U.S. GOVERNMENT PRINTING OFFICE

66–052 CC WASHINGTON : 2000

U.S. POLICY TOWARD OPEC

HEARING

BEFORE THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

WEDNESDAY, MARCH 1, 2000

Serial No. 106–132

Printed for the use of the Committee on International Relations

(

Available via the World Wide Web: http://www.house.gov/international relations

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COMMITTEE ON INTERNATIONAL RELATIONS

BENJAMIN A. GILMAN, New York, Chairman

WILLIAM F. GOODLING, Pennsylvania

JAMES A. LEACH, Iowa

HENRY J. HYDE, Illinois

DOUG BEREUTER, Nebraska

CHRISTOPHER H. SMITH, New Jersey

DAN BURTON, Indiana

ELTON GALLEGLY, California

ILEANA ROS-LEHTINEN, Florida

CASS BALLENGER, North Carolina

DANA ROHRABACHER, California

DONALD A. MANZULLO, Illinois

EDWARD R. ROYCE, California

PETER T. KING, New York

STEVE CHABOT, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

MATT SALMON, Arizona

AMO HOUGHTON, New York

TOM CAMPBELL, California

JOHN M. MCHUGH, New York

KEVIN BRADY, Texas

RICHARD BURR, North Carolina

PAUL E. GILLMOR, Ohio

GEORGE RADANOVICH, California

JOHN COOKSEY, Louisiana

THOMAS G. TANCREDO, Colorado

SAM GEJDENSON, Connecticut

TOM LANTOS, California

HOWARD L. BERMAN, California

GARY L. ACKERMAN, New York

ENI F.H. FALEOMAVAEGA, American

Samoa

MATTHEW G. MARTINEZ, California

DONALD M. PAYNE, New Jersey

ROBERT MENENDEZ, New Jersey

SHERROD BROWN, Ohio

CYNTHIA A. MCKINNEY, Georgia

ALCEE L. HASTINGS, Florida

PAT DANNER, Missouri

EARL F. HILLIARD, Alabama

BRAD SHERMAN, California

ROBERT WEXLER, Florida

STEVEN R. ROTHMAN, New Jersey

JIM DAVIS, Florida

EARL POMEROY, North Dakota

WILLIAM D. DELAHUNT, Massachusetts

GREGORY W. MEEKS, New York

BARBARA LEE, California

JOSEPH CROWLEY, New York

JOSEPH M. HOEFFEL, Pennsylvania

RICHARD J. GARON, Chief of Staff

KATHLEEN BERTELSEN MOAZED, Democratic Chief of Staff

FRANCIS C. RECORD, Senior Professional Staff Member

MARILYN C. OWEN, Staff Associate

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C O N T E N T S

WITNESSES

Page

The Honorable Bill Richardson, Secretary, Department of Energy .................... 16

APPENDIX

Prepared Members’ Statements:

The Honorable Benjamin A. Gilman, a Representative in Congress from New

York and Chairman, Committee on International Relations ........................... 46

The Honorable Sam Gejdenson, a Representative in Congress from Connecticut .................................................................................................................. 49

The Honorable Paul Gillmor, a Representative in Congress from Ohio ............. 52

Prepared Witness Statements:

The Honorable Bill Richardson, Secretary of Energy ........................................... 54

Additional statements and materials submitted for the record:

Joint Statement between Venezuela’s Minister of Energy and Mines, Ali

Rodriguez, and U.S. Secretary of Energy Bill Richardson dated February

29, 2000 ................................................................................................................. 58

Joint Statement of the Kingdom of Saudi Arabia’s Minister of Petroleum

and Mineral Resources, Ali Al-Naimi, and U.S. Secretary of Energy Bill

Richardson ............................................................................................................ 59

Communique between the Minister of Oil of the State of Kuwait and the

Secretary of Energy of the United States of America dated February 24,

2000 ....................................................................................................................... 60

Joint statement between Norwegian Minister of Petroleum and Energy, Marit

Arnstad, and U.S. Secretary of Energy Bill Richardson dated February

27, 2000 ................................................................................................................. 61

Inserts for the record:

Insert A, concerning steps Department of Energy has taken to spur domestic

oil and gas production .......................................................................................... 62

Insert B, concerning capacity figures as rough estimates by EIA ....................... 64

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U.S. POLICY TOWARD OPEC

Wednesday, March 1, 2000

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERNATIONAL RELATIONS,

Washington, D.C.

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

2128, Rayburn House Office Building, Hon. Benjamin A. Gilman

(Chairman of the Committee) presiding.

Chairman GILMAN. The Committee will come to order. I am very

pleased to convene this hearing on our United States policy toward

the Organization of Petroleum Exporting Countries, OPEC, and

want to extend a hearty welcome to our witness, Energy Secretary

Bill Richardson, whose long, distinguished track record of public

service in both the legislative branch and the executive branch is

to be commended.

We understand that Secretary Richardson has been particularly

heavily traveled over the past few weeks, with numerous meetings

with the oil-producing nations and non-OPEC energy officials. In

light of his arrival late last night, we are particularly pleased that

he could be with us this morning to share his observations and his

conclusions on his most recent round of energy diplomacy.

We are fully aware of the challenges facing this Secretary and

the Clinton Administration, and they will not be readily overcome.

Thousands of households and businesses across New York State

and New England and elsewhere are facing sky-high fuel bills that

they can’t afford to pay in many instances, and many of our citizens on fixed income are choosing between eating and staying

warm. It is impacting our economy.

Today we are trying to find some answers for our constituents

and for the millions of Americans who are demanding to know why

the Administration sat idly by as the nations of OPEC and its

major oil-exporting allies raised prices from $11 a barrel in December 1998 to a high of $30 a barrel today. Over a year transpired.

A hearing on OPEC and the Northeast energy crisis on February

10th before this Committee clearly demonstrated that OPEC’s goal

of reducing its oil stocks was the major reason behind large-scale

price increases for heating oil and diesel oil stocks. They have manipulated the oil price in our Nation.

The transportation infrastructure of our Nation is under severe

stress, as tens of thousands of small and medium-size trucking

firms throughout the Northeast and throughout other areas in our

Nation are on the verge of bankruptcy because of a $2-per-gallon

diesel oil price, absorbing 20 percent or more of the entire operating budget of each of these firms.

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Oil prices today are higher than at any time since the Iraqi invasion of Kuwait a decade ago. Earlier this week it was reported that

average gasoline prices across our Nation have risen 6 cents over

the past 2-week period, the largest such increase since the 1990 period. We are up to prices per gallon of over close to $1.50 in my

region alone.

Production cutbacks decreed by the producer cartel, the Organization of Petroleum Exporting Countries, OPEC, has caused worldwide stocks, including those of our own Nation, to be drawn down

to severely low levels. This imbalance has resulted in the sharp

climb in heating oil and diesel prices over this past year.

As our dependency on foreign oil has increased over the past decade, the Administration has fallen short thus far in its efforts to

persuade OPEC and non-OPEC nations alike to moderate their aggressive policies designed to punish oil-importing countries like our

own.

Several key oil-producing nations relied on our country’s military

for their protection in 1990 and 1991, and those nations in the Persian Gulf still depend on us for their security, but in the view of

this Member, a continuation of those present policies put in place

at the meetings of OPEC ministers in March and September of last

year threatens our relationship, a relationship that many of the

OPEC nations presently enjoy with our Nation.

Over the past several weeks, my offices in New York State and

here in Washington have received numerous calls and letters asking us how it could be that the very nations we helped in their

hour of peril are repaying us with this sky-high energy bill and

shocks to our economy that are still being felt throughout the

Northeast and the rest of our Nation.

Last month I received one such impassioned letter from two of

my retirees, William and Mary Nickels of Warwick, New York, who

are trying to make ends meet on a fixed income. They are, like

many Americans, tired of our excuses and expecting answers from

all of us, and I quote from their letter:

‘‘Similar to the 1970’s, when OPEC held us hostage to their demands, our local fuel supplier has raised the price of home fuel to

exorbitant levels. True, we realize . . . harsh weather has struck

the Northeast; but what caused this to go unnoticed by our government? Wall Street is booming, but retired individuals such as ourselves must make harsh decisions daily relative to the spiraling

cost of . . . home heating oil and gasoline. If there is a real shortage of home fuel oil, why hasn’t our President or Congress released

some of the country’s reserve supply to counteract this tyranny?

. . . Now this aging veteran is calling upon you to take the initiative and solicit Congress to do the right thing, namely, to bring

home fuel oil prices down to a reasonable market level.’’

Later today I will be introducing legislation entitled the Oil Price

Reduction Act, which will begin to respond to the kind of questions

and concerns that I see from the Nickels family in Warwick and

from millions of other Americans across the Nation. I am inviting

my colleagues to join with me in cosponsoring this legislation requiring the President to cutoff assistance, cutoff arms sales to those

members of OPEC and other major net oil exporting countries

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which are determined to be engaged in oil price fixing to the detriment of our Nation’s economy.

Specifically, my bill requires the President, not later than 30

days after enactment, to send the Congress a report containing a

description of our security relationship with each OPEC member

and any other major net oil exporter, together with information

about our assistance programs and government-supported arms

sales provided to those nations.

That report would also include a determination by the President

to the extent that any of these countries is engaged in oil price fixing, and would further require the President to subsequently reduce or terminate or suspend any assistance or arms sales to that

nation determined to be fixing oil prices to the detriment of our

economy.

It further requires continued diplomatic efforts by our Nation to

convince all major net oil exporting nations that current price levels are unsustainable and will cause widespread economic harm in

oil-consuming and developing nations.

This bill is straightforward in its objectives, and should give the

Administration and our Secretary ample time in its ongoing energy

diplomacy, and also enable OPEC member states to take decisive

actions in turning on the spigot, increasing production levels sufficiently to bring prices down to sustainable market levels.

Before turning to my colleagues for their opening statements, I

would like to ask unanimous consent that the record remain open

for a period of 5 days for incorporating any additional relevant materials and statements related to the ongoing energy crisis. I am

pleased to recognize the Ranking Member of our Committee, Mr.

Gejdenson.

Mr. GEJDENSON. Thank you, Mr. Chairman.

Mr. Secretary, good to see you again. You probably wish you

were back at the U.N. these days, with this little tussle in front

of us.

When you were a House Member, you used to go around rescuing

Americans who were held hostage. Today you might say we are all

being held hostage, and I think the situation here gives you an opportunity to provide a rescue for the general public. I know there

is nobody in government service who has a better sense of how to

deal with these issues.

I am glad to see that, in today’s Wall Street Journal, apparently

we are now looking at opening up SPRO, the Strategic Petroleum

Reserve, but I have to tell you I think we should have done it a

long time ago. While a poker game may not always be the best

analogy of life, if we don’t ante up, there is really no incentive here

for these other countries to increase production.

All of us, I think, can tell you the kind of devastation it is bringing to individuals. From the individuals on Main Street even to Mr.

