that have put us in jeopardy, and have
resulted in hundreds of dollars being sucked out of the pockets
of the American people.
From this perspective, from where I sit, it looks like we
have rising oil prices because of, No. 1, a manipulation of
supply by a conspiracy, by a price-fixing conspiracy, an
international oil cartel, and also by--and I am sorry, and I
will be happy to talk to my old friend and am waiting for your
statement on this--but the incompetency of this Administration
in terms of the way it has dealt with certain foreign policy
issues that have made us vulnerable.
First of all--and, by the way, in California when the price
of gas--we really take our driving seriously out in California,
and when the price of gas goes up, yes, we are unhappy. But if
the price of gas goes up because of market factors, we
understand that, but that is not the reason the price of gas
has been going up. The price of gas has gone up because we have
an oil cartel that is involved with an international price-
fixing conspiracy aimed especially at the United States, but
other oil-consuming countries as well.
What makes this even worse is that two of the biggest
players in the cartel are countries in which we have American
troops stationed for their protection. Saudi Arabia and Kuwait
are two countries in which we have American troops stationed
there for their protection.
Now, I want to know whether this Administration, and I hope
Secretary Richardson will tell us this, has used this leverage
and our commitment of blood and treasure to protect these
countries, have we used that as leverage to prevent those two
countries from engaging in a conspiracy? Saudi Arabia has
maximum leverage on this, But they are involved in a conspiracy
to suck money out of the pockets of the American people, their
very protectors. I want to know what we have done to use that
leverage, the protection we afford Saudi Arabia and Kuwait, to
end this price-fixing cartel.
Second of all, and again the Members of this Committee have
heard this before. I know Secretary Richardson and I may have a
disagreement on this, because you have been personally involved
in this particular area.
I believe that the policies of this Administration have led
to a continuing instability in Afghanistan. The instability in
Afghanistan with the Taliban in control there not only have led
to these gross violations of human rights and the terrorism
that we know of, but it has also prevented a pipeline from
being built over these last 8 years through Afghanistan that
would have brought Central Asian oil onto the market. That
Central Asian oil would have made it impossible for this cartel
to control this huge supply of oil, and would have meant that
there wouldn't have been this manipulation of the supply of
gasoline and oil into the system that has resulted in this
massive increase in price.
I am very interested to hear what Mr. Richardson has to say
about our policies in Afghanistan that has led to the isolation
of Central Asian oil. Again, we are talking about the
competence of not only those who are handling the policy but
actually the legitimacy and how good that policy is to begin
with.
So, Bill, welcome back to Congress. We miss you on this
side, but you are on that side now, so we have got to ask you
some tough questions.
Thank you very much, Mr. Chairman.
Chairman Gilman. Thank you, Mr. Rohrabacher.
Mr. Lantos?
Mr. Lantos. Thank you, Mr. Chairman.
Let me first welcome our distinguished Secretary of Energy.
His diplomatic skills were obvious when he served as a
distinguished Member of my Committee throughout the 1980's when
we dealt with the European Community, and we were delighted to
see your diplomatic bravura performances in saving the lives of
American citizens. I personally want to commend you on your
most recent swing through the oil-producing countries, which I
can only describe as a major diplomatic achievement on your
part, and I want to congratulate you.
I want my friend from California to pay close attention,
because his criticism of the Administration I think needs to be
put in somewhat of a perspective. Yesterday John McCain in
Bakersfield, for the first time, to my knowledge, came out with
a statement that many of us of course have made, not now but 9
years ago, that had the previous Administration terminated the
tenure of Saddam Hussein at the end of the Persian Gulf War, we
would not be in this predicament.
I presume that some of my friends on the other side may
agree with that, but I am very happy to see that one of the two
Republican Presidential hopefuls at long last has come clean on
this issue and recognized that the failure of the Bush
Administration to finish the job in Iraq is at the core of this
particular difficulty, as indeed many other difficulties in the
whole region.
I think it is extremely important to underscore and I am
sure, knowing your candor, you did, that the Emir of Kuwait and
the King of Saudi Arabia would be living in villas on the
French Riviera, had it not been for our very effective conduct
of the Persian Gulf War by evicting Saddam Hussein from Kuwait.
I think these people need to be reminded, time and time again,
that they are now in office because of the decision and the
determination and the courage of the American people and the
American military and our allies, and we expect far more
cooperation from them than we have had over the years, and this
is really the moment when they have to come through in a major
way.
As you know, Mr. Secretary, as a professional economist in
the early 1980's I held hearings on the Strategic Petroleum
Reserve, and I do agree that we need to open the Strategic
Petroleum Reserve now. I think there is no justification for
further delay, and I strongly urge you and the President to
proceed without delay to open the Strategic Petroleum Reserve.
This will be not only good economically, I think it will be
good politically, I think it will stabilize the international
situation, and it will certainly bring tremendous relief to
tens of millions of American consumers.
I do want to say a word about conservation and efficiency
standards. Those of us who have been in the forefront of trying
to gain some recognition of this issue on the part of the
automobile industry unfortunately find this new period yet
another moment when we perhaps can make our case.
It is simply absurd to have gas-guzzling, gigantic sport
utility vehicles used for going down three blocks on Rodeo
Drive in Beverly Hills to buy some cosmetics. This is not the
way to deal with the energy crisis in the Year 2000, and I hope
that we will be able to look at CAFE standards, conservation
standards, fuel efficiency standards, and our friends on the
other side this time around will come along with us and support
these long-overdue measures.
I want to commend you, Mr. Secretary, for this past week. I
studied carefully your schedule, and from Saudi Arabia to
Norway to Kuwait to Venezuela, you have turned in another
Richardson performance of extraordinary energy, and I look
forward to your testimony.
Chairman Gilman. Thank you, Mr. Lantos.
Mr. Manzullo?
Mr. Manzullo. Thank you, Mr. Chairman.
Mr. Secretary, we look forward to your testimony. I
represent an area of Illinois that is highly agricultural and
has a lot of manufacturing, and I am pretty disappointed in the
fact that the United States has used no muscle whatsoever in
order to bring relief to the farmers who are paying $1.30,
$1.40 a gallon for diesel fuel; to bring relief to the truckers
who are paying that type of money for diesel fuel. All that
gets added back to the consumer, not only in the price that the
consumer is paying at the gas station but also in terms of the
amount that consumers are paying.
There is an avenue, I think. I am not sure if I agree
wholeheartedly with what the Chairman wants to do, but we give
these countries an enormous amount of foreign aid. Russia, for
example, receives in excess of $170 to $180 million a year in
foreign aid. The American people are very much interested as to
why these people are entered into what I consider to be a
criminal conspiracy. If these were American producers that got
together to do something like this, there would not only be a
civil conspiracy action, there would be criminal conspiracy and
they would be jailed for doing that.
But why should the American people have to give foreign aid
to people who get together in a little room, use the word
``production,'' tie up production, and then to say that it is
simply the free market and the law of supply and demand taking
place. The law of supply and demand is not taking place? That
law never kicks in, whenever there is a cartel that determines
the amount of production that is taking place.
I would suggest that this Administration should get very,
very tough, and I agree with Mr. Rohrabacher, especially
concerning those nations on whose soil we landed troops to
protect them during the Gulf War. This is the thanks that we
get from Saudi Arabia and Kuwait, when they turn right around
and stiff the American people who are paying, I heard,
somewhere in California over $2 a gallon now for gasoline.
I think it is time for the Clinton Administration to step
up, to take very dramatic action, to do something on behalf of
the American people and break the cartel, break OPEC, break it
open and say any nation that belongs to OPEC is not going to
get our foreign aid. Maybe that is a way to entice them to
become responsible.
I look forward to your testimony.
Chairman Gilman. Thank you, Mr. Manzullo.
Mr. Menendez?
Mr. Menendez. Thank you, Mr. Chairman. I want to thank you
and Mr. Gejdenson for continually holding hearings on this
issue that I really think is of national importance. I know
those of us in the Northeast feel particularly pressed by it,
but we believe it is of national importance. I want to welcome
our good friend, the Secretary, before the Committee.
Home heating oil prices for my constituents have jumped to
nearly double, to about $2 a gallon, in just a matter of weeks.
As a result, a typical household will pay $400 or more in a
very short period of time, and most families that I represent
simply cannot afford such a large fluctuation in their budgets.
Now, I am pleased to see that the President now appears to
be considering tapping into the Strategic Petroleum Reserve.
However, by the time his decision comes, it may just simply be
too little, too late. Prices are higher now than during the
Gulf War when we released from the Reserve.
Consumers, truckers--I have the Port of Elizabeth and
Newark, which is part of the Port of New York and New Jersey.
We are being strangulated, with independent truckers who
simply--many of them have taken their trucks off the road
because they cannot sustain their families. They cannot sustain
their costs.
This is the economic lifeline for the distribution of
products to the greatest consumer base in the Nation. All of
the Administration's trade efforts ultimately, when they come
to port, which is how we move products through, whether we are
exporting our products or importing others, are ultimately
clogged when we don't have these truckers moving. They in fact
have some incredible, incredible increases in costs. Some of
them have simply taken their trucks off the road because they
can't afford to operate them.
If the President is going to act, he must, he must act now.
We can't afford, I believe, to wait until OPEC's meeting on
March 27th. Winter weather doesn't wait for government
decisions, and our constituents in the Northeast cannot afford
to wait any longer for a solution.
Now, I want to commend Secretary Richardson for his
whirlwind OPEC tour, his aggressive efforts, his diplomatic
skills, in addition to his knowledge of the energy questions. I
believe hopefully they will produce some long-term benefits,
because this is an issue that continues to plague us in the
future. But we need some short-term responses.
I do believe the United States should leverage its good
relationship with many of these countries to ask that they work
with OPEC in the short and long term to ensure market stability
and close the balance between supply and demand. But many of us
on this Committee are increasingly wondering what is the
relationship between us and some of these countries, the
relationship in which we have used the national resources of
the United States and men and women in the safety of these
countries, and now find ourselves in a set of circumstances
where they in essence undermine the economic security of the
United States. Those are very serious public policy, foreign
policy questions that are continuously raised by the actions of
the OPEC countries.
Last, I think we need to seriously look at how we can
protect ourselves in the future from monopolistic OPEC
practices. You have heard some of the suggestions here. We must
look at the possibility of creating a home heating oil reserve
and other measures that cushion future spikes in oil prices. It
in untenable for the U.S. economy and U.S. consumers to be held
hostage to OPEC, now or in the future. We need to act now to
protect our short-term and long-term interests.
Mr. Secretary, I know you have been out there trying to
help us, but we need some immediate help in this process. We
are enjoying, from the weather forecast this week, some
relatively mild weather, but the winter isn't over and the oil
prices have already hit and consumers and families have already
paid. Notwithstanding LIHEAP and all that, many families simply
do not qualify for that, and yet they are certainly, by no
stretch of the imagination, families that are economically well
off.
We need help. We need it now. We look forward to your
leadership in helping us achieve some of those results now.
Chairman Gilman. Thank you, Mr. Menendez.
Mr. Chabot?
Mr. Chabot. Thank you, Mr. Chairman. I will be brief,
because some of my colleagues on both sides of the aisle have
already, in a very articulate manner, stated some of my
concerns, and I know that we all want to get to the Secretary's
testimony here briefly.
But I just have to say that the thing that is particularly
outrageous about this whole situation which has been
orchestrated by OPEC, is that these are the countries that we
have gone to bat for, that America has gone to bat for, that we
have had American citizens put their lives on the line for,
most particularly in the instance of Kuwait, and Saudi Arabia
as well, because there is no question I think in most of our
minds that had Saddam Hussein not been stopped in Kuwait, he
would have gone right into Saudi Arabia next.
So these are these same countries that are now essentially
slapping the United States and the rest of the world right in
the face. These countries are cavalierly jeopardizing not only
the U.S. economy but the economies of nations all across the
globe. We should look at every weapon in our arsenal, whether
it is the Strategic Petroleum Reserve, whether it is weapons
sales, whether it is any type of other foreign aid, as Mr.
Manzullo indicated very strongly. This is a critical situation,
and any leverage that we have, any leverage at our disposal
should be exercised.
