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61–637 2010

PUMPING UP PRICES: THE STRATEGIC 

PETROLEUM RESERVE AND RECORD GAS PRICES 

HEARING 

BEFORE THE

SELECT COMMITTEE ON 

ENERGY INDEPENDENCE 

AND GLOBAL WARMING 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

APRIL 24, 2008 

Serial No. 110–34 

( 

Printed for the use of the Select Committee on 

Energy Independence and Global Warming 

globalwarming.house.gov 


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SELECT COMMITTEE ON ENERGY INDEPENDENCE 

AND GLOBAL WARMING 

EDWARD J. MARKEY, Massachusetts, Chairman 

EARL BLUMENAUER, Oregon 

JAY INSLEE, Washington 

JOHN B. LARSON, Connecticut 

HILDA L. SOLIS, California 

STEPHANIE HERSETH SANDLIN, 

South Dakota 

EMANUEL CLEAVER, Missouri 

JOHN J. HALL, New York 

JERRY MCNERNEY, California 

F. JAMES SENSENBRENNER, JR., 

Wisconsin, Ranking Member 

JOHN B. SHADEGG, Arizona 

GREG WALDEN, Oregon 

CANDICE S. MILLER, Michigan 

JOHN SULLIVAN, Oklahoma 

MARSHA BLACKBURN, Tennessee 

PROFESSIONAL STAFF

GERARD J. WALDRON, Staff Director 

ALIYA BRODSKY, Chief Clerk 

THOMAS WEIMER, Minority Staff Director 


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C O N T E N T S 

Page 

Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachusetts, opening statement .................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. F. James Sensenbrenner, Jr., a Representative in Congress from the 

State of Wisconsin, opening statement .............................................................. 5 

Hon. John Hall, a Representative in Congress from the State of New York, 

opening statement ................................................................................................ 5 

Hon. John Shadegg, a Representative in Congress from the State of Arizona, 

opening statement ................................................................................................ 6 

Hon. Jerry McNerney, a Representative in Congress from the State of California, opening statement .................................................................................... 7 

Hon. Jay Inslee, a Representative in Congress from the State of Washington, 

opening statement ................................................................................................ 7 

Hon. John Larson, a Representative in Congress from the State of Connecticut, opening statement ................................................................................ 8 

Hon. Stephanie Herseth Sandlin, a Representative in Congress from the 

State of South Dakota, opening statement ........................................................ 9 

Hon. Earl Blumenauer, a Representative in Congress from the State of Oregon, opening statement ...................................................................................... 9 

Hon. Emanuel Cleaver II, a Representative in Congress from the State of 

Missouri, prepared statement ............................................................................. 11 

WITNESSES

Ms. Melanie Kenderdine, Associate Director, Strategic Planning, MIT Energy 

Initiative ............................................................................................................... 12 

Prepared statement .......................................................................................... 15 

Mr. Mark Cooper, Director of Research, Consumer Federation of America ....... 24 

Prepared statement .......................................................................................... 26 

Mr. Dave Berry, Vice President, Swift Transportation Company, Inc., Chairman, Energy and Environment Policy Committee, American Trucking Association .................................................................................................................... 41 

Prepared statement .......................................................................................... 43 

Answers to submitted questions ...................................................................... 95 

Mr. Kevin Book, Senior Vice President, Senior Analyst, Energy Policy, Oil 

& Alternative Energy, Friedman, Billings, Ramsey & Company, Inc. ............ 51 

Prepared statement .......................................................................................... 54 

Answers to submitted questions ...................................................................... 104 

Dr. Frank Rusco, Acting Director, Natural Resources and Environment, GAO 64 

Prepared statement .......................................................................................... 66 

Answers to submitted questions ...................................................................... 110 


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PUMPING UP PRICES: THE STRATEGIC PETROLEUM RESERVE AND RECORD GAS 

PRICES 

THURSDAY, APRIL 24, 2008 

HOUSE OF REPRESENTATIVES, 

SELECT COMMITTEE ON ENERGY INDEPENDENCE

AND GLOBAL WARMING, 

Washington, DC. ÷ 

The Committee met, pursuant to call, at 10:00 a.m., in room 

2212, Rayburn House Office Building, Hon. Edward Markey (chairman of the Committee) presiding. 

Present: Representatives Markey, Blumenauer, Inslee, Larson, 

Herseth Sandlin, Hall, Sensenbrenner and Shadegg. 

Staff present: Morgan Gray. 

The CHAIRMAN. Good morning, and welcome to this hearing by 

the Select Committee on Energy Independence and Global Warming on the subject of Pumping Up Prices: The Strategic Petroleum 

Reserve and Record Gas Prices. 

This summer families all across America will pile into their cars 

to take their vacations. Unfortunately, as a result of nearly eight 

years of the Bush administration’s energy policy, they will face gas 

and oil prices that are skyrocketing out of control with no end in 

sight. 

Earlier this week oil reached yet another all-time high, trading 

above $119 per barrel. The price of oil has risen by $100 a barrel 

since President Bush took office. American consumers are paying 

the price at the pump for this administration’s failed energy policy. 

They are being tipped upside down by the big oil companies. They 

are being tipped upside down by OPEC, with money being shaken 

out of their pockets at the pump every day across America. 

Gas prices have more than tripled over the last six years. The 

price of a gallon of gas jumped 12 cents in just the last week alone, 

and more than a quarter in the past month. American families are 

now paying $3.53 per gallon every time they fill up, and the Department of Energy projects that gas may reach $4 a gallon by this 

summer. 

And what has been the Administration’s response to this energy 

crisis? Well, earlier this week, Energy Secretary Bodman said, ‘‘I 

have done everything I know how to do with OPEC.’’ Rather than 

taking action to help consumers, it seems that the Bush administration’s response is to throw up its hands and to say that there 

is nothing to be done. 


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Well, there are things that can be done. Earlier this year, the 

House passed legislation that would redirect $18 billion in tax 

breaks for big oil to promote renewable fuels and clean energy. 

However, the Bush administration continues to oppose this legislation that would move us away from a fossil fuel future and help 

provide consumers with long-term relief from high oil and gas 

prices. 

Democrats in the House have passed four bills this Congress to 

address high prices and break our dependence on oil. This administration has answered with tax breaks for big oil and tough breaks 

for American consumers. The Bush administration is ignoring actions that would provide consumers with relief right now. 

The United States currently purchases 70,000 barrels of oil every 

day to fill the Strategic Petroleum Reserve, which already contains 

over 700 million barrels and is roughly 97 percent full. By law, the 

Strategic Petroleum Reserve must be filled ‘‘as expeditiously as 

possible without incurring excessive cost or appreciably affecting 

the price of petroleum products to consumers.’’ 

With the price of oil at $119, removing 70,000 barrels of oil a day 

from the market to build the Reserve is both incurring excessive 

cost for the Federal Government and affecting, in a negative way, 

runaway oil and gas prices. Based on projections by the Bush administration’s own Department of Energy, ending the fill of the Reserve could reduce prices by about $2 per barrel of oil and 5 cents 

per gallon of gas. 

Not only should the Bush administration stop filling the Reserve, 

it should also release oil onto the world market as a weapon to end 

escalating prices. These two actions would send a strong signal to 

speculators and to OPEC that Americans won’t be held hostage by 

high prices. 

Earlier this month, the number two executive at Exxon Mobil 

testified before this Committee that speculation, along with geopolitical instability and a weakening dollar, was responsible for 

half of current oil prices. That based only on oil supply and demand, the price of a barrel of oil should be only $50 to $55 a barrel. 

However, President Bush continues to refuse to use the Strategic 

Petroleum Reserve to pop the speculative bubble. The Bush administration is willing to deploy our National Guard Reserves in Iraq, 

but it refuses to deploy our oil reserves to protect consumers and 

our economy. 

If President Bush were to announce his intention to release oil 

from the Strategic Petroleum Reserve today, it would put an immediate end to the speculative feeding frenzy that is driving up prices. 

Releasing oil from the Reserve is something that can be done to 

help American families this summer. It is high time that the Bush 

administration does it. 

Now I would like to turn to recognize the Ranking Member of the 

Select Committee, the gentleman from the State of Wisconsin, Mr. 

Sensenbrenner. 

[The prepared statement of Mr. Markey follows:] 


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Mr. SENSENBRENNER. Thank you very much, Mr. Chairman. I am 

not going to make a partisan rant this morning, because this is a 

serious problem and it should rise above partisanship. 

Sometimes administrations have tapped the Strategic Petroleum 

Reserve effectively. Sometimes they haven’t done it and there have 

been consequences. Sometimes they have done it and it has been 

ineffective. Sometimes they haven’t done it and it has been effective. And I don’t know whether tapping the Strategic Petroleum 

Reserve or not is going to help or have no effect on the cost of high 

gas prices here in America. 

What I will say is that the problem that we face is one of lack 

of supply. And the Chairman referred to the hearing that we had 

earlier this month where either the CEOs or their representatives 

of the five major domestic oil companies came to testify. And in my 

five minutes of questioning, I asked them point blank, what would 

be the single most important thing that Congress can do to lower 

prices of gas at the pump? And every one of them said ‘‘increase 

domestic production.’’ 

Now, what has this Congress done? We have voted down every 

effort to increase domestic production. We have taxed or taken 

away tax credits for domestic production, which was referred to by 

the Chairman, which means it is cheaper to buy oil from OPEC, 

because we have taxed domestic production so high. 

Now, it seems to me that the time has come to quit the partisan 

shots and to start going back to Economics 101. We do need to increase the supply of petroleum. Tapping the domestic petroleum reserve, or not filling it any further, is going to be literally a drop 

in the bucket compared to the huge amount of oil that is used both 

in the United States and worldwide. 

But I think that we ought to start looking at serious issues relative to this, rather than trying to get sound bites on the network 

news. And I hope this hearing will allow us to get serious. 

I yield back the balance of my time. 

The CHAIRMAN. Great. The gentleman’s time has expired. 

The chair recognizes the gentleman from New York State, Mr. 

Hall. 