Greenspan, they recognize this poses an important and dangerous

threat to our economy. We have got, thanks to this Administration

in very large part, the longest sustained economic growth I think

in the history of the country, certainly in the history of keeping

records on these things. If you look at the impact of previous oil

embargoes, you know the kind of economic disruption that occurs

there.

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Now, with heating oil there is a particular problem. No Energy

Secretary or State regulator would allow an electric utility or a natural gas utility to get in a position where homeowners were put in

danger.

But what happens with heating oil, which is how 65 percent of

my constituents heat their homes, is if there is a cold snap, the

natural gas pipeline turns off a lot of their commercial customers

who have interruptible service. So just as we were sitting there

with the shortest supply ever, just as we were sitting there with

cold weather increasing demand, the impact on another energy system, natural gas, forced commercial customers to increase the demand on heating oil.

Now, we have introduced legislation that would establish a

Northeast Reserve. I think that makes sense. I think we ought to

look at demanding that wholesalers have an adequate supply and

reserve, as well. These people profit in our region. It makes sense

not to leave us in the kind of situation we were in this year, where

even an average winter would have left our homeowners in deep

trouble.

Now, if you look at what we have done in the past, when we had

the Gulf War and there was a sudden rise in crude oil prices, we

got the Administration then to go into the Strategic Petroleum Reserve. We had a significant, $10-a-barrel drop almost overnight,

just by the fact that they said they would do it, in the price of

crude oil. What we have seen up to date now in heating oil is going

to be replayed in gasoline.

Again, if you are the OPEC nations, you are sitting there looking

at working less hours in a sense and making more money. Why

would they change that policy?

Now, I think the Chairman’s proposal is an intriguing one. I

think it doesn’t work unless we make it multilateral, and clearly

the impact is not just on the United States. All of our Western allies are in the same situation, all the developed nations.

I want to take one moment to say that Congress is partly at fault

here. When this Administration, time after time, has tried to increase the efficiency of our automobile fleet; when this Administration, with your and the President’s leadership, has tried to take initiatives on energy conservation, this Congress has stood in the way.

As a matter of fact, it is my understanding that in congressional

legislation they prohibited you from even looking at ways to make

the American automobile fleet more efficient. Now, that is a mistake that this present Congress has made, and they ought to be

called to task for it.

As a friend and somebody I have great respect for, I am trying

to get this message across as gently as I can, but your actions are

needed here. I think you would be a lot more effective in talking

to the OPEC members if you had your hand on that spigot and you

were in the process of turning it on, because nothing will get their

attention like dumping some of this crude.

Now, the average cost of the crude that you have in the Strategic

Petroleum Reserve is about $3 a barrel less than what the market

price for crude is right now. I know this would be a shocking thing,

but if you sold some of it, you would actually be making a profit

for the government; and if you drove the price down, you would be

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able to buy it back at a lower price, thereby increasing profits for

the U.S. Government, which wouldn’t be a bad thing, either.

Sixty-five percent of the country is dependent on truckers that

use diesel fuel to bring them their products. When you look at the

price of gasoline, which is already starting to increase markedly

across the Nation even before the summer driving situation, we

have really got to act here. I think at the beginning of the heating

oil crisis the response was that it takes too long for this stuff to

get in the pipeline. I think the leveraging effect of saying we are

going to start dumping crude into the marketplace will do a lot

more to get the Saudis’ and the Kuwaitis’ attention than almost

anything else we can do.

As I said at the beginning of my statement, you did an awfully

nice job rescuing Americans who were held captive in unfriendly

nations during your time in Congress. We want to see you as effective in the executive, rescuing the American economy and the people from this crunch that we have been put under by the OPEC

nations. It is great to have you here.

Chairman GILMAN. Thank you, Mr. Gejdenson.

Any other Members seeking recognition? Mr. Rohrabacher.

Mr. ROHRABACHER. Thank you very much, and welcome back,

Bill.

Only my good friend Mr. Gejdenson could do the stretch, the

great stretch in his analysis that would end up blaming the Republican Congress for this dramatic increase by our not stressing conservation. Now, just a note, Mr. Gejdenson: This isn’t a problem of

demand. What we have got is a manipulation of supply.

Mr. GEJDENSON. Will the gentleman yield?

Mr. ROHRABACHER. I certainly will.

Mr. GEJDENSON. I think you are right. There is no question that

the fundamental issue is supply, but if we had less demand, it

would have the same impact on the imbalance. I think you would

probably be on my side on this and agree with me that Congress

has prohibited the Administration from looking at ways to increase

the CAFE standards for automobiles.

Mr. ROHRABACHER. Reclaiming my time, actually I don’t agree

with you on that, but I would say that it would be—I would expect

that, if Congress wasn’t controlled by the Republicans, that you

might not be blaming the Republicans at this time in order to deflect the fact that we have an Administration that has had policies

that have put us in jeopardy, and have resulted in hundreds of dollars being sucked out of the pockets of the American people.

From this perspective, from where I sit, it looks like we have rising oil prices because of, No. 1, a manipulation of supply by a conspiracy, by a price-fixing conspiracy, an international oil cartel, and

also by—and I am sorry, and I will be happy to talk to my old

friend and am waiting for your statement on this—but the incompetency of this Administration in terms of the way it has dealt with

certain foreign policy issues that have made us vulnerable.

First of all—and, by the way, in California when the price of

gas—we really take our driving seriously out in California, and

when the price of gas goes up, yes, we are unhappy. But if the price

of gas goes up because of market factors, we understand that, but

that is not the reason the price of gas has been going up. The price

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of gas has gone up because we have an oil cartel that is involved

with an international price-fixing conspiracy aimed especially at

the United States, but other oil-consuming countries as well.

What makes this even worse is that two of the biggest players

in the cartel are countries in which we have American troops stationed for their protection. Saudi Arabia and Kuwait are two countries in which we have American troops stationed there for their

protection.

Now, I want to know whether this Administration, and I hope

Secretary Richardson will tell us this, has used this leverage and

our commitment of blood and treasure to protect these countries,

have we used that as leverage to prevent those two countries from

engaging in a conspiracy? Saudi Arabia has maximum leverage on

this, But they are involved in a conspiracy to suck money out of

the pockets of the American people, their very protectors. I want

to know what we have done to use that leverage, the protection we

afford Saudi Arabia and Kuwait, to end this price-fixing cartel.

Second of all, and again the Members of this Committee have

heard this before. I know Secretary Richardson and I may have a

disagreement on this, because you have been personally involved in

this particular area.

I believe that the policies of this Administration have led to a

continuing instability in Afghanistan. The instability in Afghanistan with the Taliban in control there not only have led to these

gross violations of human rights and the terrorism that we know

of, but it has also prevented a pipeline from being built over these

last 8 years through Afghanistan that would have brought Central

Asian oil onto the market. That Central Asian oil would have made

it impossible for this cartel to control this huge supply of oil, and

would have meant that there wouldn’t have been this manipulation

of the supply of gasoline and oil into the system that has resulted

in this massive increase in price.

I am very interested to hear what Mr. Richardson has to say

about our policies in Afghanistan that has led to the isolation of

Central Asian oil. Again, we are talking about the competence of

not only those who are handling the policy but actually the legitimacy and how good that policy is to begin with.

So, Bill, welcome back to Congress. We miss you on this side, but

you are on that side now, so we have got to ask you some tough

questions.

Thank you very much, Mr. Chairman.

Chairman GILMAN. Thank you, Mr. Rohrabacher.

Mr. Lantos?

Mr. LANTOS. Thank you, Mr. Chairman.

Let me first welcome our distinguished Secretary of Energy. His

diplomatic skills were obvious when he served as a distinguished

Member of my Committee throughout the 1980’s when we dealt

with the European Community, and we were delighted to see your

diplomatic bravura performances in saving the lives of American

citizens. I personally want to commend you on your most recent

swing through the oil-producing countries, which I can only describe as a major diplomatic achievement on your part, and I want

to congratulate you.

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I want my friend from California to pay close attention, because

his criticism of the Administration I think needs to be put in somewhat of a perspective. Yesterday John McCain in Bakersfield, for

the first time, to my knowledge, came out with a statement that

many of us of course have made, not now but 9 years ago, that had

the previous Administration terminated the tenure of Saddam Hussein at the end of the Persian Gulf War, we would not be in this

predicament.

I presume that some of my friends on the other side may agree

with that, but I am very happy to see that one of the two Republican Presidential hopefuls at long last has come clean on this issue

and recognized that the failure of the Bush Administration to finish the job in Iraq is at the core of this particular difficulty, as indeed many other difficulties in the whole region.

I think it is extremely important to underscore and I am sure,

knowing your candor, you did, that the Emir of Kuwait and the

King of Saudi Arabia would be living in villas on the French Riviera, had it not been for our very effective conduct of the Persian

Gulf War by evicting Saddam Hussein from Kuwait. I think these

people need to be reminded, time and time again, that they are

now in office because of the decision and the determination and the

courage of the American people and the American military and our

allies, and we expect far more cooperation from them than we have

had over the years, and this is really the moment when they have

to come through in a major way.

As you know, Mr. Secretary, as a professional economist in the

early 1980’s I held hearings on the Strategic Petroleum Reserve,

and I do agree that we need to open the Strategic Petroleum Reserve now. I think there is no justification for further delay, and

I strongly urge you and the President to proceed without delay to

open the Strategic Petroleum Reserve. This will be not only good

economically, I think it will be good politically, I think it will stabilize the international situation, and it will certainly bring tremendous relief to tens of millions of American consumers.

I do want to say a word about conservation and efficiency standards. Those of us who have been in the forefront of trying to gain

some recognition of this issue on the part of the automobile industry unfortunately find this new period yet another moment when

we perhaps can make our case.

It is simply absurd to have gas-guzzling, gigantic sport utility vehicles used for going down three blocks on Rodeo Drive in Beverly

Hills to buy some cosmetics. This is not the way to deal with the

energy crisis in the Year 2000, and I hope that we will be able to

look at CAFE standards, conservation standards, fuel efficiency

standards, and our friends on the other side this time around will

come along with us and support these long-overdue measures.

I want to commend you, Mr. Secretary, for this past week. I studied carefully your schedule, and from Saudi Arabia to Norway to

Kuwait to Venezuela, you have turned in another Richardson performance of extraordinary energy, and I look forward to your testimony.

Chairman GILMAN. Thank you, Mr. Lantos.

Mr. Manzullo?

Mr. MANZULLO. Thank you, Mr. Chairman.

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Mr. Secretary, we look forward to your testimony. I represent an

area of Illinois that is highly agricultural and has a lot of manufacturing, and I am pretty disappointed in the fact that the United

States has used no muscle whatsoever in order to bring relief to

the farmers who are paying $1.30, $1.40 a gallon for diesel fuel; to

bring relief to the truckers who are paying that type of money for

diesel fuel. All that gets added back to the consumer, not only in

the price that the consumer is paying at the gas station but also

in terms of the amount that consumers are paying.