Again, I think it is just outrageous, particularly in the
instance of Kuwait and Saudi Arabia, what is going on here, and
I don't think the United States should stand for it, and we are
looking for leadership from the Administration. I think it has
been slow. I don't want to be too critical because I think the
Congress and the Administration ought to work together on this
one, but we hope that we are going to see some strong
leadership as quickly as possible.
I want to again thank the Committee Chairman, Mr. Gilman,
for proposing legislation. I think it is the right thing to do,
and let's move forward with it.
Chairman Gilman. Thank you, Mr. Chabot.
Mr. Hastings?
Mr. Hastings. Thank you very much, Mr. Chairman.
Mr. Secretary, thank you very much for being with us, and I
join my colleagues and associate myself with their remarks,
offering the accolades so rightly deserved for the work that
you did here in Congress as well as the work that you do now.
I introduced legislation yesterday that, if passed, will
suspend for one year the 24.4 cent Federal tax on diesel fuel.
While this will assist businesses that rely on diesel fuel, and
consumers will benefit indirectly, the average American is
directly and painfully affected by this oil crisis when they go
to fill their gasoline tanks in their automobiles.
I guess ultimately we would be asking you what are your
suggestions for us here in Congress and what we can do, as I am
sure you are as interested and probably have more information
than most of us as to what we may be able to do to help the
American consumer. More importantly, is there an avenue that we
are overlooking, and doubtless you may be able to provide us
with that information.
While it is easy for us, it appears to me, to talk in terms
of what to do with the Strategic Petroleum Reserve that we have
in this country, many of us are not even mindful that the
authorization for the Strategic Petroleum Reserve expires at
the end of this month.
One of the things that is not being factored into this
discussion and doubtless will not be today, is that today the
President's responsibility to Congress is to assert those
countries that are certified or decertified as it pertains to
their cooperation in the drug enforcement arena, and some of
those countries, for example, Mexico, Nigeria, Venezuela, are
countries with whom we have relations as it pertains to oil.
Additionally, the ultimate question I would like to at some
point put to you, Mr. Secretary, is what tools do we have at
our disposal to pressure the major oil-producing nations to
increase the international supply of oil? I heard what the
Chairman said, but I could suggest to the Chairman that if his
legislation became law and if we were to withdraw military
sales, as rightly we should do whether there is an oil crisis
or not, if we were to withdraw military sales, other countries
would offer the same military materiel that we are offering,
and the oil-producing countries would have more money to buy it
with if we didn't do something.
The other thing is, we don't have any relations with Libya
and Iran, and we have strained relations with other members of
OPEC. Therefore we need to be guided by caution in this matter,
and I do not believe that it is wise of us to try and determine
which Administration did or did not do what others perceive
should be done. What the American public wants us to do, is to
do something and to do it now to eliminate the potential for
degradation in this economy.
Thank you, Mr. Chairman. Thank you, Mr. Secretary.
Chairman Gilman. Thank you, Mr. Hastings.
Mr. Burr?
Mr. Burr. Thank you, Mr. Chairman. Welcome, Mr. Secretary.
I guess I feel a little bit deficient. I haven't introduced
anything, but I guess it is because I didn't think I had to. I
always thought that the policy of this country would be a
policy that always protected the American people, and I think
we have failed as it relates to this crisis.
I have listened to a number of my colleagues give opening
statements, and I have got to admit that I wondered whether
their opening statements really dealt with the crisis at hand
or whether it was a much larger political statement. I think it
is time for all of us to focus on what the problem is and who
that problem affects. It affects people in every community
across this Nation. It affects truckers, it affects farmers. It
affects individuals who make a choice between drugs or heat.
I guess the question that I have got today is twofold: What
took so long to open SPRO? Why was going there conditional upon
the decision to open SPRO? Selling SPRO has been a part of this
Administration's annual budget to raise revenues and balance
the budget they sent to Congress practically every year, some
proposal, so I don't see anything sacred.
I would tell you today that the question that we are here
to determine is, where has the Administration been for 12
months on this? If we have had a plan, share it with us, Bill.
If we haven't, tell us where it is that we will go from your
trip. I commend you for your willingness to do that. Share with
us why it took so long, and what is the Administration's plan
to respond to this today.
I thank you once again, look forward to seeing you next
week, hopefully, in the Energy and Power Subcommittee hearing,
as well. With that, I yield back.
Chairman Gilman. Thank you, Mr. Burr.
Mr. Rothman?
Mr. Rothman. Thank you, Mr. Chairman. Mr. Chairman, Ranking
Member Gejdenson, thank you for calling this meeting.
Mr. Secretary, it is always a pleasure to be with you. I am
in my second term in Congress, so I did not get a chance to
serve with you in this body, but I have had wonderful
experiences with you and your staff when you were Ambassador to
the United Nations, and I know that you are doing a wonderful
job in trying to help this country through this very difficult
situation and others in your present capacity as Secretary of
Energy. I, too, want to lend my commendations and high praise
for your aggressive and highly skillful tour of the OPEC
countries in order to get relief for American consumers.
Two things: One, I want to also say thank you to the
Administration for releasing the emergency funds to support
LIHEAP, the Low Income Heating Oil Assistance Program. I come
from northern New Jersey. We do not have a high household
income, relatively speaking, compared to some others, but
nonetheless the LIHEAP program will not help the majority of
people in my district, the Ninth Congressional District. So,
while it is good that you released those and it will have an
effect on those regions of the country with the poorest of the
poor of our citizens, it will not have a benefit to working
people, let alone middle class people, who are suffering.
I also want to commend your reestablishing the Energy
Emergency Office at the Energy Department, and then I want to
get to the area where I think we have had some disagreement but
I think we are coming to consensus, ``we'' meaning Members of
the Congress and the Administration, and that is releasing
reserves from the Strategic Petroleum Reserve, and I am hopeful
that you will be commenting about that and we will have good
news.
As you know, the prices of a gallon of home heating oil
have doubled in the past year. They are more than 40 percent
higher than during the height of the Persian Gulf War. Mr.
Secretary, we have an Administration who, if not wholly
responsible for the largest economic expansion in the history
of the United States, certainly it is an Administration that
has handled the economics of the country, of our country,
extraordinarily and I think history will give credit where
credit is due. So I have, as a general matter, confidence that
you have a strong handle on what it takes to keep the American
economy and the American consumer prosperous, moving forward
and growing. I am hopeful that you will take the steps in the
short run, for short-term relief, as well as long-term relief
on this home heating oil and the price of gasoline situation.
One other remark, which would be, I too join my colleagues
who have suggested that we have leverage, considerable
leverage, not total but considerable leverage through military
sales and assistance and economic assistance to those OPEC
members who, while they perhaps were trying to restore some of
the profits they felt they lost when gas prices were
extraordinarily and historically low for a long period of time,
they have taken their profits.
Now it is time to face reality and face their obligation to
their consumers, as well as to the friends in America who
bailed them out and saved their lives by putting the lives of
our soldiers, our young men and women, at stake to defend them.
That is what we did. Now is the time for them to remember, and
if they don't remember that and know what it means to be a
friend, we will remember that for the future, and we ought to
also in the short term deny them the considerable benefits of
our relationship with them that they are now enjoying.
Thank you, Mr. Secretary.
Chairman Gilman. Thank you, Mr. Rothman.
Mr. Houghton? Dr. Cooksey?
Mr. Cooksey. Thank you, Mr. Chairman.
Mr. Secretary, I think the most fascinating information
that could come out of this meeting would be if we could know
what your thoughts are about us. As you hear all these
politicians on this side of the table, tell us what you think,
because I can tell you are taking it in very seriously. You
were on this side one time. I really expect you to divulge what
you think about us.
But let me just run through some things that I hope you
will cover. Home heating oil: home heating oil got up to $58 a
barrel 20 years ago. I'm sorry, crude oil was $58 a barrel,
home heating oil was $1.30 a gallon. Today, crude is $30 a
barrel, home heating oil is $2.10 a gallon; theoretically, it
ought to be 75 cents. Can you blame that on OPEC, or is it the
wholesalers or the refiners?
Second question: To my friends in the Northeast, we have
bountiful amounts of natural gas in my home State of Louisiana.
Right now we are producing oil in the deep water off the
Continental Shelf, because now we have the technology to
produce in 2,000 feet of water instead of 200 feet of water. I
know of two pipelines that come in near the Loop, that bring in
300,000 barrels a day. So I would encourage my friends in the
Northeast to switch to natural gas, and we will ship you all
the natural gas you want. Environmentally, it is the best thing
out there, and then you won't be at the beck and call or the
whims of a group of people in OPEC.
Another major reason that costs of production, costs of
home heating oil are up right now, is because of a bunch of
politicians and regulators and bureaucrats. The costs of
production in this country are greater than they are elsewhere,
but I think it is good that we have taken all these measures to
make it cleaner and safer. We don't have many accidents, or
major accidents, in our offshore production.
Last summer on my birthday we were in a boat and we went
right through the Loop. Have you flown over the Loop or been to
the Loop, Mr. Secretary? We went right through it. I don't
think we were supposed to go through. But we went out and
caught blackfin tuna and we caught speckled trout all around
there, and the waters were wonderful. The oil rigs make great
manmade reefs.
I think if we really want to do something about bringing
the price of oil down, the most effective way to do it is
market forces, and market forces will ultimately discipline
these people in OPEC much more effectively than a group of
wimpy politicians who may not have all the facts right. I think
that they need to be disciplined.
But right now our largest source of oil is Mexico and
Venezuela, if I am not mistaken, and yet in 1973 we were
producing, according to this document, nine million barrels a
day in the States. Now we are producing two million. In 1980,
Saudi Arabia was producing nine billion.
So it can be done, but we need to still depend on market
forces rather than all of us who are pontificating from up on
high. I am anxious to hear your testimony. Generally I think
you have done a good job at Energy, and hopefully we can make
the right decisions together.
Thank you, Mr. Chairman.
Chairman Gilman. Thank you, Dr. Cooksey.
We are joined today by a nonmember of our Committee who has
a very intense interest in this issue, Mr. Watkins.
Mr. Watkins. Thank you, Mr. Chairman and Members of the
Committee. I thank you.
Mr. Secretary, it is good seeing you. I saw you in Oklahoma
when the oil prices dropped from $20 or $21 per barrel down to
$8. This is the point I would like to make, Mr. Chairman. No
one screamed then. What I am hearing today is the fact that it
has peaked up to $30. In the oil patch of this country, what we
would like to have is a stable price, $20, $22, somewhere in
that neighborhood.
Mr. Secretary, I recorded that message back in Oklahoma. I
have been concerned about some of the things I have been
hearing from the Administration, exactly some of the things
that were not said back then. But the point I would like to
make to the Committee is what I have tried to say for several
years: We need a national energy policy for the national
economic security of our country. When the price dropped from
$20 a barrel down to $8, we lost 75,000 oil field workers in
America. Where was the voice? I tried, I talked, but they
turned a deaf ear.
I came and asked the Chairman to let me attend because now
the crisis is reversed, and maybe, just maybe, we will listen.
We do not control the destiny of our country. We have become
dependent, totally dependent. Yes, we shifted a little bit from
some of the OPEC countries and the Arab nations to Venezuela
and others, but ladies and gentlemen, don't forget that three
or four years ago we wouldn't even let the now-President of
Venezuela into this country. We would not give him a visa
because he was trying to overthrow that country, and he is a
very close ally to Castro and others.
So I am pleading this day, Mr. Chairman, and thanking you
for letting me come, but at this time of crisis, when people
say let's open SPRO, why did we set up SPRO? I guess being
around here a little while gives us a little historical
perspective. Mr. Chairman, you and I have been here. But SPRO
was set up after the Arab oil embargo. If we had another war,
for national security, we probably wouldn't have more than two
months of oil there available to carry out a war. Let's don't
be too hasty about starting to say we are going to pull
everything out of there at this time.
But I think the Administration, Mr. Secretary, and I have
great respect for you, Mr. Chairman and Members from the
Northeast, but it behooves us to set up, a national energy
policy to have some kind of stabilization for the national
economic security of our country. Sanctions will not work in a
world of surplus because there is a black market.
We had the U.S. Navy board Russian tankers less than three
weeks ago, causing some tension, because they were shipping
illegal Iraqi oil. The oil for food program, they are using
that to help buildup their weapons. In Iraq today, Saddam
Hussein is putting millions upon millions of dollars in his
pocket.
