and indians in the world oil market or two we can commit to blazing a new path one that frees our country from the shackles of oil and unleashes the renewable energy revolution that will save the planet and drive our economy in the st century the choice is simple this hearing is very important let me turn now and recognize the ranking member of the committee the gentleman from wisconsin  the select committee a chance to explore what could be the biggest energy issue facing the planet over the coming decades oil powers our allies and the economy making it a vital part of our future it is not hard to imagine how some of the reckless policies of the democratic majority will create a future where energy is scarce and expensive in our country and by expensive i mean far more expensive than the pelosi premium driven four dollars a gallon gas that is already causing great problems across the country and stretching everybody's budget while we are hearing calls for energy independence from my friends we are seeing little action particularly in the area of gas prices while prices are skyrocketing foreign countries like saudi arabia and venezuela are raking in the profits thanks to the aching pocketbooks of millions of americans the united states has many energy resources so many that i think most americans would be surprised to know exactly how much energy is available right here in our own country i am sure they would also be surprised to learn how diligently my distinguished colleagues are fighting any expansion of america's capacity to explore for and produce oil and gas on monday investor's business daily laid out exactly how much energy there is out there in the western u s it is estimated that there is the equivalent of one trillion barrels of oil and shale rock the democratic majorit the house and senate voted within the last year to keep shale rock off limits to exploration despite the fact that these reserves could be as much as three times as large as saudi arabia's while china and india are drilling sixty miles off florida's shores investor's business daily noticed that congress continues to keep eighty five percent of america's offshore oil and gas off limits i don't think that congress should be picking winners and losers  believe that all energy options should be open for consideration that includes renewable resources like wind and solar that also includes nuclear power and improve energy efficiency certainly expanding our oil and natural gas exploration in production should be a top priority because we know it is there while technology will help produce demand for gasoline the only other thing that can reasonably bring down gasoline prices is an increase in domestic supplies america needs relief now from high gas prices and increased production is the best way to get there after taking control of congress the democrats created this select committee partly to address the issue of energy independence yet it seems that the democrats are throwing up roadblocks to any reasonable proposal that would help free the united states from its reliance on foreign oil with so much potential oil available the u s should have a bright energy future however unless my distinguished friends over here begin to drop some of the roadblocks i can see a future where gas prices rise higher and higher while americans suffer more and more that is not the kind of future i want to imagine and i hope that my distinguished friends in congress will work with republicans in coming months to help create a brighter future for all of us i thank the chair and yield back the balance of my time the chairman i thank the gentleman we now turn and recognize the gentleman from barrelhead of oil i think it is pretty clear especially in recent testimony when we see that on our own continent where this administration has already granted in excess of ten thousand permits on millions of acres that companies could be drilling on that sixty seven million acres already permitted aren't being drilled on today one has to wonder why that is the case secondly the policy of this administration best described by thomas friedman leave no moolah behind where we see the united states going hat in hand to saudi arabia to try to get from the saudis some help and esteem and receive basically a slap in the face clearly when we have the opportunity to invest in alternative energy and we see the senate time after time block the funding block the funding necessary to make sure there is an appropriate investment in fuel cell technology in solar wind these are important aspects that need to be followed through as part of any integrated policy and i hope to be able to ask the distinguished panelists also how they feel about speculators and whether or not speculators are artificially driving the price up are the laws of supply and demand suspended during this time because of speculation and i will wait to hear and y i thank the gentleman for yielding and appreciate him holding this hearing i think everyone recognizes it is time to do what we can and to be as aggressive as humanly possible at moving off of a fossil fuel based economy but no expert has come before this testimony and no expert has come before this committee and no expert has come before the subcommittee on energy of the commerce committee on which i serve and said that we can move off of these oil based fuels overnight certainly not for a period of years some as long as beyond two thousand and thirty in the meantime the question is what do we do as americans face gas prices they say the average in the country today is four dollars four cents a gallon in my state of arizona it is over four dollars  fifteen cents a gallon for regular and i would suggest for the sake of this nation this congress needs to act and it needs to act now america is the third largest producer of oil in the world and could be doing far better we have enacted policies that lock up billions of barrels of oil and natural gas and we are choosing not to pursue those those policies may have made sense when we could buy oil or buy gasoline at two point five or three dollars a gallon but when we forcing on the economy gas prices of over four dollars a gallon quickly moving to five dollars a gallon and perhaps moving to six dollars a gallon those policies simply makes no sense i would echo the comments of the ranking member on issue after issue whether it is outer continental shelf whether it is the intermountain west whether it is oil shale where the u s house recently imposed a moratorium or whether it is anwr we have made a decision as a nation to lock up our current supply and virtually ninety percent of the democrats in this congress have voted against supply vote after vote after vote for the last fifteen years and virtually ninety percent of republicans have voted to increase supply on vote after vote after vote over the last fifteen years i don't think you can look backward at those votes and criticize them now it is important to look forward because we have to do something about this problem for the sake of the working men and women of america and for the sake of our nation's economy and with that i yield back  gentleman's time has expired the chair recognizes the gentlelady from california ms solis ms solis thank you mr chairman and i want to again thank you and our witnesses for being here to hold this very important hearing on the future of oil the price of oil hit a record high of one hundred and thirty eight per barrel in june of this year an increase of over six hundred percent since two thousand and two in the district that i represent in east los angeles in california the price of gasoline is over fo six and that is not even premium our economy and our national security as you know is very vulnerable as a result of our nation's dependence on oil government owned and operated companies such as the national iranian oil company in iran represent the top ten holders of oil reserves internationally while domestic demand is expected to grow from twenty one million barrels per day to about twenty five million barrels per day in two thousand and thirty our domestic supply of oil as we know is limited this includes reserves which are already accessible to oil companies for production yet are not being developed why domestically companies have stockpiled nearly ten thousand drilling permits as was stated earlier which they are not developing again why one quarter of the public lands and water available for energy development are actually in production why why can't we drill well in my opinion we can't drill our way out of this  united states was to rely on domestic resources to meet all of our current consumption all proven reserves would be exhausted in three years the only long term sustainable secure solution is to reduce our demand on oil and i do believe that the pelosi solution is and was the energy independence and security act which became law last december which increased the fuel economy standards to thirty five miles per gallon at a forty percent increase over current levels those are the kinds of activities that this congress is undertaking i am proud to be a part of that plan that speaker pelosi has put forward we need more revitalization renewable energies and other sources of fuel to appreciate very much that you are here i don't think there is anyone that denies that the current global market is enduring a period of record prices and tight supplies and increasing demand that is where i think we need to focus is on that supply and demand issue as we hear the platitudes and the prognostication we know that what we have done in this country is we have kept our ability to get to our supply quite frankly i am one of those members that i think the smartest thing that we could do would be to repeal the provisions from last year's energy independence and security act because we are making it impossible to explore for american oil on american soil and the american people are really quite offended that the most creative thing that has come out of this th congress to address energy issues is to repeal the light bulb that does not help them when they paying over four dollars a gallon at the pump we know that there are worldwide reserves that would take care of the next thirty years at the current rate of consumption we know that there are american reserves that are off limits and it would handle it would give us a sufficient supply for one hundred years so yes we need to be looking at what we are going to do as americans to find an american solution to this problem short term mid range and long term answers that will address the needs of our nation and i am looking forward to hearing from each of you how you think we should best address it in fork in the road and must choose which path to take in one direction there is the path that leads in the direction of business as usual based on oil as the prime mover of our vehicles and our economy with gas prices at record highs all we hear from the oil companies their allies in congress is we need to drill drill drill drill for more oil here at home i would ask you with all deference to my distinguished colleagues on the other side of the aisle who is stopping you about seventy five percent of the oil in the united states is on land that is already open for production but less than one third of that land is actually being used by the oil companies they are literally sitting on ten thousand permits and millions of acres of leased land that they have already paid for that would let them start pulling more oil out of the ground