will come to order americans are literally again for our country's reliance on imported oil global oil prices reached another record high yesterday prices rose dramatically at the pump but relatively few americans are aware of a potential hidden cost the dependence on foreign oil has broader ramifications to our foreign policy and energy security several forces complicate the picture the drop in the value of the dollar overseas the rising energy needs around the world and friendly regimes use energy resources for geopolitical gain and the propounder and of other global crises such as food shortages now experienced in several countries that are linked to transportation costs including the world faces increasing competition for the fossil fuels that drive global industry transport and economic growth rising powers such as china india and brazil have a growing appetite for energy to satisfy their thirst for oil some are looking to buy energy from regimes that the united states finds problematic china for example has been supporting the oil industries of iran sudan and burma such energy deals can undermine the international community's influence on these countries in matters ranging from nuclear proliferation to genocide to political freedom in addition many sources apostle fuels on the world market are in parts of the world that are either unstable or politically unfriendly to the united states this provides leverage for those who control these energy supplies and they bring them to challenge us foreign policy objectives we have seen examples of this in recent years russia cutting off gas supplies to the caucuses the ever more brazen read to oracle attacks against the united states by venezuelan president hugo chavez and the flow of petrodollars from the middle east supporting extremism sometimes even terrorism finally linkages between energy security and other international says challenges whether it be global warming or the current food crisis has prompted many to take a look at alternative energy sources but  a food crisis show as showing picking winners can be have unintended consequences when you see energy companies competing with food companies for corn on the commodities exchange us policy objectives to promote both energy security and food security can become compromised whatever alternatives we pursue in order to sustain them we will need to avoid creating competition among global priorities these are just some of the challenges we face when examining energy security policies i look forward to hearing the testimonies of our three when distinguished witnesses about what we can do in the foreign policy realm to address these issues and i just sort of to go off the record here we see pretty acutely the tensions and and crises that exist now but the fact is that our whole middle east policy since the end of world war two has caused relationships to be developed and and and situations to be ignored because of this dependence on foreign oil from that region and i could spend thirty minutes just off the top of my head amplifying that point there is really i don't think there can be any serious dispute about the impact that this reliance is had on american foreign that i'm going to recognize the gentleman from new jersey for a one minute for an opening statement hearing i like most americans extremely concerned about the shocking rise in oil prices we've seen all over the country in two thousand and three a barrel regular gas prices aren't even the highest as we find in other states but it's still having a deleterious effect on my constituents and so mr chairman we need to continue to work tirelessly to find a solution to this challenge one that hits our people every day i'm glad we're having this hearing another aspect of the national security implications of rising oil prices these issues are often overlooked and are critical to consider when evaluating overall foreign policy control of global oil resources is becoming concentrated in fewer and fewer countries fourteen of the world's top twenty oil companies are state owned a recent report revealed that western oil companies now control less than ten percent of the world's oil and gas reserves many of the remaining oil reserves are of course concentrated in the middle east venezuela and russia the largest opec producer also play important roles as more and more money flows american money to these countries  hydrogen fuel cell power and earlier this year i voted in favor of domestic energy legislation to reduce america's dependence on foreign oil and increase our use of clean energy technologies but measures that we take here at home only part of the solution given that so much of our energy comes from abroad our foreign policy must increasingly focused on ensuring a stable supply and unfortunate fact is that many of the sources of imported oil are concentrated in areas ruled by autocracies some of which are openly hostile to u s interests or rans and dominate the gulf and beyond is the greatest of the threats but russia has demonstrated its willingness to use energy as a tool for applying political pressure on other countries such as ukraine and georgia and venezuela strongman chabi is spending that country's oil wealth to promote an anti u agenda throughout latin america including undermining the governments of neighboring colombia in addition to the political uses of energy that is the threat posed by artificial restrictions on its supply especially the many attempts to create monopolies of one type or another opaque is of course the most prominent example in its malign influence on the global economy has long been established but there are others as well including the new effort by several natural gas exporting countries to set up a similar cartel that has been termed as a gas opec when reports appeared that this plan was actively being considered by several of the major producers in an april two thousand and seven meeting of the gas exporting countries forum several of us warned the administration of the dangers of sitting back and allowing the creation of yet another global extortion racket bring greater attention to this thread i was joined by a bipartisan group of members in introducing house resolution five hundred which was passed unanimously by the house in july of last year the bill classified the establishment of a gas opec as prejudicial to our nation security it called for the united states to work with our allies to prevent this gas card tell from coming into existence and that this year's annual meeting of the gas exporting countries forum it was announced that considerable progress had been made towards setting up a gas cartel some experts have dismissed the idea of a cartel in natural gas due to the structure of the industry but good job is iran's ahmadinejad disagree they ha repeatedly stated their strong support for the creation of a gas opec that they hope to use for the resulting leverage in political strategy purposes another area of concern mr chairman when discussing energy issues a national security is the expansion of nuclear power around the world and the risk that it will lay the foundation for the proliferation of the means to make nuclear weapons the most troubling region of this is the middle east where several countries with troublesome issues involving islamic militants and extremists have announced their intention to establish a nuclear power program this is been accompanied by an eager willingness on the part of nuclear exporting countries to provide the necessary facilities the technology and the know how and the most aggressive nuclear merchants are france and russia unfortunately the united states has joined this rush just last week and secretary of state and her saudi counterpart announced an agreement to establish a nuclear cooperation between the united states and saudi arabia saudi arabia would have the world's largest deposit of hydrocarbons and is home to violently anti u s militants the director general of the international atomic energy agency has stated that for these middle eastern states concerned about iran it's enough to buy yourself an insurance policy by developing a potential  nuclear weapons capability and then sit on it so at a minimum the u s should not enter into any new agreements before there's been a thorough review of the potential consequences of this policy and we must press countries  eager to sell the range of nuclear facilities technology and know how to hold off thank you mr chairman i look forward to our testimony today i appreciate  time and now one one one more opening statement and then we'll go to our panel i recognize the gentleman from indiana mr burton for one minute you know mr chairman sometimes i think i'm listening to people who are on the moon if we have enough oil in this country to make ourselves almost energy independent and not one speaker so far as talked about domestic