Gas Prices

Floor Speech

GAS PRICES -- (Senate - July 24, 2008)

Mr. DURBIN. Mr. President, the motto of the Republicans in the Senate is: Talk more, produce less. Do you know what we offered them this week? We said to the Republicans: Here is the opportunity of a lifetime. Do you have a position on speculation? Do you think it is an issue? If you do, put your proposal on the floor and we will put our proposal on the floor. We will have an equal vote requirement, equal debate time. We will go at it and we will let the Senate decide. We are not going to write your version of the speculation, you would not write ours, but you have every right to do that. The Republican response was: No, we are not interested in that. We don't think speculation is a problem.

Well, they ought to meet with the CEOs of the major airlines. They ought to spend a minute talking to them about what they feel because they are paying the jet fuel costs and they are cutting back on service and they are cutting back on employment. That is the reality of what they face today. Speculation, manipulation is a major concern. We have a responsible approach to it. The Republicans refuse to offer an alternative. OK. That is their decision.

Then we said to them: Why don't you present your energy bill? The Republican leader came to the floor with a litany of things the Republicans believe in. For over a week we have said to them: Put it in a bill offered on the floor. They have said: No, no. We would rather come to the floor and complain, rather than come to the floor and debate our approach.

I listened to the Republican leader as he came to the floor, and it is very clear to me. They don't want a debate and a vote. They want this issue to drag out forever and ever, amen. That is not what the American people want. They want us to tackle this thing, offer alternatives on the floor, debate them up or down, go forward.

It troubles me when the Republican leader repeatedly says--incorrectly--that when it comes to energy, from the Democratic view, we want to deal with speculation and, in his words, ``do nothing else.'' He forgets the whole second part of this--the Energy bill we are proposing on the Democratic side and they are going to propose on the Republican side. We offered them that. They turned us down.

I might also say there is no idea how many amendments the Republicans are going to offer. Two days ago, Senator Kyl and I were on the floor, and he said there were 25 amendments. Senator Specter walked up and said: I have 2, so make that 27. Then Senator Kyl said: Come to think of it, I have one too. We are up to 28. That was 2 days ago. This is growing similar to bacteria in a petri dish as the Republicans meet in their conference and dream up more amendments. That is good. It shows a creative mind at work, and it is a great exercise, but it isn't what the American people are asking for.

If you have a good set of ideas, offer them. You want to bring up more nuclear power, Senator Domenici? Put that in your package. You want to have more offshore drilling, put it in your package. You want to have coal to oil, put it in your package. If you believe in it, stand and fight for it. But they will not. They will not fight for it. They want to run. Run to the press and explain that they are not being given enough time on the floor, if they could have a little more time, as days burn off the calendar as they stand and complain. They can't come up with a plan, and that is the unfortunate reality.

Then, they quote T. Boone Pickens. Mr. Pickens, I am sure, is a gifted man. I have never met him. I have seen him on TV. He has spent a lot of money to make sure we all get to see him. They have misquoted him on the floor so often. I have watched that ad he is paying millions of dollars for America to see, and I do remember the part of the ad where he says: ``We can't drill our way out of this problem.'' Mr. T. Boone Pickens said that.

You don't hear that from the Republican side. Their idea is we can drill our way out of this. They forget the reality. Of all the oil in the world, if you look at the vast quantity, we have 3 percent of it under our control--3 percent. We use 25 percent of the oil. You can't drill your way out of it. We know we are going to need exploration and production, but we know we need a lot more, including conservation, renewables, sustainable energy sources. That is the reality of what we face.

We have made this offer to them time and again. They will not accept it. They would rather come to the floor and complain.

When you go through the list, you see first drilling offshore. Democrats support that. There are 34 million acres currently under lease to oil companies for drilling they are not using. Why don't they start drilling there since they paid for this land?

Oil shale. That is in our bill. Even though that is 15 years away, we want to take a look at oil shale as an opportunity.

Incentives for batteries, of course we support that. There is no debate there.

Untapped American oil. We think there is untapped American oil in Alaska--23 million acres' worth that the oil companies aren't touching. They should go in there and take a look, drill for it, bring it forward.

Nuclear energy. I don't understand how Senator McConnell could come to the floor and say we could bring gasoline prices down with more nuclear energy. Could you picture a car being powered by nuclear energy? I can't. If he is talking about plug-in hybrids, he ought to clarify the example he is using.

There are plenty of things we can do. It should have started with a good-faith offer which we made to the Republicans and, frankly, they should have accepted.

I yield the floor to the Senator from Missouri.