Under Secretary Tom Pickering says, let's be more liberal,
let them produce more, because the Iraqi people will have
better feeling for the United States. My colleagues, there is
one person who sits between us, between the Iraqi people and
the United States, and that person is Saddam Hussein. He gets
all the credit. If our policy is to cause him discomfort so we
can overthrow him, we have got the wrong policy in Iraq.
You are the Committee that will have to address that, but I
ask you to join me as I have talked to the Speaker about having
a bipartisan commission to try to create a national energy
policy for the national economic security of our country. Thank
you, Mr. Chairman, for letting me attend.
Chairman Gilman. Thank you, Mr. Watkins. Mr. Delahunt, and
I know the Secretary's time is limited.
Mr. Delahunt. I just want to make some very brief
observations and I want to pick up on what Mr. Menendez said. I
respect the gentleman from Oklahoma when he talks about a long-
term policy and crafting a vision that takes into account
future crises, and what Mr. Menendez said about time being of
the essence. We have got to address in the short term what
clearly is a crisis.
We have seen the impact in terms of home heating oil and
what it has done to our constituents. We have heard it loud and
clear from folks in the Northeast and in the northern section.
Clearly the price of gas is going up. We heard the gentleman
from California talk about what it means in that part of the
country.
But really I think we have got to understand, too, that the
prosperity that many have worked so hard to achieve over the
course of the past nine years is at risk unless it is
addressed. While there has been a reluctance to execute or to
draw down on the reserve, historically the best evidence is
that when that occurs it has an immediate impact on the
marketplace itself. I think Mr. Gejdenson referenced what
occurred during the Gulf War, when it went down overnight some
$10.
So I am anxious to hear from you in terms of the result of
your tour and your consultations with these area ministers. I
would suggest that unless you are convinced that they are going
to take action in the immediate future which will reduce this
crisis, that it is time now to draw down on the Strategic
Petroleum Reserve.
I yield back.
Chairman Gilman. Thank you, Mr. Delahunt, and now we are
pleased to call on our witness. Mr. Richardson is one witness
who needs little if any introduction to his many friends and
colleagues who are here with us today. Sworn in as the ninth
Energy Secretary in August 1998, he served ably as our
Permanent Representative to the United Nations, and was
previously a seven-term Member of the House from the State of
New Mexico.
We look forward to hearing Secretary Richardson's insights
as to how we got into this energy crisis and his specific plans
on how we can prevent such crises in the future, and what we
are doing to resolve the crisis at the present time. Mr.
Richardson.
STATEMENT OF HON. BILL RICHARDSON, SECRETARY, DEPARTMENT OF
ENERGY
Secretary Richardson. Mr. Chairman, thank you, and I
appreciate the sincerity of the statements of all the Members.
Mr. Chairman, thank you for giving me the opportunity to
address the current situation in oil markets, to report also on
my recent discussions with the energy ministers of key oil-
producing countries, and to describe for the Committee the
Administration's short- and long-term strategies to address the
extreme oil market volatility we have seen over the last year.
First, let me briefly describe today's oil markets. To do
so, we have to go back to 1996 and 1997, when OPEC leaders met
and decided to substantially increase oil production.
Unfortunately, at the time production was increasing, demand
started decreasing. Asia was headed into recession, and the
world experienced extremely mild winters for two years in a
row.
The result was disastrous. Overproduction resulted in a two
million barrel per day oil overhang, driving oil prices to some
of their lowest levels in history. This was devastating to the
national economies of oil exporters, as well as to the economic
health of our domestic oil industry, as Congressman Watkins
mentioned. The nations of the Middle East lost $50 billion of
investment revenue in Asia, at the same time oil revenues to
run their governments plummeted.
In Venezuela, for example, 70 percent of annual Federal
revenue was at risk. At home in the oil patch, and I used to
represent New Mexico, which has considerable oil and gas
interests, exploration virtually shut down and wells were shut
in.
Today's story is dramatically different. In March 1998,
OPEC and non-OPEC producing countries instituted three
production cuts. At the same time oil-exporting nations were
carrying out these production cuts, world demand for oil was
shooting up. Both crude and product stocks are now well below
1996 levels. In other words, inventories are dangerously low.
Extremely tight markets have driven prices up and caused
refiners to draw down stocks worldwide. Each day the world is
consuming around two million barrels more than it is producing.
The exact statistics are, it is consuming 75 million and it is
producing 73. We cannot sustain this imbalance between supply
and demand without risking serious repercussions for the world
economy.
A review of the last several years is important, and this
is why I think we have to give it a context in the historical
perspective. It is important because it illustrates extreme oil
price volatility, boom and bust cycles for both producing and
consuming nations.
When oil prices were $10 per barrel, I said they were too
low, and I said this on the record several times. In fact I
think, Congressman Watkins, I said it in Oklahoma, too. When
they approached $30, I said they were too high, and they are
too high, and here is why.
Very low prices discourage investment in production, put
producers out of business, and increase our reliance on
imports. Profit margins for refiners become so small there is
little incentive to maintain inventories of heating oil, diesel
fuel, and other products. Cheap energy encourages inefficient
energy use. High prices, on the other hand, lead to inflation
and slow economic growth throughout the world. They stimulate
overproduction, which will eventually lead to a collapse in
prices down the road, and then the cycle repeats itself.
Volatile markets overall--and we have volatility right now,
the roller coaster ride of high prices to low, low prices to
high--create a climate of uncertainty for investors and energy
producers who can expect neither long-term price stability nor
plan for rational investment of capital.
So how, then, can we stop or minimize the impacts of this
cycle and introduce some stability into the markets? I think
our objective should be, as a Congress and as an
Administration, to stabilize the market, to bring stability to
oil markets.
First, an observation: The extreme volatility we are
witnessing today is testament to the folly of artificial
production quotas. Markets, not cartels, should set the price
of oil. This bipartisan view has been expressed again and again
over the last 20 years, as the Congress systematically removed
or severely limited the Federal Government's authority to set
oil prices or allocate supply.
Several of you praised this Administration's economic
policy, and deservedly so. One of the reasons has been that we
have not, as an Administration, intervened in markets, or we
have done so very sparingly, and that has produced some very
positive results. Both the Congress and the Administration have
taken the government out of the oil equation and committed us
to the free market principles of supply and demand.
Having said this, we are confronted today with the reality
that OPEC and other major oil-producing nations are setting
production levels, and that today these levels threaten to
encourage inflation and discourage world economic growth. This
is unacceptable, and this is why I just returned from my
discussions with key energy ministers and key leaders from
Saudi Arabia, Kuwait, Mexico, Norway, and Venezuela.
I said we as a government cannot force nations to increase
production. Instead, the purpose of my trip was to explain how
continued artificial restrictions of supply could hurt the
United States and global economies. By the way, we are joined
by other international economies in our view. Developing
nations, for example, members of the International Energy
Agency, and members of the European Community, share our view.
I went there to convince but not to coerce. We presented
them with the very latest data from the Energy Information
Administration. We shared our documents and our latest
information, which showed that global oil and crude stocks are
at extremely low levels. We explained our immediate and
anticipated domestic problems from low stocks: high home
heating oil and diesel prices, public and government anxiety
over the reliability of our oil supply, high gasoline prices
for the summer.
We urged the ministers to increase production levels, to
address global stock level statistics and to understand their
manifestations, that is, global economic slowdown, increased
inflation, a bad investment environment and, over time, a loss
of market share as other producing nations start competing for
business from reliable partners.
I believe that my trip has met with a significant measure
of success. Before our mission, say some 30 days ago, many
energy producing nations believed there was no problem in the
oil market, that stock levels were adequate, that prices were
fine, that the world economy was not suffering. We are
returning today with four joint communiques that I would like
to insert for the record, Mr. Chairman, that reflect the common
understanding of the following:
Chairman Gilman. Without objection, the statements will be
made part of the record.
[The information referred appears in the appendix.]
Secretary Richardson. Number one, that volatility in oil
markets is not desirable, that it is damaging. Stability in oil
markets is a shared and desirable goal for both consuming and
producing nations. While the communiques varied in substance
from country to country, the single point on which all
producing countries--Kuwait, Saudi Arabia, Norway and
Venezuela--agreed was to reevaluate data on current oil market
conditions to help avoid market volatility and preserve world
economic growth.
I just recently read that Mexico, a few moments ago, just
made a statement in Paris, the oil minister of Mexico, that
they would be prepared now to increase production.
In other words, their upcoming decisions on production
levels will not be arbitrary. They will take into account the
implications of current production levels on the world economy.
We believe that this analysis will lead to only one conclusion
as the ministers meet on March 27th. I think what is also key,
Mr. Chairman, is a meeting tomorrow in London between Mexico,
Venezuela, and Saudi Arabia, and today Mexico and Norway meet
in Paris, two key producing countries. We believe this analysis
will lead to only one conclusion as the ministers meet on March
27th, that there should be substantial and timely increases in
production.
Finally, what else have we done, and where should we go
from here. I think that is a vital question that many Members
of this Committee have asked.
First, the Administration has sought to address the short-
term problems of high home heating oil prices by softening the
impact on those who can least afford it. The President
authorized the release of almost a third of a billion dollars
in funds for low income individuals to pay their skyrocketing
heating bills, $300 million. I think almost all of your states
got some relief.
The President also urged States to address some of the
problems that I believe Congressman Rothman mentioned, and that
is to deal with the eligibility requirement so that middle-
income people that have also been hurt can more adequately tap
into these resources.
The President also has asked for $600 million more in Low
Income Housing Energy Assistance funds; he is asking for a
supplemental to replenish the funds that we have already used,
$600 million in energy assistance funds. He is also seeking an
additional $19 million from the Congress for low-income home
weatherization.
Second, we have addressed the issue of supply through a
variety of measures, including increased Coast Guard support
for tankers; SBA loans for heating oil distributors and other
small businesses, such as truckers and loggers, impacted by
high prices; and also by encouraging refiners to produce as
much heating oil as safely as possible.
We are also reestablishing an Office of Energy Emergencies
at the Energy Department, to coordinate with the States and
other Federal agencies not only on heating oil problems but
power outages and other energy-related crises, as well.
Mr. Chairman, I have met extensively with heating oil
operators, with truckers. I have been to the four states in the
Northeast. We have talked to consumers, we have talked to some
of the energy people, we have talked to State regulators, we
have met with Governors, and we are trying jointly to address
this problem. I must say that some in the industry have been,
such as refiners and home heating oil operators and truckers,
have been cooperating in taking the steps that we believe are
necessary to address this crisis.
Third, the President has directed me to study the longer
term issue of heating oil supply shortages and price spikes by
examining possible ways to reduce regional reliance on heating
oil, mainly through the increased use of natural gas. We are
also examining the impacts of interruptible contracts on
heating oil supply.
Mr. Chairman, specifically what the President has asked me
to do is to study, a 60-day study of the possibility of having
additional natural gas, to look at alternatives of natural gas
to home heating oil in the Northeast. This would mean the
possibility of what Congressman Cooksey said, gas pipelines.
Natural gas is a clean fuel, and the President is prepared, if
such a study determines that this makes sense, to come to the
Congress again and deal with the issue of providing the
necessary request for infrastructure if this is where the
policy is heading. We are also examining the impacts of
interruptible contracts on heating oil supply.
Finally, we are tackling head-on the underlying reason for
high heating oil, diesel and gasoline prices here in the United
States, namely the high price of crude oil, and the boom and
bust cycles that are results of artificial production levels.
To do, we have utilized one of the few tools the government has
at its disposal, and one that I thin this Committee understands
the best because you are all active in international issues,
and that is international energy diplomacy.
I have described for you the immediate results of my
efforts in this regard, but we need to do more. This trip began
an intensive consultative process among nations. I expect this
process to continue. I think, as many of you mentioned, each of
these nations--Saudi Arabia, Kuwait, Mexico, Venezuela, and
Norway--they are our friends. We share many common objectives
and national security issues together.
We now share a common interest in stable and secure energy
markets and world economic growth, but ongoing, frequent,
intense and frank communications is clearly essential between
consuming and producing nations, and I have had extensive
telephone conversations in the last year and visits with each
of these energy ministers, so we have not just addressed the
problem recently. We have raised some of these concerns a year
ago with these energy ministers, and warned them of the
potential effects of what might happen.