oil production we could drill in the anwar and get up to two million barrels of oil a day we can drill off the continental shelf and get up to two million oil barrels of oil a day in florida right now sixty miles off the coast the chinese are drilling in our oil reserves in cuban waters and creating and getting oil that they're selling to china and you know we're talking about all kinds of other things around the world and new technologies which we wa but the american people want some results now and we're sticking around here not doing a darn thing we haven't created a new refinery in the last thirty years we're not drilling for oil in our country and we've got great resources we've got a five hundred year supply of natural gas and we're walking around with our finger in our ear talking about all the problems around the world where we're not getting energy i'm telling you by november you mark my words the american people are going to be questioning every politician saying why in the hell are you drawn here in america we've got the oil why don't you instead of worrying about the rest of the world this time the gentleman has expired no argument there we have an expert panel of witnesses today first we'll hear from david sandal david is currently a senior fellow at the brookings institution mr sandow has served as assistant secretary a member of the national security council under president clinton his recent book freedom from oil how the next president can end the united states or oil addiction offers a detailed plan for winning us from oil in a generation i look forward to hearing his insights on this critical issue next we'll hear from him and corrine ms coren is co director of the institute for the analysis of global security and editor of the periodical energy security is also chair of the said america free coalition and alliance of national security environmental labor and religious groups promoting ways to reduce america's dependence on foreign oil ms coren is well versed on the issues confronting us energy security objectives and i look forward to her testimony and finally we recommend we welcome mr paul sanders who is currently the executive director of the next and center mr saunders also served in the bush administration from two thousand and three to two thousand and five as senior advisor to the undersecretary of state for global affairs mr saunders is a prolific writer having contributed numerous newspaper and journal articles on the ranking member of latino members of the committee last year more than ninety six percent of the energy in our cars and trucks came from oil that this seems normal to us we grew up in a world in which oil is the only fuel used to move cars and trucks so did our parents so did our grandparents but i believe it is fundamentally abnormal for the entire global transportation system to rely on a single commodity if i'm thirsty and don't feel like this glass of water i can of soda orange juice if i'm hungry and i don't want to hamburger i can have a hot dog or pasta but if i want to go anywhere on this planet today of anything if i can distance and i don't want to use petroleum i am basically out of luck the overwhelming dependence of the global transportation system on this one commodity creates a national security threat that we ignore at our peril today i'll identify four such threats noting in particular ways in which rising oil prices exacerbate them i'll conclude with recommendations for the single most important st believe we can take to solve this problem the first threat oil dependence strengthens al qaeda and other islamic terrorists as you've already said in this hearing mr chairman for more than fifty years the need to protect loyal flows has shaped u s policy and relationships in the persian gulf the steps to secure oil flows have come at a cost by making us central players in a region torn by ancient rivalries oil dependence has exposed us to resentment vulnerability and attack osama bin laden first hundred six was titled declaration of war against the americans occupying the land of the two holy places today a deep resentment of the u s role in the persian gulf remains a powerful recruitment tool for as long as fundamentalists but we are constrained  our capacity to respond to it because of our dependence on oil compounding these problems the huge money flows into the persian gulf help finance terrorist network the sharp increase in oil prices in recent months deepens these problems further enriching those who fund terrorists committed to our destruction a second threat oil dependence strengthens oil exporting nations that oppose u s interests several leading pursue policies that threaten the united states today the most serious threat i believe comes from iran whose nuclear ambitions could put terrifying new weapons into the hands of terrorists get efforts to respond to this threat with multilateral sanctions have often foundered on fears that iran would retaliate by withholding oil from world markets in short three decades after the first oil shocks and a quarter century after the humiliating capture of u s diplomats in tehran we remain hostage to the world's because it is not often appreciated oil dependence endangers our men and women in uniform oil dependence jeopardizes the safety of our troops in iraq during the past five years many brave men and women have died in fuel convoys which are often vulnerable to attack diesel generators display a heat signature easily detected by some enemies rising oil prices here put a budgetary strain on the pentagon a leading purchaser of petroleum product a one dollar a barrel increase in global oil prices increases the pentagon's fuel cost by one hundred twenty four million dollars a year and finally oil dependence undermines democracy and good governance around the world oil wealth corrodes democratic institutions as oil prices have climbed in recent years both lattimer putin and hu go chavez for example has moved away from democratic institutions and towards more authoritarian rule so what can we do about it there are many solutions we could talk about biofuels conservation and domestic drilling in my short time today i want to highlight one that i think is the most potent plug in electric vehicles to reduce oil dependence there is nothing that would do more good than putting these cars on the road soon the u s have a vast infrastructure for generating electricity with plugs and out with an essentially every home and business but it does almost no good today in reducing oil dependence because our cars and trucks can't connect to them plug in electric vehicles are a game changing technology and here's the good news these cars are on the way to market soon general motors said that its plug in chevy volt will be in showrooms by two thousand and ten toyota mitsubishi ford and other automakers are close behind in fine is working with visionary entrepreneurs to convert the entire nation of israel to plug in electric vehicles yet congress needs to act to pick up the pace of this transition and address the security threat from rising oil prices tax incentives for the purchase of these vehicles and put would quickly build the market the federal government should use its enormous purchasing power to help bring these smart cars to market as well mr chairman i drove to work today in a plug in electric vehicle each night i go home i plug it into a regular outlet in my garage it gets thirty miles on a charge which means i use almost no gasoline driving back and forth to work each day after thirty miles when the battery runs out the car automatically switches over to a gasoline engine so i get all the driving range i need and here's some good news in this era of rising prices driving on electricity cost me the equivalent of seventy five cents a gallon thank you mr chairman i'd be delighted to answer your questions very interesting thank you very much  muslim because we have stolen their oil prices when i submitted my written testimony two days ago i said we have twenty dollars to go until we hit bin laden well yesterday there's a one hundred forty and spot was one hundred thirty i would like to emphasize to this committee that hitting bin laden's target will strike a major blow to the prestigious of of the united states and it will be perceived as a victory for the jihadist movement and specifically a victory for the economic warfare component of their war against the rest of the world now at a time of a war with radical islam we are in effect financing both sides let's be clear the reason that our president went to saudi arabia to once again kowtow to the saudis and ask him to open  them nuclear cooperation is because we are fundamentally held hostage by our dependence on these countries and the saudis are the lead country in opec saudi arabia is making an extra one billion dollars a day if you just look at the delton oil price