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Mr. DURBIN. Will the Senator, through the Chair, yield for a question?

Mrs. MURRAY. I would be happy to yield to the Senator from Illinois.

Mr. DURBIN. Is it not only true that we have 68 million acres of land we have leased to the oil companies, which they are paying us money to lease in order to find oil and gas, but they are not doing anything with it--some 34 million offshore, on the Outer Continental Shelf and some 33 million onshore that they are now leasing?

The Republican side of the aisle has become a one-trick pony--keep drilling, keep drilling, keep drilling. We know if we decided today to drill on any acreage here, it would be 8 to 14 years before we would see any oil coming from it. So this notion not only flies in the face of the 68 million acres they currently have, but it doesn't solve the problem.

As the Senator from Washington said, it makes the problem worse because we don't face the realities of what we need to do to have a national energy policy.

Mrs. MURRAY. The Senator from Illinois is absolutely correct. Every time we have come out here to try to broaden the energy debate and to bring down the price of gasoline and get to energy independence, we have heard from the other side: Oh, no, there is only one answer, and that is drill more.

We have given them that. In fact, yes, the oil companies have 68 million acres of land today that can be drilled, but they are choosing not to. Why? Because if they increase the supply, the price is going to drop. So what good does it do for us to give them even more of our Federal lands, because their benefit is keeping the price high.

Mr. DURBIN. If the Senator from Washington will yield for another observation, she noted that when we elected President Bush and Vice President Cheney we brought two people in from the oil industry, and coincidentally, during this two-term administration, profits of the oil companies in America have reached historic high levels at the expense of our economy and families. The Republicans, the President's party, want to end this administration by giving them the biggest farewell gift anyone could ever wish for in the oil industry--millions and millions more acres so that they can, at their pace and in their time, decide to drill on.

It would seem to me, if you are honest about the oil companies and what they have done to this economy, this is the last thing we should be doing. We should be holding them accountable for the prices they charge, the profits they are reporting, and what they have done to the American economy. So I ask the Senator from Washington: The alternatives we have talked about over the years--fuel efficiency for cars, more efficiency in the appliances we use, the buildings we build, all of this is part of the big energy picture, is it not? It isn't just about keeping oil companies happy.

Mrs. MURRAY. Well, I say to the Senator from Illinois, he is absolutely correct. In fact, in the past few days, a headline from Reuters read: ``ConocoPhillips' Earnings Rise With Record Oil Prices.''

The oil companies are making a lot of money, so what is the other side's answer to every energy debate we have? Give them more money.

I say to my colleague from Illinois, I know he goes to the President's State of the Union Addresses every January, as I do, and we sit in the House Chamber and listen to what the President is presenting to us. I wonder if the Senator from Illinois remembers 2 1/2 years ago, the President's third State of the Union, I believe it was--and I rose with excitement when I heard the President say this to us:

Keeping America competitive requires affordable energy. And here we have a serious problem:

Now, this is the President of the United States in his State of the Union speech.

America is addicted to oil, which is often imported from unstable parts of the world. The best way to break an addiction is through technology.

These are not my words, but those of the President of the United States. Yet every time we have tried to bring a bill to the floor to break our addiction to oil, we are stopped because the other side wants to drill more oil.

So I say to my colleague from Illinois, does it feel to him as though we are trying to break our addiction to oil here?

Mr. DURBIN. I would respond to the Senator from Washington, through the Chair, and say that I think America understands this. Sure, we are going to be drilling oil in America--we need to, for exploration and for production--but we know we only have 3 percent of the world's supply of oil--3 percent--and we use 25 percent of the oil. So we can't drill our way out of this.

Whether it is T. Boone Pickens or some friend of mine in central Illinois, it is obvious: You have to look for other solutions, and those solutions mean the oil companies are not going to be the answer to every question. Unfortunately, the Republican side of the aisle, time and time and time again, all they have to suggest is drill more oil and make more money for the oil companies.

That isn't the answer to America's energy problem. If it were the answer, we would have seen, as the Senator said, gasoline prices coming down as we made more acreage available for drilling over the last several years. It has not happened. They have gone up dramatically.

Mrs. MURRAY. The Senator from Illinois is absolutely correct. I have listened to this debate, and it is not just the debate today on speculation, about whether we should do that. It is whether we should bring energy tax credits, whether we should repeal oil company tax breaks and whether we can invest in alternative energy.

Every time, the only answer we get from the other side is, no, we are not going to do that. We want to drill more.