our president george w bush said when oil was only fifty dollars a barrel there should be no need for more incentive for oil companies to drill for oil now at one hundred and thirty five i can't imagine that there is more incentive so i am wondering why are they sitting on millions of acres of already leased land here in the united states it is ready to drill drill away but at the same time if we are going to move further toward the drilling and burning of oil we must also ready for more extreme weather events more tornadoes more floods more eleven inches of rain one day in indiana or kansas three record fifty year floods in my district in the space of five years more drought in the southeast et cetera these are the computer projections of climate change that the consumption of oil and other carbon based fuels lead to so i just say we can and we may wind up drilling for and using a lot more oil but we should be moving for the economy and for the environment's sake toward a renewable future i yield back the chairman the gentleman's time has expired the chair recognize the gentlelady from michigan misess miller misess miller thank you very much mister chairman and i appreciate you calling this very important hearing i think the american citizenry is looking toward this congress to work in a bipartisan fashion to effect some change and some hope for what is happening with these gasoline prices with the oil prices i think the cost of gas has got the ability actually to cripple our economy probably more than any other single factor and it is manifesting itself in so many various ways i mean we see the airlines merging with northwest and delta merging for a number of reasons but probably foremost because of the price of fuel from michigan coming from michigan i see what is happening with our auto industry certainly just in the last couple of weeks we have had general motors announcing they are closing a number of plants that are producing suvs and trucks and various things and you hear the folks at gm saying that almost overnight the buying patterns of the american public is changing and they think it will be a permanent thing  we see it impacting the rail every mode of transportation and because of the way we structured our society with so many people commuting long distances et cetera as i say it has the ability to impact more than there and i am very interested to hearing the panel today and again i think the american public is looking to this congress to effect some meaningful comprehensive energy policy that will have an impact on their ability to  the high price of gas is hurting businesses in communities throughout our country in fact the most recent lundberg survey which compares average fuel prices nationwide was stockton california in my district as having the highest average gas prices anywhere at more than four dollars fifty cents a gallon people are struggling and with these high prices people are inevitably asking why are the prices of gas so high and what are we doing about it thankfully we can tell them that the congress has taken some badly needed steps both in the near term and the long term it is essential that we pursue policies that will lower prices now and we double our efforts to increase efficiency investing in new technology and ultimately work to wean our country from foreign oil today's hearing should answer some of the questions of why oil prices and gas prices are so high clearly the world demand is up while production has stagnated rampant speculation drives the price of oil higher we remain at the mercy of government controls oil companies and international cartels we have taken action by stopping strategic petroleum reserve deposits by mandating new efficiency standards and by providing explicit authority to the administration to investigate gas gouging while oil companies are demanding additional drilling rights which they claim will lower the price of gas they are only using twenty six percent of the area they already have for drilling if we encourage innovation to increase efficiency and find new forms of energy we can keep ahead of the oil price increases and maintain our high standard of living this is america's great historic challenge and our opportunity i yield back  the gentleman and now we will recognize the gentleman from washington state mister inslee for an opening statement mister inslee i thank you we know one thing for sure as long as we remain dependent on dead dinosaurs for our transportation we doomed to price hikes global warming and the security concerns associated with the fact that the dinosaurs went to die under the mideast sands we don't know how it happened but it did we have got to replace an old resource of oil  with a new resource of intellectual capital that is happening across america today our fundamental challenge is to get on with the business of hastening this giant clean energy revolution that is now happening across the input what do all of those companies have in common they are not based on dead dinosaurs they are based on living geniuses and those are living american geniuses one of the things mister shadegg my friend said that this revolution is not going to take place overnight none of us can promise the american people the congressional snap of the finger to create the new technologies over night they are going to take years if not decades that is a reason to start today not to wait another three years the fact that this may take a year or two means it is more important to start today rather than less important and that is why the debates we are having the debates between the optimists on this side of the aisle who believe in the power of this intellectual capital and some pessimists who want to remain addicted to dead dinosaurs that is what the debate is let's move forward on clean energy revolution the chairman the gentleman's time has expired all time for opening statements for the members of the select committee has been completed now we will turn to our very distinguished panel and our first witness who is mister paul caruso he has been the administrator of the energy information administration for the past six years and obviously there can't be a more important job in the united states government today than mister caruso and the recommendations which he makes to congress and to the american people so we welcome you sir whenever you are ready please begin mister caruso thank you very much mister chairman i appreciate the opportunity to appear today to discuss the long term outlook for oil in the united states and globally the energy information administration eia is the independent statistical and analytical agency within the department of energy as such we do not promote formulate or take positions on policy matters and our views should not be construed as representing those of the department of energy or the administration in your invitation letter you asked about our current forecast for gasoline prices our june short term energy outlook yesterday projects that regular grade motor gasoline retail prices will average three dollars seventy eight cents per gallon this year that is ninety seven cents per gallon above the two thousand and seven average with the monthly average prices projected to peak at four point one five in august nationwide crude oil prices for low sulfur light grade are projected to average one hundred and twenty two dollars per barrel in eight and one hundred and twenty six dollars per barrel in two thousand and nine compared with seventy two dollars last year i think it is important  when you are discussing the long term outlook for oil and liquid fuels to start with a clear set of definitions first table in my written testimony shows the estimated global quantities for six categories of liquid fuels we use the term oil to refer to the first four which are conventional crude oil lease condensate natural gas liquids refinery gain and unconventional crude oil including canadian oil sands shale oil and very heavy crude o we use the term liquids to refer to oil plus biofuels and liquid fuels manufactured using coal and natural gas these distinctions are important because the conventional crude oil share of total liquid fuel supply which was eighty four percent in two thousand and six is projected to decline to between sixty two and seventy two percent of total global liquid supply in two thousand and thirty in the reference and hi price cases as discussed in the written testimony last december as several members have noted the energy independence and security act was passed and signed by congress and signed by the president  specific provisions that have the most significant implications for future oil markets are the updates to the corporate average fuel economy cafe standards for new light duty vehicles and the renewable fuel standard taken together the updates to these two standards in eisa produce a substantial reduction in oil use and oil imports in our long term outlook eia estimates that the combined affects of the impacts of high oil prices by developing and reporting projected projections for several alternative oil price paths higher oil prices can be expected to reduce u s liquids consumption increase domestic production and reduce the nation's reliance on imported oil generally the responsiveness of both supply and demand to higher prices grows over time reflecting consumers response to high prices oil use in the transportation sector in two thousand and thirty is nearly six percent lower in the high price case than in the reference case higher prices also result in fuel switching between liquids and other energy in the industrial sector turning to supply projected domestic crude oil production in the high oil price case as shown in figure four of the written testimony is six point four million barrels per day compared to the two thousand and six level of five one by dampening the demand for liquid fuels and increasing the domestic production of crude oil and biofuels higher oil prices together with the cafe and rfs provisions in eisa substantially reduce projected u s oil imports in two thousand and six u s oil imports were twelve point four million barrels per day accounting for sixty percent of our total liquid fuel use and in the aeo two thousand and eight high price case oil imports are expected to provide forty four percent of our total projected liquid fuel use in two thousand and thirty higher oil prices will also effect global liquid fuels in oil markets in the aeo two thousand and eight high price case global liquid consumption grows from eighty five million barrels a day in two thousand and six to ninety eight million barrels per day in and thirty significantly below the reference case consumption level of one hundred and thirteen million barrels per day in two thousand and thirty higher oil prices also affect the projected mix of global liquids production the reference case in conclusion mister chairman both the reference and high price case in the aeo two thousand and eight suggests that liquid will continue as a primary global fuel through two thousand and thirty although they are expected to overall liquids to two thousand and thirty use grows by about fifteen percent while conventional crude oil production declines by more than fifteen percent policy decisions taken by this body and others will make is expected to be a key driver in changing this business as usual outlook and we certainly look forward to working with you mister chairman members of committee and other welcome you sir whenever you are ready please begin