since nine eleven one billion dollars every single day every single foreign policy objective that this country holds from fighting radical islam nuclear proliferation you name it poverty allev all of these are tied back to the oil issue and what i want to emphasize to this committee is opec has undergone a deliberate campaign to keep oil prices high opec production today if you look at the graph on page two of my written testimony you will see that while the global economy has grown and non opec production has doubled over the last thirty years opec has kept production constant opec's production today is the same as it was thirty years ago and specifically over the last year opec has stolen essentially two point and i use that word advisedly two point four million barrels a day off the world oil market this is how it happened opec added angola and ecuador to its roster of members but it did not increase the net opec production quota and therefore it removed a quota of norway from the global oil market and this is part of the reason that oil prices are so high this is a deliberate campaign now david said very accurately oil has a monopoly in the transportation sector and that monopoly is what gives oil its strategic status and what we need to do is strip oil of its strategic status and i agree that this country has plenty of resources but let it be clear drill anywhere you want we have just over three percent of world conventional oil reserves neither drilling nor efficiency will strip oil of its strategic value the marginal barrel of oil will always be cheaper in the persian gulf in order to strip oil of its due to the value we need to do it all  so we need to do the same thing to all and they need to do that by focusing on the sector from which oil derives its strategic value we no longer generate electricity from oil solar wind nuclear power all of these are very valuable technologies but they will do nothing our dependence on oil what we need to do is focus on the transportation sector from which the oil strategic value derives and we need to focus on fuel choice i agree with david that plug in hybrids are an extremely promising technology and tax credits would be very useful the lowest hanging fruit that this chamber and the other chamber have the ability to to make happen in the very near term is flexible fuel vehicles for one hundred dollars extra per car one hundred dollars extra it out flex fuel vehicles provide a platform on which fuels can compete and by doing that by doing that they enable us to strip all of its strategic value and we can layer other technologies on top of them we can have flex fuel plug in and so forth but i would like to emphasize to you that each year that passes without congress passing an open fuel standard to require new cars to be flex fuel vehicles another year in which seventeen million cars start their life on america's roads they will be on these roads for seventeen years and they will only be able to run on gasoline and every year that this open fuel standard does not pass is a year that binds us tighter and tighter to the world's petro dictators this country cannot afford to do that we will not win the war on radical islam as long as this is the case  thank you very much mr chairman thank you also to the ranking member and the other members of the committee for organizing and participating in the hearing today in the interests of time i will also summarize my my written statement from my perspective the united states faces three interconnected problems and global energy markets one is high prices one is high demand the third is high earnings i'll talk about high prices first no one here needs me to talk about the impact of high prices on american families i think there's been ample discussion of that very important topic but in thinking about our foreign policy and the challenges that will face on our foreign policy it's important to remember that many other countries around the world are facing exactly the same dilemma as and facing slower negative growth that could contribute to political instability especially in poorer countries and in transitioning economies that couldn't learn in turn lead to security challenges for the united states secondly is the ranking member already mentioned  high energy prices have fueled a growing interest in nuclear power around the world with the attendant risk of nuclear proliferation the second problem as i mentioned is high  demand changing patterns of demand it can have a profound impact on global and regional dynamics we see this around the world in the increasingly close relationship between china and saudi arabia and china is quite likely in the coming decade to overtake the united states in imports of oil from saudi arabia growing european dependence on russian natural gas competition between china and russia for central asia as natural gas and india's relationship with iran also driven by india's need for natural gas one key question i think as we move forward is whether we can continue to count on international energy markets to function as markets or will markets become an extension of politics it's encouraging in the case of china actually that a couple of recent reports increasingly show chinese national oil companies actually selling the oil that they acquire in foreign countries on international markets rather than trying to bring it back to china for example showing a clear response to commercial incentives on their part  unlike oil however natural gas as has already been mentioned is not really traded extensively in a global market and most importers have many fewer options as a result of this as has been mentioned there is a strong temptation among some gas exporters to try to create a gas opec i think it is unlikely eventually that that will succeed but the attempt in itself will be a problem for the united states the third problem that we face in energy markets today is the problem of high earning and higher earnings of course as has already been mentioned for countries that oppose the current s role in the world significantly diminished and have much greater resources to pursue that objective developing policy options for the united states to deal with these challenges is going to be in my view a difficult and long term task my colleagues have already mentioned some of the steps that we can take domestically to reduce our consumption on oil i think that's a very important goal for us but  also need to maintain a clear sense of perspective about the level of efforts that's going to be required people talk about a manhattan project or talk about putting a man on the moon and i think that is  an appropriate way of thinking about the problem but not necessarily the right time scale i think if we're serious about addressing these problems of not just oil but also natural gas and many of the other  dependencies that we face in the international system we need to be thinking about a level of effort and frankly a level of bipartisan cooperation on a sustained basis akin to fighting the cold war because that's the amount of time that's going to be required it's going to take decades to make fundamental changes in the way that we produce and use energy i will and there and would be happy to amplify any other points later particularly i mean that was just it was very clear where you're coming from one thing we talk about security we look for alternatives of course  know the value of corn ethanol versus what it's going to cost us in the long run i want to emphasize that there's been a campaign of disinformation against corn ethanol just so you know where i'm coming from i known as a global park communications which you may want to bring here and ask who exactly is sponsoring this campaign beyond the d m a first of all these are the factors that are driving world hunger number one on a good thing hundreds of millions of people in china and india have risen out of poverty and beyond a subsistence diet and so they're putting more calorie demand pressure on the market especially because they consume more meat it takes a thousand times more grain to produce a calorie of meat than it does a calorie of if you just ate gr and this is bad news the rise in oil price the canvas that estimates that every one percent increase in oil price drives a point two percent increase in retail food price third and because oil feeds into transportation and labor and packaging third speculation as capital please the dollar it's going into other commodities and putting pressure on every couple food commodity and so when you look at commodities like nobody's making biofuels out of fish or rice nobody is making biofuels out of rice in fact china has a ban in place against making biofuels out of food grains all of these are drastically increasing it's not driven by corn ethanol and when you look specifically at the numbers for corn ethanol net us corn