Also, at each stop on my trip, the accuracy and timeliness
of data on oil markets, production and stock levels, reserve,
was at issue. We are confident that our Energy Information
Administration data is the best available, but everyone agreed
we should do more and do it better. Just last month the
Department of Energy convened a meeting in Houston of
significant oil market analysts to examine oil data, their
adequacy and transparency.
So we would hope the Congress can help us to ensure that,
at least in the international community, everybody is working
together on the same inventory level data. We intend to push
this issue forward, to develop global data regimes to give
producing and consuming nations an early warning system when
supplies and production levels get out of whack with demand and
consumption needs, not to manipulate but to inform.
Finally, we are also seeking to stop the declines in
domestic production of oil, increase energy efficiency, and
develop alternative sources of energy, and we have had some
positive measures to spur domestic production and we are
considering additional others. But it is clear that we need the
support of the Congress for funding to develop alternative
energy sources and increase our energy efficiency. Our research
and development investments reflect these goals, and our fiscal
year 2000 budget request amplifies the Administration's
commitment.
Also, later this month the White House will authorize the
release of the Commerce Department's so-called 232 Report which
examines the implications of oil imports on national security.
It is my hope that a National Economic Council-led process will
result in a greater commitment to incentives for increased
domestic production.
Mr. Chairman, I appreciate the spirit and the positiveness
of you and Members of this Committee to address this crisis
jointly. I think we are moving in the right direction. I
believe that my trip has been successful. I believe we have a
successful dual-track strategy of dealing with some of the
crisis domestically. We are moving ahead with initiatives
regardless of what OPEC does on March 27th.
I believe that what is needed is a cooperative effort, not
to use precipitous action but to move ahead with some of the
policies that we are considering, and working with you on
others. I believe we can reach our mutual objectives of
bringing long-term financial stability to the markets and
relief to many of our constituents, your constituents in the
Northeast and Midwest and throughout the country.
Chairman Gilman. Thank you, Secretary Richardson, and we
appreciate the efforts you have been undertaking. However, it
has been a year now while the oil-producing nations and their
monopolistic control have affected our marketplace.
We all agree that $30-a-barrel oil is causing problems for
our economy in general, Northeast in particular. But I am
troubled by the fact that the main oil-exporting nations,
including the Saudis and Venezuela, appear to be resisting any
increases in oil production despite the fact that OPEC has more
than 4 million barrels of oil held off the market by these and
other countries, and you have stated that they are 2 million
barrels short from demand compared to supply, and that they are
not ready to adjust that.
I look at the statement from the Public Affairs Office of
the Embassy of Kuwait, and they say ``The two ministers,'' in
reference to the Scudit Kuwaiti oil ministers, ``discussed the
current situation and agreed that stability is a common goal.
The two ministers agree that price volatility in the oil
markets is detrimental to both the producing and consuming
nations. They agree that adequate oil supplies at reasonable
prices is of crucial importance for sustaining world economic
growth, prosperity, and investment in the energy sector.''
Yes, they agree to all of that, but what are they doing
about it? They are talking now about a further meeting coming
up at the end of March, and maybe by June or July they might
agree to open up the spigot a little bit. That does not help
our Nation. Would you care to comment on that?
Secretary Richardson. Mr. Chairman, let me say that prior
to my visit to Kuwait, the Kuwaiti energy minister and other
officials there had said that they felt that production cuts
might continue. They felt that there was no reason for OPEC to
change policy.
We engaged the Kuwaitis extensively. They, as I said, are
our friends. I met with the Kuwaiti oil minister several times
on my trip.
Chairman Gilman. What was the last date of your meeting,
Mr. Secretary?
Secretary Richardson. About three days ago, Mr. Chairman.
Chairman Gilman. I am reading from their statement of
February 24th that I just quoted from.
Secretary Richardson. I think that statement is consistent
with what we achieved. What the Kuwaitis said that they would
do, along with the Saudis, along with the Venezuelans, which I
think is key and very significant, is that they would review
production levels. In other words, they are not quite saying
that production increases are going to happen, and I am not
going to predict what they are going to do, but I can say to
you that I believe the odds are good for production increases
to take place.
Now, this final decision is made on March the 27th, and I
believe that by these nations, the Saudis, the Mexicans, the
Venezuelans, the Kuwaitis, they basically agreed on five points
that we were stressing, and the five points is that price
volatility hurts producers and consumers; that adequate oil
supplies at reasonable levels is of crucial importance to the
world economy; third, that we need greater equilibrium between
production levels and consumption; fourth, that serious review
of production levels and economic data is needed; and, last,
that we need better and more timely information about oil
markets.
Chairman Gilman. Have they promised you, Mr. Secretary,
that as of that March 27th meeting they are going to increase
production?
Secretary Richardson. No. Mr. Chairman, they act in
consensus. They try, until they meet, to develop a consensus.
My objective in my trip was to present our views, present them
forcefully, so that that consensus that takes place at their
meeting would happen.
Now, as I said, we have moved regardless of what they are
going to do. But, again, a key meeting will also take place
tomorrow between Mexico, which is not a member of OPEC but is a
major international producer; Venezuela, which is a member of
OPEC; and Saudi Arabia. My talks with the Venezuelans, with the
Mexicans, with the Kuwaitis, with the Saudis, were extremely
positive.
Chairman Gilman. Have they made promises, these Saudis and
Mexicans and Venezuelans, that they will increase production?
Secretary Richardson. As I mentioned, I just saw a
statement that Mexico made that they would; that they think
OPEC should. Now, Mr. Chairman, I have to be very careful about
making predictions. Now, I have made a prediction. I believe
that production will increase, based on my discussions. But,
again, March 27th is the date when they all meet, the 10
members of OPEC. They will make their collective decision. But
I think the signs are good, they are positive. That is good for
us.
Now, the next issue is going to be how much production and
the timeliness of that production. That is something that we
are also working with them, also.
Chairman Gilman. Two questions: What if they don't raise
production? What specifically will you do or what can you do to
move this forward?
Secretary Richardson. Mr. Chairman, I don't want to
speculate here because I do believe that production will be
increased. There were a lot of questions by many Members of
this Committee about the Strategic Petroleum Reserve, what is
our current thinking on it.
The President yesterday said that the issue of the oil swap
is being looked at, and that release from the Strategic
Petroleum Reserve is still on the table. What I have said in
response to questions in the past is that under the statutes,
the Strategic Petroleum Reserve can be drawn only for reasons
of a national energy shortage due to severe interruption in the
supply of oil.
I have not recommended that we sell from the Strategic
Petroleum Reserve. The SPRO is on the table but, as the
President said, he is not ruling out any contingency. While I
have the authority to take these steps, he gives me the
direction. I think it is important that we be prudent, that we
not overreact, that we see the trends in the next few days and
what OPEC does, that we work together on this.
As I said, I stepped off a plane last night, and you are
the first group I am seeing----
Chairman Gilman. Which we appreciate.
Secretary Richardson. I will see the President later this
evening and I will discuss the results of my trip, but I did
want to share with you our latest information, and our latest
information is I think we have to be prudent. We have to play
it smart. I think we are taking adequate steps domestically and
internationally. We have a long-term strategy, and it is
important that we work together.
Chairman Gilman. Mr. Secretary, what long-term policies are
you putting in place to ensure that we will never again find
ourselves in this crisis?
Secretary Richardson. First, on the international side, Mr.
Chairman, continued energy diplomacy engagement. OPEC is most
likely going to continue. There are several producer nations
outside of OPEC that we work very closely with, like Mexico,
like Norway. We will continue engaging Norway, talking to them
about the importance of free markets and financial stability.
On the domestic front, I mentioned several initiatives:
spurring domestic production, and we need the Congress' help in
getting us additional Low Income Energy Assistance,
weatherization funds. We are looking at the future, in the
Northeast, of the possibility of gas pipelines there. We are
studying, although I cannot endorse it at this time, the
reserve in the Northeast that Congressman Gejdenson mentioned.
We are studying that. I will say to you that our data 2 years
ago showed that it might not be cost-effective, but we are
studying it. We are looking at ways perhaps that States might
take control over some of these LIHEAP funds, give the States
more flexibility, but again, this requires study that we are
doing right now.
Chairman Gilman. Mr. Secretary, I just want to remind you
that my sanctions bill is intended to give you some leverage
with your friends in the event they are not going to be
cooperative.
Mr. Gejdenson?
Mr. Gejdenson. Thank you, Mr. Chairman.
There are other cartels out there. There is a coffee
cartel. They get together sometimes. They can set prices. But
obviously the impact on the economy is very limited because it
doesn't affect everything we do.
In the same sense, de Beers controls the price of diamonds,
but there is an easy solution here. You buy less diamonds. For
industrial uses you may shift to other abrasives or cutting
tools.
When it comes to oil, it is so central to our economy that
I think, frankly, we must have a more significant response. If
the value of the American dollar had dropped or risen by 300
percent, as has happened to the price of oil, you can bet your
life that the government would either be buying or selling
dollars, trying to mitigate that steep rise or fall because of
the obviously devastating impact on our ability in
international sales and purchases. So if we saw a rapid rise in
the dollar, we would go into the marketplace and sell some
dollars; if we saw too big a drop in the dollar, we would come
back and buy some dollars.
So I really don't understand, Mr. Secretary, your hesitance
while we are having these very nice discussions with these
other countries. We are very hopeful that your persuasive ways,
and they have always been persuasive, are effective here; but
your kind words would be that much more effective if you had
your hand on the spigot and it was open.
You can turn to them and say, ``Look, we've got these bad
guys in Congress who are unreasonable. They don't want to give
you the time to respond, so in order to prevent them from doing
worse, we are opening the spigot a little.'' We have seen that
work in the past. You certainly have the authority. We did it
during the Gulf War. As a matter of fact, Congress mandated you
sell some oil to help balance the budget in 1996, so we have
been in SPRO before.
The other thing we ought to do is look at a broader energy
policy, which we frankly haven't had since the Reagan
Administration came to town in 1980. It seems to me that you
ought to do two things: you ought to open this reserve and
establish a home heating oil reserve; and you ought to come up
and give it to Congress for not focusing on energy
conservation.
I hope my friend from California is paying attention. There
are two parts to this equation. Part of this is what the oil-
producing nations make available to us and how we use SPRO to
balance that. I think, frankly, we have been too slow in
responding to the shortage they created. I think we should have
opened SPRO.
The other part of the problem, though, is that Congress has
stood in the way of energy conservation, alternative fuels, and
increasing the efficiency of American automobiles. You ought to
be up here hammering us to demand that in this crisis, before
our short-term memory wanes. If prices level out, we will
forget the need to deal with energy efficiency.
Anybody who reads the paper can see that the American
automobile producers are capable of making cars that get 80 and
90 miles to a gallon today with some of these combined fuel
systems, not dream cars of the future but cars that can be
here. We ought to press this Congress, House and Senate, to
come forward with energy conservation measures.
I have got one question: Why on God's green earth would you
not add to your leverage by just opening that spigot a little,
and come here--SPRO's legislative authority runs out at the end
of March--come back here and ask us for the authority to buy
when it is cheap. We didn't buy enough when it was $10 a
barrel, and we ought to sell when it is high.
You say it is not an emergency, but we are never going to
have enough LIHEAP funds to reach the average citizen. We are
not going to be able to somehow fudge what this does to the
rest of the economy. Open the spigot. Keep talking. I think it
gets their attention.
As they used to say about the farmer and the donkey; he had
the carrot and the baseball bat. They said, ``What's the bat
for?'' ``First I've got to get his attention, and then I give
him the carrot.'' We need a little bit of the baseball bat with
our friends to get their attention. Why don't you open up SPRO?
Secretary Richardson. Congressman, let me just say one
thing. We do have an energy policy. It is also in writing, and
it is a good energy policy, and we have been following it.
We have had a successful economic program under this
Administration. One of the tenets has been that every time the
government intervenes in price areas, it doesn't work. Now,
with the SPRO, with the SPRO you are intervening and you are
manipulating markets.
Now, I am going to stress to you, the President has not
taken this off the table, but it is used for national supply
disruptions. Now, the swap issue is something that is also
being considered, so we do have tools. Now, what I believe
makes sense is to let the results of our energy diplomacy work,
and so far the signs are good.