There is an avenue, I think. I am not sure if I agree wholeheartedly with what the Chairman wants to do, but we give these

countries an enormous amount of foreign aid. Russia, for example,

receives in excess of $170 to $180 million a year in foreign aid. The

American people are very much interested as to why these people

are entered into what I consider to be a criminal conspiracy. If

these were American producers that got together to do something

like this, there would not only be a civil conspiracy action, there

would be criminal conspiracy and they would be jailed for doing

that.

But why should the American people have to give foreign aid to

people who get together in a little room, use the word ‘‘production,’’

tie up production, and then to say that it is simply the free market

and the law of supply and demand taking place. The law of supply

and demand is not taking place? That law never kicks in, whenever

there is a cartel that determines the amount of production that is

taking place.

I would suggest that this Administration should get very, very

tough, and I agree with Mr. Rohrabacher, especially concerning

those nations on whose soil we landed troops to protect them during the Gulf War. This is the thanks that we get from Saudi Arabia

and Kuwait, when they turn right around and stiff the American

people who are paying, I heard, somewhere in California over $2

a gallon now for gasoline.

I think it is time for the Clinton Administration to step up, to

take very dramatic action, to do something on behalf of the American people and break the cartel, break OPEC, break it open and

say any nation that belongs to OPEC is not going to get our foreign

aid. Maybe that is a way to entice them to become responsible.

I look forward to your testimony.

Chairman GILMAN. Thank you, Mr. Manzullo.

Mr. Menendez?

Mr. MENENDEZ. Thank you, Mr. Chairman. I want to thank you

and Mr. Gejdenson for continually holding hearings on this issue

that I really think is of national importance. I know those of us in

the Northeast feel particularly pressed by it, but we believe it is

of national importance. I want to welcome our good friend, the Secretary, before the Committee.

Home heating oil prices for my constituents have jumped to nearly double, to about $2 a gallon, in just a matter of weeks. As a result, a typical household will pay $400 or more in a very short period of time, and most families that I represent simply cannot afford such a large fluctuation in their budgets.

Now, I am pleased to see that the President now appears to be

considering tapping into the Strategic Petroleum Reserve. HowVerDate 11-MAY-2000 10:22 Aug 16, 2000 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 66052.TXT HINTREL1 PsN: HINTREL1
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ever, by the time his decision comes, it may just simply be too little, too late. Prices are higher now than during the Gulf War when

we released from the Reserve.

Consumers, truckers—I have the Port of Elizabeth and Newark,

which is part of the Port of New York and New Jersey. We are

being strangulated, with independent truckers who simply—many

of them have taken their trucks off the road because they cannot

sustain their families. They cannot sustain their costs.

This is the economic lifeline for the distribution of products to

the greatest consumer base in the Nation. All of the Administration’s trade efforts ultimately, when they come to port, which is

how we move products through, whether we are exporting our

products or importing others, are ultimately clogged when we don’t

have these truckers moving. They in fact have some incredible, incredible increases in costs. Some of them have simply taken their

trucks off the road because they can’t afford to operate them.

If the President is going to act, he must, he must act now. We

can’t afford, I believe, to wait until OPEC’s meeting on March 27th.

Winter weather doesn’t wait for government decisions, and our constituents in the Northeast cannot afford to wait any longer for a

solution.

Now, I want to commend Secretary Richardson for his whirlwind

OPEC tour, his aggressive efforts, his diplomatic skills, in addition

to his knowledge of the energy questions. I believe hopefully they

will produce some long-term benefits, because this is an issue that

continues to plague us in the future. But we need some short-term

responses.

I do believe the United States should leverage its good relationship with many of these countries to ask that they work with

OPEC in the short and long term to ensure market stability and

close the balance between supply and demand. But many of us on

this Committee are increasingly wondering what is the relationship

between us and some of these countries, the relationship in which

we have used the national resources of the United States and men

and women in the safety of these countries, and now find ourselves

in a set of circumstances where they in essence undermine the economic security of the United States. Those are very serious public

policy, foreign policy questions that are continuously raised by the

actions of the OPEC countries.

Last, I think we need to seriously look at how we can protect

ourselves in the future from monopolistic OPEC practices. You

have heard some of the suggestions here. We must look at the possibility of creating a home heating oil reserve and other measures

that cushion future spikes in oil prices. It in untenable for the U.S.

economy and U.S. consumers to be held hostage to OPEC, now or

in the future. We need to act now to protect our short-term and

long-term interests.

Mr. Secretary, I know you have been out there trying to help us,

but we need some immediate help in this process. We are enjoying,

from the weather forecast this week, some relatively mild weather,

but the winter isn’t over and the oil prices have already hit and

consumers and families have already paid. Notwithstanding

LIHEAP and all that, many families simply do not qualify for that,

10

and yet they are certainly, by no stretch of the imagination, families that are economically well off.

We need help. We need it now. We look forward to your leadership in helping us achieve some of those results now.

Chairman GILMAN. Thank you, Mr. Menendez.

Mr. Chabot?

Mr. CHABOT. Thank you, Mr. Chairman. I will be brief, because

some of my colleagues on both sides of the aisle have already, in

a very articulate manner, stated some of my concerns, and I know

that we all want to get to the Secretary’s testimony here briefly.

But I just have to say that the thing that is particularly outrageous about this whole situation which has been orchestrated by

OPEC, is that these are the countries that we have gone to bat for,

that America has gone to bat for, that we have had American citizens put their lives on the line for, most particularly in the instance of Kuwait, and Saudi Arabia as well, because there is no

question I think in most of our minds that had Saddam Hussein

not been stopped in Kuwait, he would have gone right into Saudi

Arabia next.

So these are these same countries that are now essentially slapping the United States and the rest of the world right in the face.

These countries are cavalierly jeopardizing not only the U.S. economy but the economies of nations all across the globe. We should

look at every weapon in our arsenal, whether it is the Strategic Petroleum Reserve, whether it is weapons sales, whether it is any

type of other foreign aid, as Mr. Manzullo indicated very strongly.

This is a critical situation, and any leverage that we have, any leverage at our disposal should be exercised.

Again, I think it is just outrageous, particularly in the instance

of Kuwait and Saudi Arabia, what is going on here, and I don’t

think the United States should stand for it, and we are looking for

leadership from the Administration. I think it has been slow. I

don’t want to be too critical because I think the Congress and the

Administration ought to work together on this one, but we hope

that we are going to see some strong leadership as quickly as possible.

I want to again thank the Committee Chairman, Mr. Gilman, for

proposing legislation. I think it is the right thing to do, and let’s

move forward with it.

Chairman GILMAN. Thank you, Mr. Chabot.

Mr. Hastings?

Mr. HASTINGS. Thank you very much, Mr. Chairman.

Mr. Secretary, thank you very much for being with us, and I join

my colleagues and associate myself with their remarks, offering the

accolades so rightly deserved for the work that you did here in

Congress as well as the work that you do now.

I introduced legislation yesterday that, if passed, will suspend for

one year the 24.4 cent Federal tax on diesel fuel. While this will

assist businesses that rely on diesel fuel, and consumers will benefit indirectly, the average American is directly and painfully affected by this oil crisis when they go to fill their gasoline tanks in

their automobiles.

I guess ultimately we would be asking you what are your suggestions for us here in Congress and what we can do, as I am sure

11

you are as interested and probably have more information than

most of us as to what we may be able to do to help the American

consumer. More importantly, is there an avenue that we are overlooking, and doubtless you may be able to provide us with that information.

While it is easy for us, it appears to me, to talk in terms of what

to do with the Strategic Petroleum Reserve that we have in this

country, many of us are not even mindful that the authorization for

the Strategic Petroleum Reserve expires at the end of this month.

One of the things that is not being factored into this discussion

and doubtless will not be today, is that today the President’s responsibility to Congress is to assert those countries that are certified or decertified as it pertains to their cooperation in the drug

enforcement arena, and some of those countries, for example, Mexico, Nigeria, Venezuela, are countries with whom we have relations

as it pertains to oil.

Additionally, the ultimate question I would like to at some point

put to you, Mr. Secretary, is what tools do we have at our disposal

to pressure the major oil-producing nations to increase the international supply of oil? I heard what the Chairman said, but I could

suggest to the Chairman that if his legislation became law and if

we were to withdraw military sales, as rightly we should do whether there is an oil crisis or not, if we were to withdraw military

sales, other countries would offer the same military materiel that

we are offering, and the oil-producing countries would have more

money to buy it with if we didn’t do something.

The other thing is, we don’t have any relations with Libya and

Iran, and we have strained relations with other members of OPEC.

Therefore we need to be guided by caution in this matter, and I do

not believe that it is wise of us to try and determine which Administration did or did not do what others perceive should be done.

What the American public wants us to do, is to do something and

to do it now to eliminate the potential for degradation in this economy.

Thank you, Mr. Chairman. Thank you, Mr. Secretary.

Chairman GILMAN. Thank you, Mr. Hastings.

Mr. Burr?

Mr. BURR. Thank you, Mr. Chairman. Welcome, Mr. Secretary.

I guess I feel a little bit deficient. I haven’t introduced anything,

but I guess it is because I didn’t think I had to. I always thought

that the policy of this country would be a policy that always protected the American people, and I think we have failed as it relates

to this crisis.

I have listened to a number of my colleagues give opening statements, and I have got to admit that I wondered whether their

opening statements really dealt with the crisis at hand or whether

it was a much larger political statement. I think it is time for all

of us to focus on what the problem is and who that problem affects.

It affects people in every community across this Nation. It affects

truckers, it affects farmers. It affects individuals who make a

choice between drugs or heat.

I guess the question that I have got today is twofold: What took

so long to open SPRO? Why was going there conditional upon the

decision to open SPRO? Selling SPRO has been a part of this AdVerDate 11-MAY-2000 10:22 Aug 16, 2000 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 66052.TXT HINTREL1 PsN: HINTREL1
12

ministration’s annual budget to raise revenues and balance the

budget they sent to Congress practically every year, some proposal,

so I don’t see anything sacred.

I would tell you today that the question that we are here to determine is, where has the Administration been for 12 months on

this? If we have had a plan, share it with us, Bill. If we haven’t,

tell us where it is that we will go from your trip. I commend you

for your willingness to do that. Share with us why it took so long,

and what is the Administration’s plan to respond to this today.

I thank you once again, look forward to seeing you next week,

hopefully, in the Energy and Power Subcommittee hearing, as well.

With that, I yield back.

Chairman GILMAN. Thank you, Mr. Burr.

Mr. Rothman?

Mr. ROTHMAN. Thank you, Mr. Chairman. Mr. Chairman, Ranking Member Gejdenson, thank you for calling this meeting.

Mr. Secretary, it is always a pleasure to be with you. I am in my

second term in Congress, so I did not get a chance to serve with

you in this body, but I have had wonderful experiences with you

and your staff when you were Ambassador to the United Nations,

and I know that you are doing a wonderful job in trying to help

this country through this very difficult situation and others in your

present capacity as Secretary of Energy. I, too, want to lend my

commendations and high praise for your aggressive and highly

skillful tour of the OPEC countries in order to get relief for American consumers.