food and feed product remember most of our corn doesn't go to feed people it goes to feed animals has increased despite the corn ethanol program that u s corn food in feed has increased thirty four percent in the last five years now you may think well maybe we're planting corn where we are planting other things before not the net u s food exports have increased twenty three percent on the year food plantings of soybean wheat everything is increasing remember we have a lot of farmland but we only thirty percent of our farm land is actually performing we actually pay farmers not to farm so as price goes up as prices go up one of the things that happened is that more so it is not the case that corn ethanol is driving hunger i have just a second mr infrastructure so that if we develop an all and even more advanced biofuels like algae based up biofuels we will have the infrastructure in place in order to have a real alternative  prius which costs about twenty five thousand dollars and the conversion is about eight thousand dollars question about thirty three thousand dollars we have millions and millions and millions of in kernel internal combustion engines that are running our cars across the country and it's going to take a fairly long time for a transition to these kinds of electrical cars if we just went with that one approach to get that done in the meantime we need energy and the thing that bothers me is right now gasoline is close to four dollars a gallon food prices are going up as a result of transportation costs that are added to the cost of the product airlines right now are adding  five dollars a bag and charging for curbside service because the fuel prices are so high they've got to figure out some way to to make up the loss that they're feeling because of energy prices and so i the thing that bothers me i really like to listen learned people because you obviously have long term solutions but there has to be a transition period and that's the thing that bothers me is that everybody's talking about the new technologies that are needed and i agree with that we were talking about these back in the one nine hundred seventy s when i first entered politics jimmy carter was the president united states they said when we had gas lines around three blocks and people carrying gas cans to the station say we've got to be energy independent that was almost forty years ago and you know what we haven't done a darn thing about it now we're at the point where we're saying we've got to do something about it and i couldn't agree more but it's going to take a transition period in the meantime the one thing that my colleagues and nobody seems to be talking about is the resources that we have available to us here in this country now granted it's going to take some time to get some of those resources to the market but we have the ability right now right now to get four or five million barrels of oil a day into the marketplace in a relatively short period of time we have a five hundred or three hundred or one hundred years between them which geologists you talk to the supply of natural gas which we could drill for and get up to the market even quicker in the transition from the internal combustion engine being really relying on oil it could be transferred to gas we could have companies creating a transit machinery that would convert a car from gasoline powered to a gas powered which would be cleaner burning fuel in a relatively short period time but people aren't talking about that and they're taught not talking about it in the congress because of environmental concerns the environmental lobby in this congress has blocked real progress in dealing with these problems for a long time because they want to see us go to energy to energy sources that don't pollute the atmosphere and i agree with that i agree with that but it ain't going to happen overnight and in the meantime people driving around who can't get to work who can't pay for their kids transportation who can't buy food and a whole bunch of things can make their house famous because the gasoline costs four dollars a gallon and so i guess i'm giving a little speech here because i feel so frustrated the american people in my opinion this year are going to start asking the question why are we using our natural resources why we talking about saudi arabia and iran and talking about chavez and venezuela and mexico and talking about all these other countries when we have resources right here in america and they're going to they're going to hold politicians accountable it's not going to cross party lines because i guarantee you this is going to be an issue this fall and all of us talking about the  environment cleaning up this thing and going to transition kinds of vehicles and new sources of energy everybody's going to say hey that's great but i've got to get to work tomorrow and i got to pay four dollars a gallon for gasoline and when the heck aren't you guys in congress doing something about it instead of having these meetings and everybody talking about what we ought to be doing to make ourselves energy independent over the next ten years they are concerned about ten years from now they're concerned about right now and for us to sit back and only talk about you know these clean air programs in the new technologies and everything else i mean that's all important and it's good and we ought to be doing it but in the meantime we have to look at the realities of today and the realities of the day say if we have an energy supply here that we're not tapping we ought to tap and there needs to be a balance between the ecology and the economy for cleaning up the environment in the ecology of this this country in this world but in the meantime the american people don't want to go down the tubes economically thank you very much the time of the gentleman has expired the panelist response to that would be very interesting in one day a member will say could you take my time to answer his question but i'm not sure will be alive to testimony particular to be intriguing in terms of how you view a little closer to how you viewed this current crisis not necessarily in the context of the last thirty or forty years but in terms of a much broader picture in terms of what it took to take people's reliance on soft salt towards other means of preservation of meats and other foods as an example  was to be very opening in terms of i guess looking stepping back and looking at this maybe a bigger picture but i also know that in order to make that transition off a lot of energy had to be created and electricity had such an order to really provide for that opportunity to make the ice as opposed to just relying upon saws and cutting i said a big lakes in upstate new york at such and transporting those down to areas where they had no means of producing ice for preservation purposes and then electricity that ultimately afforded for econd of shooting and ice production and that's also part of the reason why we're in the mess we're in today is because of the cost of producing energy in electricity for those purposes but i still think in terms of the big picture you're right i mean this is a crisis to handle because of our dependence on one substance when there are multiple options available to us that we have that too would have been a in the same way the same effect of going from salt to refrigeration in that it would also put heavy reliance on electricity so has there been any thought in terms of what impact that would have you know you need coal or oil or natural gas in order to produce electricity what effect that would have on the global issue of global warming it's a very important question mr congressman and  the good news is that we will need to build almost no new additional power plants in order to power tens of millions of plug in cars and there's two reasons for that one of them is we can recharge these off peak we only use about sixty percent of our electricity at night as compared to what we use during the day so if you provide the incentives for recharging in night like i do in my garage we really don't need additional power generating capacity the second is these electric motors are so much more efficient than the traditional gasoline engines we drive if you think about it the engine you've been driving your entire life you drive it on a cold winter day for more than a mile or two it gets too hot to touch that's all wasted heat and wasted energy electric motors are much more efficient so driving our electricity overall is going to save or actually more than a quarter at one time was a quarter the cost now maybe like a tenth of the same cost so but transferring from oil or or gasoline to or diesel to natural gas as a means of consumption including everything we have just three percent of world reserves and if you look where natural gas reserves are distributed in all other than trinidad it's