mister sieminski mister chairman thank you very much for inviting me and in the spirit of the discussions i had when i was asked to come today i was talking with both the majority and the minority staff and listening to some of the discussions going back and forth here this morning what i would like to offer as a suggestion is that the ideas that have been proposed on both sides of the aisle are not mutually exclusive in fact the national petrol council did a report about a year ago came to the same conclusion saying that we are having supply problems but we are not running out of resources and to mitigate the risks on the supply side we need to expand just about everything that we can do all economic energy sources are going to be required to solve the problems that we are having coal nuclear renewable unconventional oil and gas  getting acreage opened up or worrying about the low proportion of acreage that is being drilled on doesn't seem to me to be the heart of the issue the heart of the issue is what is the resource that is on those acres and where are the resources and can you get at those resources if the oil is in alaska or offshore then those are the acres that need to be opened up no silver bullet to solving the problems that we have in the energy area we have got to do it all and we needed to do it yesterday so the sooner we get on with it the happier i believe the american consumers and voters are going to be  i tried to answer the questions that were submitted to me by the staff and they are in my testimony and they will be in the record but rather than to go into all that what i would like to offer is another suggestion about what has changed everybody is looking at the price of oil and saying well nothing has changed in the last year why is the price of oil up so much there must be some underlying conspiracy or problem let me offer two things that have changed very dramatically in the last year and that i  think have given us the situation that we are in first the u s economy has slowed down but it has not spilled over into the rest of the world where energy demand and especially oil demand are still growing very strongly and in fact if you look at the projections we may be on an overall global basis be at one hundred and ten million barrels a day of demand by the year two thousand and thirty some ninety five ninety six or ninety seven million barrels a day by tw the second thing that has changed is that there is an accumulating amount of evidence suggesting that we may actually run into a problem of being able to deliver more than ninety five or one hundred million barrels a day of oil not because of a resource issue but because of access issues getting access to the places that have the oil if we can't do that then there is going to be a problem because demand is going to be a lot higher than supply that situation or potential situation i think is what is informing the markets that are lifting prices to try to find some way to rebalance in everybody's models for where the future of the oil market lies to rebalance those models and it is probably going to require a higher price well since we are looking for what are these reasons let me just mention some of them underlying drivers for prices in my view are very diverse and involve a lot of fundamental supply and demand issues one opec production and capacity issues two demand in china the middle east where consumption is subsidized and economic growth has been fast three the normal lags in capital spending in the oil russia venezuela iran iraq nigeria and elsewhere that are keeping supplies off the market mister chairman we haven't had a huge energy crisis appear but a series of mini crises it is sort of we are having the after quakes without having the big one  time sixth political decisions themselves corn ethanol is a good example of unintended consequences and the ability to get other legislation passed on both conservation efficiency and supply is an issue and finally mister chairman since i think i am probably going to be asked about this i have excluded speculation in the sense of rising funds flow into the futures markets from index funds and hedge funds as a reason for the price increase volumes in futures really don't matter as much as sentiment the sentiment is that supply isn't growing fast enough to meet demand and that is causing prices to rise if we can do things in the united states with the help of our elected representatives to get demand to slow down and to get the supply of all of our energy sources to begin to rise i am not allowed to give guarantees as a financial analyst but as close as i can come to giving a is the wallace wilson fellow for energy studies at the baker institute for public policy at rice university we welcome you to the select committee whenever you feel comfortable please begin could you turn on your microphone please ms jaffe i really appreciate the opportunity to be here today and am honored to be able to address this committee that has done excellent work over the past year i want to give you the visual image of two things if you remember the cartoon road runner so imagine that america is wile e coyote and he is running off the cliff and he is still spinning his legs the gravity hasn't hit that is where we are on the energy crisis right now we are still on the level land and we don't understand how deep the problem is if you will excuse me for saying this in thinking about the congress you are like deer with your eyes in the headlights right  people understand the magnitude of the problem but they haven't understood how large the magnitude is in terms of the need to get beyond partisan ideas right so i second adam in his suggestion that the body needs to get beyond its current thinking because we are in a serious problem that over time could become a catastrophic problem but it could become a manageable problem if we would have smart and sound public policy let me just say that ethanol was not a sound and smart public policy and so therefore in thinking about what we need to do we need to think comprehensively because we are importing between twelve and thirteen million barrels a day of oil our imports last month were thirteen point five million barrels a day of oil and ultimately that volume is so large and it is going to grow so much more that coming up with these little solutions that help somebody's district is not going to solve the problem so we need to move away from false choices right we need to come up with concrete policies we need to both curb demand growth we need to increase what i call the substitutability one of the reasons why you are having a hearing on oil and gasoline and not on electricity is because we have many different fuels we use to generate electricity in this country and none of them are oil right that was something that was a positive future substitutability in certain areas we need to do that in transportation transportation is now one hundred percent or ninety nine percent oil based we now see the emerging technology where we could diversify that right and if we look at the wonderful projections that the doe and others have done we know that something like seventy five percent of the increase in world demand for oil is going to come from the transportation sector now getting at this issue between drilling versus demand the reality is and rice university spent two years going into the sec filings of all the american oil companies and i welcome you to have your staffers to come to the web and look at that study the reality is that between two thousand and six and two thousand and seven the five largest oil companies only increased their exploration spending by ten percent i mean that is pretty shocking i could understand that in two thousand or two thousand and two when we all said geez they should be spending more they felt cautious about how much of their cash flow to spend over the last year it seems kind of amazing i think all of you are important people in your own right in your own areas if you were the chairman of a company and saw the commodity price for your entity rising the way it has i would think that you would have increased spending a little bit more right  second thing that has happened in the last year is not only did the majors not increase their exploration spending dramatically though in fairness to them they did make some big boosts in two thousand and six but remember costs have gone up one hundred percent so even if they are increasing fact saudi arabia announced within the last few months that they are freezing their expansion plans and that they are happy with their plans to go to twelve point five million barrels a day by two thousand and nine but their previous plans to add new fields to go to fifteen million barrels  day seem unnecessary so they are not going to continue with those plans in addition if you look at the research and development spending of our five largest oil companies that are collecting one hundred and sixty dollars billion in operating cash so again in an age where we need new technologies and a new investment we are not getting the momentum now just a couple of quick facts we have done simulations if the offshore continental shelf was open to drilling without restrictions we could expect a seven or eight percent rise in natural gas production so that is about one point five trillion cubic feet higher day if we could get our cars in america to average fifty miles to the gallon that would mean we could shave six to seven million barrels a day off demand by two thousand and twenty five  so in summary we have seen other countries have more effective energy policy japan is a leader now in automotive technology instead of closing factories they regulated their industry and also gave them r and d tax breaks to make sure that the cars that they would be selling now would get thirty to fifty miles to the gallon thank you very much the chairman we appreciate it very much ms jaffe and you'll have plenty of opportunity in the question and five chapters and forty five groups around the country that makes us the largest grassroots environmental organization in the country before i start i am a little confused as to how i should begin i have come to some of these hearings before and i know a lot of times witnesses open by hailing issues one is gas prices and the second one is access to resources here in the united states a lot of the members have mentioned this and some of the panelists have mentioned it too that we all know americans are paying a record amount of prices for a gallon of gas over four dollars a gallon it is disappointing when you consider that we were first put on notice about gas prices almost forty years ago in the first arab oil shock and it is disappointing from our perspective to see that thirty five forty years later we are still dependent on fossil fuels  l natural gas and coal and in addition to pandering about the red sox i have got to talk about myself a little bit more i am a greek american and my parents love quoting the ancient greeks like homer but in this case i have to quote homer simpson so i am not making the first for a pretty aggressive drilling for the last thirty five years is again four dollars for a gallon of gas if we are truly addicted to oil and gas as president bush said in a recent state of the union address we clearly think the answer is not to seek a bigger fix by drilling in special places like the arctic refuge or off of our coasts and off of our beaches in looking at the arctic refuge in particular the energy information