Now, we do have a policy. I can't agree with you more about
alternative sources of energy. We have not gotten the support
from the Congress we deserve. The weatherization funds have
been cut. We want to improve the efficiency of the energy
system. We have a comprehensive electricity deregulation bill
before the Congress that would improve the reliability of our
electric system. I have been to your State, where there were
some blackouts. We need that reliability in our system. We have
to expand future energy choices.
We have taken a number of steps to spur domestic
production. I would like to put them on the record, because
they involve----
[The response in detail to this appears in the appendix, on
page ??, as insert A.]
Mr. Gejdenson. Let me let you put that on on somebody
else's time. I hate to interrupt you, but I think you have been
here long enough that you have probably interrupted a Secretary
or two.
I would agree with you if this were the normal marketplace,
possibly. This isn't the marketplace working. This is an
organized manipulation of supply. So, some guys walk along,
they are lucky, they think they have got a good policy. We were
lucky for a while in energy.
Now we are at a point where OPEC is testing its muscle
again, and the question for us is, if this were the free market
working I would say yes, it will work out. But if you increase
production here at these prices and OPEC sees this really works
well, they will just drop production a little more, and so they
can play this in the short term.
The only defense we have in the energy area is your hand on
that spigot, and I think you ought to at least appear to be
more ready to use it. When those guys meet at the end of March
it will be helpful, and I think the article in the Wall Street
Journal today is helpful in that area. But, think about the
Treasury for a moment. If some other country were trying to
manipulate the value of the dollar for their trade advantage,
you can be darn sure if there was a 300 percent change in the
value of the dollar compared to the Euro or the yen, we would
be out there trying to make sure there wasn't as erratic a
movement because of the damage to our economy.
It is the same thing here. This isn't marketplace forces.
This is manipulation. We have got to be ready to defend
ourselves. It is a great pleasure to see you again.
Chairman Gilman. Thank you, Mr. Gejdenson. Again, that is
why sanctions are so important.
Mr. Rohrabacher?
Mr. Rohrabacher. First of all, I would like to commend the
Chairman for being the only one that seems to have put forward
a real policy, an alternative to the policies that have brought
on this crisis. So thank you very much, Mr. Chairman, for
holding this hearing.
I commend our good friend, Bill Richardson, for coming here
today. The fact is, as he said, this is his first meeting after
getting off the plane from his trip to the oil-producing
regions. Bill, we know you are very tired, and I think it is
very gracious of you and speaks very well of you that you have
come here to talk to us.
With that said, I am sorry that I have to be a little
pointed in some of the questions that I am going to be asking.
But, quite frankly, the fact that you have been on top of this
for a year, and we have ended up in this situation, does not
speak well of your or the Administration's ability to do your
job. You have said you have just spoken to these oil producers
and you got a commitment for them to review production levels.
I mean, that is pathetic. It is pathetic.
Look, these are people who we have troops stationed in
their countries in order to defend. It was just a few weeks ago
we had a service here in Washington, D.C. in memory of the 260
Americans who died during the Gulf War. The Kuwaiti Ambassador,
who is a friend of ours, a friend of yours, a friend of mine, a
very fine man, was at that memorial service.
How can we remember the 260 American lives that were lost,
how can we still have our troops there protecting these people,
while they are engaged in a conspiracy, in an international
price-fixing conspiracy to shaft the people of the United
States. We didn't even use that as leverage, and from what you
said, we haven't used that as leverage to get them to change
their ways. Now, what is it? Have we at all used our leverage
in this area of their national security to protect the
interests of the American people, or haven't we.
Secretary Richardson. Congressman, let me say that in my
talks with these energy ministers, these countries that are our
friends, we are very frank.
Mr. Rohrabacher. Yes.
Secretary Richardson. Now, I am not going to divulge
internal conversations, but I think that these nations value
their relationship with the United States. They know that
international problems have been created from the production
cuts.
Now, all I am saying is, they will be meeting on March
27th. They have not made any decisions. I believe they are
leaning forward on increasing production and recognizing that
volatility is extensive, that world economies are being
damaged, including our own.
I do think that the Chairman's bill--we would oppose it. We
don't think that sanctions----
Mr. Rohrabacher. Bill, let me just be very fair with you;
this reflects not only on you but on the Administration's
policies. These people are tough people. They are rugged. They
know what is in the interest of their people, and they are
aggressively pursuing those interests. The fact is that when we
are not aggressive and we do not make demands, we get run over.
What is happening here today to our people throughout this
country, whether it is the Northeast or whether it is our
people out in California paying $2 a gallon for gasoline, they
are getting run over, and by people who we have ended up
defending, we spent our blood and our treasure defending. It is
a sin against our own people to not be aggressive and champion
those interests.
Let me say your analysis, your statement, talks about a
cycle, repeatedly talking about the cycle. It is not a cycle
that has resulted in higher prices. It is a conspiracy that has
resulted in higher prices, a price-fixing conspiracy by a
cartel.
My good friend, Mr. Gejdenson, I will not take this
opportunity to blame the American people because they want a
little bit bigger car or a sports utility vehicle, in the face
of a conspiracy by an oil cartel that is aimed at damaging the
well-being of the American people. It is not the time to
chastise the American people for wanting to buy a car that is a
little bit more comfortable.
The fact is, we are being screwed by people that we have
defended, and we have got troops there defending them right
now. Who is watching out for the interests of the American
people?
One last thing--and I am sorry, Mr. Gejdenson--there is one
last thing I wanted to get into. Bill, you were very active on
this Afghan front, whether it was your policy or whether it was
the policy of this Administration and you were just being a
good soldier.
The fact is, the Taliban are still in power, and the
instability that the Taliban have brought with their support
for terrorism and their fascist policies toward women, is the
reason that we don't have an oil pipeline that has brought the
Central Asian oil into the world market. It permits these oil
producers like Saudi Arabia, who bankrolls the Taliban, it
permits the Saudi Arabians to keep the prices high.
Frankly, again, it shows a lack of professionality or a
lack of competency on the part of this Administration to permit
that going on. So please feel free to answer this. Thank you.
Secretary Richardson. Mr. Chairman, I have had a lot of
conversations with Congressman Rohrabacher on Afghanistan, and
he knows the area well. You are accurate, the Taliban is
impossible to deal with. They repress women, they practice
terrorism, they harbor individuals like Osama bin Ladin. They
have not moderated their policies, and it is very hard to talk
to them about any pipelines.
We have pursued, as you know, the Bakujahan pipeline that
goes through Turkey, an ally, that involves Azerbaijan and
involves Georgia, Turkmenistan, and the Trans-Caspian Gas. Our
policy is firmly rooted in finding routes in that area that are
pro-Western, multiple pipelines, and I believe this policy is
working. I was there with the President in Istanbul when we
signed some agreements.
But I think to work with the Taliban right now on some of
these pipelines, given, as you mentioned, their very, very
difficult attitudes toward anybody in the world--their hostile
attitude--it would be a big problem.
Chairman Gilman. Thank you very much.
Mr. Hastings is gone. Mr. Rothman? Mr. Delahunt?
Mr. Delahunt. Yes, thank you, Mr. Chairman.
I think I can read between the lines, Mr. Secretary, that
you have some optimism in terms of action by the OPEC nations
on March 27th. I also have to agree, however, with others,
particularly Mr. Gejdenson, who I think has stated so well that
we are running out of time. What I guess I would suggest or
what I would ask is, if you can, give us a measurement of your
level of optimism.
Secretary Richardson. Congressman, I am guardedly
optimistic that OPEC will increase production.
Mr. Delahunt. How guarded are you, Mr. Secretary? On a
scale of 100?
Secretary Richardson. How about from one to ten?
Mr. Delahunt. One to ten.
Secretary Richardson. I would be guardedly optimistic, nine
out of that ten.
Mr. Delahunt. Those are pretty good numbers, Mr. Secretary.
Secretary Richardson. In other words, I am reasonably
optimistic. The reason for this, Congressman, is I think the
Administration's energy diplomacy. The President has been
active on this issue, the Administration has been active, we
have explained our position. I think using sanctions would be--
--
Mr. Delahunt. I am not talking about sanctions. In fact, I
had a colloquy here with Mr. Gejdenson and the Chairman
regarding the amount of aid, and I think it is important
because it has been stated here. The amount of nonmilitary aid
that this country provides to OPEC nations I dare say is
minimal. We shouldn't delude ourselves, that there is very
little leverage in terms of the level of nonmilitary foreign
assistance that we give to these nations.
I have been handed from staff, via the Chairman,
information that out of the eleven countries that comprise
OPEC, only four receive some aid and it is primarily military.
I would agree with the Chairman about cutting off arms sales. I
think we should do it anyhow. I think it makes a lot of sense.
But, as Mr. Gejdenson points out, you would have to have
multilateral agreement to achieve that.
Chairman Gilman. If the gentleman will yield to the Chair,
what we failed to put on that list we gave to you is the amount
of trade, we have with them. Most of them have a significant
amount of trade with us, to their benefit. We want to give the
Secretary of Energy some leverage while he goes and tries to
talk with them and reason with them. He can blame the Congress
for feeling a little more bitter about all of this than he
does. Thank you.
Mr. Delahunt. I tend to agree with the Secretary. I don't
think sanctions would work. But I think what would work, and I
would hope that if your guarded optimism fails to materialize,
that you will draw down on the SPRO. I think that is absolutely
critical and absolutely important to do, because I think that
will pierce the bubble of speculation that is going on now, and
I think we would see a rerun of what occurred when President
Bush drew down during the Gulf crisis.
I yield back. Would you care to make a comment, Mr.
Secretary?
Secretary Richardson. Congressman, I am going to repeat
what President Clinton told the Nation's Governors yesterday,
and that is, the oil swap and drawdown, the sale of SPRO, is on
the table and he is reviewing those options. I have told you
that on this drawdown I have reservations, because I think it
should only be used in a national supply emergency.
I am also interested in what OPEC will do in March, and
what in fact some of the key nations will do tomorrow. These
are signals that we are watching. If they make a decision on
March 27th that is detrimental to America's interests, then I
think the President has a number of options. But I am not
threatening them. I just explained our position. We were very
forthright and clear about what is in our interests. In fact,
Congressman, I know that many of you care about developing
nations and the European Community. They share our view, too,
so it is not as if we are alone.
Mr. Rohrabacher. [Presiding] Mr. Manzullo?
Mr. Manzullo. Thank you. I appreciate your taking the time
to come, Mr. Secretary. I just want to say that I have looked
at these joint statements between you and the heads of energy
from four different countries, and in all candor, what it says,
Minister Rodriguez of Venezuela reiterated his country's
``commitment to continue to analyze.'' I mean, this is nothing.
I mean, you went to them, you did the best you could, and you
know what you are telling the American people? Is that the
American people have to step up to the plate to do several
things.
Number one, the first thing that is going to happen is when
inflation gets spiked, Greenspan is going to increase the
interest rate, and the American consumer is going to pay more
in interest to borrow because of the international criminal
conspiracy on the part of the oil-producing nations.
The second thing is, the President is going to come to us
and ask for a supplemental, which presumably will be off
budget. The American people are going to have to step to the
bat, not only will we pay more in gasoline prices, we will pay
more in interest prices, and then a supplemental means it will
probably go off budget, more money being eaten out of the
budget surplus that is due.
The third thing is this: Why not use these tools? Saudi
Arabia is an applicant for WTO. Algeria is an applicant for
WTO. Why don't we tell these countries, ``If you want to get
into WTO, you cannot engage in an international criminal
conspiracy to fix the world oil prices.'' I mean, why don't we
use that as a tool?
Why don't we use this as a tool? Why don't we say, ``If you
want the IMF to come in and bail you out,'' such as we did with
Russia and Mexico and, I believe, Venezuela, why don't we use
some tools on that? We go around the world bailing people out
everywhere, and you know who catches it on the chin? The
American taxpayer. Always, it is always us, not them. It is
always us.
When you refer to Mexico and Venezuela and Norway and Saudi
Arabia and Kuwait as our friends, if they are our friends and
our friends stick it to the American consumer to double the
price of gasoline, to pay more interest on loans, to have a
supplemental take money out of our surplus, then what do our
enemies do to us?