on the same nasty places as oil is distributed the middle east so we don't want to increase low value uses of natural gas already our chemical industry has suffered very much because we natural gas to generate electricity it's driven up the price of gas and therefore our chemical industry is no longer competitive because natural gas unlike oil is not fungible what we need to focus on is not one particular thing it's choice in the transportation sector and i think we can learn a lot from the example of brazil ninety percent of new cars sold in brazil this year are flex fuel vehicles they went from zero to seventy percent of new cars being flex fuel in three years  pressure price pressure on gasoline is so high that the brazilian oil industry just had to receive a subsidy from the brazilian government to keep gasoline prices low enough to compete with sugarcane ethanol so when you have choice at the pump when you can choose amongst  tap into all of our resources we have a quarter of the world's call reserves we need to tap into that to generate liquid fuel we have massive amounts of agricultural material we need to tap into that our electricity is not generated from oil so that's nuclear a little bit of solar and wind coal and so forth we need to tap into that specifically when it comes to oil yes we need to expand our use what we need to keep in mind though is because we only have three percent of world oil reserves and we will always need oil especially for the petrochemical industry for uses where it's not easily replaceable ok if we ship the flex fuel vehicles we ship to plug in hybrids we have easy alternatives to oil and petrochemicals you don't know it's oil or natural gas we want to make sure that generations after us you know we haven't tapped out everything so there needs to be a balance here where we don't use all of the easily accessible in this country where we leave some for future generations i think the primary focus on the transportation sector has to be pass a flex fuel vehicle requirement so we can tap into the vast array of our domestic energy resources all of them to generate transportation fuel commercialize plug in hybrid vehicles congress can help with tax credits then remove the tariffs on ethanol imports so we can share in the global market of of alcohol companies doing now because we don't have flex fuel vehicles the easiest liquid fuel to make from coal is the alcohol methanol what they're doing is they're converting call to methanol then they're taking an extra and very inefficient step to convert that methanol into gasoline since they don't have this hundred spike i think that the fact that two point four million barrels a day were actually removed from the oil markets between zero seven and zero eight has a significant significant impact on that you've removed supply and demand has increased china and india are still growing and so it's made the market much tighter you also have attacks against oil infrastructure around the world that's building in concern you certainly have some speculation going on i would urge you to think about who is doing the speculating who has the money to speculate you had a hearing yesterday about about sovereign wealth funds but beyond that the opec countries have an enormous amount of wealth that they can throw around to push up the price of commodities u s comp these can buy their own products to push up the price of their product but opec certainly can do that they can invest in futures and drive up the price and i would be very surprised if they're not doing that just add to that that prices always rise around this time for the summer driving months and i think back to the speculative pressures on the other the other tensions in the global oil market that's the type of rapid rise that there's also really a fair amount of uncertainty in the international system and i think that's certainly a component to think about too you know when you have a strike in nigeria or we have the level of uncertainty that we have in iraq we have a tense relationship with iran and you know when we're importing twelve million barrels a day approximately of oil when the price of oil goes up a dollar a barrel that's four billion dollars over the cost over the course of a year in terms of additional money strictly because of  uncertainties i think we should also actually be thinking about some of the steps that we can take to reduce a little bit of the uncertainty in the system and one way actually that i would suggest there is really to engage more with china to engage more with india and some of the other major consumers and to try to bring them into many of the global institutions that we already have like the international energy agency for example where people talk about they share information on their consumption they share their projections they make common plans to deal with crises to manage emergencies and it could be very useful to have a number of the other major consumers in the world that are currently outside many of these institutions the g eight is another another one that i would mention where they can be very useful and to bring them in and i think we all so i have to think frankly about some of the things that we say because when leaders in this country make some of the statements that they make that contributes very much to anxiety in global markets that oil in particular countries may not be available in the global market and that drives up the price thank you you just talk a little bit a little bit about sugar cane ethanol because it seems that everybody talks about corn is the drawback to  sugar cane than from corn so it's a it's quite a bit cheaper how come we're not talking about in this country as much well we have sugar quote on tariffs the stuff that keeps the us sugar price twice the world sugar prices we're certainly not going to be using any of our sugar to make ethanol though the farm bill does have subsidies to do that which you know what we want to do we need to i know it's very politically hard to do given the particular family that's involved but what we need to do is is open up the markets basically by removing the tariffs on ethanol imports i realize that will be politically impossible to do until we have an open fuel standard in place that acquires new cars sold in this country to be flex fuel vehicles and thus create a potential demand for alcohol that's much much bigger than the domestic market can down there they couldn't spell a prius you know they don't drive those kind of cars they people i work for are represent blue collar people they work the land they're rice farmers and they drive pick trucks they're everywhere because that is their office they load the back with all kinds of gear and they're off to the refineries and that's what they do and of course like everybody else they can't afford diesel and those trucks those duties i'm sure you know what to do we pick up do you it's four wheels in the back that's why it's called to duty that those are their work that's their office and they have a difficult time working and it's ironic because most of mork or a lot of work at the refineries twenty two percent the nation's refineries are in my congressional district and it seems to me you all mentioned about  dependence on oil i think the real answer is dependence on oil from foreign countries like opec i'm as an american citizen that the president out of state has to go and beg the opec minister to produce more crude oil so that we can have it in this country and of course they in their arrogance said no we're not going to do it that is a bad state of affairs for this country to be in we have two issues one i think that we should drill offshore where we have crude oil we can do so safely when hurricane katrina and rita came right through my congressional district seven hundred all rigs in the gulf of mexico were damaged or destroyed but we didn't hear anything about oil seepage from the bottom the gulf of mexico because those valves shut down we can drill sightly offshore but because of the environmentalists fear lobby we don't do that and it seems like we need to do sure we need to drill in anwar but we need to have the second component we have to have refineries wouldn't do us any good to have more crude oil in this country if we can't refine it and the refineries refineries are run at capacity because we hadn't built a new one in thirty years in this country because of too many unnecessary regulations and unless we deal with those two issues we're still going to be begging the opec ministers and that nut dictatorship for crude o a solution would seem to me to open up the outer continental shelf to drill take care of ourselves and then move in a direction where we can use other alternatives i'm not so sold on corn based ethanol for the reasons you mentioned it's too expensive and we can't fill up enough land to produce enough