administration admitted or released a report last week that mentioned that peak production which wouldn't be until two thousand and twenty seven the effect on prices at the pump if any would be a few pennies from drilling in the arctic refuge so we don't think drilling there is the solution or would reduce prices by contrast the eia research indicates that clean energy and energy efficiency technologies could do ten times more to help reduce our dangerous dependence on foreign oil and fossil fuels the same example holds true for the outer continental shelf if you look at the eastern gulf of mexico in particular which is kind of an area of highest industry interest only about nine hundred and thirty million barrels of oil thought to be in that area again against current rates of consumption that is just not much oil certainly not enough oil to again reduce the price of gas that consumers pay at the pump again looking at the ocs a vast majority eighty percent of the nation's undiscovered technically recoverable oil and gas is located in areas that are already open for drilling according to the department of the interior ms solis mentioned that in her opening statement that even if we drilled everywhere in the united states we wouldn't have enough supply to impact prices or to  help consumers at the pump finally on access again many of the opening statements mentioned how the oil companies have access to quite a few areas both on and offshore a new report by the natural resources committee here in the house opec it is also influenced by speculation increases in demand in asia and china and india and by a weak dollar and again we don't think leasing and drilling is going to solve that problem this year there have been two huge leases held in the chukchi sea and in the gulf the early s the u s has produced almost ninety billion barrels of oil since then so we have tried drilling our way out of the problem and it just hasn't worked we think now this new congress is going to take steps to solve the problem last year under the leadership of mister markey and other members congress did pass increases in fuel economy standards for the first time there are many innovative programs being offered this year by members of congress to get us off fossil fuel and use more renewables and we think that is clearly the best way to go when looking at the energy policies so when we look at the future of oil we hope that we really see a future of clean renewable energy and energy efficiency programs we really are optimistic that america can innovate our way out of this problem and instead of doing the failed policy of the past which is again more and more drilling everywhere here in the united states thank you mister manuel very much and our final witness is karen harbert the president and managing director of the institute for st century energy she has been an assistant secretary for policy energy supply is fundamental to our future national security and the expansion of american economic opportunity and prosperity america needs a comprehensive common sense energy policy with a long term view and durable policy and fiscal commitments is no surprise to tell you all that we do not have that now it will take unprecedented political commitment from the congress and the executive branch better partnerships with local and state governments and much improved relationships with the private sector we need to be honest about what it is going to take we need to stop penalizing demonizing regulating and picking winners we need to instead stimulate investment incentivize and innovate solutions to address the greatest threat to the st cent difficult they are in places that are politically unstable and they are unfriendly to new investment national oil companies own fifty to eighty percent of the world's proven oil reserves energy sector exploration and development costs have risen and yet the share devoted to exploration has fallen are seeing growing resource nationalism around the world we don't have enough energy professionals we don't have enough equipment and nimby is a thing of the past we are now on to banana build absolutely nothing anywhere near anything and even nope not on planet earth not on planet earth that is an unsustainable path to sustain our economic competitiveness if we want to do that we are not running out of resources that is simply untrue we are running out of access to the resources the international energy agency estimates we have six trillion to seven trillion barrels of conventional oil in place around the world our u s geological survey estimates that we have three point three four five trillion recoverable barrels around the world and if you take out what has already been produced that leaves anywhere between one point five trillion to three five trillion barrels of oil still available but we have to be able to open markets we have to be able to have transparent trade and we have to have fair market pricing of energy and we need to capitalize on our resources here at home the us is still the largest producer of energy but we still have significant resources that the congress and the executive branch have put off limits for exploration our minerals management service estimates we have one hundred and thirty nine billion barrels of undiscovered oil here in the united states eighty percent of the outer continental shelf is off limits that part alone if we would just use that part of the oil we would have actually a thirty five year supply of gasoline for our cars we would have heating oil for the millions of homes in the next hundred of years we are depriving the american consumer of choice and opportunity may there was a gallup poll that demonstrated huge change in public opinion forty one percent used to believe that drilling off our coast and in wilderness areas should be off limits fifty seven percent now support it we need to listen to the american people and their pocketbooks we need to develop a comprehensive plan and we need the comprehensive plan to embrace the following concepts we need to increase and diversify supply we need to increase our suppliers we need to improve energy efficiency that is the next best source of energy is the one we currently waste we have to accelerate technology development and deployment and invest in it with regularity and predictability we have to increase the use of alternatives and renewable sources of energy yes we need to improve our environmental stewardship we have to modernize our infrastructure it is not enough to get the hydrocarbons if we can't get them to where they need to be and we have to exert international leadership we need it all we must allow for increased domestic oil and gas supplies we have to recognize the role of nuclear power an emissions free source of power we need clean coal we need to use the two hundred and fifty years of coal we have here we have to emphasize energy efficiency and renewables we have to update our aging energy infrastructure we have to be better environmental stewards and we have to develop and deploy those clean technologies that will improve our trade imbalances and that will not conflict with fuel demands we can build safe emissions free nuclear power plants and we can drill responsibly on and off of our shores but we have to inform the public and policymakers with due respect about the huge challenge we are in the choices we have and the urgency of this matter we have to consider the tradeoffs the costs and the feasibility and viability of what we are proposing we need less rhetoric we need more facts there is no single solution no single fuel we must embrace all sources i would like to leave you with the thought that the decisions we make this congress makes the next congress and the next president those decisions we make in the next few years we will be with those decisions for generations to come we need to take it responsibly seriously the stakes are enormous for our competitiveness and for our national security and we at the institute for st century energy look forward to being a constructive and integral part of the deliberation this country desperately needs thank you the chairman thank you ms harbert very much and now we will turn to questions from the select committee of oil is going to go below fifty seven dollars a barrel in two thousand and sixteen and then even further out you are predicting that the price of a barrel of oil is going down  seventy dollars a barrel by two thousand and thirty so on the one hand america believes that we are in an energy crisis and i think that all of us really feel that but your projections are in and sixteen the price will be pretty much cut in half and by two thousand and thirty it really gets even better because these are constant dollars how can you explain that it doesn't make any sense to people that the price of oil is released several months ago and they are only one of a number of scenarios that we look at the chairman but the problem with that is that  and thirty so if you give them that number then the cost benefit of course is much lower in terms of the benefit to america the higher the prices if you were projecting four dollars a gallon or five dollars a gallon well then  is free to increase by five or six or seven miles per gallon the efficiency of the vehicles by two thousand and thirty so your number is very relevant because it goes right to the question of the pressure which is going to be way off i don't think it is even remotely close to where the price of oil is going to be and it has a profound impact then on all the other decisions which are made mister caruso well the point is well taken that nhtsa does use the reference case we do give them the high price case which in nominal dollars goes to one hundred and eighty dollars in two thousand and thirty the chairman would you recommend mister caruso that the department of transportation used the high case scenario in planning for what the efficiency basis for their planning as to what the efficiency of the vehicles that we drive should be mister caruso well of course that is obviously the prerogative of nhtsa but we are on the higher price path right now if you would ask me today what i would use i would use useful guideposts but you cannot make concrete policy decisions based solely on forecasts the chairman well if we are not going to be basically learning from what is going on right now in our economy with these high prices the testimony about india dollars a barrel they have it lower than that in the out years okay so again this is a big problem that we have in terms of what the bush administration continues to propose in the long run for what we have to do as a society in order to protect ourselves my time has not running out of oil you said that we need to look at what is out there and where the resource is on the acres that are available and then you talked about the importance of being able to get to those resources and you said that if the resources  lands that are essentially locked up those are the lands that need to be released i take it then that you believe that there are lands where we have locked up the supply and cannot get to them at the current time is that correct  said and i thought it was important that we may be reaching a point where we have a problem getting to the acres where the supplies are are there some that you can identify mister sieminski yes sir we know that there is natural gas off of the coast of florida it has already been discovered and it is not being produced because of environmental concerns that seem to me to