Mr. HALL. Thank you, Mr. Chairman. I was recalling a hearing 

myself, and it was interesting to hear the CEOs of the five top oil 

companies, as the Ranking Member said. Their main recommendation was to increase domestic production. It just happens to be production of the product that they make profits on, in fact record 

profits in the history of all industries in recorded time. 

We are, in fact, working on increasing domestic production of 

many other kinds of fuels to try to phase out the oil dependency, 

not just foreign but oil dependency in general, that is damaging the 

environment, damaging our balance of trade deficit, damaging our 

health, damaging the climate, damaging our standing in the world 

and our involvement—very costly involvement, I might say—in 

military conflicts in unstable parts of the world to secure those oil 

supplies. 

But everybody here knows that oil and gasoline has gone through 

the roof, already exceeding $4 in some parts of the country. We 

didn’t get into this hole overnight, and there is no silver bullet that 

will get us out of it immediately. I am proud that Congress has 


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acted to pass sweeping legislation to raise fuel economy, provide 

tax incentives for green energy development, and to establish a 

green collar workforce, so that we can get back to being a leader, 

being the leader in the world in energy and economic policy on the 

right track, rather than giving other countries a 20- or 30-year 

head start on such things as hybrid vehicles. 

People in my district talked to me, my constituents in the 19th 

District of New York, talked to me about how much they want to 

do and what they can do. From the students—high school students 

at Arlington High School in Dutchess County, New York, who recently put together plans for a solar system on the roof of their 

high school, and got half the money from New York State and I 

was able to secure the other half of the money in a private grant 

for them, to a local company that is making ethanol gas that they 

can spin a turbine with and make electricity, and also hydrogen 

that they can fuel hydrogen fuel cells from from municipal solid 

waste. 

There is such a wide range, not just solar and wind and all of 

the geothermal and the ones everybody talks about, but there are 

a lot of new sources of energy that are coming to play, and that 

with the proper subsidies and the proper investments and research 

and development dollars will come to play. 

So I would hope that that’s the direction that we will go in, and 

I encourage what the Chairman is suggesting—that for now in this 

crisis situation we stop purchasing oil for the Strategic Reserve. 

And I yield back. 

The CHAIRMAN. The gentleman’s time has expired. 

The chair recognizes the gentleman from Arizona, Mr. Shadegg. 

Mr. SHADEGG. Thank you, Mr. Chairman, and I would like to 

commend you for calling this hearing on gas prices and, more specifically, on what is pumping them up and what we can do about 

it. 

I want to begin by welcoming a fellow Arizonan and a personal 

friend, Dave Berry, Vice President of Swift Transportation. I believe you will find him to be very knowledgeable about the impact 

of high fuel prices on our entire economy, and I think—I know I 

am looking forward to his testimony, and I think it will be helpful 

to the Committee. 

High gas prices are an extremely serious problem for all Americans, American consumers and American businesses. And, therefore, it is important that we identify the reason for those high 

prices and, more important, that we do what we can to alleviate 

them. 

I think in this Committee I have repeatedly said they are a 

unique problem for those of us out West who drive great distances, 

both in commuting back and forth to work or in taking summer vacations. In many instances, much more travel, much more driving 

time, and much more mileage than those who live in the East. 

I would suggest that gas prices are most appropriately addressed 

by looking at the relationship between supply and demand. During 

the last 25 years, world energy demand has increased by 60 percent. The Energy Information Administration predicts that demand 

in the United States alone will grow by 19 percent through 2030. 


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I wholeheartedly agree, as the Chairman knows, with his sentiment that we have to find alternative forms of energy. But every 

single expert that has been before this Committee, and that I have 

talked to, has said that at least in the short run we are looking 

at an oil-based economy. At least for today. We are talking about 

the price spike in gasoline over the last 60 to 90 days, or, at most, 

over the last 12 months, which has been stunning and has had a 

dramatic impact on our constituents. 

I don’t think that alternative forms of energy are going to go at 

that issue, and so we are looking at whether or not speculation has 

driven up the demand. One issue here today is: could we deal with 

that speculation by addressing the SPRO and perhaps releasing 

some fuel from it? 

I would suggest that a much greater signal in the wrong direction has been sent to speculators by all of the potential sources of 

oil that we have locked up in this country and made unavailable, 

on the outer continental shelf and the inner mountain west, in 

coal-to-shale or shale-to-oil programs, and that we have sent, at 

least in the short run in this Congress, by refusing to adopt policies 

that would open up our domestic supply, even where it can be done 

in a very rational and safe way, the wrong signals, which have 

driven up the cost of gasoline for our consumers dramatically in the 

short run. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Okay. The gentleman’s time has expired. 

The chair recognizes the gentleman from California, Mr. 

McNerney. 

Mr. MCNERNEY. Thank you, Mr. Chairman. I want to thank the 

witnesses for agreeing to testify here today. Many of the issues 

that we consider in Congress are topics that the average person 

may not—may only rarely consider in their daily lives. But I can 

tell you, the issue we are discussing today, people are watching, 

they are interested in. 

You can ask any commuter in my district or around the country 

how much it cost for them to fill their tank with gas the last time, 

and they will tell you the exact number. And they will tell you how 

much more it was than they paid the week before. So this is an 

issue that is affecting everybody’s lives in this country. 

And in our current economy, oil and gas do drive progress. And 

whether you are just going to the beach or you are driving to work 

on a Thursday, high gas prices are a constant consideration. Given 

the recent increases in prices, and the prospect for this continuing, 

I am hopeful that the panel today can shed some light on the importance of the Strategic Petroleum Reserve, how we might be able 

to lower the price of gasoline by manipulating what goes in and 

what does go in the SPR. And I am looking forward to your testimony to help us understand that. 

And with that, I yield back. 

The CHAIRMAN. Great. The gentleman’s time has expired. 

The chair recognizes the gentleman from Washington State, Mr. 

Inslee. 

Mr. INSLEE. Thank you. I think there are four things we can do 

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ministration has done zero out of those four, and we are here to 

talk about them. I just want to outline them. 

First, we can do something with the SPRO to send a signal to 

the speculators, which are a significant part of the reason for the 

runup in these prices. We heard Exxon Vice President Simon tell 

us that speculation was a significant part for the reason for these 

extraordinary volatile prices. What we can do is send a message to 

the speculators that we are going to stop at least increasing the capacity of the SPRO, and the reason is is when your house is on fire 

it is more important to get the hose than an additional policy of 

insurance. 

And that is the situation right now. We need some water. We 

need less insurance. At the moment, that is clearly something we 

should do. That is the first thing. The administration has refused 

to do it. 

Second, we should clearly bring in the over-the-counter market 

for oil futures into the jurisdiction of the Commodities Future 

Trading Commission. We have these markets transparent and open 

and regulated in oranges, soybeans, wheat, sorghum, but not oil 

and gas. It is insane to have such a fundamental part of our economy open for the wild west speculation that is going on right now 

and driving up these prices. That is number two. The administration has refused to help us. 

Third, Senator Cantwell and I have called for the formation of 

a task force in the Justice Department to send a signal again to 

the markets of the seriousness to follow the law and have transparency in these markets. That is the third thing the administration has failed to do. 

The fourth thing is the long-term, and what the American people 

understand, that all of the things we are going to talk about today 

are short-term. They are not permanent fixes to this problem. The 

permanent fix to this problem is found in groups like a couple of 

people I met in my office yesterday. They are the leaders of the 

Phoenix Motor Car Company, who are going to bring an all-electric 

car to market in June from Ontario, California, that you can drive 

on all electricity for 120 miles for $3 for 120 miles. That is the solution. The administration refused to help us move in that direction. 

We have got to do all four. Thank you, Mr. Chair. 

The CHAIRMAN. Great. The gentleman’s time has expired. 

The chair recognizes the gentleman from Connecticut, Mr. 

Larson. 

Mr. LARSON. I want to thank the Chairman and thank the witnesses for being here this afternoon. Let me follow on with the reasoning of my esteemed colleague from Washington State. At a previous hearing, we have heard from a number of executives in the 

oil and gas business around this whole issue of speculation. 

The independent Connecticut Petroleum Dealers Association tells 

heart-rendering story after story of citizens who receive their Social 

Security checks turning around and handing them over to them. 

They say that the rules of supply and demand no longer apply with 

respect to this issue. That, in fact, it is speculation and greed that 

is driving the cost up at the pump, and clearly in the area of home 

heating oil. 


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These rock-rib Republicans from my district have said that what 

needs to be done is that what we need to do is focus on this speculation and require that unless, in fact, you are the recipient of the 

commodity you would not—you shouldn’t ought to be able to use 

the declining dollar as a way to transfer paper or continue to speculate in such a manner that it raises the cost of gas at the pump 

or home heating oil that is distributed to your home. 

I am interested in hearing from all of you, and concur with my 

other colleagues’ outlining of the issues that confront us. 

The CHAIRMAN. Great. The gentleman’s time has expired. 

The chair recognizes the gentlelady from South Dakota, Ms. 

Herseth Sandlin. 

Ms. HERSETH SANDLIN. Thank you, Mr. Chairman. Thank you for 

having this important hearing, and I thank our witnesses for testifying. 

To reiterate some of the important points made by some of my 

colleagues, I represent the entire State of South Dakota, a very 

rural State, and so you can imagine the impact that record gas 

prices are having on families and businesses across the State. 

While we have been one of the leaders in biofuels production, 

that it has had a moderating influence on the gas—price of gas, upwards of 15 percent as we have seen in some analysis that we explored with oil companies—company executives that generally 

agreed, although they didn’t think that it was upwards of at least 

15 percent that ethanol has been able to, again, moderate the price 

that we would see otherwise if we didn’t have ethanol production 

today. 

But I do think it is important, as we explore with our witnesses 

today the other impacts—I have long advocated in times of record 

gas prices, whether it was last year, the year before, or now, that 

we not continue to add oil to the Strategic Petroleum Reserve to 

help alleviate some of the market pressures. 

But I would also like to explore with the witnesses today the impact of our domestic refining capacity, as well as how we develop 

a plan for the SPR in light of the projected effects of last year’s energy bill and the standards that we put in and what that is projected to save us in terms of imported oil over time. 