Two things: One, I want to also say thank you to the Administration for releasing the emergency funds to support LIHEAP, the

Low Income Heating Oil Assistance Program. I come from northern

New Jersey. We do not have a high household income, relatively

speaking, compared to some others, but nonetheless the LIHEAP

program will not help the majority of people in my district, the

Ninth Congressional District. So, while it is good that you released

those and it will have an effect on those regions of the country with

the poorest of the poor of our citizens, it will not have a benefit to

working people, let alone middle class people, who are suffering.

I also want to commend your reestablishing the Energy Emergency Office at the Energy Department, and then I want to get to

the area where I think we have had some disagreement but I think

we are coming to consensus, ‘‘we’’ meaning Members of the Congress and the Administration, and that is releasing reserves from

the Strategic Petroleum Reserve, and I am hopeful that you will be

commenting about that and we will have good news.

As you know, the prices of a gallon of home heating oil have doubled in the past year. They are more than 40 percent higher than

during the height of the Persian Gulf War. Mr. Secretary, we have

an Administration who, if not wholly responsible for the largest

economic expansion in the history of the United States, certainly

it is an Administration that has handled the economics of the country, of our country, extraordinarily and I think history will give

credit where credit is due. So I have, as a general matter, confidence that you have a strong handle on what it takes to keep the

American economy and the American consumer prosperous, moving

forward and growing. I am hopeful that you will take the steps in

13

the short run, for short-term relief, as well as long-term relief on

this home heating oil and the price of gasoline situation.

One other remark, which would be, I too join my colleagues who

have suggested that we have leverage, considerable leverage, not

total but considerable leverage through military sales and assistance and economic assistance to those OPEC members who, while

they perhaps were trying to restore some of the profits they felt

they lost when gas prices were extraordinarily and historically low

for a long period of time, they have taken their profits.

Now it is time to face reality and face their obligation to their

consumers, as well as to the friends in America who bailed them

out and saved their lives by putting the lives of our soldiers, our

young men and women, at stake to defend them. That is what we

did. Now is the time for them to remember, and if they don’t remember that and know what it means to be a friend, we will remember that for the future, and we ought to also in the short term

deny them the considerable benefits of our relationship with them

that they are now enjoying.

Thank you, Mr. Secretary.

Chairman GILMAN. Thank you, Mr. Rothman.

Mr. Houghton? Dr. Cooksey?

Mr. COOKSEY. Thank you, Mr. Chairman.

Mr. Secretary, I think the most fascinating information that

could come out of this meeting would be if we could know what

your thoughts are about us. As you hear all these politicians on

this side of the table, tell us what you think, because I can tell you

are taking it in very seriously. You were on this side one time. I

really expect you to divulge what you think about us.

But let me just run through some things that I hope you will cover. Home heating oil: home heating oil got up to $58 a barrel

20 years ago. I’m sorry, crude oil was $58 a barrel, home heating

oil was $1.30 a gallon. Today, crude is $30 a barrel, home heating

oil is $2.10 a gallon; theoretically, it ought to be 75 cents. Can you

blame that on OPEC, or is it the wholesalers or the refiners?

Second question: To my friends in the Northeast, we have bountiful amounts of natural gas in my home State of Louisiana. Right

now we are producing oil in the deep water off the Continental

Shelf, because now we have the technology to produce in 2,000 feet

of water instead of 200 feet of water. I know of two pipelines that

come in near the Loop, that bring in 300,000 barrels a day. So I

would encourage my friends in the Northeast to switch to natural

gas, and we will ship you all the natural gas you want. Environmentally, it is the best thing out there, and then you won’t be at

the beck and call or the whims of a group of people in OPEC.

Another major reason that costs of production, costs of home

heating oil are up right now, is because of a bunch of politicians

and regulators and bureaucrats. The costs of production in this

country are greater than they are elsewhere, but I think it is good

that we have taken all these measures to make it cleaner and

safer. We don’t have many accidents, or major accidents, in our offshore production.

Last summer on my birthday we were in a boat and we went

right through the Loop. Have you flown over the Loop or been to

the Loop, Mr. Secretary? We went right through it. I don’t think

14

we were supposed to go through. But we went out and caught

blackfin tuna and we caught speckled trout all around there, and

the waters were wonderful. The oil rigs make great manmade

reefs.

I think if we really want to do something about bringing the

price of oil down, the most effective way to do it is market forces,

and market forces will ultimately discipline these people in OPEC

much more effectively than a group of wimpy politicians who may

not have all the facts right. I think that they need to be disciplined.

But right now our largest source of oil is Mexico and Venezuela,

if I am not mistaken, and yet in 1973 we were producing, according

to this document, nine million barrels a day in the States. Now we

are producing two million. In 1980, Saudi Arabia was producing

nine billion.

So it can be done, but we need to still depend on market forces

rather than all of us who are pontificating from up on high. I am

anxious to hear your testimony. Generally I think you have done

a good job at Energy, and hopefully we can make the right decisions together.

Thank you, Mr. Chairman.

Chairman GILMAN. Thank you, Dr. Cooksey.

We are joined today by a nonmember of our Committee who has

a very intense interest in this issue, Mr. Watkins.

Mr. WATKINS. Thank you, Mr. Chairman and Members of the

Committee. I thank you.

Mr. Secretary, it is good seeing you. I saw you in Oklahoma when the oil prices dropped from $20 or $21 per barrel down to $8.

This is the point I would like to make, Mr. Chairman. No one

screamed then. What I am hearing today is the fact that it has

peaked up to $30. In the oil patch of this country, what we would

like to have is a stable price, $20, $22, somewhere in that neighborhood.

Mr. Secretary, I recorded that message back in Oklahoma. I have

been concerned about some of the things I have been hearing from

the Administration, exactly some of the things that were not said

back then. But the point I would like to make to the Committee

is what I have tried to say for several years: We need a national

energy policy for the national economic security of our country.

When the price dropped from $20 a barrel down to $8, we lost

75,000 oil field workers in America. Where was the voice? I tried,

I talked, but they turned a deaf ear.

I came and asked the Chairman to let me attend because now

the crisis is reversed, and maybe, just maybe, we will listen. We

do not control the destiny of our country. We have become dependent, totally dependent. Yes, we shifted a little bit from some of the

OPEC countries and the Arab nations to Venezuela and others, but

ladies and gentlemen, don’t forget that three or four years ago we

wouldn’t even let the now-President of Venezuela into this country.

We would not give him a visa because he was trying to overthrow

that country, and he is a very close ally to Castro and others.

So I am pleading this day, Mr. Chairman, and thanking you for

letting me come, but at this time of crisis, when people say let’s

open SPRO, why did we set up SPRO? I guess being around here

a little while gives us a little historical perspective. Mr. Chairman,

15

you and I have been here. But SPRO was set up after the Arab oil

embargo. If we had another war, for national security, we probably

wouldn’t have more than two months of oil there available to carry

out a war. Let’s don’t be too hasty about starting to say we are

going to pull everything out of there at this time.

But I think the Administration, Mr. Secretary, and I have great

respect for you, Mr. Chairman and Members from the Northeast,

but it behooves us to set up, a national energy policy to have some

kind of stabilization for the national economic security of our country. Sanctions will not work in a world of surplus because there is

a black market.

We had the U.S. Navy board Russian tankers less than three

weeks ago, causing some tension, because they were shipping illegal Iraqi oil. The oil for food program, they are using that to help

buildup their weapons. In Iraq today, Saddam Hussein is putting

millions upon millions of dollars in his pocket.

Under Secretary Tom Pickering says, let’s be more liberal, let

them produce more, because the Iraqi people will have better feeling for the United States. My colleagues, there is one person who

sits between us, between the Iraqi people and the United States,

and that person is Saddam Hussein. He gets all the credit. If our

policy is to cause him discomfort so we can overthrow him, we have

got the wrong policy in Iraq.

You are the Committee that will have to address that, but I ask

you to join me as I have talked to the Speaker about having a bipartisan commission to try to create a national energy policy for

the national economic security of our country. Thank you, Mr.

Chairman, for letting me attend.

Chairman GILMAN. Thank you, Mr. Watkins. Mr. Delahunt, and

I know the Secretary’s time is limited.

Mr. DELAHUNT. I just want to make some very brief observations

and I want to pick up on what Mr. Menendez said. I respect the

gentleman from Oklahoma when he talks about a long-term policy

and crafting a vision that takes into account future crises, and

what Mr. Menendez said about time being of the essence. We have

got to address in the short term what clearly is a crisis.

We have seen the impact in terms of home heating oil and what

it has done to our constituents. We have heard it loud and clear

from folks in the Northeast and in the northern section. Clearly the

price of gas is going up. We heard the gentleman from California

talk about what it means in that part of the country.

But really I think we have got to understand, too, that the prosperity that many have worked so hard to achieve over the course

of the past nine years is at risk unless it is addressed. While there

has been a reluctance to execute or to draw down on the reserve,

historically the best evidence is that when that occurs it has an immediate impact on the marketplace itself. I think Mr. Gejdenson

referenced what occurred during the Gulf War, when it went down

overnight some $10.

So I am anxious to hear from you in terms of the result of your

tour and your consultations with these area ministers. I would suggest that unless you are convinced that they are going to take action in the immediate future which will reduce this crisis, that it

is time now to draw down on the Strategic Petroleum Reserve.

16

I yield back.

Chairman GILMAN. Thank you, Mr. Delahunt, and now we are

pleased to call on our witness. Mr. Richardson is one witness who

needs little if any introduction to his many friends and colleagues

who are here with us today. Sworn in as the ninth Energy Secretary in August 1998, he served ably as our Permanent Representative to the United Nations, and was previously a seven-term

Member of the House from the State of New Mexico.

We look forward to hearing Secretary Richardson’s insights as to

how we got into this energy crisis and his specific plans on how we

can prevent such crises in the future, and what we are doing to resolve the crisis at the present time. Mr. Richardson.

STATEMENT OF HON. BILL RICHARDSON, SECRETARY,

DEPARTMENT OF ENERGY

Secretary RICHARDSON. Mr. Chairman, thank you, and I appreciate the sincerity of the statements of all the Members. Mr. Chairman, thank you for giving me the opportunity to address the current situation in oil markets, to report also on my recent discussions with the energy ministers of key oil-producing countries, and

to describe for the Committee the Administration’s short- and longterm strategies to address the extreme oil market volatility we

have seen over the last year.

First, let me briefly describe today’s oil markets. To do so, we

have to go back to 1996 and 1997, when OPEC leaders met and

decided to substantially increase oil production. Unfortunately, at

the time production was increasing, demand started decreasing.

Asia was headed into recession, and the world experienced extremely mild winters for two years in a row.

The result was disastrous. Overproduction resulted in a two million barrel per day oil overhang, driving oil prices to some of their

lowest levels in history. This was devastating to the national economies of oil exporters, as well as to the economic health of our domestic oil industry, as Congressman Watkins mentioned. The nations of the Middle East lost $50 billion of investment revenue in

Asia, at the same time oil revenues to run their governments plummeted.