I think the answer is very simple here. I mean, again,
Indonesia, a member of OPEC, an oil-producing nation, what do
we do? IMF money goes in there and bails them out. I think the
American people are sick and tired of bailing these people out.
What about the issue of foreign aid? Can't you go to
Russia, though not a member of OPEC but certainly part of that
cozy group of people, and say, ``Look, here we give you
hundreds of millions of dollars in foreign aid''--and I am not
talking about Nunn-Lugar money to dismantle their rockets, I am
talking about money that we give many of these nations in terms
of foreign aid--and say, ``Look, we are going to cut you off.
You cutoff the production of oil, and we will cutoff the
foreign aid going from the American taxpayers to you.''
These are four tools that I have presented that we could
use. You went there, Bill, with no tools. You went there to use
diplomatic language, and you know what you got? Analyze this.
Saudi Arabia will continue to review the oil supply and demand
levels. Kuwait reaffirmed its intention to enhance mutual
cooperation. Norway, the two ministers discussed energy
cooperation and science and technology cooperation.
Bill, you came back with nothing. All of your hard work--
and you were a good and honest and hardworking Member, and it
has been my pleasure to serve with you for four years in the
House. No one works harder than you. But you went there with no
tools and no ammunition. Could you comment on some of the
suggestions that I have given to you?
Secretary Richardson. Congressman, I came back with quite a
bit. You didn't read the rest of the statements. With
Venezuela, which was my last meeting, I believe that we had the
language that we sought out, review of production levels,
volatility, that what we need to have is, high prices are bad,
low prices are bad.
They have their own processes. OPEC operates in a
consensus. They are meeting in March, at the end of March. I
believe by the presence of the Energy Secretary, representing
the President of the United States, taking the case of the
American people and the Congress to these countries, I think
the message is strong enough.
Now, did I threaten? No. Did I coerce? No. I think that our
arguments were convincing. All I can tell you, Congressman, is
30 days ago I think your staff could provide you with what
these nations were saying. OPEC was saying that production cuts
were probably going to continue. They were saying that in the
second quarter, demand was going to lower, and that therefore
no changes were needed. Now we have the key members of OPEC,
including its leaders, saying that they are going to look at
production levels.
Mr. Manzullo. But you have no promise, you have no
incentive. They may or may not do that. What is the plan of the
Administration to end OPEC, to end the criminal conspiracy that
controls the production of oil? Is there any plan to end it, to
dismantle it?
Secretary Richardson. That would be a problem, Congressman.
You know that.
Mr. Manzullo. Why would it be a problem, when we are giving
these people money, when we are bailing them out on a day-to-
day basis?
Secretary Richardson. I think, just for the record, because
this has come up a lot, in terms of assistance to OPEC nations,
what we are talking about, total American assistance to all
countries, and this Committee has these statistics, is $23
billion. When we are talking about aid to OPEC, we are talking
about less than $300 million in economic, military and
agricultural assistance.
Now, we do have military relations, arms supply
relationships, and there is no question, I will also say,
Congressman, that I felt when I talked to the Saudis, when I
talked to the Mexicans, to the Kuwaitis, the Venezuelans, the
Norwegians, they felt very strongly that it was important to
have a strong relationship with the United States. I think
that----
Mr. Manzullo. Then you should have just said, ``If you want
to be strong with us, get out of your international criminal
conspiracy,'' so you could meet on fair ground.
Secretary Richardson. March 27th is an important date. They
will all convene, and I am optimistic, guardedly optimistic
that they will increase production. The key will be the level
and the timing of that increase.
Mr. Rohrabacher. Thank you very much. Thank you, Mr.
Manzullo, and thank you very much, Mr. Secretary.
Ms. Lee?
Ms. Lee. Thank you very much, Mr. Chairman.
Thank you, Mr. Secretary, for your presentation and really
for your very bold leadership. Let me just mention a couple of
things with regard to the cost of gasoline in California.
According to the California State Automobile Association,
Northern California gasoline prices have shot up by
approximately 12 to 17 cents per gallon in just the past two
weeks. The average price of a gallon of regular unleaded gas at
self-service pumps soared 12 cents to $1.71 in San Francisco,
just four cents shy of the record $1.75 reached last August.
Northern California, I believe, has some of the highest prices
of gasoline in the country.
Now, this past weekend was very interesting. I saw lines of
cars at gas stations where the prices were a bit less, and
people are getting very angry. I sense frustration. The
American public, especially in Northern California, doesn't
really understand why the cost of gasoline is so high.
I wanted to ask you, how do you think we need to present
this to the American public in layperson's terms so they can
really understand why the cost of gasoline is so high, so that
their frustration level can either be minimized or so they can
really kind of understand what is going on?
Then, second, I just wanted to ask you a question about
Nigeria. Given the fact that they could increase their output,
and of course Nigeria is going through now some very, I think,
positive changes in terms of their government, but there is
still some civil unrest and there are still some difficulties,
what should our policy be toward Nigeria as it relates to what
we can do in terms of our assistance to help them produce more
oil?
Thank you very much.
Secretary Richardson. Congresswoman, you have been very
constructive in your two questions. Here is how I would answer
your constituents.
I would say to them, the high price of gasoline or the high
price of home heating oil was caused for three reasons: one,
the high price of crude oil; second, an unexpectedly cold
winter, especially in the month of January; and, third,
transportation problems in delivering some of the home heating
oil. I would also say to them that low inventories in U.S.
stocks have caused increases in gasoline.
I would also say to them that your Administration, our
Administration, is addressing the short term and long term on
the international front with energy diplomacy, explaining
forcefully the importance of free markets, of price stability,
of having increases in production based on the need for
financial stability in the markets. I would also explain that
we are taking steps with refiners, with home heating oil
operators. We have got to get refiners to pump more crude. We
have got to find ways to postpone maintenance that refiners are
making, so that they don't spend their time on maintenance and
home heating oil can be delivered.
We believe that in California your market is a unique
gasoline market. You have very strict environmental regulations
and limited supply options, but the underlying problem for you
is the high cost of oil. If we get increases in production, we
believe that costs will recede.
Now, I am conscious of the increases in the price of
gasoline. We expect that when our Energy Information Agency
releases its report sometime soon, that in the short term there
may be some further increases, but we expect if OPEC increases
production, that prices will stabilize. Nobody wants high
gasoline prices. The price of diesel, I think the President has
also talked about, with the Members of Congress that met with
him on issues relating to the diesel fuel tax. That is being
considered, although that presents some problems, the Highway
Trust Fund and other factors. But I would explain to your
constituents that we are aggressively addressing the problem.
The second question, which is an excellent one, we are very
excited about what is happening in Nigeria. It is a democratic
government. They are bringing their energy--they are a huge
energy resource, especially in oil--they are cleaning up some
of the problems there, corruption and others. They are taking
aggressive steps to privatize. They are bringing their oil into
the market. Early indications are that Nigeria would be
cooperative with us on increasing production.
They are a member of OPEC. The OPEC Secretary General, Mr.
Rilwan Lukman, is from Nigeria, and the contact we have had
with Nigeria on this issue so far, and I am going to have
further contact, has been very positive. So we are very excited
about what is happening in Nigeria.
Mr. Rohrabacher. You are welcome, because Mr. Manzullo took
a couple extra minutes, if you would like another question.
Ms. Lee. Thank you very much, Mr. Chairman. Let me just
respond with regard to Nigeria.
Do you see any efforts that we need to mount in the
Congress to assist the Administration, given the enormous
crisis really that we are in, in terms of our energy crisis
now? Or is this an effort that you think the Administration and
yourself can actually work out?
Secretary Richardson. I would ask the Congress to adopt our
numbers for alternative energy, for climate change, our budget
numbers. Help us promote energy efficiency, more efficient fuel
vehicles. Give us the money we need on weatherization; the
Congress cut us in half on weatherization.
Give us the supplemental for Low Income Energy Assistance.
The President has three times tapped the Low Income Energy
Assistance, more than any other President, and we are asking
for $600 million more. This is money that helps poor people.
There are poor people. I have met with them in the Northeast. I
have been in Maine, I have been in New Jersey, I have been in
Boston. I plan to go to Rhode Island and Connecticut. We had a
summit in Boston, of Governors, of local officials, of
consumers, to try to address the problem, and I do see
progress.
Mr. Rohrabacher. Thank you very much, Mr. Secretary.
Mr. Cooksey?
Mr. Cooksey. Thank you. Mr. Secretary, I have gone from
saying I thought you were doing a relatively good job at DOE to
thinking you are doing a great job at DOE, after your
testimony, as long as you adhere to the principle of market
forces. I have a lot more confidence in market forces than I do
politicians. I think that cartels will always collapse in the
face of market forces, in spite of what the politicians will
do.
My other problem is with politicians. I notice that 13
Members or 15 Members of this Committee are from the Northeast,
and they are good friends of mine. Mr. Gejdenson is a great
friend. We have a lot of fun riding each other about certain
things or teasing each other about things. But they are wrong
in trying to come in and do some of the things that they are
proposing. I feel that this is a tendency that politicians have
where they are playing to their home media, and it is just not,
the facts.
But I would assure my friends from Connecticut and New York
and from the Northeast that spring will be here soon. When
spring is here, the demands on petroleum and the home heating
oil prices will come down, and we won't have to draw anything
out of the Strategic Petroleum Reserve, which is in my State. I
understand it has 570 million barrels in it. It is there for a
reason and I think it should stay there. So basically my
message to you is, keep the faith in the face of all the
criticism by my colleagues on this side and the ones on the
other side.
I would point out, I made one misstatement earlier. The
United States is producing six million barrels of oil a day in
2000; we were producing nine in 1973. But that two or three
million barrels a day is about the deficit that we have in this
country.
I would also point out that if you adjusted gasoline for
inflation from 1979 or 1981, we should be paying $2.50 a gallon
today instead of $1.50 or $1.60 a gallon.
The bad news for the politicians in the OPEC countries, is
that there are more poor people in their countries than there
are in ours, because democracy and market forces still will
prevail over dictatorships and cartels. The thing that disturbs
me today is that some of my colleagues are trying to make us a
cartel, are trying to make us a bully, and it will not work in
the face of market forces.
Secretary Richardson. Congressman, your words are music to
my ears. I hope that doesn't hurt----
Mr. Cooksey. Did you say music or amusing?
Secretary Richardson. Music.
Mr. Cooksey. A lot of my colleagues think they are amusing.
Secretary Richardson. Our policy is that market forces in
energy and oil should dictate prices, and I believe again that
the success of this Administration's economic policy is, we
have applied that across the board.
Now, on the Strategic Petroleum Reserve, which is in your
State and in Texas, we made a wise decision a year ago. We
replenished it through what is called the RIC sale, exchange
with the Department of the Interior. We have 10 million barrels
more there because of this policy of proceeding when the price
was low, and it is replenished. It is being managed very well,
especially in your State and in Texas.
Now, let me just say something. We are concerned about high
gasoline prices. While inflation-adjusted numbers suggest
gasoline prices are not that much higher than in the 1970's, we
still need to work to get them down. The best way to do that is
by lowering crude oil prices, and that is what we are trying to
do.
Congressman, I will also say to you, I would like to just
mention for those from energy-producing States, we have taken
steps with the Federal royalty payment, less paperwork,
increased technology in drilling, so that our drillers, through
the Department of Energy programs, can drill more effectively,
efficiently, with the latest technology.
We are aggressively pursuing that, and we will try to take
additional steps to help our domestic production--I think that
is one of the messages from this problem--at the same time that
we also properly fund alternative sources of energy, solar,
wind, biomass, natural gas. This is the time to invest in those
energy sources, and we are trying to do that through our
electricity restructuring, deregulation bill, by having a
renewable mandate of 7.5 percent, our funding for many of these
energy conservation efforts, our joint projects with the Big
Three in Detroit to produce a more energy-efficient vehicle. We
have had some breakthroughs in that area.
We need the Congress' support, especially in Low Income
Energy Assistance, weatherization. These are programs that help
poor people, and what we need to do is have the States and the
Federal Government raise the eligibility requirement so that
more middle class and more average people can be helped, too.
Mr. Cooksey. Can I make one closing statement, Mr.
Chairman? The red light just went on.