So, again, I thank the Chairman and the witnesses, and look forward to their testimony. 

The CHAIRMAN. Great. The gentlelady’s time has expired. 

The chair recognizes the gentleman from Oregon, Mr. 

Blumenauer. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. I, too, welcome our 

witnesses, look forward to some thoughtful interaction. 

It is important that we focus on three things, in my judgment. 

One is making sure that we have a transparent and fair market, 

look forward to exploring that. Second is being sensible about what 

the Federal Government itself does. It is not just the Strategic Petroleum Reserve, but how we, as the largest consumer of petroleum 

in the world, for our military and other actions, do the best possible 

job of stretching that resource. 

And, finally, with the work of this Committee, look comprehensively at how we are going to deal with rebuilding and renewing 

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tenced to buy—if they want to buy a gallon of milk that they have 

to burn a gallon of gas, because of how we organize our communities, the limited transportation choices that people have, and how 

we have failed in terms of promoting more technology. 

Mr. Chairman, I appreciate what you have done with this Committee, looking at the big picture, not just as we are today with one 

piece of it, but how all of them fit together. And I look forward to 

our progress in looking at that bigger picture as we go on. 

Thank you. 

The CHAIRMAN. I thank you. I thank the gentleman from Oregon. 

That completes the time for opening statements for the members 

of the Select Committee. 

[The prepared statement of Mr. Cleaver follows:] 


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Mr. CHAIRMAN. I note that we have a guest, Mr. Welch from 

Vermont, who is sitting in today, and we welcome you, sir, to the 

hearing. 

Let me now turn to our first witness. Our first witness is Ms. 

Melanie Kenderdine. She is the Associate Director of Strategic 

Planning for the MIT Energy Initiative. She has had a long career 

as well at the Department of Energy before that. 

We welcome you. Whenever you are comfortable, please begin. 

STATEMENTS OF MS. MELANIE KENDERDINE, ASSOCIATE DIRECTOR, STRATEGIC PLANNING, MIT ENERGY INITIATIVE; 

DR. MARK COOPER, DIRECTOR OF RESEARCH, CONSUMER 

FEDERATION OF AMERICA; MR. DAVE BERRY, VICE PRESIDENT, CHAIRMAN, SWIFT TRANSPORTATION COMPANY, INC., 

AMERICAN TRUCKING ASSOCIATION; MR. KEVIN BOOK, SENIOR VICE PRESIDENT AND SENIOR ANALYST, ENERGY POLICY, OIL, AND ALTERNATIVE ENERGY, FRIEDMAN, BILLINGS, 

RAMSEY AND COMPANY, INC.; AND DR. FRANK RUSCO, ACTING DIRECTOR, NATURAL RESOURCES AND ENVIRONMENT, 

GAO 

STATEMENT OF MELANIE KENDERDINE 

Ms. KENDERDINE. Thank you, Mr. Chairman. Mr. Chairman, Mr. 

Sensenbrenner, members of the Committee, thank you for giving 

me the opportunity to testify today. 

While the SPR is our primary line of defense in the event of an 

emergency oil supply disruption, each day the current RIK program 

pulls 70,000 barrels of oil off tight markets, at a time of record high 

prices and volatile geopolitics. Attention to market conditions and 

the willingness to act in a more flexible and creative manner could 

achieve the same result but enable lower cost options for filling the 

SPR, as well as help address other key energy priorities. 

The purposes in implementation of the original RIK program in 

1999 provides an example of such creativity. In late 1998, oil prices 

hit historic lows. While moderate oil prices are good for consumers, 

extremely low prices, shut-in wells, decimate the workforce, particularly in the oil-producing regions of the country, and destroy 

the technical infrastructure of the industry—impacts that lead to 

lower supplies and higher prices in the future. 

To help mitigate these adverse impacts, the Clinton administration established the RIK program. This provided a market outlet 

for domestic oil in a glutted market and enabled DOE, without the 

need for new appropriations, to replace 28 million barrels of oil in 

the SPR that had been sold two years earlier, largely at the direction of Congress, simply to generate revenues. 

The current RIK program is operating under market conditions 

that are precisely the opposite of those that the original program 

was established to exploit. In fact, two energy secretaries, in both 

Democratic and Republican administrations, elected to pursue the 

path of do no harm with the RIK program. Secretary Richardson 

in 2000 and Secretary Abraham in 2003 deferred deliveries under 

the RIK program for fear that removing even small amounts of oil 

from the market would increase prices to consumers. 


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Another authority where creativity and flexibility can and should 

be employed is exchanging oil to acquire oil. We first used this in 

a significant way to establish a home heating oil reserve in the 

Northeast in 2000. Chairman Markey was a major supporter of 

that effort. The rapid stand-up of this reserve, absent appropriations to do so, was accomplished by using this authority and cost 

us no money. 

We also conducted a time exchange of oil in September of 2000 

when heating oil inventories in New England were 72 percent 

lower than in the previous winter. On September 22nd that year, 

the President directed the Secretary to conduct a time exchange of 

SPR oil, in effect loaning the market 30 million barrels of oil. 

The results were immediate. Spot prices dropped by almost 20 

percent. By the end of the year, actual oil prices had decreased by 

34 percent, and there was adequate heating oil supplies for the 

winter. Importantly, this exchange of 30 million barrels of oil ultimately returned over 35 to the Reserve, or a 17 percent interest 

payment on that loan. At today’s prices, this equates to an additional half billion dollars of oil in the Reserve at no cost to the taxpayer. 

The energy bill passed last December established the foundation 

for alternative energy security pathways. Conservative estimates 

are that by 2022 provisions in that law will reduce net oil imports 

by well over two million barrels per day, in effect increasing the 

insurance value of the SPR without adding any additional oil to the 

Reserve. 

Between now and then, however, we have to meet what I call the 

80/80/40 challenge—replacing current—the current 80 percent fossil fuel consumption with 80 percent carbon-free or carbon light energy, renewable energy, and sequestration, to avoid the doubling of 

CO2 emissions in approximately 40 years. That 40 years also 

roughly equates to the time it will take us to turn over the energy 

infrastructure. 

Replacement cost of that infrastructure is estimated to be $12 

trillion. To do this, we will need to find new ways to finance key 

energy technologies and research. Total energy R&D investment in 

both the U.S.—in the U.S., both public and private, is estimated to 

be around $5 to $6 billion a year. And, according to GAO, DOE’s 

total budget authority for energy R&D has dropped by over 85 percent since 1978. 

I offer, without advocating, three options for your consideration. 

First, an outright sale of 40 million barrels of oil from the SPR 

would generate around $4.5 billion in new revenues. That could 

help pay, for example, Congressman Inslee’s Apollo project. 

This would have the added benefit of lowering prices to consumers. Notwithstanding attacks that this would diminish our energy security, I note that this would reduce the amount of oil in 

the SPR to around 660 million barrels, roughly 60 million barrels 

more than was in the Reserve when we went to war in Iraq. Presumably, that was deemed sufficient to go to war in the Middle 

East. 

Or, second, temporarily suspend the current RIK program, and 

forcing the sale of that oil into the open market could provide at 

least a billion new dollars to fund key energy research programs. 


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And, finally, exchanging 50 million barrels of sweet crude in the 

Reserve for heavy oil in the open market, if done correctly, could 

net roughly $500 million without reducing the overall volume of 

the Reserve by a single barrel. This, combined with the roughly $590 million currently in the 

SPR account, would also provide an additional billion dollars for 

energy research at no cost to the taxpayer. 

The CHAIRMAN. If you could please summarize. 

Ms. KENDERDINE. Yes. In closing, sir, the current policy of taking 

royalty oil in a continuous flow, regardless of market signals, ignores many of these lessons. It is a waste of taxpayer dollars to put 

oil in the Reserve at today’s prices when futures markets offer the 

same oil at a lower price 12 months from now. 

Thank you very much. 

[The prepared statement of Ms. Kenderdine follows:] 


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The CHAIRMAN. Thank you. We very much appreciate that. 

Our next witness, Dr. Mark Cooper, is the Director of Research 

at the Consumer Federation of America, and has testified many 

times on these subjects before Congress. 

Welcome, Dr. Cooper. 

STATEMENT OF MARK COOPER 

Mr. COOPER. Thank you, Mr. Chairman. I appreciate the opportunity to testify on this important issue. 

We estimate that over the past six years household expenditures 

on gasoline and motor oil have more than doubled, rising by over 

$1,200. In a recent national poll earlier this month, we found that 

73 percent of respondents are greatly concerned about rising gasoline prices, and 60 percent are greatly concerned about Mideast imports. Thus, the pocketbook and national security implications of 

our oil addiction, which are the subject of this hearing, are top of 

mind for consumers. 

Our research shows that current high gasoline and oil prices are 

the result of a long-term combination of an international crude oil 

cartel and a tight domestic refining oligopoly, both of which have 

systematically underinvested in production capacity. By failing to 

expand production capacity to meet demand and provide a reasonable reserve in an industry with very low elasticities of supply and 

demand, and that is prone to accidents and disruptions, they have 

created tight and volatile markets from which they profit. 

While crude oil is the largest component of gasoline costs, there 

have been months over the past five years when the domestic 

spread, the amount that domestic refiners and marketers take at 

the pump, has been over $1 per gallon. That is domestic $1. 

Moreover, the tug of war between OPEC and the domestic refining industry over the extraction of consumer surplus has pushed up 

prices. The U.S. gasoline market accounts for about one-quarter of 

all the gasoline consumed in the world and is by far the largest single product market in the oil sector. As U.S. refining margins increase, OPEC receives the signal that the market will support 

higher prices, and, as a rent-seeking cartel, pushes crude prices up, 

so that they get their share of the available rents. So crude oil 

pushes gasoline prices up, and U.S. gasoline prices pull crude oil 

up in a vicious anti-consumer spiral. 

Speculation has also played an increasing role in driving up the 

price of crude oil and gasoline, as huge influxes of money increase 

volume, volatility, and risk in those financial markets. A couple of 

years ago, the Senate Committee on Oversight Investigations concluded that speculation accounted for one-third of the oil price. 