In Venezuela, for example, 70 percent of annual Federal revenue

was at risk. At home in the oil patch, and I used to represent New

Mexico, which has considerable oil and gas interests, exploration

virtually shut down and wells were shut in.

Today’s story is dramatically different. In March 1998, OPEC

and non-OPEC producing countries instituted three production

cuts. At the same time oil-exporting nations were carrying out

these production cuts, world demand for oil was shooting up. Both

crude and product stocks are now well below 1996 levels. In other

words, inventories are dangerously low.

Extremely tight markets have driven prices up and caused refiners to draw down stocks worldwide. Each day the world is consuming around two million barrels more than it is producing. The

exact statistics are, it is consuming 75 million and it is producing

73. We cannot sustain this imbalance between supply and demand

without risking serious repercussions for the world economy.

17

A review of the last several years is important, and this is why

I think we have to give it a context in the historical perspective.

It is important because it illustrates extreme oil price volatility,

boom and bust cycles for both producing and consuming nations. When oil prices were $10 per barrel, I said they were too low,

and I said this on the record several times. In fact I think, Congressman Watkins, I said it in Oklahoma, too. When they approached $30, I said they were too high, and they are too high, and

here is why.

Very low prices discourage investment in production, put producers out of business, and increase our reliance on imports. Profit

margins for refiners become so small there is little incentive to

maintain inventories of heating oil, diesel fuel, and other products.

Cheap energy encourages inefficient energy use. High prices, on the

other hand, lead to inflation and slow economic growth throughout

the world. They stimulate overproduction, which will eventually

lead to a collapse in prices down the road, and then the cycle repeats itself.

Volatile markets overall—and we have volatility right now, the

roller coaster ride of high prices to low, low prices to high—create

a climate of uncertainty for investors and energy producers who

can expect neither long-term price stability nor plan for rational investment of capital.

So how, then, can we stop or minimize the impacts of this cycle

and introduce some stability into the markets? I think our objective

should be, as a Congress and as an Administration, to stabilize the

market, to bring stability to oil markets.

First, an observation: The extreme volatility we are witnessing

today is testament to the folly of artificial production quotas. Markets, not cartels, should set the price of oil. This bipartisan view

has been expressed again and again over the last 20 years, as the

Congress systematically removed or severely limited the Federal

Government’s authority to set oil prices or allocate supply.

Several of you praised this Administration’s economic policy, and

deservedly so. One of the reasons has been that we have not, as

an Administration, intervened in markets, or we have done so very

sparingly, and that has produced some very positive results. Both

the Congress and the Administration have taken the government

out of the oil equation and committed us to the free market principles of supply and demand.

Having said this, we are confronted today with the reality that

OPEC and other major oil-producing nations are setting production

levels, and that today these levels threaten to encourage inflation

and discourage world economic growth. This is unacceptable, and

this is why I just returned from my discussions with key energy

ministers and key leaders from Saudi Arabia, Kuwait, Mexico, Norway, and Venezuela.

I said we as a government cannot force nations to increase production. Instead, the purpose of my trip was to explain how continued artificial restrictions of supply could hurt the United States

and global economies. By the way, we are joined by other international economies in our view. Developing nations, for example,

members of the International Energy Agency, and members of the

European Community, share our view.

18

I went there to convince but not to coerce. We presented them

with the very latest data from the Energy Information Administration. We shared our documents and our latest information, which

showed that global oil and crude stocks are at extremely low levels.

We explained our immediate and anticipated domestic problems

from low stocks: high home heating oil and diesel prices, public and

government anxiety over the reliability of our oil supply, high gasoline prices for the summer.

We urged the ministers to increase production levels, to address

global stock level statistics and to understand their manifestations,

that is, global economic slowdown, increased inflation, a bad investment environment and, over time, a loss of market share as other

producing nations start competing for business from reliable partners.

I believe that my trip has met with a significant measure of success. Before our mission, say some 30 days ago, many energy producing nations believed there was no problem in the oil market,

that stock levels were adequate, that prices were fine, that the

world economy was not suffering. We are returning today with four

joint communiques that I would like to insert for the record, Mr.

Chairman, that reflect the common understanding of the following:

Chairman GILMAN. Without objection, the statements will be

made part of the record.

[The information referred appears in the appendix.]

Secretary RICHARDSON. Number one, that volatility in oil markets is not desirable, that it is damaging. Stability in oil markets

is a shared and desirable goal for both consuming and producing

nations. While the communiques varied in substance from country

to country, the single point on which all producing countries—Kuwait, Saudi Arabia, Norway and Venezuela—agreed was to reevaluate data on current oil market conditions to help avoid market volatility and preserve world economic growth.

I just recently read that Mexico, a few moments ago, just made

a statement in Paris, the oil minister of Mexico, that they would

be prepared now to increase production.

In other words, their upcoming decisions on production levels

will not be arbitrary. They will take into account the implications

of current production levels on the world economy. We believe that

this analysis will lead to only one conclusion as the ministers meet

on March 27th. I think what is also key, Mr. Chairman, is a meeting tomorrow in London between Mexico, Venezuela, and Saudi

Arabia, and today Mexico and Norway meet in Paris, two key producing countries. We believe this analysis will lead to only one conclusion as the ministers meet on March 27th, that there should be

substantial and timely increases in production.

Finally, what else have we done, and where should we go from

here. I think that is a vital question that many Members of this

Committee have asked.

First, the Administration has sought to address the short-term

problems of high home heating oil prices by softening the impact

on those who can least afford it. The President authorized the release of almost a third of a billion dollars in funds for low income

individuals to pay their skyrocketing heating bills, $300 million. I

think almost all of your states got some relief.

19

The President also urged States to address some of the problems

that I believe Congressman Rothman mentioned, and that is to

deal with the eligibility requirement so that middle-income people

that have also been hurt can more adequately tap into these resources.

The President also has asked for $600 million more in Low Income Housing Energy Assistance funds; he is asking for a supplemental to replenish the funds that we have already used, $600 million in energy assistance funds. He is also seeking an additional

$19 million from the Congress for low-income home weatherization.

Second, we have addressed the issue of supply through a variety

of measures, including increased Coast Guard support for tankers;

SBA loans for heating oil distributors and other small businesses,

such as truckers and loggers, impacted by high prices; and also by

encouraging refiners to produce as much heating oil as safely as

possible.

We are also reestablishing an Office of Energy Emergencies at

the Energy Department, to coordinate with the States and other

Federal agencies not only on heating oil problems but power outages and other energy-related crises, as well.

Mr. Chairman, I have met extensively with heating oil operators,

with truckers. I have been to the four states in the Northeast. We

have talked to consumers, we have talked to some of the energy

people, we have talked to State regulators, we have met with Governors, and we are trying jointly to address this problem. I must

say that some in the industry have been, such as refiners and

home heating oil operators and truckers, have been cooperating in

taking the steps that we believe are necessary to address this crisis.

Third, the President has directed me to study the longer term

issue of heating oil supply shortages and price spikes by examining

possible ways to reduce regional reliance on heating oil, mainly

through the increased use of natural gas. We are also examining

the impacts of interruptible contracts on heating oil supply.

Mr. Chairman, specifically what the President has asked me to

do is to study, a 60-day study of the possibility of having additional

natural gas, to look at alternatives of natural gas to home heating

oil in the Northeast. This would mean the possibility of what Congressman Cooksey said, gas pipelines. Natural gas is a clean fuel,

and the President is prepared, if such a study determines that this

makes sense, to come to the Congress again and deal with the

issue of providing the necessary request for infrastructure if this is

where the policy is heading. We are also examining the impacts of

interruptible contracts on heating oil supply.

Finally, we are tackling head-on the underlying reason for high

heating oil, diesel and gasoline prices here in the United States,

namely the high price of crude oil, and the boom and bust cycles

that are results of artificial production levels. To do, we have utilized one of the few tools the government has at its disposal, and

one that I thin this Committee understands the best because you

are all active in international issues, and that is international energy diplomacy.

I have described for you the immediate results of my efforts in

this regard, but we need to do more. This trip began an intensive

20

consultative process among nations. I expect this process to continue. I think, as many of you mentioned, each of these nations—

Saudi Arabia, Kuwait, Mexico, Venezuela, and Norway—they are

our friends. We share many common objectives and national security issues together.

We now share a common interest in stable and secure energy

markets and world economic growth, but ongoing, frequent, intense

and frank communications is clearly essential between consuming

and producing nations, and I have had extensive telephone conversations in the last year and visits with each of these energy

ministers, so we have not just addressed the problem recently. We

have raised some of these concerns a year ago with these energy

ministers, and warned them of the potential effects of what might

happen.

Also, at each stop on my trip, the accuracy and timeliness of data

on oil markets, production and stock levels, reserve, was at issue.

We are confident that our Energy Information Administration data

is the best available, but everyone agreed we should do more and

do it better. Just last month the Department of Energy convened

a meeting in Houston of significant oil market analysts to examine

oil data, their adequacy and transparency.

So we would hope the Congress can help us to ensure that, at

least in the international community, everybody is working together on the same inventory level data. We intend to push this

issue forward, to develop global data regimes to give producing and

consuming nations an early warning system when supplies and

production levels get out of whack with demand and consumption

needs, not to manipulate but to inform.

Finally, we are also seeking to stop the declines in domestic production of oil, increase energy efficiency, and develop alternative

sources of energy, and we have had some positive measures to spur

domestic production and we are considering additional others. But

it is clear that we need the support of the Congress for funding to

develop alternative energy sources and increase our energy efficiency. Our research and development investments reflect these

goals, and our fiscal year 2000 budget request amplifies the Administration’s commitment.

Also, later this month the White House will authorize the release

of the Commerce Department’s so-called 232 Report which examines the implications of oil imports on national security. It is my

hope that a National Economic Council-led process will result in a

greater commitment to incentives for increased domestic production.

Mr. Chairman, I appreciate the spirit and the positiveness of you

and Members of this Committee to address this crisis jointly. I

think we are moving in the right direction. I believe that my trip

has been successful. I believe we have a successful dual-track strategy of dealing with some of the crisis domestically. We are moving

ahead with initiatives regardless of what OPEC does on March

27th.

I believe that what is needed is a cooperative effort, not to use

precipitous action but to move ahead with some of the policies that

we are considering, and working with you on others. I believe we

can reach our mutual objectives of bringing long-term financial staVerDate 11-MAY-2000 10:22 Aug 16, 2000 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 66052.TXT HINTREL1 PsN: HINTREL1
21

bility to the markets and relief to many of our constituents, your

constituents in the Northeast and Midwest and throughout the

country.

Chairman GILMAN. Thank you, Secretary Richardson, and we appreciate the efforts you have been undertaking. However, it has

been a year now while the oil-producing nations and their monopolistic control have affected our marketplace. We all agree that $30-a-barrel oil is causing problems for our

economy in general, Northeast in particular. But I am troubled by

the fact that the main oil-exporting nations, including the Saudis

and Venezuela, appear to be resisting any increases in oil production despite the fact that OPEC has more than 4 million barrels

of oil held off the market by these and other countries, and you

have stated that they are 2 million barrels short from demand compared to supply, and that they are not ready to adjust that.