As a physician, I have to deal in the facts more so than a
politician does, and I hope these facts are correct. I have
been told that the largest retailer in this country today is
Citgo, and I was also told that the controlling stock in Citgo
is in the hands of the government of Venezuela. It is also my
understanding that my colleague was correct about Chavez, who
tried to overthrow the democracy in Venezuela a few years ago.
Now he has been elected in the democratic process. But also he
was in China last week doing deals with the Chinese and the
Cubans, for whatever it is worth.
Thank you, Mr. Chairman. Thank you for being here. It has
been a good session.
Mr. Rohrabacher. Thank you very much, Mr. Cooksey.
Mr. Payne?
Mr. Payne. Thank you very much, Mr. Secretary. It is good
to see you, and the fact you came right off the plane and came
right here, you are certainly in the right business. You are
the Secretary of Energy, and so you have to have a lot of
energy, I guess, so we compliment you for being here.
I know you are important but I didn't know that we need to
blame you for treatment of women in Afghanistan. Maybe you are
responsible for the North Irish talks falling off, too. I mean,
you are more important, evidently, all of a sudden, than I ever
thought you were. I always thought you were important, but I
hear all the world problems are because of you--my Chairman
here.
But I think that you hit on the issues. One, we need to
really become more fuel-efficient. We need to have some subsidy
to build natural gas lines to the Northeast. The Northeast,
where I live, is where we are hurting from the high cost of
home heating fuel, and that is because there have never been
pipelines to the Northeast for natural gas. So I would like to
see the Administration look into that so that we could avoid
these problems in the future.
In addition to that, I think that when the prices are low,
for example, the airlines have increased their fares because
they say, prices went up to $30, went up from $10 to $30, but
when they were $10, they didn't reduce their fares. I don't
know how, what is good for the goose is supposed to be good for
the gander. If the prices are low, it would appear to me that
that savings should be passed on to the consumer. When the
prices go high, they then roll it back to the consumer. I can't
blame you for that, either, but maybe I should.
I think that the only answer to this problem is that we
come up with alternative fuels, that we do research, that we
have cars, as you have mentioned--Japan is putting out a car
that can do 70 miles per gallon. We need to be able to do the
same kind of thing.
I think, just in conclusion, I probably really don't have a
question, but I didn't get a chance to make an opening
statement either, and the fact is that the cartels are going to
do the same thing, whether it is next year or the following
year. I don't care if we have got 25,000 troops or no troops in
Saudi Arabia or Kuwait, or if Norway drops out of the European
Union, cartels are going to come around and they are going to
say, ``Let's hold up'' or ``Let's pump up.''
We don't grow wheat, and everybody buys our wheat for bread
around the world, we don't grow twice as much wheat as we
could. We could double the production of wheat and, therefore,
that should drop the price of bread. But we don't. We just do
enough wheat to keep prices of bread where they are. Bread
prices haven't gone down, although we have turned the technique
around, of being able to produce more. We have got new strains
of seeds. But we don't see a doubling of the production of
wheat. We don't see the price of beef going down, although we
shoot them up with hormones and everything, they get twice the
size in half the time.
So I think that the economic forces of the world are really
going to be what is going to be, and the people that pump oil
and gas, they are going to slow up when they want to slow up,
they are going to pump it up when they want to pump it up. It
is no different in that industry. It just hurts us more, and it
hurts me tremendously up in the Northeast. I wish it wasn't
that way, but that is the way the world is. They are not going
to grow any more sugar than they are growing, because sugar
could come down 50 percent of what the cost is.
So I think we are really asking, because it impacts on us
negatively and I wish it wouldn't happen, I think we are
looking for miracles, but that is really not the way the world
works. You have got a product you want; you want to keep
guzzling. My friend said we should have bigger cars, Americans
should have the right to have these big old gas guzzlers, and
that is true, if they want to pay for it and they want to buy
them. But you can't tell the guy who has got the oil in his
country that he should reduce his costs so that Americans can
have gas guzzlers cheaper.
It doesn't make sense. I mean, it would be great if we had
a magic wand and the world worked that way. I know this is the
greatest country in the world, but we can't make the world just
make everything so convenient, so if we decide we want bigger,
more gas-consuming cars, they should therefore drop the price
so we could do it.
So I am on your side. I think you are doing the right
thing. I think the Administration is doing the right thing. I
wish, though, that we would put more money really in serious
research and technology so that we can make cars more fuel-
efficient, so that we can get natural gas up to our places. We
can even help countries like Nigeria, that flares the natural
gas, even assist them to contain the natural gas, build
pipelines, so that that natural gas could be used as an
alternative for home heating fuel.
I just want to compliment you on the fine job you are
doing, and ask that you keep the talks going. As long as people
are talking, that is positive. I want you to go back, talk some
more to them. I listened to what you said. I really don't know
what you accomplished, but I want you to keep the talks going,
because as long as that is happening, I think that we are on
the right track.
Mr. Pomeroy. Will the gentleman yield?
Mr. Payne. Yes, I yield.
Mr. Pomeroy. I have to run to the Floor, but I did want to
make the point specifically relative to the incredible hit this
will have on farmers, and so your talks and your efforts to
leverage progress are extraordinarily important. North Dakota
State University estimates this will increase production costs
significantly, adding literally thousands of dollars to
farmers' costs at a time when prices are so low we have a
crisis in agriculture. So I will send you more information, Mr.
Secretary. I just wanted to get that point in before I had to
run to the Floor. Thank you.
Secretary Richardson. Congressman, I want to thank you for
your statement. You mentioned at the beginning the importance
of natural gas, and I think before you came I mentioned that
the President has asked the Energy Department to do a 60-day
study of diversifying energy supplies in the Northeast,
including converting factories and other major users from oil
to other fuels such as natural gas, in order to free up oil
supplies for use in heating homes.
We also have a request to Congress to develop new
technologies that would protect against market failures,
promote reliability through more efficient technology,
especially in natural gas distribution, transmission and
distribution technology. So we are looking forward, and I
appreciate you have a lot of diplomatic experience yourself.
You know that you have to be careful, many times, in that the
United States is the world's only superpower, that you use your
leverage carefully and guardedly. This is what we are trying to
do.
But we will keep these conversations going. As I said, I
think my talks were successful. I am guardedly optimistic that
there will be an increase in production. We will know on March
27th. But we have a strategy regardless, and we have made
considerable progress since 30 days ago, so I think we are
moving forward, and I thank you for your comments.
Mr. Leach. [Presiding] Thank you, Mr. Payne.
First, Bill, let me also welcome you back to the Hill. You
have many friends up here. But I would like to comment about
these talks, and in a sense it is positive always to be
talking, but there is something that isn't very strong about
the United States of America discussing with a cartel concerns
about pricing and supply issues, when we are being bamboozled
by that cartel, and I would like to talk to you for a second
about law.
It is my understanding, and I apologize for being late in
coming, that there was earlier discussion that under domestic
law a cartel of this nature would clearly be illegal. I would
like to make it very clear, from a congressional perspective,
under United States law today this kind of cartel is illegal.
We have an act passed a generation ago called the Foreign
Sovereign Immunities Act. What that act very precisely suggests
is that when a government acts as a corporation, it comes under
United States corporate law, which means United States
antitrust law. Very interestingly, although until recent years
it wasn't extensively applied, the Common Market has comparable
antitrust laws as the United States. Articles 85 through 90 of
the Treaty of Rome are every bit as strong as the Clayton and
Sherman Acts.
I would like to suggest that it is clear-cut that if
matters are not in a timely fashion brought into line, the
option of the United States is to bring an antitrust action,
and that type of action is of towering significance. It is the
rule of law, it isn't the rule of anything else. In fact, one
might argue that not to bring an antitrust action would be for
an Administration to not uphold the rule of law. So I would
like to just suggest to you that when you talk with other
countries, that this is an option that is being urged upon you
by Capitol Hill and thoughtful purveyors of concern on this
issue.
Now, I don't personally think that this is something that
necessarily should elicit comment, because I think comment can
be very unhelpful, but I will tell you that this is in the
arsenal of the United States. It is in the arsenal of our
Common Market partners. It is something that, when you talk
about discussions, ought to be in the discussion framework with
our allies as well as with the oil-producing countries.
Now, having said that, because I am not eager for a
response that would either be dismissive or too alacritous in
support, I want to raise one other issue that I think the
Administration has not been as quite on top of as I would like
them to be, but they have not also been totally opposed. But
when you look at alternative energy sources, we don't just have
wind and solar. We have a renewable source that derives from
the earth, and it is called gasohol, which is at the moment
largely a corn-based product.
Coming from the Midwest, I would hope that this would be an
understood kind of concern, and it relates to issues the
Administration is going to be making policy decisions on in the
not too distant future, relating to EPA and California. I would
hope the Department of Energy would be in a position to weigh
in on the side of the development of this alternative market as
a national interest issue. Would you care to comment on that?
Secretary Richardson. Mr. Chairman, let me say that I have
visited your State. We have noted, in the bio energy area, this
is a great potential in your State and the Midwest. On ethanol,
the Administration I think has a strong policy. We support the
tax credits provided to ethanol, so we have a strong
alternative fuels program at the Department.
Before you got here I was trying to say, to the Committee
and to the Congress, please fund these, because we get big cuts
in them at the end of the year. We are requesting a 45 percent
increase in funding for gasohol, biomass, bio fuels for the
year 2001. What we want to do is develop cost producing
technologies in this area. The technology that is happening in
this area is very exciting.
So we hope that you can support us in this effort on
research and new technology, but we share that view, especially
in the area of bio energy. We are very bullish about this, and
we ask for your help.
Mr. Leach. I appreciate that, but let me make it very
clear. I am asking for your help, and I want to be very
specific, Mr. Secretary. The EPA in the very near future is
going to be making significant decisions, seminal decisions,
relating to an application from the State of California, on
whether California is obligated to use more ethanol. Will the
Department of Energy be weighing in on that decision?
Secretary Richardson. Yes, we will be weighing in.
Mr. Leach. Thank you.
I have a list of other Members, and in the order of
appearance I am told Mr. Crowley is next, but I am willing to
go by whatever order the Minority prefers in this. Mr. Crowley
is recognized.
Mr. Crowley. Thank you, Mr. Chairman.
First of all, Mr. Secretary, let me thank you for staying
here. I know you have a busy schedule, and I know you once sat
in these shoes that I now have, and I appreciate your sticking
around for a question from a freshman Member of the House.
I represent a district that takes in parts of Queens in New
York City and the Bronx. The average annual income in my
district is about $30,100 a year. My notes indicate to me that
although 12 percent of American homes are heated by oil, in New
York State it is nearly 40 percent of all homes that are heated
by oil, and in my district it is actually 46 plus percent of
the homes that are heated by oil, some 108,000 homes.
A little math that I have done: the average bill was about
$200 a month, it is now well over $400 a month. LIHEAP funding
for New York is approximately $72 million. My district alone,
per month, will see an increase, and these are conservative
figures, of over $23 million in spending, just a little math I
have done here, doubling it. You cost that over four to five
months, and you are seeing over $1,000 that is coming out of
the pockets of people who don't make much money, and probably
multiply that a number of times over for congressional
districts, depending on what state you are in.
The question that is asked me a great deal when I have been
out in town hall meetings is, didn't anyone see this coming?
Did not anyone in the Department of Energy or anywhere in this
Administration see what might possibly be happening? One of the
solutions we have talked about is the creation of a separate
home heating oil reserve, and also talking about opening SPRO.
The concern I have is that while the President continues to
study the option of doing that, we will be in spring. The
crisis will have, for the most part, ended as it pertains to
home heating oil, not necessarily as it pertains to the price
of gas, and diesel fuel particularly, and what effect that will
have on the cost of products that are being shipped across this
country.
Despite the comments of my good friend from Louisiana about
switching to natural gas, of the many people in my district who
represent the 46 percent, an overwhelming majority of those
individuals are well over 65 years of age and I dare say are
not interested at this point in making those types of changes
to their home, and won't do that in the future, either.
That is the crisis we are facing right now. Individuals who
had a little extra money to maybe take care of some family
members no longer have that. Before, I know another colleague
mentioned people actually making decisions about paying their
heating bills, or purchasing prescription drugs, purchasing
proper food. These are realities in my district.
My first question, did no one see this coming? I appreciate
the work you have done. I have been following it, and I know
the hard work you have been engaged in and the Administration
is engaged in. But did someone in the Administration not see
this coming and not react sooner?