That is something like $38, not too far off what the oil executives 

told you a few weeks ago. 

In a well-functioning market, steadily growing demand, which we 

have had in the world, does not cause this powerful surge of prices 

or this huge increase in volatility. It is the failure on the supply 

side to invest, the concentration we allow to afflict the domestic refining industry, and barriers to entry that have allowed the cartel 

and the oligopoly to profit at the expense of the public with speculators driving the process forward. 


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At best, our strategic petroleum policy does us little good. At 

worst, the failure to have a comprehensive policy makes matters 

worse. We refused to fill the Reserve in the 1990s when oil was $10 

a barrel, and we refuse to stop filling it when oil is $110 a barrel. 

That adds insult to injury. 

I don’t believe that SPR fill or drawdown will have a significant 

impact on prices in the long term. However, in the short term, 

under certain circumstances, fill and drawdown can in fact affect 

the speculative bubbles or short-term disruptions. 

Unfortunately, at its current size, the SPR is not a very credible 

source to execute those policies. We don’t have enough to credibly 

threaten the markets over a significant period of time. Size matters 

when it comes to the strategic stockpiles. 

Since 1990, our stocks of crude oil have declined by 40 percent 

from 200 days of net imports to 100 days. On a percentage basis, 

our gasoline inventories have declined even more than that. Does 

anyone in this room believe that the world oil market has become 

40 percent more secure in the last two decades? Not at all. Moreover, we do not have strategic refineries or a strategic product reserve when in fact refinery capacity and extremely tight gasoline 

inventories have been important causes of price increases over the 

past six years. 

The long-term solution to our oil addiction lies in reducing our 

consumption and increasing the supply of alternative transportation fuels. Congress took a big step in that direction with the Energy Independence and Security Act of 2007. But even if every goal 

in that Act is achieved, in 2022 we will still be consuming over 20 

million barrels and importing over 10 million barrels. We will still 

have a major national oil security problem and need a more effective strategic policy. 

Strategic petroleum policy needs to be dramatically improved in 

three areas. Expand the crude reserve so we can use it as an economic weapon. It is too small. We treat it as a pure military strategy reserve. Second of all, we should create a refinery reserve, because the oil companies have made it clear they will not build 

enough capacity in the U.S. to meet our needs. And, third, we need 

to build product reserves through a mix of public stockpiles and 

mandatory private reserves, which many European nations have. 

Thank you. 

[The prepared statement of Mr. Cooper follows:] 


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The CHAIRMAN. Thank you. Thank you, Dr. Cooper, very much. 

Our next witness is Mr. Dave Berry. He is the Vice President of 

Swift Transportation, Incorporated, the nation’s largest truckload 

carrier. Mr. Berry is also the Chairman of the American Trucking 

Association’s Environmental and Energy Policy Committee. The 

American Trucking Association represents over 37,000 American 

truck carriers. 

We welcome you, sir. Whenever you are ready, please begin. 

STATEMENT OF DAVE BERRY 

Mr. BERRY. Thank you, Mr. Chairman, and members of the Committee. My name is Dave Berry. I am the Vice President of Swift 

Transportation, a truck carrier headquartered in Phoenix, Arizona. 

Swift operates more than 18,000 trucks and employs more than 

21,500 hardworking, safe individuals. As a trucking company, Swift 

is dependent on a plentiful supply of diesel fuel. In fact, Swift purchases about 650,000 gallons of diesel fuel daily to ensure that our 

trucks are able to deliver freight on time to our customers. Last year, during the first quarter, Swift spent about $2.37 per 

gallon for diesel fuel. In this year, first quarter, we spent about 

$3.37 per gallon. This dramatic, 42 percent, year-over-year increase 

in the cost of diesel fuel is harmful to Swift and to the U.S. economy. I must add that earlier this week the national average price 

for diesel fuel was $4.14. 

Today, I appear before you representing not just Swift but the 

entire U.S. trucking industry. You have heard about ATA. The 

trucking industry is the backbone of this nation’s economy, accounting for more than 80 percent of the nation’s freight bill, and 

employing more than 8.5 million hardworking Americans. 

The trucking industry delivers virtually all of the consumer 

goods in the United States. We are an extremely competitive industry comprised largely of small businesses. Roughly 96 percent of all 

interstate motor carriers operate 20 or fewer trucks. 

Diesel fuel is the lifeblood of the trucking industry. Each year 

the trucking industry consumes over 39 billion gallons of diesel 

fuel. This means that a one-cent increase in the average price of 

diesel costs the trucking industry an estimated $391 million in fuel 

expenses annually. And every penny increase in both gasoline and 

diesel costs all U.S. consumers nearly $2 billion. 

The average national price of diesel fuel is now $4.14 per gallon, 

nearly double what it cost in 2004. Based on current Department 

of Energy forecasts, the trucking industry will be forced to spend 

an incredible $141 billion on fuel this year. This is $29 billion more 

than in 2007, and more than double the amount we spent four 

years ago. 

Today it costs approximately $1,200 just to fill up a truck. As a 

result of this dramatic increase in the price of diesel, which has coincided with the down turn in the economy and a softening of demand for freight transportation services, many trucking companies 

are struggling to survive. 

Against this backdrop, we greatly appreciate the opportunity to 

discuss the Strategic Petroleum Reserve and other initiatives that 

could help address the speculative bubble that has materialized in 

the petroleum market. 


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The remainder of my statement highlights actions we believe 

Congress can take to help restore balance to the petroleum market, 

increase supplies of petroleum, and lower the demand for petroleum. We are confident that these initiatives will help reduce the 

price of diesel fuel, which has been damaging the trucking industry 

and the economy. 

ATA has previously asked the Federal Government to temporarily stop filling the Strategic Petroleum Reserve and consider releasing oil from the SPRO to address this crisis. The SPRO currently stores just over 700 million barrels of crude oil, which is the 

equivalent of a 58-day supply of imported oil for our nation to—for 

our nation or a nine-day supply of the oil consumed globally. 

The U.S. currently deposits 70,000 barrels of crude oil into the 

SPRO each day. To suspend filling of the SPRO will reduce the 

global demand for oil and could help lower its price. There are undoubtedly many factors contributing to the runup in fuel prices, but 

in a recent article in Investor’s Business Daily, an economist with 

the Institute of International Economics suggested that one of 

those factors was the SPR’s renewed purchases of oil on the open 

market. 

ATA has also asked the administration to release oil from the 

SPR. While we know the SPR does not contain enough oil to permanently alter the supply of crude oil in the marketplace, we believe that strategic releases from the SPR could temporarily increase the supply of crude oil, and hopefully help restore rational 

behavior to the petroleum markets. This type of government intervention could drive speculators out of the market and help ensure 

that petroleum prices are once again driven by supply and demand. 

We acknowledge that the rules governing the management of the 

SPR are the subject of an international agreement with other developed nations. This agreement limits our ability to use SPRO to 

address market irregularities and may be an issue that Congress 

should further investigate. 

We believe that temporarily halting the filling of the SPR and releasing oil from the SPR could have a positive impact on the speculative nature of today’s petroleum prices. We recognize, however, 

that this step, in and of itself, will not address the long-term petroleum pricing issues. 

I have put comments—additional comments on the record. I 

would just summarize by saying that other things to consider 

would be increasing domestic oil exploration, increasing domestic 

petroleum refining capacity, eliminating the tax subsidies for exported biodiesel, and enacting a national fuel standard for diesel. 

Thank you. 

[The prepared statement of Mr. Berry follows:] 


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The CHAIRMAN. Thank you, Mr. Berry, very much. 

Our next witness is Mr. Kevin Book. He is the Senior Vice President and Analyst for Energy Policy, Oil, and Alternative Energy at 

Friedman, Billings, Ramsey and Company. In those senior roles, he 

evaluates the impact of legislative actions on investment opportunities within the energy sector. 

Welcome, sir. Whenever you are ready, please begin. 

STATEMENT OF KEVIN BOOK 

Mr. BOOK. Mr. Chairman, did you intend for me to go next or 

for—— 

The CHAIRMAN. Yes. 

Mr. BOOK. Okay. Great, thank you. Chairman Markey, thank 

you very much. Thank you, distinguished members of the Committee, for the privilege of contributing to your discussion today. 

The opinions I express this morning are my own and do not necessarily reflect the viewpoint of my employer. 

To summarize my remarks, as my testimony is—— 

The CHAIRMAN. And by the way, a graduate of Tufts and Fletcher School of Diplomacy in my district, so a very well educated—— 

Mr. BOOK. You were my Congressman for six years, sir, yes. And 

I enjoyed you very much. Thank you. 

The CHAIRMAN. Thank you. [Laughter.] 

Mr. BOOK. In my view, fundamental scarcity and geopolitical risk 

form the backdrop to today’s discussion. Each day the world consumes just shy of 86 million barrels of petroleum and refined petroleum products. The infrastructure that supplies this oil took nearly 

a century and a half and multiple trillions of dollars to evolve. 

In just the last five years, however, demand patterns have shifted dramatically. Since 2003, developed world oil consumption has 

remained essentially flat, while non-OECD demand has risen by 

approximately 18 percent. Simply put, the world’s emerging economies have entered into their energy-hungry adolescence. 

I don’t need to enumerate them here, but an unfortunate confluence of geopolitical risks threats the stability of existing supply. 

This year’s WTI futures prices averaged slightly more than $100 

per barrel. As has been mentioned repeatedly, this is a significant 

premium to most fair estimates of extraction costs in the Gulf of 

Mexico and the Canadian tar sands. The dollar’s decline against 

the Euro and other currencies may be partly to blame. Producers 

may charge higher prices to compensate for value erosion. 

Increased speculative activity may play a small role as well, although speculators may also have more of an effect on the velocity 

of oil prices than their absolute levels. Speculators aren’t the whole 

story. Commercial refiners of crude oil cannot operate their businesses without stable supply. They must bid up for oil at times of 

greatest perceived supply risk. In many commodity markets, this 

behavior can accelerate at capacity utilization levels above 90 percent. 