be overreacting mister shadegg the last legislation that failed in that issue if i am correct  proposed that we would not allow a natural gas well to be closer than fifty miles from the shore and that was found to be objectionable because of sight pollution do you happen to believe that you can see fifty miles out into the ocean and  there is concern about environmental concerns and i think every witness acknowledged those i would certainly acknowledge those do you know what happens at a natural gas rig where there is a leak and have there been any leaks at natural gas sieminski well this is one of the factors that pains me when i think about this is in talking with a county representative elected county representative that have been friends with for years in the tallahassee area i said can you convince your constituents to think about looking at this gas field you are going to need it in florida we have a power problem as amy mentioned we could very easily have electricity shortages three four five years from now natural gas is going to be the only way to do that natural gas is clean if you do have a spill it is not going to foul the beaches in florida the pipelines could come in underground so nobody would see them and yet the reaction of his constituents seems to be that they are afraid that it is going to hurt the tourism industry and i am frankly more concerned that the tourism industry will be hurt by brownouts in florida than it is going to be hurt by drilling the gas that we know ms harbert said that she thought that if we explored the outer continental shelf went after the oil and natural gas there we would have a supply of thirty five additional years i believe just in natural gas i will ask her in just a moment do you agree that the supplies are in that quick comment on that the idea that it is only a small proportion of our energy needs when you look at it over an annual basis or over a period of time i think is really missing the whole point i get management service we have one hundred and thirty nine billion barrels of undiscovered oil reserves in this country of that one hundred and thirty nine eighty six are in the outer continental shelf which means that sixty two percent of the nation's resources for oil are in the outer continental and eighty seven point eight two trillion cubic feet of natural gas that is just in the lower forty eight in the outer continental shelf i want to switch to oil shale the united states congress the house just less than a year ago put a mor on oil shale the chairman mentioned that he thought the predicted supply of oil shale was in the neighborhood of one trillion barrels of oil shale in place i have heard a figure as high as one point eight trillion can you tell us about oil we could get from oil shale ms harbert there is a tremendous potential in the midwest but unless we actually have an incentive out there for the companies that are out there to develop the technology to actually be able to produce this even more cleanly and better without an opportunity to explore there is no opportunity to develop the technology there are several companies including shell that are out there that have developed the technology to extract three times the size of saudi arabia's resources out of that area but if you can't open it up who is going to develop the technology which is hugely expensive to do this in an environment be senator mccain or senator obama would you recommend that they do that behind closed doors in secret or do you think it should be a transparent open policy am head of a statistical agency and we believe in transparency and openness so i certainly think that works best mister larson do you think that that in part and parcel is a problem with the american public when they as everyone is working toward solutions that when you do things behind closed doors in the dark of night that it seems to the american people especially when you come from a background of oil yourself that somehow not you personally but the vice president that somehow these things aren't transparent mister caruso i am obviously not familiar with mister larson is there anyone on the panel who doesn't believe that we shouldn't have a more open and transparent policy with respect to our energy policy ms jaffe i would just like to add to that that there is a tremendous amount of disinformation that goes out to the public on the factual indisputable technicalities of oil and gas  and to the extent that people feel the need to fulfill what they think their constituencies want to hear and they go on cnn and tell the public something that is factually incorrect that makes the work of everybody on this panel ten times harder one of them in talking about this was going through the notion that you can't explain why oil went up eleven dollars a barrel i think it was harbert who said that are the laws of supply and demand suspended and isn't it the fact that the dark markets have taken over in terms of speculation is speculation part and parcel of what is driving the cost of oil up artificially so that we can't from a policy perspective get our arms around this sieminski if i could try a quick answer to that the eleven dollars move that we had last week two of the factors that played into that were one an outage on a significant natural gas pipeline in australia that has raised the demand for distillate fuels in that country to keep their mines open so the metals mine mister larson the funny thing is my constituents when i go back home and talk to them they say how is it that something happens and then immediately the next day  prices go up in gasoline or in any kind and yet when things happen where they say demand is less the prices stay the same they don't come down are the laws of supply and demand suspended and is the industry at they may need to be and the cftc ftc and department of justice are meeting tomorrow in their first task force meeting to look at that issue mister larson after more than two years of our pleading that they do so but it still doesn't answer the question of the dark markets and their ability to be unregulated and to speculate on what is happening and drive these costs up people in my district call that economic terrorism that is something we ought to be making sure wholeheartedly but in the meantime as my grandfather would say trust everyone but cut the cards we not only need to cut the cards we need a new deal here ms jaffe we also need to think more flexibly about how and when we use these strategic petroleum reserves and the i stockpiling system this administration unlike previous administrations has said that the spr is off the books except for national war emergencies and we are not using a tool that we have that was used by the clinton administration to cap speculators out of the market so we haven't looked at that we haven't debated it i would guess from my long experience in watching the way as adam put it market sentiment has determined that if the markets felt that some player with strategic stocks was going to come in and possibly make a release they would be a little less confident about buying the market long the chairman the gentleman's time has expired the chair recognizes the gentleman from using oil natural gas and coal i think he said or sort of the evil energy sources of the united states and that we need to wean ourselves off of those sources my question for you and for mister caruso is what is the practicality of that do you replace them with and how soon could you do that ms harbert for the benefit of our economy and our national security we want to reduce our dependence on any single fuel in this case it happens to be oil we do need a diverse supply however it is unrealistic to think that we will not have hydrocarbons as a very large part of our future for the foreseeable future and we need to figure out how to make that a stable secure supply we need to find new places where that exists we want to have control over those so they exist right here at home and so we have to be able to use our oil our gas our coal responsibly we have the technology to do that mister walden all right mister sieminski we have heard a lot about the dark markets and the effect of speculators on price about three years ago or so i actually led an effort asking the government accountability office to investigate those markets and they produced a rather lengthy report and recommended some changes in those markets and i think there is a certain element of speculation that drives up price but i thought you made a pretty good point about why the speculators are in those markets is what you were saying is that has a lot to do with the fact that we lock up most of our new resource been reacting all that much to prices so i think that we are involved in a very painful economic experiment to try to find out what price is required to get supplies to rise and demand to go down as far as the dark markets are concerned let me make three comments  attended a meeting at the commodities futures trading commission yesterday i listened very carefully to the testimony there the cftc is very concerned about three major areas the over the counter trading which doesn't have the same reporting requirements overseas the staff at the cftc has actually looked into a number of these things and so far from the data that they have they don't think that there are big issues there i am all in favor of switching the light on the dark market work with on the trading desk are all in favor of transparency i don't think there will be a monster in the room when the light goes on mister walden all right then if that is the case then it really does get back to a supply and demand curve now i don't know about anybody else i drive a hybrid here and i drive a hybrid back in have increased my mileage by sixty percent in oregon and doubled it here not everybody has the luxury of investing in a hybrid i don't know how many of you shop at wal mart i get in there about once a week back in my hometown there are a lot of wal mart moms and a lot of diesel truck driving dads that are having a hell of a time making ends meet and that is the case and mister manuel i have heard from the sierra club on this issue of no new drilling anywhere it won't help us anyhow and i have to tell you i am coming down more on the side that says access to proven reserves in america creates american jobs american energy and it will have an effect on price over time so i am going to have to respectfully disagree with you but it wouldn't be the first time because i know your group doesn't want us to cut any trees in the national forest either so we let them burn but that is another subject for another day but i want to get back to this issue mister sieminski if congress were to act to open up the ocs or anwr or shales or tar sands if we were just to pass a law knowing that we wouldn't actually extract those resources for ten or twenty years do you think the simple act of congress saying we changed america's energy policy would have an effect on markets and speculators mister sieminski yes sir i do i think that as i said during the course of my first remarks it is the sentiment that matters right now everybody in the oil markets is making this assumption that demand isn't going to go down and supply is going to be fixed if we can change that thinking and changing that thinking would be look we are going to open up the  going to start building nuclear power plants five years for the next twenty years and we are going to pass even stricter fuel efficiency standards on automobiles than