I look at the statement from the Public Affairs Office of the Embassy of Kuwait, and they say ‘‘The two ministers,’’ in reference to

the Scudit Kuwaiti oil ministers, ‘‘discussed the current situation

and agreed that stability is a common goal. The two ministers

agree that price volatility in the oil markets is detrimental to both

the producing and consuming nations. They agree that adequate oil

supplies at reasonable prices is of crucial importance for sustaining

world economic growth, prosperity, and investment in the energy

sector.’’

Yes, they agree to all of that, but what are they doing about it?

They are talking now about a further meeting coming up at the

end of March, and maybe by June or July they might agree to open

up the spigot a little bit. That does not help our Nation. Would you

care to comment on that?

Secretary RICHARDSON. Mr. Chairman, let me say that prior to

my visit to Kuwait, the Kuwaiti energy minister and other officials

there had said that they felt that production cuts might continue.

They felt that there was no reason for OPEC to change policy.

We engaged the Kuwaitis extensively. They, as I said, are our

friends. I met with the Kuwaiti oil minister several times on my

trip.

Chairman GILMAN. What was the last date of your meeting, Mr.

Secretary?

Secretary RICHARDSON. About three days ago, Mr. Chairman.

Chairman GILMAN. I am reading from their statement of February 24th that I just quoted from.

Secretary RICHARDSON. I think that statement is consistent with

what we achieved. What the Kuwaitis said that they would do,

along with the Saudis, along with the Venezuelans, which I think

is key and very significant, is that they would review production

levels. In other words, they are not quite saying that production increases are going to happen, and I am not going to predict what

they are going to do, but I can say to you that I believe the odds

are good for production increases to take place.

Now, this final decision is made on March the 27th, and I believe

that by these nations, the Saudis, the Mexicans, the Venezuelans,

the Kuwaitis, they basically agreed on five points that we were

stressing, and the five points is that price volatility hurts producers

and consumers; that adequate oil supplies at reasonable levels is

22

of crucial importance to the world economy; third, that we need

greater equilibrium between production levels and consumption;

fourth, that serious review of production levels and economic data

is needed; and, last, that we need better and more timely information about oil markets.

Chairman GILMAN. Have they promised you, Mr. Secretary, that

as of that March 27th meeting they are going to increase production?

Secretary RICHARDSON. No. Mr. Chairman, they act in consensus.

They try, until they meet, to develop a consensus. My objective in

my trip was to present our views, present them forcefully, so that

that consensus that takes place at their meeting would happen.

Now, as I said, we have moved regardless of what they are going

to do. But, again, a key meeting will also take place tomorrow between Mexico, which is not a member of OPEC but is a major

international producer; Venezuela, which is a member of OPEC;

and Saudi Arabia. My talks with the Venezuelans, with the Mexicans, with the Kuwaitis, with the Saudis, were extremely positive.

Chairman GILMAN. Have they made promises, these Saudis and

Mexicans and Venezuelans, that they will increase production?

Secretary RICHARDSON. As I mentioned, I just saw a statement

that Mexico made that they would; that they think OPEC should.

Now, Mr. Chairman, I have to be very careful about making predictions. Now, I have made a prediction. I believe that production

will increase, based on my discussions. But, again, March 27th is

the date when they all meet, the 10 members of OPEC. They will

make their collective decision. But I think the signs are good, they

are positive. That is good for us.

Now, the next issue is going to be how much production and the

timeliness of that production. That is something that we are also

working with them, also.

Chairman GILMAN. Two questions: What if they don’t raise production? What specifically will you do or what can you do to move

this forward?

Secretary RICHARDSON. Mr. Chairman, I don’t want to speculate

here because I do believe that production will be increased. There

were a lot of questions by many Members of this Committee about

the Strategic Petroleum Reserve, what is our current thinking on

it.

The President yesterday said that the issue of the oil swap is

being looked at, and that release from the Strategic Petroleum Reserve is still on the table. What I have said in response to questions in the past is that under the statutes, the Strategic Petroleum Reserve can be drawn only for reasons of a national energy

shortage due to severe interruption in the supply of oil.

I have not recommended that we sell from the Strategic Petroleum Reserve. The SPRO is on the table but, as the President said,

he is not ruling out any contingency. While I have the authority

to take these steps, he gives me the direction. I think it is important that we be prudent, that we not overreact, that we see the

trends in the next few days and what OPEC does, that we work

together on this.

As I said, I stepped off a plane last night, and you are the first

group I am seeing——

23

Chairman GILMAN. Which we appreciate.

Secretary RICHARDSON. I will see the President later this evening

and I will discuss the results of my trip, but I did want to share

with you our latest information, and our latest information is I

think we have to be prudent. We have to play it smart. I think we

are taking adequate steps domestically and internationally. We

have a long-term strategy, and it is important that we work together.

Chairman GILMAN. Mr. Secretary, what long-term policies are

you putting in place to ensure that we will never again find ourselves in this crisis?

Secretary RICHARDSON. First, on the international side, Mr.

Chairman, continued energy diplomacy engagement. OPEC is most

likely going to continue. There are several producer nations outside

of OPEC that we work very closely with, like Mexico, like Norway.

We will continue engaging Norway, talking to them about the importance of free markets and financial stability.

On the domestic front, I mentioned several initiatives: spurring

domestic production, and we need the Congress’ help in getting us

additional Low Income Energy Assistance, weatherization funds.

We are looking at the future, in the Northeast, of the possibility

of gas pipelines there. We are studying, although I cannot endorse

it at this time, the reserve in the Northeast that Congressman

Gejdenson mentioned. We are studying that. I will say to you that

our data 2 years ago showed that it might not be cost-effective, but

we are studying it. We are looking at ways perhaps that States

might take control over some of these LIHEAP funds, give the

States more flexibility, but again, this requires study that we are

doing right now.

Chairman GILMAN. Mr. Secretary, I just want to remind you that

my sanctions bill is intended to give you some leverage with your

friends in the event they are not going to be cooperative.

Mr. Gejdenson?

Mr. GEJDENSON. Thank you, Mr. Chairman.

There are other cartels out there. There is a coffee cartel. They

get together sometimes. They can set prices. But obviously the impact on the economy is very limited because it doesn’t affect everything we do.

In the same sense, de Beers controls the price of diamonds, but

there is an easy solution here. You buy less diamonds. For industrial uses you may shift to other abrasives or cutting tools.

When it comes to oil, it is so central to our economy that I think,

frankly, we must have a more significant response. If the value of

the American dollar had dropped or risen by 300 percent, as has

happened to the price of oil, you can bet your life that the government would either be buying or selling dollars, trying to mitigate

that steep rise or fall because of the obviously devastating impact

on our ability in international sales and purchases. So if we saw

a rapid rise in the dollar, we would go into the marketplace and

sell some dollars; if we saw too big a drop in the dollar, we would

come back and buy some dollars.

So I really don’t understand, Mr. Secretary, your hesitance while

we are having these very nice discussions with these other countries. We are very hopeful that your persuasive ways, and they

24

have always been persuasive, are effective here; but your kind

words would be that much more effective if you had your hand on

the spigot and it was open.

You can turn to them and say, ‘‘Look, we’ve got these bad guys

in Congress who are unreasonable. They don’t want to give you the

time to respond, so in order to prevent them from doing worse, we

are opening the spigot a little.’’ We have seen that work in the

past. You certainly have the authority. We did it during the Gulf

War. As a matter of fact, Congress mandated you sell some oil to

help balance the budget in 1996, so we have been in SPRO before.

The other thing we ought to do is look at a broader energy policy,

which we frankly haven’t had since the Reagan Administration

came to town in 1980. It seems to me that you ought to do two

things: you ought to open this reserve and establish a home heating oil reserve; and you ought to come up and give it to Congress

for not focusing on energy conservation.

I hope my friend from California is paying attention. There are

two parts to this equation. Part of this is what the oil-producing

nations make available to us and how we use SPRO to balance

that. I think, frankly, we have been too slow in responding to the

shortage they created. I think we should have opened SPRO.

The other part of the problem, though, is that Congress has stood

in the way of energy conservation, alternative fuels, and increasing

the efficiency of American automobiles. You ought to be up here

hammering us to demand that in this crisis, before our short-term

memory wanes. If prices level out, we will forget the need to deal

with energy efficiency.

Anybody who reads the paper can see that the American automobile producers are capable of making cars that get 80 and 90

miles to a gallon today with some of these combined fuel systems,

not dream cars of the future but cars that can be here. We ought

to press this Congress, House and Senate, to come forward with energy conservation measures.

I have got one question: Why on God’s green earth would you not

add to your leverage by just opening that spigot a little, and come

here—SPRO’s legislative authority runs out at the end of March—

come back here and ask us for the authority to buy when it is

cheap. We didn’t buy enough when it was $10 a barrel, and we

ought to sell when it is high.

You say it is not an emergency, but we are never going to have

enough LIHEAP funds to reach the average citizen. We are not

going to be able to somehow fudge what this does to the rest of the

economy. Open the spigot. Keep talking. I think it gets their attention.

As they used to say about the farmer and the donkey; he had the

carrot and the baseball bat. They said, ‘‘What’s the bat for?’’ ‘‘First

I’ve got to get his attention, and then I give him the carrot.’’ We

need a little bit of the baseball bat with our friends to get their attention. Why don’t you open up SPRO?

Secretary RICHARDSON. Congressman, let me just say one thing.

We do have an energy policy. It is also in writing, and it is a good

energy policy, and we have been following it.

We have had a successful economic program under this Administration. One of the tenets has been that every time the government

25

intervenes in price areas, it doesn’t work. Now, with the SPRO,

with the SPRO you are intervening and you are manipulating markets.

Now, I am going to stress to you, the President has not taken

this off the table, but it is used for national supply disruptions.

Now, the swap issue is something that is also being considered, so

we do have tools. Now, what I believe makes sense is to let the results of our energy diplomacy work, and so far the signs are good.

Now, we do have a policy. I can’t agree with you more about alternative sources of energy. We have not gotten the support from

the Congress we deserve. The weatherization funds have been cut.

We want to improve the efficiency of the energy system. We have

a comprehensive electricity deregulation bill before the Congress

that would improve the reliability of our electric system. I have

been to your State, where there were some blackouts. We need that

reliability in our system. We have to expand future energy choices.

We have taken a number of steps to spur domestic production.

I would like to put them on the record, because they involve——

[The response in detail to this appears in the appendix, on page

??, as insert A.]

Mr. GEJDENSON. Let me let you put that on on somebody else’s

time. I hate to interrupt you, but I think you have been here long

enough that you have probably interrupted a Secretary or two.

I would agree with you if this were the normal marketplace, possibly. This isn’t the marketplace working. This is an organized manipulation of supply. So, some guys walk along, they are lucky,

they think they have got a good policy. We were lucky for a while

in energy.

Now we are at a point where OPEC is testing its muscle again,

and the question for us is, if this were the free market working I

would say yes, it will work out. But if you increase production here

at these prices and OPEC sees this really works well, they will just

drop production a little more, and so they can play this in the short

term.