ethanol to fuel our cars but right now is the problem those guys are still trying to get to work down there in texas today and they can't afford the four dollars and eighty seven cents it cost to drive a car to pay for diesel diesel gasoline so it would seem to me that that makes a little common sense but when i ask you one question that we haven't talked about what about the devaluation of the dollar as the dollar continues to plummet on the world market it costs us more dollars to buy that crude oil from opec doesn't that have an effect on the cost of gasoline and if it does what your solution to stabilize in the dollar congressman the answer your first iran certainly talked about it chavez certainly talked about it and i guarantee you're going to see the saudis talk about it within a few years if they need to that they want to shift trades from dollars to euro and yen that will strike a very severe blow against the dollar that is the weapon in and of itself that kind of threat and the fact that they could do that it's because we've left our economic juggler completely exposed by being so dependent on foreign oil i would add drilling is important but keep in mind we drill more they're going to drill less they're just going to reduce their supply i do not think it will have an impact on price what it will end up doing is what the international energy agency said we deplete our reserves much faster than opec countries do because they produce according to a quota in two decades you get into a situation where the economic well being of the world is in the hands of five or six countries in the middle east and that's a direct quote from the international energy agency so we can use drilling as a stopgap solution but in the only to buy us time to contribute to global warming or we're going to do something else so we had a two decade window where we could actually make an effort on our own country to diversify and i consider corn a political fuel i found out in the zero five energy drilling everywhere in texas and in an even more we're talking about other areas that have been taken off the west coast and east coast even anwar and other parts of alaska and also include eastern gulf of mexico for natural gas there are jobs to be created but is but you don't think that if we had more domestic production it would get the attention of the other producers in the world ninety six percent of the world's transportation fuels are not going to work we need to tap into our electricity reserves which are enormous and i'd also like to add that lithium ion batteries if you look at chinese and korean technology you're talking about a premium of twenty five hundred dollars for a ten hour battery that's a battery that sufficient to take a car twenty miles on a charge so we're going to be y d and sherry  chinese companies coming out to market in china with plug in hybrids probably around two thousand and nine and you know they have a ten thousand dollars basic vehicle platform for a family sedan solaire plug in hybrids on top of that one hundred bucks to make it a flex fuel vehicle elsewhere for them to increase their production obviously that's degrading and something the american people feel upset about what about we have to look at number one why we are in this  i would suggest that what has not been addressed here in terms of why for thirty years we have had an influence a major influence on american policy of radical environmentalists the radical environmentalists to prevent the building refineries they prevented us from developing our own resources in terms of oil and gas they prevented the building of nuclear power plants some of them of even prevented windmills from being put up when they destroy somebodies view we have basically we haven't had any hydroelectric plants build thirty years of the effect of radical environmentalist among the united states not responsible environmentalist which is which is totally defensible but radical environmentalists and that has prevented us from developing our own resources and put us in this that can be made with very safely a high temperature gas cool reactor which only built one of them in japan which i went over to see myself which produces no plutonium as a love as a byproduct meaning they can't build bombs with what's left over so why should anyone be surprised that we're now so dependent on foreigners for oil and energy that we see our oil and gas i do reject the idea that simply because we produce more that means they will produce less there is a benefit to us producing more of our own oil and gas and that means we will have more resources here from which to work there positive side to that maybe it may not be the long term solution but it's short term solution and in the long term we do have mr chairman lots of options in front of us if we can free ourselves from the  bondage political bondage that has been put on us by radical environmentalists and i would suggest that we can move forward in the transportation area specifically there's no reason why trains going across this country all shouldn't be working on electricity and we can we can produce our own electricity we have right now in california a lot and others involved with the tesla auto project they are going to build in our process of building with it the market will work if we permit the market to work and we wouldn't be in this jam if it wasn't for all of those restrictions that have been put on us that's my statement please feel free to comment it just a quick comments are i'm glad to say it's not  think there's a lot of potential here for these plug in electric cars i agree with that and i and i think that we've reached a dime when the market will sustain that and promote it so i'm not and i'm not so worried about utilizing our oil and gas because we've got enormous reserves of this that we have untapped offshore in alaska and throughout our country but again we i've been permitted to utilize that thank you very much mr chairman thank you i do mind everyone that the panelists have several times said that that increased utilization of oil and gas will be accompanied by a reduction in production by the opec countries  doing his begging thing especially dealing with the opec countries i think it is a little embarrassed meant for us to be in that kind of a situation so that my questions and thoughts observations as closely related to the central asia is a region that is hardly noticed by many of our fellow americans and the fact that the amount of oil and gas and other mineral resources in this region up and coming could very well be another middle eastern supplier of oil for the rest of the world and i want to ask you what should be our foreign policy towards the region because it seems that nobody ever talks about it except china india and russia are very very well aware of this tremendous resource that is in this part of the world absolutely thank you there are certainly very considerable orlin gas resources in central asia it doesn't quite rise to the level actually of the middle east but it's it's still quite significant thus far russia has really been the principal beneficiary of especially the central asian gas because of sensually monopoly control of the pipeline domestically and turn around and export its own gas to europe at substantially greater profit this is becoming increasingly difficult for russia to sustain for gaza from the russian gas monopoly to sustain because china has energy companies have been more and more involved in this part of the world and signing a number of agreements especially with turkmenistan which is really the key gas reserve  be difficult for us to compete with china and russia which are both right they really need to get the energy to your ok that's the best we can do two things i want to ask also and i love the score and last week it was a senator were one of our former colleagues a former chairman of the natural resources committee jim hansen from utah to testify to the effect that we have enough oil to ensure that the state of utah wyoming and i believe in montana could supply oil for this country for the next hundred years we would be independently we don't need oil if we go through the development of a new one that's one question certainly about three weeks ago we had all the top executives our major oil companies come before the congress there's a lot of finger pointing who's at fault why there's so much profit making and the response if i'm correct in layman's terms the response from our oil executives don't blame us the world market pricing of oil that's causing all these problems not not our fault that we make so much money those are the two questions i like to raise i think it's easy and populist to point fingers at big oil because we see them at the pump but the fact is that the international oil companies only control six percent of world oil reserves real big oil is