we did before and even do things like the light bulbs i mean that is not the wrong thing to do that is like jaffe if everyone in the country telecommuted one day a week starting tomorrow we would save twenty percent of our oil use mister walden and that is great except i represent a district that is seventy thousand square miles where you don't pull a horse trailer w about commuters i am just talking about commuters mister walden we are all representing the people we represent and i don't disagree and i have supported telecommuting efforts and funding in my district i think it is wonderful but i am saying there are a lot of other folks out there in real america that can't do that that their costs of commuting now are higher than their mortgage costs and they lived in a different town because the housing costs were cheaper these are real people going upside down in this country and we don't want to do anything about it here  we have in the latest outlook incorporated the new law so we have about a forty percent increase in miles per gallon in this two thousand and eight outlook  we haven't specifically run a scenario where we took a much larger increase but we have done improved technology cases which try to simulate that so there are about thirty different cases in our long term outlook that try to simulate different policy changes and economic conditions mister hall thank you very much that is good and i have noticed that every state that has had for instance a renewable energy standard including texas where our president signed one for ten percent res when as president of the united states as governor i should say governor of texas he signed one as president he has been unwilling to sign one for the whole country but the state of texas exceeded their ten percent and has eclipsed california now as the largest installed wind capacity state in the country so there is some evidence that when you put a goal out there americans it with electricity or with transportation fuels or vehicles indeed the chevy volt i was just reading which will be coming out next year or the year after that will basically have a an electric car that will have an internal combustion engine for the purpose only of charging the batteries the lithium ion battery bank which will drive the vehicle and they say on long distance travel it is a commuter vehicle which will run on electric for commuter distances of one hundred miles or less on intercity or long distance travel it will average one hundred and fifty miles per gallon based on technology they have that they are bringing to market in the next couple of years toyota just announced i think yesterday or the day before a car that they are planning to release that will get five hundred miles to the gallon so i think we are going to see an exponential growth in efficiency as well as in substitute power for transportation which is a good thing because we need the liquid fuels for air travel for a considerably longer time i think as we figure out how else we might be able to fly if the overall market  article i think it was in the new york times about the impact on different areas of the country of fuel prices for instance the southern and more rural districts where trucks are in heavier use and they tend to be old and very inefficient it had a map with different colors it was really interesting and it made me think that perhaps we should be trying to help those states and those districts where people have historically driven straight away at constant speed which are being made currently by gm and ford in this country anyway i just want to make a comment about substitutability which i think you mentioned  jaffe when i was in israel i was pleased to learn about a company there that is making electric vehicles and interchangeable batteries and their concept is you pull into a service station and rather than charging your battery they just take one out and put another newly charged one in hook up the wires and you drive away in a few seconds as opposed to taking a few minutes to fill your tank with fuel and i am wondering if anybody has considered this sort of thing at least in commuter jaffe one of the things i think the israeli government said when they announced that program was that they really feel that they are sort of meeting global needs that they have a small country and it is easy for israeli commuters to do that because they don't drive more than two hours you know from one end of the country to the other three hours but that would have applications in large cities it would have a great application in manhattan a great application in a place like singapore or even in some other larger u s cities where you have a very dense population that has a limited geographic area that they drive we actually did the calculation back when gasoline prices were three dollars that if today i could plug in my car because i houston i live what we call inside the loop and i really never go more than ten or fifteen miles a day i could have spent two cents a mile if i could have plugged my car into my house and not bought gasoline versus say seventeen cents a mile at that time so there really is an advantage and there is this advantage for us in terms of national security if you can imagine our either getting cut off by the middle east or having a major hurricane in the gulf coast that knocked out refining and we suddenly  had a temporary hiatus in the ability to have enough gasoline if some americans could plug in i mean then some people would be able to drive without recourse to gasoline then the need for rationing or the kinds of things we saw in  the energy issues i talked to people on this panel other members of congress on both sides i think we all agree that when we look at some way some comprehensive energy plan to reduce prices to lessen the emissions in th we have to look at it from a multi pronged approach many different approaches it is not just one thing and you know one of the things we need to lessen our dependence on foreign oil we need to maybe use less oil and gas that is true we need to look at alternative energy sources wind solar nuclear all those things are very very important i think a lot of people ms harbert even talked about that others have talked about that on this panel but right now we are getting a lot of  said that really disturbed me that i think was less than truthful is that we don't have any gas and oil here to explore here in the united states you said that and i can tell you right now i got a thing here and i will give it to you but we have just in the offshore in the pacific offshore we have ten billion barrels of oil we could get here in our own backyard we also have eighteen trillion cubic feet of gas that is in the pacific offshore alaska have twenty seven billion barrels of oil that we could get and we have one hundred and thirty two trillion cubic feet of gas on the atlantic offshore we have four billion barrels of oil and thirty seven trillion cub feet of gas offshore gulf we have deep water forty five barrels of oil two hundred and thirty three trillion cubic feet of gas in the lower forty eight inaccessible and these are inaccessible the government says it is against the law to do we have twenty billion barrels of oil in the lower forty eight onshore and one hundred and sixty two trillion cubic feet of gas and what i am saying is until we develop the technologies that we can do other things why do you think it is so wrong to get some in our own backyard do you prefer that we go to the mideast to get it or outside this country why is it so wrong to get it here while we are developing those technologies so we can get prices down  point out i said that the u s has about two to three percent of the world's proven oil reserves i didn't say we had none on the contrary i pointed out that we have opened up thousands and thousands millions of acres to new oil and gas drilling in the last thirty five three years later the shah of iran fell and iranian oil became off the market our prices went sky high even though we had opened up the largest oil field in the united states there is no historical data to show that opening up individual fields in the united states has had any impact on the price of sullivan you wouldn't agree that this is part of the puzzle though when we look at multiple issues that we have to look at to address our energy issue you don't think this is part of the puzzle to address that as we develop the technologies where we can move to other types of energy you don't think that we should do that  from multiple approaches we are going to try to wean ourselves off gas and oil we probably will move toward that direction as technology develops but what do you think we should do in the meantime ms harbert we need to responsibly exploit the resources we have here at home you know play the home team play to our advantages we are investing now right now less in research and development than we did after the arab oil embargo we have to get serious and invest in advanced technologies we have to streamline permitting for energy infrastructure we have plenty already here in the united states to address this and that while we are in this gap looking for ms harbert well energy demand is forecasted to go up by thirty percent in this country we don't have the same amount of growth in production planned for this country so there is a growing gap between supply and demand that has to be met somehow mister sullivan okay also on the markets you mentioned the speculation and all of that there may or may not be some in the price of crude oil but probably is a little bit if energy future stable and i think everybody agrees with that the other one is that we need to encourage innovation to develop a stable and reliable energy future personally i believe that energy efficiency is our best resource and there was some very impressive testimony for example mister caruso said that our current cafe standard of thirty five miles per gallon would save two million barrels a day and ms jaffe said that fifty miles per gallon will save six  caruso well we think that as the chairman mentioned that if we can bring consumption down in this case two million barrels a day and increase supplies speculative fervor so i will say just factually u s demand for oil is down four percent this year versus last year and part of what you are trying to do is create an atmosphere where people see that as a long term trend line and they start to trade oil with that mentality in mind mister mcnerney do you think a six point seven million barrel per day savings in our oil consumption would lower the price of gas substantially ms jaffe yes i think it would make a substantial lowering of the price you know you mentioned a couple of things also that i think were interesting the strategic petroleum reserve using that to reduce the speculation in the market do you have a specific proposal and how effective do you think that would be well let me give you a specific example there was a period of time and i can't remember what the risk factor was in the market but when secretary richardson did a quote unquote test sale of the spr and the effect it had at the time because prices were sort of creeping above forty dollars a barrel and it spooked people in the market briefly and prices went back down into the s what happen then is every time the price would subsequently get to thirty nine dollars or something like that people would automatically naturally assume that the spr might be released again and so they would take their profits at a certain number