The only defense we have in the energy area is your hand on

that spigot, and I think you ought to at least appear to be more

ready to use it. When those guys meet at the end of March it will

be helpful, and I think the article in the Wall Street Journal today

is helpful in that area. But, think about the Treasury for a moment. If some other country were trying to manipulate the value

of the dollar for their trade advantage, you can be darn sure if

there was a 300 percent change in the value of the dollar compared

to the Euro or the yen, we would be out there trying to make sure

there wasn’t as erratic a movement because of the damage to our

economy.

It is the same thing here. This isn’t marketplace forces. This is

manipulation. We have got to be ready to defend ourselves. It is a

great pleasure to see you again.

Chairman GILMAN. Thank you, Mr. Gejdenson. Again, that is

why sanctions are so important.

Mr. Rohrabacher?

Mr. ROHRABACHER. First of all, I would like to commend the

Chairman for being the only one that seems to have put forward

a real policy, an alternative to the policies that have brought on

26

this crisis. So thank you very much, Mr. Chairman, for holding this

hearing.

I commend our good friend, Bill Richardson, for coming here

today. The fact is, as he said, this is his first meeting after getting

off the plane from his trip to the oil-producing regions. Bill, we

know you are very tired, and I think it is very gracious of you and

speaks very well of you that you have come here to talk to us.

With that said, I am sorry that I have to be a little pointed in

some of the questions that I am going to be asking. But, quite

frankly, the fact that you have been on top of this for a year, and

we have ended up in this situation, does not speak well of your or

the Administration’s ability to do your job. You have said you have

just spoken to these oil producers and you got a commitment for

them to review production levels. I mean, that is pathetic. It is pathetic.

Look, these are people who we have troops stationed in their

countries in order to defend. It was just a few weeks ago we had

a service here in Washington, D.C. in memory of the 260 Americans who died during the Gulf War. The Kuwaiti Ambassador, who

is a friend of ours, a friend of yours, a friend of mine, a very fine

man, was at that memorial service.

How can we remember the 260 American lives that were lost,

how can we still have our troops there protecting these people,

while they are engaged in a conspiracy, in an international pricefixing conspiracy to shaft the people of the United States. We didn’t

even use that as leverage, and from what you said, we haven’t used

that as leverage to get them to change their ways. Now, what is

it? Have we at all used our leverage in this area of their national

security to protect the interests of the American people, or haven’t

we.

Secretary RICHARDSON. Congressman, let me say that in my

talks with these energy ministers, these countries that are our

friends, we are very frank.

Mr. ROHRABACHER. Yes.

Secretary RICHARDSON. Now, I am not going to divulge internal

conversations, but I think that these nations value their relationship with the United States. They know that international problems have been created from the production cuts.

Now, all I am saying is, they will be meeting on March 27th.

They have not made any decisions. I believe they are leaning forward on increasing production and recognizing that volatility is extensive, that world economies are being damaged, including our

own.

I do think that the Chairman’s bill—we would oppose it. We

don’t think that sanctions——

Mr. ROHRABACHER. Bill, let me just be very fair with you; this

reflects not only on you but on the Administration’s policies. These

people are tough people. They are rugged. They know what is in

the interest of their people, and they are aggressively pursuing

those interests. The fact is that when we are not aggressive and

we do not make demands, we get run over.

What is happening here today to our people throughout this

country, whether it is the Northeast or whether it is our people out

in California paying $2 a gallon for gasoline, they are getting run

27

over, and by people who we have ended up defending, we spent our

blood and our treasure defending. It is a sin against our own people

to not be aggressive and champion those interests.

Let me say your analysis, your statement, talks about a cycle, repeatedly talking about the cycle. It is not a cycle that has resulted

in higher prices. It is a conspiracy that has resulted in higher

prices, a price-fixing conspiracy by a cartel.

My good friend, Mr. Gejdenson, I will not take this opportunity

to blame the American people because they want a little bit bigger

car or a sports utility vehicle, in the face of a conspiracy by an oil

cartel that is aimed at damaging the well-being of the American

people. It is not the time to chastise the American people for wanting to buy a car that is a little bit more comfortable.

The fact is, we are being screwed by people that we have defended, and we have got troops there defending them right now.

Who is watching out for the interests of the American people?

One last thing—and I am sorry, Mr. Gejdenson—there is one last

thing I wanted to get into. Bill, you were very active on this Afghan front, whether it was your policy or whether it was the policy

of this Administration and you were just being a good soldier.

The fact is, the Taliban are still in power, and the instability

that the Taliban have brought with their support for terrorism and

their fascist policies toward women, is the reason that we don’t

have an oil pipeline that has brought the Central Asian oil into the

world market. It permits these oil producers like Saudi Arabia, who

bankrolls the Taliban, it permits the Saudi Arabians to keep the

prices high.

Frankly, again, it shows a lack of professionality or a lack of

competency on the part of this Administration to permit that going

on. So please feel free to answer this. Thank you.

Secretary RICHARDSON. Mr. Chairman, I have had a lot of conversations with Congressman Rohrabacher on Afghanistan, and he

knows the area well. You are accurate, the Taliban is impossible

to deal with. They repress women, they practice terrorism, they

harbor individuals like Osama bin Ladin. They have not moderated

their policies, and it is very hard to talk to them about any pipelines.

We have pursued, as you know, the Bakujahan pipeline that goes

through Turkey, an ally, that involves Azerbaijan and involves

Georgia, Turkmenistan, and the Trans-Caspian Gas. Our policy is

firmly rooted in finding routes in that area that are pro-Western,

multiple pipelines, and I believe this policy is working. I was there

with the President in Istanbul when we signed some agreements.

But I think to work with the Taliban right now on some of these

pipelines, given, as you mentioned, their very, very difficult attitudes toward anybody in the world—their hostile attitude—it

would be a big problem.

Chairman GILMAN. Thank you very much.

Mr. Hastings is gone. Mr. Rothman? Mr. Delahunt?

Mr. DELAHUNT. Yes, thank you, Mr. Chairman.

I think I can read between the lines, Mr. Secretary, that you

have some optimism in terms of action by the OPEC nations on

March 27th. I also have to agree, however, with others, particularly

Mr. Gejdenson, who I think has stated so well that we are running

28

out of time. What I guess I would suggest or what I would ask is,

if you can, give us a measurement of your level of optimism.

Secretary RICHARDSON. Congressman, I am guardedly optimistic

that OPEC will increase production.

Mr. DELAHUNT. How guarded are you, Mr. Secretary? On a scale

of 100?

Secretary RICHARDSON. How about from one to ten?

Mr. DELAHUNT. One to ten.

Secretary RICHARDSON. I would be guardedly optimistic, nine out

of that ten.

Mr. DELAHUNT. Those are pretty good numbers, Mr. Secretary.

Secretary RICHARDSON. In other words, I am reasonably optimistic. The reason for this, Congressman, is I think the Administration’s energy diplomacy. The President has been active on this

issue, the Administration has been active, we have explained our

position. I think using sanctions would be——

Mr. DELAHUNT. I am not talking about sanctions. In fact, I had

a colloquy here with Mr. Gejdenson and the Chairman regarding

the amount of aid, and I think it is important because it has been

stated here. The amount of nonmilitary aid that this country provides to OPEC nations I dare say is minimal. We shouldn’t delude

ourselves, that there is very little leverage in terms of the level of

nonmilitary foreign assistance that we give to these nations.

I have been handed from staff, via the Chairman, information

that out of the eleven countries that comprise OPEC, only four receive some aid and it is primarily military. I would agree with the

Chairman about cutting off arms sales. I think we should do it anyhow. I think it makes a lot of sense. But, as Mr. Gejdenson points

out, you would have to have multilateral agreement to achieve

that.

Chairman GILMAN. If the gentleman will yield to the Chair, what

we failed to put on that list we gave to you is the amount of trade,

we have with them. Most of them have a significant amount of

trade with us, to their benefit. We want to give the Secretary of

Energy some leverage while he goes and tries to talk with them

and reason with them. He can blame the Congress for feeling a little more bitter about all of this than he does. Thank you.

Mr. DELAHUNT. I tend to agree with the Secretary. I don’t think

sanctions would work. But I think what would work, and I would

hope that if your guarded optimism fails to materialize, that you

will draw down on the SPRO. I think that is absolutely critical and

absolutely important to do, because I think that will pierce the

bubble of speculation that is going on now, and I think we would

see a rerun of what occurred when President Bush drew down during the Gulf crisis.

I yield back. Would you care to make a comment, Mr. Secretary?

Secretary RICHARDSON. Congressman, I am going to repeat what

President Clinton told the Nation’s Governors yesterday, and that

is, the oil swap and drawdown, the sale of SPRO, is on the table

and he is reviewing those options. I have told you that on this

drawdown I have reservations, because I think it should only be

used in a national supply emergency.

I am also interested in what OPEC will do in March, and what

in fact some of the key nations will do tomorrow. These are signals

29

that we are watching. If they make a decision on March 27th that

is detrimental to America’s interests, then I think the President

has a number of options. But I am not threatening them. I just explained our position. We were very forthright and clear about what

is in our interests. In fact, Congressman, I know that many of you

care about developing nations and the European Community. They

share our view, too, so it is not as if we are alone.

Mr. ROHRABACHER. [Presiding] Mr. Manzullo?

Mr. MANZULLO. Thank you. I appreciate your taking the time to

come, Mr. Secretary. I just want to say that I have looked at these

joint statements between you and the heads of energy from four

different countries, and in all candor, what it says, Minister

Rodriguez of Venezuela reiterated his country’s ‘‘commitment to

continue to analyze.’’ I mean, this is nothing. I mean, you went to

them, you did the best you could, and you know what you are telling the American people? Is that the American people have to step

up to the plate to do several things.

Number one, the first thing that is going to happen is when inflation gets spiked, Greenspan is going to increase the interest

rate, and the American consumer is going to pay more in interest

to borrow because of the international criminal conspiracy on the

part of the oil-producing nations.

The second thing is, the President is going to come to us and ask

for a supplemental, which presumably will be off budget. The

American people are going to have to step to the bat, not only will

we pay more in gasoline prices, we will pay more in interest prices,

and then a supplemental means it will probably go off budget, more

money being eaten out of the budget surplus that is due.

The third thing is this: Why not use these tools? Saudi Arabia

is an applicant for WTO. Algeria is an applicant for WTO. Why

don’t we tell these countries, ‘‘If you want to get into WTO, you

cannot engage in an international criminal conspiracy to fix the

world oil prices.’’ I mean, why don’t we use that as a tool?

Why don’t we use this as a tool? Why don’t we say, ‘‘If you want

the IMF to come in and bail you out,’’ such as we did with Russia

and Mexico and, I believe, Venezuela, why don’t we use some tools

on that? We go around the world bailing people out everywhere,

and you know who catches it on the chin? The American taxpayer.

Always, it is always us, not them. It is always us.