Three million barrels of global spare capacity and 86 million barrels of daily demand puts the global oil system at about 96 percent 

of capacity. And yet one well-conceived U.S. energy policy keeps refiners from engaging in bidding wars and hoarding oil—the Strategic Petroleum Reserve. The SPR primarily does ensure against 


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the risk of a catastrophic supply interruption. It provides other 

value, too. 

Refiners assured of supply can operate at lower inventory and 

working capital levels. Assurance of supply in the event of an 

emergency can deter hoarding and gouging by market participants. 

To quantify the safety value of the SPR, you can talk in storage 

levels of barrels. But it might be better to express it in terms of 

the days of import coverage provided—that is, the number of barrels of storage divided by the number of barrels the nation imports 

each day. 

Import cover has fallen from the 100-day range in 1990 to estimates, depending on how you count it, between 58, which I think 

we heard, and as high as 70, depending on what you think demand 

is. And there is a variety of reasons for this—deterred investment 

at low prices, conventional basis is declining, increased household 

wealth, transportation use rising as well. 

The suggestion I would make is that basing any fill decision on 

days of import cover, rather than absolute supply level, and using 

a thorough and ongoing assessment of supply risks might make it 

easier to determine fill rates and quantities and also easier to communicate that message and the importance of that message to the 

American people. 

Now, my view is that markets can sometimes provide useful predictions of future events, especially markets as big, liquid, and 

broadly traded as the oil market. And one might interpret $117, or 

even $100, oil as a risk premium that says maybe supply is riskier 

than we think, and we should continue to fill the SPRO. 

I realize that is not a popular view at this point in time. Suspending the fill may do little, however, to affect price as long as 

the emerging world drives oil demand. There are linkages worth 

noting. U.S. imports feed overseas manufacturing chemicals and logistics demand for oil. The wealth exporters aren’t selling into the 

U.S. stokes demand at home. Subsidies overseas make energy 

users less sensitive to price. Seventy-thousand barrels per day 

might quickly be absorbed with little or no price effect. 

U.S. circumstances can affect demand and global price. A serious 

recession—and hopefully this doesn’t happen—here could decrease 

demand by 300,000 to 400,000 barrels today, and an echo overseas, 

in China alone, could account for another 250,000 barrels per day 

in decline. 

Creating that surplus with a non-emergency drawdown could affect price, particularly the first time it occurs and especially if it 

happens with little or no fanfare and surprises the market. On the 

other hand, the price effect might be very small relative to the social cost of effectively burning the nation’s safety net in our gas 

tanks. 

Moreover, the price effect might be temporary, could be offset by 

demand growth, and OPEC cutbacks as well, and could even set 

commodity market expectations so that traders view the SPRO as 

just another upstream oil supplier. Now, you can’t run it full tilt 

for more than five months, as you know. And if you do, you are out 

of your safety net, refiners have to buy more oil, and OPEC has 

more market power. 


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So I think I would conclude by suggesting that there is risk that 

demand may start to soften of its own accord. There are also opportunities. One of these is that there is a real call now to build on 

the good work you did last year—the Energy Independence and Security Act—to add still greater standards. 

And when you make a cocktail, sometimes you marry two things 

that are bitter to come up with something sweet. And it has been 

suggested here today the notion that you can marry increased domestic energy production, including biofuels, which are a very big 

part of it, with increased conservation, I think might be the drink 

that cools the summer driving season in years to come. 

Thank you very much. I look forward to your questions. 

[The prepared statement of Mr. Book follows:] 


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The CHAIRMAN. Thank you so much, and thank you for bringing 

what you learned at Tufts about cocktails and energy policy—— 

[Laughter.] 

The CHAIRMAN [continuing]. To this hearing. They are an excellent metaphor. 

And our final witness is Dr. Frank Rusco. He is the Acting Director of Natural Resources and Environment for the Office of the 

Government—the Government Accountability Office. He has been 

with the GAO for 10 years and managed teams on wide ranges of 

issues in the energy field. 

We welcome you, sir. Whenever you are ready, please begin. 

STATEMENT OF FRANK RUSCO 

Dr. RUSCO. Thank you. Mr. Chairman, Mr. Sensenbrenner, and 

members of the Committee, I am pleased to be here today to discuss how to reduce the cost of filling the Strategic Petroleum Reserve, as well as reduce the effect that filling the Reserve is currently having on oil prices. 

The Reserve now contains just over 700 million barrels of light 

oil and has about 27 million barrels of available capacity that DOE 

is currently planning to fill in the near term. DOE has also been 

directed to create and fill an addition about 300 million barrels of 

capacity. With the price of light oil recently hitting almost $120 per 

barrel, this expansion could easily run into the tens of billions of 

dollars. 

Taking barrels of oil off the market to put in the Reserve puts 

upward pressure on prices. However, there is no consensus on the 

magnitude of that effect, and GAO does not have a position on 

that. 

In my testimony, I will discuss things DOE can do to reduce the 

cost of expanding the Reserve and to improve its effectiveness during oil supply shocks. I will also suggest something DOE could do 

in the near term to achieve both these goals while reducing whatever upward pressure on light oil prices it currently is putting. 

First, DOE has not, but should, put heavier grades of oil in the 

Reserve, because, (a) many U.S. refineries run most efficiently 

using heavier oil than what is currently in the Reserve, and (b) 

heavier oils are cheaper than light oils. 

Second, DOE should put fewer barrels of oil into the Reserve 

when oil prices are high and more when prices are low. This would 

save a great deal of money, and with record oil prices currently, 

there is no time like the present to act on this. 

DOE could achieve both of these goals by immediately swapping 

some of the light oil in the SPR for heavier oils. This would allow 

DOE to expand the size of the Reserve at lower cost, because each 

barrel of light oil can be traded for more than a barrel of heavier 

oil, and it would also improve the SPR’s effectiveness in the event 

of an oil supply disruption. 

Finally, it would have a dampening effect on the price of these 

light oils by putting them on the market now rather than taking 

them off. To elaborate on these points, our work indicates that 

about 40 percent of all crude oil used by U.S. refineries is heavier 

than what is currently in the Reserve. 


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Many U.S. refineries run most efficiently using these heavier 

oils, and, in practice, this means that during an oil supply disruption many U.S. refineries would have to operate below capacity if 

they used oil from the Reserve. This loss in capacity would reduce 

supplies of gasoline and diesel and exacerbate the economic effects 

of an oil supply disruption. 

DOE should put fewer barrels into the Reserve when prices are 

higher and more when prices are lower. One way to do this is to 

buy a constant dollar amount of oil each month rather than buying 

a constant number of barrels. This approach, commonly referred to 

as dollar cost averaging, is very similar to what many of us do 

when we put steady monthly contributions into our 401(k) plans. 

Going forward, our simulations show that because oil prices are 

typically volatile, using a constant dollar approach would save 

money as DOE adds to the Reserve, whether oil prices are generally rising or falling. 

DOE could get heavier oils into the Reserve by immediately 

using the agency’s existing authority to swap some of the Reserve’s 

light barrels for heavier barrels. DOE did a reverse swap in 1998 

when it traded the only heavy oil it had—about 11 million barrels—for eight million barrels of light oil. 

If DOE swaps some light oil for heavy starting in the near term, 

it would have three main effects. First, it would get heavier barrels 

into the Reserve, which is itself a desirable goal. Second, DOE 

could fill the remaining capacity at lower cost because a barrel of 

light oil trades for more than a barrel of heavy oil. And, third, 

swapping light for heavier barrels would put more light oil on the 

market now when light oil prices are as high as they have been in, 

well, recent history. 

To conclude, the Strategic Petroleum Reserve protects our economy from oil supply shocks. It has been useful in the past, such 

as in the aftermath of Hurricanes Katrina and Rita. Currently, the 

Reserve holds about 56, 58 days of net oil imports, but it will have 

to grow to maintain the same level of protection, if demand for oil 

continues to rise. 

However, we have a large reserve now that can protect the economy from any but the most extreme supply disruptions. This allows 

us some flexibility to be smarter about how we add oil to the Reserve. Our work shows that several billion dollars could be saved, 

and the Reserve made more efficient by putting heavier oils into 

the Reserve as soon as possible and by buying less when prices are 

higher and more when prices are lower. 

Both of these goals could be achieved in the near term if DOE 

used its authority to swap light for heavier barrels, and this would 

take pressure off the record light oil prices we are currently facing. 

Thank you. This completes my oral statement. I will be happy to 

answer any questions you may have. 

[The prepared statement of Dr. Rusco follows:] 


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The CHAIRMAN. Thank you, Dr. Rusco, very much. 

The chair now turns to recognize himself for a round of questions. 

Right now, OPEC and Big Oil have a weapon aimed at the heart 

of the American economy. We are seeing its effects in the failure 

of airlines. We are seeing its effects in the impact on truckers 

across our country. We are seeing its impact on the dramatic rise 

in the price of fuel, and we are going to see its effect on a continuing basis on the decline in the American economy. 

The Strategic Petroleum Reserve was constructed in order for the 

President to use it as a counterweapon in order to say to the 

world’s oil market that we are serious about not allowing Big Oil 

and OPEC to exploit a vulnerability in the American economic 

structure. 

Ms. Kenderdine, the Bush administration thus far has refused to 

deploy this protective weapon which we have—the Strategic Petroleum Reserve, meant to protect businesses and consumers across 

our country. What, in your opinion, would be the impact if we, as 

a country, under the President’s instructions, stopped filling the 

Strategic Petroleum Reserve, so that we reduce the amount of oil 

being taken off the world market and begin to deploy upwards of 

40 million barrels of oil in the Strategic Petroleum Reserve, and 

made that announcement today? 

Ms. KENDERDINE. The other witnesses and I have indicated it is 

difficult to quantify the precise amount of reduction in price that 

you would see. I would go back to the SPR exchange that we did 

in 2000. We put 30 million barrels of oil onto the market, loaned 

it. It wasn’t a sale. We put $30 million as a loan. 

And to put that in context, I think at that time the world consumption in a year is about three billion, give or take, you know, 

a couple hundred million barrels of oil a day—or a year. Okay. So 

in a three billion barrel market, we put 30 million barrels into the 

marketplace, and the price dropped almost $7 a barrel. And the 

price drop was immediate. 