mister mcnerney so this is a very effective tool that is in the hands of the administration that is not being used in fact it is being forbidden from being used it has been taken off the table by the administration ms jaffe by taking it off the table the administration has not only meant that you could trade up with impunity has also discouraged opec because if you are opec and you know that we might use strategic stocks then it behooves you to raise your production because you might as well get the money whereas if we release the spr the treasury gets the money so it has had a negative very careful about using the strategic petroleum reserve just solely looking at the price alone the obvious exceptions to using the strategic petroleum reserve that the administration did not use was the strike in venezuela if you actually have a shortage of oil caused by something like a strike or an accident or weather using the spr at that time and not only ours but the product inventories in europe it makes a lot of sense doing it for price alone i think takes you down a path  gasoline from european strategic stocks of gasoline and if the outage had lasted longer they were not going to lend to us a second time we do not require oil companies in this country to carry a minimum  that is required in asia and that is required in europe had we had that requirement then the buildup in prices we get every spring would be less likely to happen part of what causes the speculative run up in gasoline prices in the spring is we need to attract imports because we can't manufacture to meet demand when the companies don't carry inventory if we have an accident like the venezuelan strike that accidentally lowers inventories we never catch up and that is reflected immediately in the pump price mister mcnerney now another thing you discussed i  liked the idea was substitutability you compared the electricity market to the transportation market but the way you envision substitutability applying in the transportation market what would be the carbon footprint impact of that  compared to the current supply for the transportation market ms jaffe this is what we need to think through we know that there is a problem in the power generation sector because we are so heavily reliant on coal but we need to have what i call an infrastructure paradigm shift so over time if we bring cars that have substitutability so we bring some cars that can work off electricity right now we have different things some things in the supply stack for electricity are clean and some things aren't but if then over time we can move our policies so that we move to things like more distributed energy like say we all had better technology for solar rooftops then you could plug in your car and it would be in california i thank the chairman and i am indebted to the gentleman from a washington mister inslee for allowing me to take this set of questions now let me begin by saying that i agree with mister sullivan that parts of the area of the map that he showed us that are currently inaccessible are a piece of the puzzle and i hope that he agrees with me that biofuels production is also a piece of the puzzle and so i would like to explore with administrator caruso the issue of biofuels production and the testimony that we received on april st of this year from executives of the big five oil companies four of the five that testified acknowledged that increased biofuels production has reduced oil and gasoline prices although they didn't agree with the magnitude the analysis that i raised with them that i want to raise with you now comes from a march th article in the wall street journal reported that francisco blanch an analyst at merrill lynch who has concluded that oil and gasoline prices would be fifteen percent higher but for the expanded production of biofuels so my question mister caruso is has the eia calculated the degree to which increased biofuels production has lowered oil and gasoline prices in the united states what impact that may have had on gasoline prices and our conclusion was somewhere i think in the ten to zero dollars fifteen cents per gallon reduction in the price of gasoline that we believe can and why is that mister caruso we haven't been asked to we try to use our resources as best we can ms herseth sandlin i would look forward to talking with the chairman at greater length about a formal request in light of some of the analysis that we think currently exists that the eia could supplement as it relates to the positive impact of increased biofuels now you did say that in your testimony what are the key reasons for your triggering both waivers and a modification of applicable volumes such that the overall rfs target in two thousand and twenty two will be reduced from thirty six billion to thirty two billion gallons what are the key reasons for that testimony and what level of confidence  eia have in an analysis that is explicitly very uncertain mister caruso well i agree that we should start off by how much uncertainty there is about that technology and that is one of the reasons we make every year and i think congressman inslee in his opening remarks mentioned a few of these areas where very significant changes can take place ms herseth sandlin so would you be willing to provide the committee the full analytical basis for the administration's inflexibility as it relates to using the spr in a more strategic manner i met with propane marketing from south dakota yesterday the hedging tools that they typically use simply aren't an option for them anymore and i know that in addition to utilizing the spr more strategically they actually called for higher margin requirements and some of the other commodity folks that i represent farmers ranchers grain elevators they actually have proposed the idea of making the traders take delivery of a percentage of the commodity that they are trading could you comment on either of those options yeah i think that it is important to have financial clearing for the futures market for oil the whole purpose of having a futures market for oil is to have a smooth and transparent way that buyers and sellers can meet and have transparent and role academics have done studies that show that having a functioning futures market actually lowers volatility not the other way around but within that spectrum we are in a very unusual market today where people's perceptions about the dollar the rising price of oil has become sort of a circular self fulfilling motion we are getting to the point where the dangers of an overinflated bubble in  these facilities are a much larger danger to the average american than a normal market and so under those situations it is important to have regulatory bodies looking at it and if it just a mania right we have had another market it is just a mania people just believe it is going higher so it does go higher we still want to think about things we can do to slow that down and one option is to tighten the amount of  help our people who are taking it in the chops with four dollars a gallon gas first the short term it is clear that we have seen this movie before it was the enron debacle we lived through it with one thousand percent price hikes in thirty days with electricity because the market was broken and it is clear that the market is broken now and you know you just listen to some unlikely sources a quote from  speculation you probably have a problem and that is why we have to get these dark markets regulated it is very disappointing the administration has refused to do so and i look forward to the passage of bart stupak's bill that i am helping him on in fact bring the regulatory destruction of these speculative markets we have seen this movie before now that is the short term i want to ask mister caruso about the long term because in the long term it is clear to me that we have decarbonize our transportation sector largely as soon as possible or we are going to be stuck with these prices for a long long time and when i think about the predictions of the future mister caruso you told us about some predictions alternatively fueled vehicles that is hybrids it also includes turbo diesels and flexible fuel vehicles or e those are the three now the point you made earlier about plug i hugely expanded if congress will act we got to the moon in ten years in ten years this country got to the moon right now our policy can't even get to cleveland we have got to have a more aggressive policy and i think we need to be much more paper came up by a professor at stanford just a couple of weeks ago mark jacobson he is the professor of energy resources at stanford he said that using today's technology today's technology without technological advances if we build about one hundred sounds like a lot right but in four years we built three hundred zero airplanes because we had to do it i think that all of us need to raise the level of our ambition from that forty five percent to a much higher number much more quickly i believe the technology is there to do it by two thousand and eleven we are going to have plug in hybrid cars mass produced in the united states something no one would have predicted five years ago the lithium ion batteries are making huge strides forward we have potential commercialization of something that can be fifty times more productive than corn based ethanol or algae based gasoline and even biodiesel taking place i just point out that i just believe that the only way for r and d we have no cap and trade system to create a demand and unfortunately president bush has been against it we have no renewable portfolio standard we have no feed in tariff we have no building standards congress and the next president two we really had not hit the oil peak there are some who believe that the movie that i just saw about three weeks ago when the well that is happening all over the world right now in ethiopia in particular people are dying not to mention what is going on in the sudan but the food prices have caused a worldwide panic all of it is  depicted in a movie but we know that oil is finite and there are some including some big names in the oil industry who believe that we hit an oil and we know we have to take carbon out of our fuel system and because we know that it makes it different anyway right the way we would handle let's say we have a recession and we have a global recession and demand for oil goes down the price will come down right i mean that is one scenario that could happen right and i know there are a lot of people who feel that won't happen again but that does not change the reality that the oil reserves are finite at some point and it doesn't change the reality that a lot of the oil we have left to produce is in places like venezuela saudi arabia and iran right but the bottom line is we know that we want to decarbonize our economy solutions are the same so it really doesn't matter whether one thousand nine hundred and seventy three it is exactly the same or not exactly the same the reason that it is different is we know we have to do something for a variety of reasons not just national security but even environmental reasons we know we have to do something different we know that the lead time on scale up is decades not months and so that is why we have to start now mister sieminski mister cleaver you are absolutely right we have seen this movie before we saw it in investment r and d and especially what we need to do this time i think is enhance our science and engineering capabilities so that the technology will come out to take care