opec international oil companies like exxon or chevron texaco only have access to less than twenty percent of world oil reserves there  price takers not price makers on the market they're not even allowed to go in and explore let's say in saudi arabia rambo isn't going to let them play regarding shale there's certainly a lot of potential but there's also a lot of hype until you see a commercial scale  oil from shale it's not like producing oil from tar sands but you have to remember the marginal barrel of oil will always be cheaper in the persian gulf as long as oil is the current c opec wins  for the majority make reference to resonate with me alternative technologies wind solar but we had a pretty serious problem in columbus indiana they were three ninety nine a gallon right now and memorial day weekend is usually when people hitch up the boats and head to the lake and i know we are going to blow past four dollars a gallon and i think the shock wave this going to resonate across america is going to break the last when that happen so i'm going to continue to support legislative efforts to come up with alternative sources of energy but i do want to explore what is beyond the jurisdiction of this committee i want to concede that to the  dollars a barrel this the fact that we have one hundred ten years supply of oil in oil shale in this country is not economically feasible but i think last friday we're at one hundred thirty three dollars a barrel isn't it arguable that it is a difficult technology is expensive right but by by recent estimates which are not particularly disputed the bureau of land management says we have twenty five hundred gig barrels of potential recoverable oil in the united states of america and u s demand for oil a current right to be met for one hundred ten years and the other thing too is remember if i say with respect for witness particularly the stre categorically only has three percent of the oil reserves in the world i mean i don't know what's under anwar i don't know what's off shore with respect don't think this panel struck number one the witness is understanding what the unproved oil reserves are in the united states striking to me and the other thing is to understand how opec would respond if we announced we were going to begin to drill in environmentally responsible ways in anwar offshore or if american companies decided it was economically feasible to move into the oil shale market and mr mr sandal you just made the comment that it would not affect world price at all i respect your opinion i don't know how you know ms corn you said we're going to drill more they're going to drill less that's an interesting hypothesis maybe that's true i'm sure we don't know but it strikes me  one of our witnesses i mean no disrespect but i want to understand these broad conclusions about how our competitors would respond on the global stage and understand the on what basis do we categorically dismiss one hundred ten years of oil be clear what i said about shale and i'll say it again i hope we see a commercial scale demonstration program we haven't seen it yet and until we do it's worth exploring but we can't bank on it we can't bank on it and i would draw your attention to the graph on page two in my written testimony where you see that opec has changed its supply in response to prices in response to supply from other countries as specifically rigged supply over the past thirty years to keep prices high so it is not unreasonable to expect that they will do the same and i just want to remind everybody we do not generate electricity from oil you may have all sorts of reasons to favor solar wind nuclear has nothing to do with oil dependence focus has to be on the transportation sector flex fuel vehicles  commodity has no nationality so there's not anything such as a american oil are a you know a  in if in other words i think we're we're losing our understanding that this is a world market it's not an american market and is it a fair statement to say the all is hundred ten years of of oil develop from shale shale to do it economically would require a sustained level of price per barrel in the stratosphere somewhere is that an accurate statement so economically it isn't feasible can we expect if american companies do this extra drilling there deal give it to americans more cheaply right i mean we've got to i think understand what we're talking about i'd like to go to a point made by mr in terms of the price per barrel of oil today is this such a thing as a risk premium what how much you know there give me an estimate the estimates are pretty broad and it really depends on who you talk to ok well let me i'm talking to the three of you one of you tell me what the estimate is say a fifteen to thirty dollar terrorist premium ok that's concern about terrorist attacks removing significant supply off the market because we've seen political volatility yes but i would say the key the key concern is about physical removal of supply from the market because we've seen a jihadi campaign of attacks against oil infrastructure because they understand  point leaders we do a lot of talking ranting and raving and that impact the oil price is that a fair statement i believe so yes ok so every time we talk about the saudis wherever it creates an atmosphere if you will in the marketplace that there is such  that that risk premium which you estimate current to be somewhere between fifteen and thirty dollars escalate i think personally it depends on what people say if we say th position for america the world's superpower to be in where it has to guard its words and kowtow in front of various petro dictators and thugs around the world i agree because of that strategic value of oil that says something about oil and the need to become independent and the reality is if we look to brazil how did they do it and why can't we and what is preventing us can i ask a question about brazil they mandated they have the political courage to mandate to congress this said you've got to use biofuel just go on oil here's a lesson from brazil consistency counts they have maintained their support for that program over the course of thirty years from the hundred seventy s in good times and bad as been said we've had a bipartisan failure in this country for the past thirty or forty years and if there's a silver lining in this crisis maybe we can move towards a bipartisan success in the decade ahead in terms of the car manufacturers the japanese doing better than we are in terms of putting on the market leader calls hybrids whatever i know and flex fuel vehicles the u s automakers are actually in the lead it's only a hundred dollar feature it's a little story the car the c e o s of the big three have already said that they're willing to commit to make fifty percent of their new vehicles flexi vehicles by two thousand and twelve when an industry tells you that you don't have to argue with them and make it ok but it's true that in brazil every car that comes off and there are american manufacturers that are producing flex fuel vehicles every single car that they manufacture is a flex fuel vehicle ninety everyone ninety percent of new cars sold in brazil nationality and your answer is perfectly accurate a question that could have been posed and should have been posed yesterday to the senate committee mr del hunt's colleagues continue to beat up on the american oil companies as if they had any control over this whole process of worldwide oil demand worldwide oil demand and that's the real issue that we're dealing with here not the price of oil set by by any of the quote american companies but at any  rate the focus of this is supposed to be oh this hearing has to be on our foreign policy options with regard to the oil crisis in the united states can you help me understand what you think we can do again in terms of foreign just a lot of the issues about domestic policy options flex fuel vehicles i happen to absolutely agree with and even mandating them i believe i would go along with that but in terms of the foreign policy implications countries like mexico and venezuela where we have some degree perhaps a degree of of influence certainly with mexico more than venezuela and mexico is as close to a failed state right now as we can see around the world in terms of the  narco trafficking the cartels that have have impacted their country's ability to actually control its own destiny but what can we do what would you suggest that we do with countries with which we have some degree of influence in the hemisphere in terms of oil policy regarding mexico specifically one of the biggest problems is that they are basically destroying their oil reserves they need to open up pemex to foreign investment and what we need to do in the context of nafta is demand a bit of reciprocity demand that they open up to foreign investment that will also help deal with some of