The price dropped before the oil moved into the marketplace and 

stayed—it stayed down very—that $7 per barrel for about three 

weeks. Then, the USS COLE was bombed in the Middle East and 

the price went back up. But then, it fell back down again when the 

markets calmed down. 

The CHAIRMAN. So much of what goes on in the oil marketplace 

is just speculation. It is panic. It is exploitation of an out-of-control 

sense that the price is just going to go up and up and up with no 

stop. 

So to you, Mr. Berry, would the trucking industry, would truckers across the country like to see our President stop filling the 

Strategic Petroleum Reserve and send a signal to OPEC that we 

are going to deploy the Strategic Petroleum Reserve as a way of 

signaling that we are not going to stand still and allow our economy to suffer this grievous injury that will have negative effect on 

truckers, on consumers, and on industries all across the country? 

Mr. BERRY. Yes. 

The CHAIRMAN. You would like to see that. 

Mr. BERRY. Yes. 

The CHAIRMAN. Expand. 


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Mr. BERRY. Mr. Chairman, we have made that request of the administration, that they stop filling the Strategic Petroleum Reserve. We don’t know precisely what that impact would be, but I 

think even the mere threat of doing that may have an impact on 

the speculators. And it just seems silly and ridiculous to me at this 

time of high prices for us to be adding such a small quantity. 

And I see very little risk to our nation in stopping—to stop filling. I mean, what is the worst that could happen? Prices don’t go 

up, so then you resume filling? I mean, I see very little risk in the 

strategy to stop filling the Reserves. 

The CHAIRMAN. So this environment in which we are living right 

now is one where we are buying high, at the very peak of the market. The American people, through the Bush administration, are 

buying oil at $119 a barrel, and at the same time that we should 

be selling our oil into the global marketplace, to say to the OPEC 

countries, to say to the oil companies, ‘‘This is not going to last.’’ 

And those speculators will in fact receive that message very 

quickly, and, in my opinion, respond and the consumers will start 

to see the benefit in the marketplace. Do you agree with that, Mr. 

Berry? 

Mr. BERRY. Mr. Chairman, that is the hope, that that is precisely 

what would happen. 

The CHAIRMAN. Aren’t we, Dr. Rusco, at the worst of both worlds 

right now? We are wasting taxpayer money, and we are raising 

prices to consumers at the pump simultaneously. 

Dr. RUSCO. Our findings are that you could reduce the cost of filling the Reserve by adopting this practice of putting heavier barrels 

in there. And if you did that right now with swapping, whatever 

the effect on the price is, if you swap light barrels out now for 

heavier barrels, and more of them later, you would alleviate that 

immediate effect on the price. We do not know what the actual 

magnitude of that would be. 

The CHAIRMAN. Thank you, Dr. Rusco. 

The chair recognizes the gentleman from Arizona, Mr. Shadegg. 

Mr. SHADEGG. Thank you, Mr. Chairman. In the memo we have 

from staff, it notes that the Department of Energy is currently filling the SPRO at the rate of 70,000 barrels a day, and it proposes 

to increase that in August—I find that timing curious—to 76,000 

barrels a day. Can anybody explain to me why, at least during a 

portion of the high driving season, we would increase the fill rate? 

Does anyone—I know there isn’t a DOE witness. Does that make 

sense to anybody? I will have to ask DOE. Okay. 

Mr. BERRY. Mr. Shadegg, I would just add to that that not only 

is that the peak driving season for people going on vacation, students returning to school, but it is also when the economic activity 

starts to rise. All of your Christmas, fall shipments start going and 

the trucking activity is actually picking up then. So any activity 

that would cause fuel prices to rise during that time would not be 

good. 

Mr. SHADEGG. It is the peak trucking industry or trucking time 

for the Christmas shopping. 

Mr. BERRY. It is the advent of the peak. 

Mr. SHADEGG. Well, that means we ought to put more oil in right 

then. I guess I will have to ask DOE about that. 


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Dr. Rusco, I am fascinated by your proposal that by swapping 

heavy—I guess it is swapping light for heavy we could have a positive effect. Is it your testimony that that could have an effect not 

just on—in terms of beneficially filling the SPRO, but also in terms 

of the price of oil? And would it have a consequent effect on the 

price of gasoline? 

Dr. RUSCO. Yes. We have advocated—long advocated—the introduction of heavy oil into the SPR, because it would make it more 

effective, you know, in the event of a supply disruption. It has also 

been considerably less expensive. It has—over the last five years, 

heavy oil has averaged over $12 a barrel less than light oil. So you 

could fill the Strategic Reserve more cheaply by adding heavier oil 

and make it more effective. 

And, once again, if you did that with a swap where you swapped 

light oil now for heavier oil in the future, you would be selling essentially light oil out of existing caverns. When they are empty, 

then you would go and buy heavy oil to fill it. That would have an 

immediate effect on light oil prices currently. And, again, I don’t 

know the magnitude of that effect. 

Mr. SHADEGG. I find the idea fascinating. The next question is, 

so—you keep saying, ‘‘We advocate this.’’ Who is resisting it? And 

why? And what are the reasons? 

Dr. RUSCO. Well, we have recommended that the DOE study the 

maximum amount of heavy oil they could put in. They agree that 

they should put heavy oil in in the amount of at least 10 percent. 

But so far, to our knowledge, they have no intention of doing so 

until they expand beyond the current level. 

Mr. SHADEGG. I would be happy to join you and maybe talk further. Maybe some of us in Congress need to talk to them and get 

answers from them why they are not doing that. 

Mr. Book, you mentioned that speculation can in fact be a part 

of the current high gas prices. One of the issues at least that Mr. 

Berry has raised and the trucking industry is concerned about is 

that if we were to at least stop filling the SPRO, or perhaps even 

release some oil from the SPRO, we could drive down—we could 

drive out that speculation and maybe have a consequent impact on 

the price of gasoline. 

I have heard it said that the price of gasoline is 20 to 40 percent 

higher than it would be but for the speculation. First question is: 

do you agree that there is a possibility that we could have that effect? And, second, are we also driving speculation by locking up a 

great deal of the supply that is potentially available in the United 

States, in the inner mountain west, on the outer continental shelf, 

in Alaska, and elsewhere, and saying, ‘‘Well, it is there, but we are 

never ever going to go get it.’’ Is that also driving speculation? 

Mr. BOOK. Congressman, 70,000 barrels per day is a small 

amount relative to the global market. It is possible it could have 

an effect, but it is certainly not anything like the effect of a sale 

that has been described, nor is it anything like the effect—to your 

second question—that would be immediately signaled if you were 

to open up some of the off-limits areas, because we have the best 

oil production technology in the world. We have the best information management technology in the world. 


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We are really a very capable economy. I suspect the market 

would take a look at our intent to produce some of our own reserves and take it very seriously. On the other hand, to be fair, the 

effect of that production hitting the market is 7 to 10 years away 

from the go decision. 

Mr. SHADEGG. But speculators are in fact speculating out into 

the future. So that—— 

Mr. BOOK. There is contracts all the way out to 2016 right now 

that would probably start to change shape on the basis of that decision, yes. 

Mr. SHADEGG. Is there anything else—since I think every member of this panel, Republican and Democrat alike, wants to do what 

we can do to deal with the spike in gas prices right now, is there 

anything else you would suggest? 

Mr. BOOK. Well, the idea of tax holidays is a symbolic move and 

a dangerous one. I think the hard part is swallowing the bitter 

medicine and trying to encourage consumers to learn more about 

ways they can save energy on a daily basis. 

Mr. SHADEGG. We are doing that. Thank you very much. 

The CHAIRMAN. Okay. The gentleman’s time has expired. 

The chair recognizes the gentleman from California, Mr. 

McNerney. 

Mr. MCNERNEY. Thank you, Mr. Chairman. We have heard a lot 

about how the SPR manipulations can impact the market. But 

what I would like to know is: are there computer models out there, 

and how sophisticated they are, how much collaboration there is, 

how much validation there is. In other words, when market manipulations occur, are the models validated? Can anyone answer that 

question? Mr. Book, you are probably in the best position. 

Mr. BOOK. Well, there are certainly very sophisticated oil traders 

who use computer models to try to predict market activity. In 

terms of my own models, my models as a Wall Street analyst tend 

to be simple and, based on my current oil price estimates, inadequate. So I would humbly say that it is very tough to do any kind 

of simulation of that much activity with that many players and 

that many variables, and any model, no matter how sophisticated, 

may not be truly reliable. 

Mr. MCNERNEY. Do you have an opinion, Ms. Kenderdine. 

Ms. KENDERDINE. I am sorry. 

Mr. MCNERNEY. Do you have an opinion on that? 

Ms. KENDERDINE. MIT has no models that is looking at the 

level—the granularity that you are talking about or would need in 

that kind of a—to make that kind of a determination. It is very difficult to do. I think Wall Street is the most appropriate place. They 

are paying the most attention. 

Mr. MCNERNEY. Well, then, basically what we have heard is all 

speculation. I mean, look at—the SPR would look like a spring in 

a mechanical system. It can make it—it can smooth it out, but it 

can also make it more unstable. So, I mean, it seems to me that 

we ought to have a fairly sophisticated market. Maybe someone in 

the University of Chicago or—— 

Ms. KENDERDINE. Or MIT. [Laughter.] 

But the activity and what we are seeing—and we do have historical data about the use of the SPR. And the—I went through and 


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had a price graph, looked at when we went to war in Iraq and we 

released oil into the market—first time, not second time, because 

we didn’t do it the second time. 

Looked at when we put the SPR oil—the exchange we did in 

2000 and Katrina, and you see an immediate decline in price on 

that graph. So, historically, we do know of the impacts of using the 

SPR. 

You can also look at the graph and see prices go up when OPEC 

takes certain actions. So we are informed by what we know from 

the past, and certainly traders are looking at these issues constantly. But it is not necessarily transparent what OPEC countries 

are up to or, you know, it is meant to not be transparent. 

Mr. BOOK. Congressman, could I—— 

Mr. MCNERNEY. Yes. 