Secretary Richardson. Congressman, you know last year we
had tremendous surpluses, inventory surpluses, and it wasn't
until late last year that we started seeing very low stock
levels. I was aware of this, and I was alerting the OPEC
ministers, and they said, ``Well, we're going to be meeting.
We'll deal with that.''
The cold snap in January aggravated the markets, and we
reacted immediately. I think as you said, we have dealt with
LIHEAP. In your specific case, we found in New York there were
serious transportation problems, and we worked with the Coast
Guard to make sure that ships had priority, vessel traffic that
would deliver some of this home heating oil to your specific
part of New York.
Let me just say on the natural gas issue, what we are
suggesting is natural gas for large users, not necessarily for
homes. What we would like to do is, with home heating oil
operators, and you have many that are small business people who
have real cash-flow problems, that we are helping. We started a
new loan program, an emergency loan program with the Small
Business Administration for truckers, for loggers, and they
should try to get in on some of these problems.
We have also gotten refiners to postpone some maintenance
work so home heating oil supplies can be more rapid. We have
also worked with several states for Clean Air Act waivers for
several days, so that home heating oil can move more rapidly
and efficiently in those areas. Several states requested that,
including I believe New York, so what we would like to do is
continue working with you.
I think another thing, Congressman, that we need to do at
the Federal and State level, is some of your constituents,
because of income, may not be eligible for LIHEAP funds, for
weatherization funds. We need to look at what constitutes the
poverty level, the middle class. The President has urged that
states that have the primary responsibility look at eligibility
standards. So Low Income Energy Assistance, that the President
has reduced three times, $300 million; your state has gotten, I
think you said, $76 million.
Mr. Crowley. Right. Mr. Secretary, if you add up four
months at $23 million in my district alone, we have more than
the LIHEAP for the entire State of New York. That is also part
of the problem. There is not enough money in LIHEAP coming to
New York.
Secretary Richardson. Right. We have asked for $600 million
more in a supplemental, and we hope that is taken up soon, and
that will be to address some of the problems that you have. We
are also worried about the summer, possibly excessive heat. We
are concerned about outages, and we want to be sure that the
reliability standards of our utilities are strong so that we
don't have these problems also in the summer, and your
constituents would be vulnerable then, too.
Mr. Crowley. Mr. Chairman, just one final followup.
I know you have been to several States in the Northeast. We
would like to get you to New York and to Queens and the Bronx
specifically at some point, if you can.
Secretary Richardson. Sure.
Mr. Crowley. A lot of people want to see you.
Secretary Richardson. Sure. I didn't know I would be
welcome.
Mr. Crowley. You are very welcome. Thank you very much.
Thank you, Mr. Chairman.
Mr. Leach. Thank you very much, Mr. Crowley.
Mr. Meeks?
Mr. Meeks. Thank you, Mr. Secretary, for your testimony. I,
too, want to compliment you on the job that you have been doing
as Secretary of Energy.
I just have a quick question. We talk about the marketplace
and it controlling the economy and supply and demand, and most
of the testimony that has been heard today and most of the
questions are all focused primarily on the OPEC nations. I am
wondering what--and I think dialogue, I agree with Mr. Payne
that dialogue is tremendously important--I am wondering what
dialogue have we had with the oil-producing nations who are not
members of OPEC, about getting them to increase production and
doing some certain things so that we can balance this thing out
and give OPEC some level of competition so that they don't have
the dominance that they have on the oil market right now.
Secretary Richardson. Congressman, that is an excellent
question. I have spent a lot of time talking to two countries
that are not members of OPEC but have been tracking OPEC
production and other levels, Mexico and Venezuela--I am sorry,
Mexico and Norway. I have been to Norway twice in the last
three weeks. They are a key producer. They are the second
largest exporter of oil in the world, I believe.
Mexico is possibly our number one producer. Mexico,
Venezuela, Saudi Arabia, depending on shipping schedules, each
one is number one every month, but Mexico has recognized that
their economy is very tied to ours. They have been responsive
on the production issue. I think just this morning the energy
minister of Mexico said that Mexico felt that production needed
to be increased. Norway is meeting Mexico, I believe tomorrow
or today, to discuss possible additional production levels.
So we have engaged nations outside of OPEC that are
producers. There are also other nations within OPEC that we
have been talking to, that I didn't mention. There are other
Gulf states. Nigeria is a key member, Indonesia. The
International Energy Agency, the IEA, is comprised of several
nations. It is based in Paris. The member nations, I would like
to submit for the record, have stated their concern about high
oil prices, their need for increased production.
The European Community, and many developing nations, I know
you are very active on the developing world. Africa, there is
great need for lower prices in Africa, several countries there.
In fact, in Egypt, where I visited just a few days ago in North
Africa, Egypt has associated themselves with our position for
the need for more production, that prices are too high. So we
have engaged other countries and we are going to continue doing
that.
Chairman Gilman. [Presiding] Mr. Sherman?
Mr. Sherman. Thank you, Mr. Chairman.
There has been discussion of OPEC collapsing. I don't think
it is going to collapse. It is a conspiracy in restraint of
trade. I should point out that the United States once used its
governmental power to restrict or encourage a reduction in farm
production for the purpose of increasing prices, but that was
never with the goal of increasing world prices.
You have talked about heating oil aid for the poor, Mr.
Secretary. I would point out to you that there are poor people
in warm places, and they are dependent upon gasoline to get to
work. Public transportation is not a viable option for many
poor people in states such as the one you represented and the
one that I represent. I would hope that there would be equal
attention to providing gasoline vouchers to the poor as to
providing heating oil vouchers for the poor.
I join you in hoping that later this month we are going to
see increases in production, but I would hope that there is a
back-up plan. Unfortunately, all the back-up plans I can think
of, because using the Strategic Petroleum Reserve is a very
short-term and limited thing that we could do, involve changing
some of the foreign policy of the United States.
I would hope that our friends in Indonesia know that we
might choose to support independence movements in part of
Indonesia, if they are waging war against American consumers. I
would hope that Saudi Arabia and Kuwait would recognize that
the American people are not going to be willing to continue to
station ground troops in their area to continue to defend them
from Saddam Hussein, if they are waging war against us; that
our position on border disputes between the Emirates and Iran
could be influenced by the fact that the Emirates continues to
wage war against the American consumer.
Up until now, American foreign policy, and I have said this
before, is best described as saying, ``We would like the honor
of defending other countries for free, and in return for that
honor we will sacrifice our own economic position.'' I don't
know if we can continue to ignore the fact that OPEC is waging
war against the American consumer.
Mr. Secretary, there are a few oil-producing countries that
get aid from the United States in significant amounts. Now, it
is interesting that our chart shows that Iraq is getting $7
million of U.S. aid, which seems like a waste of $7 million,
since whatever food goes to Iraq is under Saddam's control.
But looking at more significant oil exporters, you have
indicated that there are four that are receiving significant
U.S. security aid, trade aid, or direct aid, or in Nigeria's
case is eligible for debt relief aid, and those four are
Nigeria, Mexico, Russia, and Indonesia. You have indicated that
some of these countries have paid lip service to the idea that
maybe oil production should be expanded.
But I would like you to review, for each one of those four
countries, Nigeria, Mexico, Russia, and Indonesia, whether
those countries are currently producing oil as quickly as they
can, given physical constraints, or whether there are
governmental policies, either with the government acting as
sovereign or the government acting in its proprietary capacity.
Which of those four countries is producing oil as quickly as it
can, and how many more barrels would be on the market today if
all efforts of those four countries to restrict oil production
were released and eliminated?
Secretary Richardson. Congressman, very few countries in
the world, OPEC or not, right now have sufficient excess
capacity to supply American needs. I think we have to move very
carefully as we seek to address production levels and supply at
the same time that we encourage development in some areas.
Let me go country-by-country. Nigeria is a member of OPEC,
so they abide by the OPEC decisions. But they have, as you
know, because of their internal situation, because of capacity
problems, I don't think they have been able to produce at full
capacity. They, in their statements and their discussions with
us, have acted very responsibly, and I believe that on
increased production, they would be sensitive to the needs of
other nations in Africa and the United States.
Mr. Sherman. But are they producing as much oil today as
they could?
Secretary Richardson. No, they are not, because you know
they had a serious civil war there.
Mr. Sherman. No, I want to say as they could. I mean, are
they producing as much as they can, given their physical and
political and security problems, or are they restricting oil
production in order to help OPEC achieve its pricing
objectives?
Secretary Richardson. No, I think with them, they don't
have the capacity, so what they are doing is consistent with
their capacity to produce.
Now, the others you mentioned, Mexico is not a member of
OPEC but has been abiding with the OPEC pact. Mexico I believe
has been extremely responsible, recognizing the need of
international demands. I was in Mexico about 10 days ago, and
the energy minister and I agreed that prices were too high. I
believe earlier this morning Mexico made a statement saying
that they would favor increased production, so that is very
positive.
Mr. Sherman. But they are not producing as much as they
physically can at the present time?
Secretary Richardson. The answer is yes with Mexico.
Mr. Sherman. In adherence to OPEC's desire to wage war
against the American consumer, the Mexican government is
preventing oil production today from being as high as it
otherwise would be?
Secretary Richardson. Mexico is abiding by the OPEC pact.
Mexico is not a member of OPEC, but it has agreed with the OPEC
position. But of all the countries that I visited, because of
the tie-in to the Mexican economy that we have and Mexico has,
Mexico has been, I believe, quite responsive. But also they
have had serious budget problems when prices were $10, and they
are balancing their needs. But I would say Mexico has been
responsive to the international economy and they are not----
Mr. Sherman. Their rhetoric has been responsive but they
have not increased production in the last few weeks in order
to----
Secretary Richardson. No, but Congressman, they can't. They
can't until they formally meet as OPEC and non-OPEC members.
This is why this is all very sensitive. They can't
independently act of each other because they have----
Mr. Sherman. Mexico is not a sovereign country? It doesn't
have the right to change its government policy and increase oil
production? Their loyalty to OPEC exceeds their loyalty to
their NAFTA partner, and they feel bound to participate? Their
rhetoric is good, but their practice is to participate with
this OPEC squeeze?
Secretary Richardson. I just look at what the energy
minister has told me and what he said this morning, and I am
encouraged that they say that OPEC and they would be ready to
increase production.
Russia, you mentioned Russia. Russian oil and gas
infrastructure is in bad shape. They could deliver more, and we
could benefit if we encouraged investments in Russian energy
infrastructure upgrades. We have tried to get the Russians to
have what are known as production-sharing agreements, where
issues like transparency and other factors operate more
efficiently for our investors. But, as you know, Russia has had
difficulty in getting some of their economic problems
straightened out.
Congressman, you asked me another country?
Mr. Sherman. Going back to Russia, I realize that they need
a lot of investment, longer term, but today are they producing
as much oil as they practically can with today's----
Secretary Richardson. No.
Mr. Sherman. Is their government preventing their
enterprises from producing oil?
Secretary Richardson. No, I think it is just a matter of
their economic condition.
Mr. Sherman. The final question was Indonesia. Are they
underproducing as part of the OPEC effort?
Secretary Richardson. Indonesia is a member of OPEC. I
believe our information is that Indonesia first of all has been
sensitive to our concern for increased production. Whether they
are operating at full capacity because of their, as you
mentioned, internal problems, the answer I will supply for the
record. I do not believe so.
[The response in detail to this appears in the appendix, on
page ??, as insert B.]
Chairman Gilman. Thank you, Mr. Sherman.
Mr. Secretary, we want to thank you for your appearance
today and your patience. I welcome the opportunity to meet
further with you to discuss the legislation I am introducing
today, that would reduce, would terminate and suspend
assistance and arms sales to countries determined by the
President to be fixing oil and gas prices to the detriment of
our own economy. I think it could be to your benefit to have
this measure before you as you go to discuss and negotiate with
the oil-producing nations. You can blame it on these bad guys
here in the Congress, but we think it is an important vehicle
for you to make use of. I will send you a copy of our bill
after we introduce it later today.
We thank you once again, and we hope you will continue in
your efforts to provide a better energy policy for our Nation.
The meeting stands adjourned.
[Whereupon, at 12:50 p.m., the Committee was adjourned.]
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A P P E N D I X
March 1, 2000
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