the corruption because it will provide some sort of transparency and oversight another foreign policy option that's very important we made a huge blunder by letting a huge free trade abuser which is saudi arabia join the world trade organization now there are a number of other opec countries that would like to join the world trade organization and we need to not let them join the world trade or going to they sion until they remove themselves from opec and commit to free trade and same for countries that are about to build a natural gas cartel and if i can mention something that's a little bit different but very important not when we look at all but when we look at gas india is about to tie itself to iran by signing a huge pipeline deal  it was just recently in delhi to help move this deal forward iran pakistan india pipeline deal we cannot allow this to happen we've already offered them nuclear cooperation they need to supply the electricity somehow it's either the call but we're complaining we don't want them to use their call it's either nuclear or we can go to another option we can urge our ally pakistan because pakistan is a transit state and let them know that we would prefer to have that gas come from value but it was vetoed before and it will likely be vetoed again because the fact is i don't can't think of a nice way to say it but they're holding us by go ahead you know so we don't really have very much leverage against them again we have to focus on stripping oil of its strategic value this is the leverage that we have against them and we have to start today because every new car that goes on the road is going to be there for seventeen years we can't afford to have that car only be able to run on oil that the sort of the current if you will natural price of a barrel of oil should be about sixty dollars a barrel and that it would be at about sixty dollars a barrel for the foreseeable future and the question is what accounts for the differential between what these different authoritative sources say is the natural price of oil sixty dollars a barrel and roughly one hundred twenty dollars a barrel and my quick analysis of this and i'd like to hear from the panel to the extent that you agree or disagree is that the differential is due to three primarily three sources a war tax weak dollar and pure financial speculation in the markets  we went into iraq i don't think surely because of oil there are some folks who do but i think that one of the results of this administration's drive to go to war in iraq was the instability in the middle east that has driven up the price of oil that is one of the three contributing causes secondly this administration's fault intentionally a weak dollar policy i don't know of any great economy ever in world history that has done well over the long term with a weak currency policy but that has been the policy of this administration and that has contributed to the increase of that sixty dollars barrel to one hundred twenty dollars a barrel and thirdly in two steps we permitted pure financial speculation in all commodities futures not just oil but food and everything else one of the piece of legislation was signed in the year two thousand in the clinton minutes passed by republican congress the second piece of legislation passed by republican congress and signed by george w bush there is legislation that permits wall street hedge funds to speculate on everything from food toys to every other commodity that's t actually be players in that market they can actually take delivery of the futures that they're speculating and i like the comment of of our learned panel on these three factors and  how much they might or might not account for the differential between sixty dollars a barrel oil and one hundred twenty dollars bill increased demand from china and india terrorist attacks that remove supply from the market they removed about two million dollars of physical supply two million barrels a day of physical supply from the market all these things contribute to the fundamental the natural price of oil i would put those what what makes oil sixty dollars ok the difference between sixty and where we are today is because we not dealing with a free market we're dealing with a cartel that's rigging supply and keeping it artificially low and not increasing supply demand increases in demand not increasing supply when terrorists are moved supply from the market that is the difference between what the price of oil would be in a free market even with all these disruptions and what the price of oil is today it's the fact that we're dealing with a cartel and until we break opec and the only way we can break opec is by stripping oil of its strategic value breaking its monopoly  dollars a barrel that will change over time over weeks and days and with the facts of on the ground a change but but your fundamental point is exactly right the fifty dollars barrel production was made five years ago by the stanford professor and it fundamental base an economic principles but it's also a little bit of an index of psychology and there are good days and bad days and good times and bad times and i think the prices in markets now are clearly a reflection of are you available to run for president let me let me just let me just interject i'm told that was standing in the absence of lights there is a vote we have about twelve minutes i will probably have a chance for two people  so i need to her answer is whether she's available to run for president it's amazing the clarity with which he was speaking and i also find it amazing our inability to hear and receive it and i wonder if we're sort of like the gad that goes out on the beach and he thinks he's done all right except he's one of these guys like me that turns into a lobster at the beach and along comes this most unfortunate event when the lifeguard starts pulling down the stand and he's an incredibly fit you know tanned fellow and we now feeling like wimps because we got three percent of the world's known oil reserves and it hurts her feelings it apparently i think that's what's going on here i hurts our feelings that we're found out to not have that three percent i mean we get these little bodies and we've got but the guy that turns into a lobster at the beach may be a fabulous baseball player not my case but in so you change the game you get off the beach and you say come on fellas go to the baseball diamond in less compete there so rather than go to the baseball diamond we keep slugging it out on the beach hoping i guess to put on more sunscreen and get the shirts on could everybody put shirts on here on the beach and so then we could be have to cover up our problem so it's amazing to me that we the resistance that we're finding to this incredible triple play of the next american century if we could get to the baseball diamond and say we're going to create jobs with new technology we're going to save the automobile industry in michigan with g m bringing in the volt we're we're going to clean up the air and we're going to improve the national security the united states we can knock it out of the park if we just get off the beach and get to the baseball diamond so jim woolsey sat there while back and said you know run a ring the day of the iranian oil minister announce a five hundred mile per gallon plug in hybrid you'll ruin his day so it's amazing to me this resistance we have but i wonder on the national security point security risk many people in this country cannot buy a loaf of bread or go to the doctor without getting into their car we are incredibly incredibly dependent on oil for the very structure of our economy and our way of life and so the market doesn't reflect that because people can't take into account catastrophic risk you know they can take into account some disruption but not supply being removed off the market by a terrorist attack they tried at some point they'll succeed so we're not taking that into account and that's why we need to act very very swiftly to change the game to change the terms of the debate and get fuel choice into the transportation sector lowest hanging fruit then plug in hybrids so americans can buy a loaf of totally unacceptable a wake up call it needs to be a patrick henry call i am convinced if we don't move quickly to do something about this we're looking at the beginning of the cause of emphasize is the farm bill focuses on the supply side of alternative fuels until you pass a law that says new cars sold in this country need to be flex fuel vehicles you're not doing anything for the demand side and so it's very very important that that happen because when you do that you send a very strong signal to the market to invest in alternative fuel you say as new cars enter the market your potential demand is growing year to year now go off and compete you choose the feedstock the fuel whatever alcohol whatever feedstock