of some of these problems i really don't think it is speculators that are driving up the oil price i think it actual fear of shortfalls in the coming years and we need to take steps now to turn that psychology around i think we can this is not a horror movie with a bad ending it has got a good ending we just need to move along financial services we are holding a hearing today on whether or not congress should enact legislation that would require hud to construct energy efficient public housing units and we are in a battle  because some folks don't think that is the direction we ought to go and it is just amazing that if somebody took footage of our hearing they could use it in a futuristic movie listening to all the people give reasons why we shouldn't do this would like to ask that the testimony submitted by carl michael smith executive director of the interstate oil and gas compact be entered into the record the chairman without objection that document will be included in the appropriate place in time in the history of the united states relationship with oil and other energy sources and we are going to go in reverse order of our original testimony so we will begin with you ms harbert your best one minute if you would ms harbert congratulations on this hearing we need more deliberate discussion on this very complex issue it is important to recognize there is no single solution there is no short term fix there is no panacea so we in partnership with the american people have to address this in a very comprehensive way and a very urgent manner we need a short term medium term and long term view on this we have to remove restrictions on our resources here at home we have to get serious about investing in our research and development we have to invest in the next generation of leaders scientists engineers so we can continue to have the intellectual feedstock that we need to sustain our competitiveness over the long term we actually have to make available the fiscal resources so that we actually incentivize the investments to be made in this country rather than in other countries we need to open up ourselves for that investment in innovation in this country that we are not doing we have to make sure that we have predictability regulatory predictability that we have fiscal predictability so the business community can make long term capital investments in these very complex capital intensive projects in this country i am an optimist we have a lot of venture capital money going into this we need to sustain that so we can actually win energy efficiency programs renewable energy clean energy programs and fuel economy we think ultimately that is the way the country really needs to go and do so quickly we didn't learn our lesson from the past and we continue to think we could drill our way out of the problem and we just encourage congress to lead so my one minute message is that foreign oil producers and countries whose interests are not the same as the united states are exploiting our lack of political will to gain power at the expense of u s national security and our flexibility in international relations there are many short term things we can do the senate has addressed some of those things but when push comes to shove given the challenges that are facing us both in energy and climate we need a serious research and development program in this country both in private industry and in government we need to not only think about how we tax corporations to get them to spend more on r and d we need to think about how we raise public funds to spend more on  r and d and let me end with an optimistic note i work with eighty one nanotechnologists they are working on solar energy they are working on better transmission systems they are working on wind power all kinds of very interesting technologies that i agree had we said we were going to the moon but only put in one hundred dollars million to spend to do that we would never have got there and so we need to think about how we are going to come up with the money to do the kind of r and d we need we have the people and we have the will the chairman we thank you very much and we know you are from rice university in houston and the same way that we want you to say houston we have a problem and that was the space program i think we can say the same thing now about our energy program we thank you for being here mister sieminski mister sieminski thank you just two points there have been tons of research done and investigations already underway that have shown that the futures markets are not being manipulated and so what i would suggest as a first recommendation is that we be very careful about taking steps immediately to curtail trading activity when what we really need is to cast light on the so called dark market so let's get the information first and then act rather than the other way around second point is i really feel that direct controls on prices or profits are going to give you the wrong answers to the crisis that we are facing now unfortunately and painfully the high prices are actually what is encouraging solar and wind growth by meeting these needs through using energy more efficiently definitely more economic environmentally consciously but also to develop all forms of energy resources there is no single solution as a number of our panelists have said so we need to facilitate investment in all forms of energy and research and development and innovation as has been mentioned this is not a short term solution we need to recognize this is a large scale long term solution and it is going to take time the chairman thank you mister caruso very much and we thank  each of our witnesses this is a very important hearing it is a very timely hearing because it really goes to the question of where are we today and what do we have to do in order to avoid the most catastrophic consequences of this huge amount of high priced oil that we are importing from around the world if we do not have a plan then clearly there is going to be an incredible price that our economy is going to have to pay so whether we are talking about using the strategic petroleum reserve as a weapon against the speculator against the manipulators we have to do that and president bush has refused to do that whether it is ensuring that the cftc the commodities futures trading commission looks in at these dark markets finds out upon these price increases and going forward long term we have to have accurate projections because much of what goes on inside the federal government much of what happens in the private sector is dependent upon the long term projections of the bush administration at this time and its energy information administration what we are seeing over the last five or six years is that there has basically been about a fifty cents lag between what the administration says the price of gasoline is going to be and then what it winds up being in year after year and that it has a tremendous impact not only upon consumers but upon what the mandates that we would then impose upon especially the automotive industry to increase their fuel economy standards we again put seventy percent of all the oil we consume in america into gasoline tanks and we only have two percent of the oil in the world that is our weakness now our strength is technology and that is the weakness of the middle east that is their weakness so if we don't use our technology based upon what is a realistic assessment of what the long term price of oil is going to be then we are ultimately going to be subservient to the geopolitical whims of the middle east by the way when president bush went to  saudi arabia just three weeks ago and asked them to produce more oil that we could consume in the united states that is a pretty sad moment in our history but what was even sadder is that after the saudi arabians said that they would not produce more oil they then asked us to provide them with nuclear power plants for saudi arabia and condoleezza rice and president bush said yes to that request now of all the countries in the world that need nuclear power and all the nuclear equipment and the materials that go with it saudi arabia is the bottom of that list they have more oil more gas more solar more wind in combination than any other country in the world and they have a very small population why would the bush administration be agreeing to a deal that will have us sell nuclear power plants into saudi arabia iraq north korea and all those nuclear power plants and their dual use purpose for nuclear bomb programs continue to haunt us that is a sad state of affairs for us it is a very sad state of affairs and very dangerous it will get us even more deeply in trouble in the middle east ten years and twenty years from now and so it is time for the bush administration to get more realistic the energy  completely unrealistic it is off the mark and off the point as every other projection that has been made in this decade and it as a result will diminish our ability to improve our technologies so that we can tell the middle east that we don't need their oil any more than we need their sand and right now we still cannot deliver that message because we are operating in a delusory environment where the bush administration is not getting real with what is happening this is no longer the opec people deliberately saying no more oil it is no longer the shah of iran falling this is now structurally the indians and the chinese and others who are going as each year goes by and we have to change the technologies and our relationship to technology in our country and because of the bush administration the agency responsible for determining how efficient our automobiles have to be in two thousand and fifteen two thousand and twenty and two thousand and thirty they are going to be able to set standards at five six seven miles per gallon lower than where they should be by the way the legislation which we passed in december the democrats in the first we import on a daily basis from the persian gulf that is the difference a change in technology can make but you have to have realistic data because now the bush administration's department of transportation is going to implement the standards that are put in place pursuant to that law which we passed in december and so all of this is interrelated no question about it when you are talking about oil you are talking about transportation because that is where we put it this is again very central to the dilemma which we have the democrats came back in after being out for twelve years it is the first thing we did but the bush administration had plenty of opportunity in their first six years to put those standards on the books the republican congress ha every opportunity to improve the fuel economy standards of our vehicles they never did it and so as we go forward we have to think of this as an opportunity to create a new generation of jobs a new economy in our country green collar jobs yes but they are really the blue collar jobs of the past the blue collar power building the wind mill the solar the new technologies that will slowly but surely wean us away from this incredible mess that the middle east is now and is very likely to become even worse in the years ahead we thank all of you for your testimony here today it is very helpful to us because it is going to help us to begin to chart a course where we help the american consumer to stop being tipped upside down at the gas pump and having money shaken out of their pockets every single time they refill thank you so much