Mr. BOOK. The historical comps are the best we have. They are 

also a different world. Globalization was still in its late childhood, 

pre-adolescence. We have had a lot of changes in the currency relationships between the dollar and other currencies, and it is hard, 

with the narrower head room in global capacity and a different dollar, to take those as apples to apples. They are a good place to 

start. I would start there, too. 

Mr. MCNERNEY. Should we be looking in the Congress at commissioning a modeling of this phenomenon? Yes? 

Mr. COOPER. The one thing we should do is—the lack of transparency in OPEC is one thing. There is not a lot we can do about 

that. The lack of transparency on our commodity markets is something we can do about it. We made a huge mistake in 2002 when 

we modernized the Commodities Future Trading Commission—Exchange Commission and failed to extend oversight to energy markets. And so now we have a complete lack of transparency in the 

trading of energy commodities and futures on the over-the-counter 

markets. 

We have had a series—a continuous series of cases brought and 

settlements signed about abusive markets. And we are told that 

the most sophisticated model that ever existed about these markets 

was Enron’s model. And, of course, Enron said, you know, it is supply, it is this, it is that, the other thing, and it was cheaters. And 

we have had plenty of court cases. 

So if we want to learn about what is going on in these markets, 

we—and Congress passed in the ag bill last year a law that would 

have closed the Enron loophole. The President vetoed it for all 

kinds of other reasons, and we are struggling to get that back in. 

If you want transparency, you need to have the Commodities Future Trading Commission overseeing these markets. 

They told us they had enough power, and then we had the effort 

to corner the gas market with AmerEn, and a whole series of 

things they don’t know. We simply don’t know who trades what in 

this most important commodity. That is the single most important 

thing you could do to fix the financial speculation problem. 

The CHAIRMAN. Great. The gentleman’s time has expired. 

The chair recognizes the gentleman from Connecticut, Mr. 

Larson. 

Mr. LARSON. Thank you, Mr. Chairman. 


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And thank you, Mr. Cooper. I couldn’t agree more with what you 

have to say. A colleague of ours, Bart Stupak, has a bill as well 

called the PUMP Act that would do just that. I believe the GAO, 

even in its recent study, came out and said the CFTC, while it does 

have regulatory authority, doesn’t seem to have the broad exuberance needed or required to be able to look at and peel away, especially when it comes to the over-the-counter market, these unregulated activities. 

Let me ask first, Dr. Book—excuse me, Dr. Rusco, and then Mr. 

Book—whether or not you feel that that would better help in terms 

of transparency the initiative that would be required, as my grandfather Nolan would say—to trust everyone but cut the cards? 

Dr. RUSCO. I am going to have to answer that for the record. 

That was done in a team outside the energy group, and I would 

hesitate to offer an opinion without first reviewing that report. 

Mr. LARSON. Well, if you could get back to them, and, as part of 

GAO, I would love to get that, Mr. Chairman, for the record. 

The CHAIRMAN. Without objection, it will be included. 

Mr. LARSON. It also brings up a point that—and I think several— 

I think it was Mr.—the Chairman or Mr. Blumenauer might have 

mentioned that the largest consumer of energy of course is the Federal Government. 

And that being the case, if the Federal Government were to say, 

with regard to speculation, that the procurement of oil, the procurement of petroleum for the entire federal system is not subject 

to speculation, that you have to actually receive, be a recipient, in 

order to be a trader in those areas, what would that do to the price 

of oil? Would either of you care to respond? 

Mr. BOOK. I mean, Congressman, it sounds like that proposal 

would take a substantial volume of oil off market and put it into 

a time contract between the buyer and the seller. And by reducing 

the available supply to the market, you might raise the price with 

a proposal like that. 

Mr. LARSON. Well, it is in the market currently. If we are purchasing X amount already, but it is subject to the prices driven up 

by speculation, why, if you eliminated the speculators, would it cost 

the Federal Government more? And if it cost the Federal Government less, would we be able to, therefore, release the Strategic Petroleum Reserve or purchase more in a way that would be able to 

assist our truckers and everybody else throughout the economy? 

Mr. BOOK. I mean, the idea makes sense. The problem is finding 

a seller who will tie a contract at a time of high prices and say, 

‘‘Yes, I will tie it—lock this in’’ with uncertainty and volatility and 

scarcity on the horizon. 

Mr. LARSON. Yes. But if all we are hearing from our oil executives is that the laws of supply and demand and volatility, and 

yada, yada, yada, no longer apply, then what does it leave policy 

decisionmakers with? And if we have unregulated markets that 

have no transparency, and small businesses and oil dealers saying 

that it is a fraud and a sham and nothing more than, you know, 

a charade that is going on that causes our prices to go up, while 

the people, as you pointed out, were concerned on making the 

money on paper based on a declining value of the dollar and other 


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volatility or other arguments that they may make, and call that the 

marketplace. Isn’t that—— 

Mr. BOOK. Well, increased transparency is always good for markets. Also, cautious small moves are generally good for markets, 

particularly when there is a lot of capital in circulation. I would 

agree that any move you can make to try to increase accountability, without increasing the transaction cost—and that is sort of 

the flip side of it. The more you regulate something the more expensive it becomes to trade on that regulated exchange. 

And this is a global world. Trade can go elsewhere. So you have 

to balance the two. 

Mr. LARSON. Well, I am all in favor of balancing the two, but perhaps Ms. Kenderdine could answer. 

Ms. KENDERDINE. Transparency is terrific for markets. The only 

concern I have is that 80 to 90 percent of the world’s oil reserves 

are controlled by national oil companies or OPEC. And so you can 

have transparency in U.S. markets and on our producers. You are 

only going to have a very small picture of what is actually going 

on in global oil markets. 

So it is just a caution that I would put out there is that there 

is not transparency in the rest of the world, and you will only get 

a small slice of what is actually going on. And we actually, when 

I was at DOE—there is also not transparency on oil data in general, including demand data. And we launched an effort to try and 

improve data worldwide, so that we could have a better understanding from a government policy perspective. Very difficult thing 

to do. 

Mr. LARSON. I see my time has expired, Mr. Chairman, but I 

thank you. 

The CHAIRMAN. The gentleman’s time has expired. 

The chair recognizes the gentlelady from South Dakota, Ms. 

Herseth Sandlin. 

Ms. HERSETH SANDLIN. Thank you, Mr. Chairman. 

Dr. Rusco, I think in response to some of the questions of Mr. 

Shadegg and the recommendations as it relates to more cost effective ways of filling the SPR, he discussed with you the whole issue 

of heavier versus lighter crude into the SPR. I would like to ask 

you about the employment of the dollar cost averaging that you discussed. Why isn’t that recommendation being employed? 

Dr. RUSCO. I don’t know why. It clearly makes sense. We did 

simulations that estimated the value of dollar cost averaging, when 

prices were generally rising but volatile, generally falling but volatile, or staying generally flat but volatile. And as long as there is 

volatility in prices, you can, on a month-to-month basis save 

money, and essentially fill the SPR at the same rate that you want. 

You just have to pick the right target for the number of dollars. 

You would have to adjust that target periodically, because you 

don’t know where prices will be in the future. But there are potentially billions of dollars to be saved as you expand the SPR. 

Ms. HERSETH SANDLIN. Are you aware of any specific opposition 

to employing this method when making purchases? 

Dr. RUSCO. I think that the primary opposition is that the DOE 

has essentially used royalty-in-kind oil only to fill the—or almost 

exclusively to fill the SPR, and—— 


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Ms. HERSETH SANDLIN. Since when, 1999? Later than—— 

Dr. RUSCO. Yes. Since about 1999, yes. And the problem with 

that is that there is no real coordination between DOE and DOI 

in terms of how to do that. They could—you could still use royaltyin-kind oil and adopt a dollar cost averaging approach. You would 

just—DOI would deliver fewer barrels when prices are high, and 

they would sell the remainder of the RIK barrels in the market and 

deliver more barrels when the price is low. And you could still do 

it, but it may be a lack of coordination or a lack of imagination. 

Ms. HERSETH SANDLIN. Most likely, I would think you are right 

on that. We have seen a lot of lack of coordination between agencies. And if we can save dollars, we appreciate your insight today 

as we address these issues further. 

Dr. Cooper, your written testimony notes on page 6 that there is 

a ‘‘disastrous shortfall in domestic refining capacity, and the refinery shortfall has doubled to over 300 million barrels per day since 

the early 1990s.’’ To what factors do you attribute the increase in 

refining capacity shortfall over that period of time, and what do 

you think would be the optimal increase in domestic refining capacity over the next five years? 

Mr. COOPER. Well, the cause of the lack of capacity is clear. The 

industry has not provided it. If you look back through the early 

1990s, the Clean Air Act amendments were passed in 1990. They 

went into effect in 1995. And the industry engaged in a series of 

strategic decisions about what to do, and the central strategic decision was to reduce refinery capacity. 

The decision was made not to upgrade certain refineries to meet 

the Clean Air Act. Decisions were made and mergers were allowed 

to go forward, which dramatically slashed the number of refiners. 

So we are down—and you know the names—Exxon Mobil, Chevron, 

Texaco, BP, ARCO, Amoco, Conoco Phillips. All of those companies 

once were separate, and now they are one. 

And so clear decisions made throughout the 1990s about how to 

tighten the market—there is a very good RAND study which 

showed a complete change in behavior. They no longer compete for 

market share on price. And over that time period, we have seen the 

shortfall increase from about a million and a half barrels a day to 

three million barrels a day. 

Refinery profits have gone through the roof. So this is the outcome of a policy of shorting the market—the strategic underinvestment in domestic refining. And every price spike we have had in 

the last six or seven years, except this most recent one, was always 

triggered by some complaints about, oh, we didn’t have enough capacity. They couldn’t even do spring cleaning, switching over from 

winter fuels to summer fuels, without it. 

So the answer is—I believe Dingell and Stupak had a bill in that 

started to talk about a domestic refinery reserve, operating these 

refineries to meet military needs in normal times, and diverting capacity to serve the market. The oil industry will not build enough 

refineries in this country. 