I would say to my colleague that drilling for oil is a false promise to the American people that it will bring down their prices substantially as we head off to our August break. Even their own Presidential candidate has said drilling oil only brings psychological benefit. We don't need any mental health care. We need real reductions at the pump. Even President Bush's own energy experts say drilling more oil will not produce a significant decrease in the price at the pump.

As I truly believe and I think most people understand in this country, until we invest in long-term energy independence, all we are going to do is see the oil companies get more profits and our prices go up. The bill we are offering today and hope to move to will begin to deal with that and that addresses the issue of speculation. I hope we move to that.

I yield the floor.

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Mr. DURBIN. Mr. President, I ask the Senator from North Dakota to yield.

Mr. DORGAN. I will be happy to yield.

Mr. DURBIN. I wish to ask him a question because he has been a leader in the Senate on the question of speculation. I want to say that many of our Republican colleagues have come to the floor over the last several days saying virtually speculation is not the problem, not speculation. I know the Senator from North Dakota has ample evidence and many experts behind his position. He and I have joined with the leadership in coming up with an approach which will try to dampen the fires of speculation which may be driving up oil prices and creating volatility not reflected in the market.

I want to make sure the Senator from North Dakota is aware of what happened today with the Commodity Futures Trading Commission. They have charged an oil trading firm with manipulating oil prices, the first complaint to be announced since regulators began a new investigation into wrongdoing.

The CFTC accused Optiver Holding, two of its subsidiaries, and three employees with manipulation and attempted manipulation of crude oil, heating oil, and gasoline futures of the New York Mercantile Exchange, which is a regulated exchange, I might add.

``Optiver traders amassed large trading positions, then conducted trades in such a way to bully and hammer the markets,'' CFTC Acting Chairman Walter Lukken said at a press conference. ``These charges go to the heart of the CFTC's core mission of detecting and rooting out illegal manipulation of the markets.''

I say to the Senator from North Dakota that his leadership on this issue and coming to the floor repeatedly to tell us about the possibility this was occurring I think has sparked this commission to come to life, at least today in terms of making these charges.

I am going to leave this story with the Senator because I want him to be able to put it in the Record every time our Republican colleagues come to the floor and say speculation is not an issue. It is enough of an issue that there was a civil action filed today against a company for hammering and bullying the market.

I know this is not in the nature of a question, but I wish to ask the Senator if he feels this action by the CFTC is an indication of what he has been saying over the last several months.

Mr. DORGAN. Mr. President, it appears a Federal agency has arisen from the dead. Good for the CFTC. I have been talking a long while about the CFTC being dead from the neck up. This is, after all, the regulatory agency that is supposed to wear the striped shirts, blow the whistle, and call the fouls.

This apparently is manipulation of the market. We are talking about manipulation. Good for them, if they have risen from the dead, if they are taking action against someone manipulating the marketplace.

The acting CFTC Chairman, whom the Senator from Illinois described, spent the last seven months saying there is no problem with the marketplace, it is working fine. The doubling of the price of oil and gas in the past 12 to 14 months has been because of supply and demand, he says. About a month ago, the acting Chairman had an epiphany. He must have had a good night's sleep, woke up from his dream saying: OK, I have been saying supply and demand justifies the doubling in price, but, in fact, we have been doing an investigation for seven months.

So which is it? Here is what it is. In the year 2000, 37 percent of the trades in the oil futures market were speculation trades, having nothing to do with hedging a physical product between consumers and producers; 37 percent of the trades by speculators. Today 71 percent of the trades are by speculators. They don't have any interest in buying oil, taking delivery of oil, carrying a 5-gallon can of oil, or putting a quart of oil in their car. They don't have the foggiest interest in oil. They have interest in buying and selling contracts and making big profits. They have taken over this marketplace and broken the market.

The proposition on the floor of the Senate is to try to wring out this excessive, relentless speculation in this market. My colleagues come to the floor of the Senate, and they have developed another narrative of more drilling because they don't want to tackle this issue of speculation. I said before, 47 Members of the Senate in the minority have all indicated, in one form or another, that speculation is a problem. If you believe that, help us get this bill to the President. Yet, they come to the floor of the Senate and say we need more drilling.

As I described in the year 2020, we will have more to bring on more supply. I don't disagree with that point. Let's talk about it; offer some amendments. In fact, the majority leader has offered to the minority to bring your amendment to the floor. We will have a vote on it.

But what about next month? What about 6 months from now? How about let's do some things that are game changing in this country? How about the next decade? Between now and then, let's work to change the game.

I said two days ago that, in the 1960s, John F. Kennedy did not say: I would like to have us try to go to the Moon. I think we should think about going to the Moon. I think we should make an effort to go to the Moon. He didn't say that. He said by the end of the decade, we are going to put a man on the Moon, and we did just that.

The plan of all of those who have come to the floor of the Senate diminishing this legislation, degrading this legislation, saying we shouldn't deal with speculation and getting this market right. We shouldn't spend time on that. Let's instead focus on drilling. If that is the only thing they focus on, then that is what I call a yesterday forever strategy. If you want to wake up 10 years from now and keep the same position, good for you. I don't.

I think what we ought to do is this: Let's at least address something that has broken the marketplace and has doubled the price of oil and gas in the last year, something that experts have come to the Congress to testify about and some have said up to 40 percent of the current price of oil is not and cannot be justified by the fundamentals of supply and demand. It is because speculators have taken over this marketplace.

Don't take it from me. Take it from the CEO of Royal Dutch Shell. Here is what he said in April:

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

If that is the case, what is the problem? The problem is, as I described in the chart, this market has been taken over by the speculators.

My colleague comes and says: NYMEX and ICE, describes all that is going on, what an aggressive regulator we have. You know what, this regulator has been sending out no action letters. Isn't that a wonderful thing to perfectly describe a regulatory agency that wants to take no action for anything? It said: Let me be willfully blind and not see what is happening. By the way, because of these no action letters, I can't see what is happening in the over-the-counter market, the intercontinental exchange, and all of the unregulated trades because I have decided I don't want to see it. Then let me go to the Congress and testify, and with a straight face--I am sure suppressing a grin--at least with a straight face say, I don't see anything that represents anything other than supply and demand.

My question to them was: I understand you don't see that. Is it the case you see very little because you have chosen, through no action letters and other limitations, to decide you don't want to see it all?

We brought a bill to the floor of the Senate that says we have a lot of problems. First and foremost, let's set this market straight, putting pressure downward and preserving the oil futures market for that which was intended in 1936. It was for the hedging of a physical product between consumers and producers. That is what it was for. It has now been taken over by the carnival of greed. Speculators control these markets, have driven up the price despite the fact there has been no change in the fundamentals.

My colleagues on the other side of the aisle say drill. I have had a bill in for a year and a half to say drill more in the eastern Gulf of Mexico and allow U.S. companies to produce in Cuban waters. I am also one of the four Senators who opened up lease 181 in the Gulf of Mexico for drilling. I support that. I am fine with drilling. But if drilling is your only answer, boy, that, in my judgment, is a pretty pathetic future. Here is what Boone Pickens says. Boone Pickens and I have disagreed on a lot of things, but he came to Congress this week:

I've been an oil man all my life, but this is one emergency we can't drill our way out of. But if we can create a new renewable energy network, we can break our addiction to foreign oil.

Think of this. What if between now and 2020, if we start now we can actually have a new barrel of oil by 2020, and you say to somebody down the block: Cheer up, things are going to be better in 12 years--that is one position to take, I guess.

What if the other position is as Mr. Pickens suggests? What if we did this: We are going to produce oil. We want to be less dependent, however, on the Saudis, Kuwaitis, Venezuela, and so on, because if we didn't get their oil for some reason, we would be flat on our back as an economy. This makes our country vulnerable. We have to be less dependent on them. We are going to use oil we produce.

How about if we decide to do something dramatically different? How about in the wind belt from Texas to North Dakota where we produce a massive quantity of wind and have the capability of taking the energy from the wind and producing electricity? And how about in the Sun Belt where we move dramatically to solar energy and create a superhighway of transmission lines to be able to move that energy all around this country? How about if we do that for a decade and then say: You know what, all that natural gas we are using for coal-fired generating plants, we can displace a fair amount of that with wind and solar and a superhighway of transmission lines, and we can dramatically change America's energy future.

We need more conservation and energy efficiency and dramatic increases in renewables. There are so many exciting things we can do to change America's future. Yet, my colleagues come to the floor of the Senate for a different pursue. They plant their flag, and say: We want our future to be the same as our past, and every 10 or 15 years, they will be content to come here and say: Yes, we have an urgent problem and what we ought to do is more of the same. That is not a future that makes much sense to us.

Again, coming back to this issue, we are saying with this legislation on the floor of the Senate requires that we do first things first. We should do a lot of things, we agree with that. Senator Bingaman is introducing a bill I fully support as a cosponsor. It deals with a whole range of other issues with which we have to deal. First things first. At least let's address this issue of excess speculation that has broken the commodity futures market for oil.