Ms. HERSETH SANDLIN. My time is almost up. So in addition to 

the Dingell-Stupak bill, just an optimal increase over the next five 

years, what would you say? I mean, optimal. 


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Mr. COOPER. It would be wonderful. How are you going to make 

them do it? The oil industry won’t do it. You will haul them up 

here, and they will tell you why they are not going to build any 

more refineries. You cannot depend on the oil industry to meet our 

refinery needs. 

The CHAIRMAN. The gentlelady’s time has expired. 

The chair recognizes the gentleman from Washington State, Mr. 

Inslee. 

Mr. INSLEE. Thank you. While listening to the testimony, I was 

reminded of what we went through on Enron, which was a learning 

experience. And I remember a time where we had a Northwest delegation go meet with Vice President Dick Cheney to beg the administration help us take some action in response to what was going 

on with prices going up through the roof on electricity. 

And what we told the Vice President was that there was obviously some ‘‘imperfections in the market,’’ some manipulation going 

on, we didn’t have adequate oversight over speculation and manipulation. And we told him that one-third of all the power was turned 

off, sort of similar to the refinery situation Dr. Cooper talked about, 

at that time while prices were going up 1,000 percent. He looked 

at us and he said, ‘‘You know what your problem is? You just don’t 

understand economics.’’ 

And we did. I suggest that they did not. And we got absolutely 

taken to the cleaners on the West Coast while the administration 

sat on its hands and did nothing. And I think that is reminiscent 

of what we are having here, listening to this testimony, where 

there is an abject lack of action to respond to this in any way. 

And I just don’t believe we are totally helpless in the face of 

what is going on in the economy. There are these underlying tensions, but there are things we can do, and, frankly, we are not 

doing them because the administration will not use tools at its disposal, nor help us to respond. 

I want to talk about a longer term issue. We have talked about 

the short-term issue. I want to talk about a longer term. Ms. 

Kenderdine talked about the need for research and development 

dollars to really develop a post-carbon based economy. That might 

be my term rather than Ms. Kenderdine’s, but that is the way I 

think of it. 

And I wonder if you can just go in a little greater depth what 

you view as the shortfall in research and development to develop 

non-carbon based fuel systems, fuels and fuel systems. I alluded to 

these electric cars that are now starting to hit the road. 

Could you just tell us what you think is in the realm, should be 

in the realm of the scope of our ambition in research and development to wean ourselves off of being so oil and gas dependent? 

Ms. KENDERDINE. The reason I used the numbers on the challenge is because they—the magnitude of the need, the magnitude 

of the requirements is—needs to be well understood. And, you 

know, we are talking—we are not talking about telephones, widgets, etcetera, in terms of innovation. We are talking about a major 

commodity-based industry, has a 40-year—its infrastructure has a 

40-year life span. 

And we are facing right now under business-as-usual carbon 

emissions a catastrophic event by 2050, beyond the doubling of CO2


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emissions in the atmosphere, if we do not do something and do 

something now. As I mentioned, the infrastructure value that we 

are going to have to turn over in the next 40 years is $12 trillion. 

We have significant challenges. We have to go from 80 percent carbon-based fuels to—and I agree with you, a carbon-free, carbon 

light. 

I would say perhaps carbon light is kind of the interim that we 

are going to have to support in order to get to those goals. And by 

carbon light, I would say sequestration is going to be critical in 

order for us to get there, as well as natural gas, because it produces so much fewer greenhouse gas emissions. 

But the—and we have done modeling on this at MIT. Incredible 

gains in reductions of CO2 emissions and efficiency technologies, 

both—and that is in part a deployment issue. But we need biofuels, 

obviously, we need alternative—we need—quite frankly, we need 

nuclear in order to get there. 

And so the R&D investments are—and I said we have $5 to $6 

billion total investment, U.S. Government and industry in the U.S., 

to turn over a $12 trillion infrastructure. 

Mr. Inslee. And what should be our national goal as far as R&D? 

What is a reasonable R&D figure we should be shooting at in the 

next several years? 

Ms. KENDERDINE. Right now, the Department of Energy on its 

applied energy R&D programs—and I set aside the Science Office, 

because while it is doing basic research, energy research, it is not 

strategic research, it is research for research sake, for knowledge 

sake. 

We are only spending maybe $3 billion a year in energy R&D. 

I think a doubling of that is absolutely essential. I think also a carbon price is essential, and I know that the Congress is debating the 

carbon price. We can put a price on carbon. We still don’t have the 

technologies to produce affordable renewable energy at this point, 

so we need the research. 

So a combination of an increase in R&D, much more focused 

R&D, I think we need to do it better than we have done in the 

past. And a carbon price is, I believe, critical. And I would double 

the R&D budget. 

Mr. INSLEE. Thank you. 

The CHAIRMAN. The gentleman’s time has expired. 

The chair recognizes the gentleman from Oregon, Mr. 

Blumenauer. 

Mr. BLUMENAUER. Thank you. Thank you, Mr. Chairman. 

I would just like to clarify. Do any of you feel that there is any 

question but that we should regulate petroleum and gasoline 

through the commodities future trading market? Any of you disagree with that proposition? 

Ms. Kenderdine. I am not sure I would use the word ‘‘regulate.’’ 

Certainly oversight on the part of the CFTC is—— 

Mr. BLUMENAUER. But they are included within the regime. 

Ms. KENDERDINE. Yes, yes, yes. 

Mr. BLUMENAUER. Is there any reason to exclude them any 

longer? 

Dr. RUSCO. Again, I cannot comment on that. I don’t want my 

silence to be viewed as—— 


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Mr. BLUMENAUER. Okay. GAO exception noted. [Laughter.] 

But—— 

Mr. BERRY. I would just say that the trucking industry I don’t 

think has considered specifically that point. As one member of the 

trucking industry, it seems reasonable to me—the proposal. 

Mr. BLUMENAUER. Mr. Berry, I appreciate that. Would it be possible to check with your association about running it through the 

trap line and see where they are? Because—— 

Mr. BERRY. Yes. 

Mr. BLUMENAUER [continuing]. They are a pretty big player in 

this game. 

Mr. BERRY. Yes. We will get back to you. 

Mr. BLUMENAUER. Thank you. I appreciate it. And I must say 

that I do appreciate the comprehensive nature of your testimony in 

particular. I have had the opportunity in recent days out campaigning in Pennsylvania, maybe not to very good effect for Senator 

Obama, but hearing very heart-rendering direct reactions from people who can only afford to fill up a third of the tank. And making 

it real I thought was very important. 

And the notion that you have in terms of some specific things in 

terms of reducing demand, which I welcomed from ATA—the section that you had in your testimony—touching what some feel is 

the third rail, like, you know, should we take a look again at controlling speeds? Because we did move in that direction 30 years ago 

to significant effect. 

And even the notion of reducing—I mean, we have had legislation. We have tried to fix this to be able to help, what, APUs? So 

that we don’t have the whole rig burning expensive diesel. This is 

an example to me of simple, common sense items that ought to be 

employed in a heartbeat, that make sense, save money. Do you 

want to elaborate on that for a moment? 

Mr. BERRY. I would be happy to. At great personal risk, I will 

tell you that it is our association’s position that there should be a 

65 mile an hour speed limit, and that that would save a tremendous amount of fuel. And I would venture to say that it would 

probably save as much as 10 percent of our annual consumption, 

and that is a big number. 

Our own company has reduced our speed in December from 65 

to 64 miles an hour, and our trucks are governed so that we can 

set it with a computer. And then, here three weeks ago in response 

to the high price of fuel, we reduced our speed even further to 62 

miles an hour. Now, we did that at great risk because there is a 

shortage of truck drivers, and we felt as though we might be disarming unilaterally in the war to attract truck drivers. 

But our drivers all understood the need, they see the $4 price at 

the truck stops, and they willingly voluntarily reduce the speed, 

and we have had wonderful compliance. They get it. They know 

this is a huge problem, and they were on board with it. 

But anti-idling—Representative Inslee talked about research and 

development. There are a lot of common sense solutions coming 

from the users, and the users are left out of all of these equations. 

And I think that the users need to be included in the research and 

development. 


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There are trucking companies that are coming up with fabulous 

ideas, common sense solutions, and those should be incorporated. 

Anti-idling—we are looking at battery-powered. We can’t get the 

battery-powered to work, because the cabs need to be better insulated. So we are all out there experimenting with ways to better 

insulate the cabs. 

EPA’s Smart Way Program is a fabulous program that has 

looked at different technologies, has put it out on the internet, so 

truckers can see what works, what doesn’t work, and that has been 

a huge service. Those are all examples of things that can be done. 

Mr. BLUMENAUER. I appreciate that. I appreciate, as I say, the 

comprehensive testimony that you have offered up. We are working 

to try and fix that APU item. In the Ways and Means Committee, 

we have got a little glitch. But I think in toto this was extraordinarily helpful. 

Mr. Chairman, I really appreciate your allowing us to come together to analyze this. 

The CHAIRMAN. I thank the gentleman from Oregon. 

And I thank all of our witnesses. I think this has been an extremely helpful hearing. I think it is clear from today’s testimony 

that President Bush must deploy the Strategic Petroleum Reserve 

in order to send a signal to OPEC that we are going to stop begging, to send a signal to the speculators that we are going to begin 

to take action against them, and to send a signal to those who are 

afraid of the impact on the trucking industry, on the food industry, 

on the airline industry, and all other industries of this dramatic 

rise in the price of fuel, that we are not going to allow our competition here to raise the price of oil to have such a dramatic impact 

upon our economy. 

Our poor people have to choose between fuel and food. This is not 

something that America should allow to happen. This is not something that President Bush should sit on the sidelines and pretend 

he is powerless to do something about. If President Bush can call 

up the Reserves over and over again to go to Iraq, he can deploy 

the Strategic Petroleum Reserve as a weapon against OPEC and 

Big Oil to protect the American consumer and American industry 

here at home. 

I think that is clear from the testimony that we heard here 

today. We thank all of our witnesses for this testimony, and we 

hope that President Bush hears the plea of the American people. 

This hearing is adjourned. 

[Whereupon, at 11:41 a.m., the Committee was adjourned.] 


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