To my colleagues who say, you know what, this is all about drilling, I say to them: Come to the floor of the Senate and tell me what has happened in the last year, what has happened in supply and demand that justifies a doubling of the price of oil. They will not come and cannot come because they don't have an answer to that.

I can give them a partial answer. If anything would have been expected to happen to the price of oil and gas, it should have gone down because we have driven nearly 6 billion fewer miles in America than we did in the previous 6 months. So we are using less energy and less gasoline.

So one would expect, if you are using less, you would put some downward pressure on prices. But that is not the case. Prices go up like a Roman candle, double in a year.

The only conceivable reason given us is by the experts who don't have a vested interest in this issue of the oil futures markets, and they say that the market is now broken. Fidel Gheit has been an Oppenheimer analyst for 30, 35 years--the top energy analyst for Oppenheimer--and he says: Look, this is like a casino, open 24/7, like a highway with no speed limit, he said, and no cops, and everybody is going 120 miles an hour.

Is that really what we are willing to allow an oil futures market to be, if it drives up the cost of oil and gas, doubles it in a year, and imposes this kind of burden and financial penalty on every American family and every American business; imposes this kind of burden on some of our major industries, such as airlines and trucking companies and farmers and others? That is a back breaker. Are we really willing to stand on the floor of the Senate and say: Yeah, that is OK. It is OK. Let's do something that will increase the production of a barrel of oil in 2020.

That seems to me to be a false choice that we are being offered. I think it was Will Rogers who once said:

It is not what he knows that bothers me, it's what he says he knows for sure that just ain't so.

I think about that as I hear this debate on the floor of the Senate; all this assertiveness about one answer. Do something now so we have more oil in 2020. What about tomorrow, next week, or next month? What do you want to do about that? What about a market that is broken; do you ever care about fixing it? What about the fact that investment banks and hedge funds have marched right directly into the oil futures market?

The Wall Street Journal writes about investment banks that are actually purchasing oil storage so they can purchase oil and keep it off the market. Pension funds--CalPERS and others--are moving money into the oil futures market as if it is just another share of stock. That is just pure speculation. That massive quantity of money flooding into this market has dramatically changed the market.

Now, I have had a lot of people come and see me about these issues because some are very upset with what we are trying to do. They like the speculation in the marketplace because a lot of people made a lot of money by speculating in this marketplace. I think this marketplace needs to exist. You have to have a market that represents a place for legitimate hedging of a physical product. But when the market is broken, you also have to have a regulator with the strength, the capability, and the willingness to stand up and do what is necessary to fix it.

The current regulator at the Commodity Futures Trading Commission has not done that, has not demonstrated a willingness to do that, and it seems to me Congress must. Our legislation does a couple of things. It says to the Commodity Futures Trading Commission: You determine who is trading out there and distinguish between them. Those who are engaged in legitimate hedging of a physical product between consumers and producers, that is fine. That is what the market was created for. All others are pure speculators, and we establish strong position limits on those speculators to try to shut down that speculation, that excess speculation in the marketplace. Relatively simple. But it does cause a firestorm of protest by those who are making a lot of money having broken this marketplace.

I suppose there is room--I shouldn't say I suppose. There is room for disagreement. I respect those who disagree. But it seems to me that this country will pay a very high price if we don't understand the need to cooperate. There is no Republican or Democrat label on the fuel gauge on a car. There is just ``full'' and ``empty.'' And all too often these days it is empty because of what has happened to prices. I think the American people expect and demand we do something that addresses these issues.

The first step--the first step and most important step, in my judgment--is to set this market straight and to distinguish between excess speculation and legitimate hedging and establish position limits in order to put downward pressure on gas and oil prices. We are told by some very distinguished people who have testified before our committees that we could see as much as a 40-percent decrease in the price of oil and gas just by wringing the oil speculators out of the futures market.

If we did that, it would be a good thing, a good thing for our country. Then, yes, we have much yet to do. I don't disagree at all with that, and some of it is drilling. But as I said before, if our future is just to continue down that road, without understanding the need for a game-changing, moon-shot plan to make us less dependent on the Saudis, less dependent on foreign oil, this country will have missed an enormous opportunity and put its future in jeopardy.

I remain hopeful. It is now Thursday, and we have been largely at parade rest most of the week. The minority has required us, in effect, to spend 30 hours postcloture--30 hours postcloture--doing nothing, which makes precious little sense. I think the country senses some emergency here, but some of my colleagues in Congress sense no such emergency. So we spend 30 hours largely doing nothing, and then we will come to a cloture vote to shut off debate to see if we can perhaps get to a vote to end this relentless speculation.

My hope is we will have sufficient votes to do that.

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