When you refer to Mexico and Venezuela and Norway and Saudi

Arabia and Kuwait as our friends, if they are our friends and our

friends stick it to the American consumer to double the price of

gasoline, to pay more interest on loans, to have a supplemental

take money out of our surplus, then what do our enemies do to us?

I think the answer is very simple here. I mean, again, Indonesia,

a member of OPEC, an oil-producing nation, what do we do? IMF

money goes in there and bails them out. I think the American people are sick and tired of bailing these people out.

What about the issue of foreign aid? Can’t you go to Russia,

though not a member of OPEC but certainly part of that cozy

group of people, and say, ‘‘Look, here we give you hundreds of millions of dollars in foreign aid’’—and I am not talking about NunnLugar money to dismantle their rockets, I am talking about money

that we give many of these nations in terms of foreign aid—and

30

say, ‘‘Look, we are going to cut you off. You cutoff the production

of oil, and we will cutoff the foreign aid going from the American

taxpayers to you.’’

These are four tools that I have presented that we could use. You

went there, Bill, with no tools. You went there to use diplomatic

language, and you know what you got? Analyze this. Saudi Arabia

will continue to review the oil supply and demand levels. Kuwait

reaffirmed its intention to enhance mutual cooperation. Norway,

the two ministers discussed energy cooperation and science and

technology cooperation.

Bill, you came back with nothing. All of your hard work—and

you were a good and honest and hardworking Member, and it has

been my pleasure to serve with you for four years in the House.

No one works harder than you. But you went there with no tools

and no ammunition. Could you comment on some of the suggestions that I have given to you?

Secretary RICHARDSON. Congressman, I came back with quite a

bit. You didn’t read the rest of the statements. With Venezuela,

which was my last meeting, I believe that we had the language

that we sought out, review of production levels, volatility, that

what we need to have is, high prices are bad, low prices are bad.

They have their own processes. OPEC operates in a consensus.

They are meeting in March, at the end of March. I believe by the

presence of the Energy Secretary, representing the President of the

United States, taking the case of the American people and the Congress to these countries, I think the message is strong enough.

Now, did I threaten? No. Did I coerce? No. I think that our arguments were convincing. All I can tell you, Congressman, is 30 days

ago I think your staff could provide you with what these nations

were saying. OPEC was saying that production cuts were probably

going to continue. They were saying that in the second quarter, demand was going to lower, and that therefore no changes were needed. Now we have the key members of OPEC, including its leaders,

saying that they are going to look at production levels.

Mr. MANZULLO. But you have no promise, you have no incentive.

They may or may not do that. What is the plan of the Administration to end OPEC, to end the criminal conspiracy that controls the

production of oil? Is there any plan to end it, to dismantle it?

Secretary RICHARDSON. That would be a problem, Congressman.

You know that.

Mr. MANZULLO. Why would it be a problem, when we are giving

these people money, when we are bailing them out on a day-to-day

basis?

Secretary RICHARDSON. I think, just for the record, because this

has come up a lot, in terms of assistance to OPEC nations, what

we are talking about, total American assistance to all countries,

and this Committee has these statistics, is $23 billion. When we

are talking about aid to OPEC, we are talking about less than $300

million in economic, military and agricultural assistance.

Now, we do have military relations, arms supply relationships,

and there is no question, I will also say, Congressman, that I felt

when I talked to the Saudis, when I talked to the Mexicans, to the

Kuwaitis, the Venezuelans, the Norwegians, they felt very strongly

31

that it was important to have a strong relationship with the United

States. I think that——

Mr. MANZULLO. Then you should have just said, ‘‘If you want to

be strong with us, get out of your international criminal conspiracy,’’ so you could meet on fair ground.

Secretary RICHARDSON. March 27th is an important date. They

will all convene, and I am optimistic, guardedly optimistic that

they will increase production. The key will be the level and the

timing of that increase.

Mr. ROHRABACHER. Thank you very much. Thank you, Mr. Manzullo, and thank you very much, Mr. Secretary.

Ms. Lee?

Ms. LEE. Thank you very much, Mr. Chairman.

Thank you, Mr. Secretary, for your presentation and really for

your very bold leadership. Let me just mention a couple of things

with regard to the cost of gasoline in California.

According to the California State Automobile Association, Northern California gasoline prices have shot up by approximately 12 to

17 cents per gallon in just the past two weeks. The average price

of a gallon of regular unleaded gas at self-service pumps soared 12

cents to $1.71 in San Francisco, just four cents shy of the record

$1.75 reached last August. Northern California, I believe, has some

of the highest prices of gasoline in the country.

Now, this past weekend was very interesting. I saw lines of cars

at gas stations where the prices were a bit less, and people are getting very angry. I sense frustration. The American public, especially in Northern California, doesn’t really understand why the

cost of gasoline is so high.

I wanted to ask you, how do you think we need to present this

to the American public in layperson’s terms so they can really understand why the cost of gasoline is so high, so that their frustration level can either be minimized or so they can really kind of understand what is going on?

Then, second, I just wanted to ask you a question about Nigeria.

Given the fact that they could increase their output, and of course

Nigeria is going through now some very, I think, positive changes

in terms of their government, but there is still some civil unrest

and there are still some difficulties, what should our policy be toward Nigeria as it relates to what we can do in terms of our assistance to help them produce more oil?

Thank you very much.

Secretary RICHARDSON. Congresswoman, you have been very constructive in your two questions. Here is how I would answer your

constituents.

I would say to them, the high price of gasoline or the high price

of home heating oil was caused for three reasons: one, the high

price of crude oil; second, an unexpectedly cold winter, especially

in the month of January; and, third, transportation problems in delivering some of the home heating oil. I would also say to them that

low inventories in U.S. stocks have caused increases in gasoline.

I would also say to them that your Administration, our Administration, is addressing the short term and long term on the international front with energy diplomacy, explaining forcefully the importance of free markets, of price stability, of having increases in

32

production based on the need for financial stability in the markets.

I would also explain that we are taking steps with refiners, with

home heating oil operators. We have got to get refiners to pump

more crude. We have got to find ways to postpone maintenance

that refiners are making, so that they don’t spend their time on

maintenance and home heating oil can be delivered.

We believe that in California your market is a unique gasoline

market. You have very strict environmental regulations and limited supply options, but the underlying problem for you is the high

cost of oil. If we get increases in production, we believe that costs

will recede.

Now, I am conscious of the increases in the price of gasoline. We

expect that when our Energy Information Agency releases its report sometime soon, that in the short term there may be some further increases, but we expect if OPEC increases production, that

prices will stabilize. Nobody wants high gasoline prices. The price

of diesel, I think the President has also talked about, with the

Members of Congress that met with him on issues relating to the

diesel fuel tax. That is being considered, although that presents

some problems, the Highway Trust Fund and other factors. But I

would explain to your constituents that we are aggressively addressing the problem.

The second question, which is an excellent one, we are very excited about what is happening in Nigeria. It is a democratic government. They are bringing their energy—they are a huge energy resource, especially in oil—they are cleaning up some of the problems

there, corruption and others. They are taking aggressive steps to

privatize. They are bringing their oil into the market. Early indications are that Nigeria would be cooperative with us on increasing

production.

They are a member of OPEC. The OPEC Secretary General, Mr.

Rilwan Lukman, is from Nigeria, and the contact we have had with

Nigeria on this issue so far, and I am going to have further contact,

has been very positive. So we are very excited about what is happening in Nigeria.

Mr. ROHRABACHER. You are welcome, because Mr. Manzullo took

a couple extra minutes, if you would like another question.

Ms. LEE. Thank you very much, Mr. Chairman. Let me just respond with regard to Nigeria.

Do you see any efforts that we need to mount in the Congress

to assist the Administration, given the enormous crisis really that

we are in, in terms of our energy crisis now? Or is this an effort

that you think the Administration and yourself can actually work

out?

Secretary RICHARDSON. I would ask the Congress to adopt our

numbers for alternative energy, for climate change, our budget

numbers. Help us promote energy efficiency, more efficient fuel vehicles. Give us the money we need on weatherization; the Congress

cut us in half on weatherization.

Give us the supplemental for Low Income Energy Assistance.

The President has three times tapped the Low Income Energy Assistance, more than any other President, and we are asking for

$600 million more. This is money that helps poor people. There are

poor people. I have met with them in the Northeast. I have been

33

in Maine, I have been in New Jersey, I have been in Boston. I plan

to go to Rhode Island and Connecticut. We had a summit in Boston, of Governors, of local officials, of consumers, to try to address

the problem, and I do see progress.

Mr. ROHRABACHER. Thank you very much, Mr. Secretary.

Mr. Cooksey?

Mr. COOKSEY. Thank you. Mr. Secretary, I have gone from saying

I thought you were doing a relatively good job at DOE to thinking

you are doing a great job at DOE, after your testimony, as long as

you adhere to the principle of market forces. I have a lot more confidence in market forces than I do politicians. I think that cartels

will always collapse in the face of market forces, in spite of what

the politicians will do.

My other problem is with politicians. I notice that 13 Members

or 15 Members of this Committee are from the Northeast, and they

are good friends of mine. Mr. Gejdenson is a great friend. We have

a lot of fun riding each other about certain things or teasing each

other about things. But they are wrong in trying to come in and

do some of the things that they are proposing. I feel that this is

a tendency that politicians have where they are playing to their

home media, and it is just not, the facts.

But I would assure my friends from Connecticut and New York

and from the Northeast that spring will be here soon. When spring

is here, the demands on petroleum and the home heating oil prices

will come down, and we won’t have to draw anything out of the

Strategic Petroleum Reserve, which is in my State. I understand it

has 570 million barrels in it. It is there for a reason and I think

it should stay there. So basically my message to you is, keep the

faith in the face of all the criticism by my colleagues on this side

and the ones on the other side.

I would point out, I made one misstatement earlier. The United

States is producing six million barrels of oil a day in 2000; we were

producing nine in 1973. But that two or three million barrels a day

is about the deficit that we have in this country.

I would also point out that if you adjusted gasoline for inflation

from 1979 or 1981, we should be paying $2.50 a gallon today instead of $1.50 or $1.60 a gallon.

The bad news for the politicians in the OPEC countries, is that

there are more poor people in their countries than there are in

ours, because democracy and market forces still will prevail over

dictatorships and cartels. The thing that disturbs me today is that

some of my colleagues are trying to make us a cartel, are trying

to make us a bully, and it will not work in the face of market

forces.

Secretary RICHARDSON. Congressman, your words are music to

my ears. I hope that doesn’t hurt——

Mr. COOKSEY. Did you say music or amusing?

Secretary RICHARDSON. Music.

Mr. COOKSEY. A lot of my colleagues think they are amusing.

Secretary RICHARDSON. Our policy is that market forces in energy and oil should dictate prices, and I believe again that the success of this Administration’s economic policy is, we have applied

that across the board.

34

Now, on the Strategic Petroleum Reserve, which is in your State

and in Texas, we made a wise decision a year ago. We replenished

it through what is called the RIC sale, exchange with the Department of the Interior. We have 10 million barrels more there because of this policy of proceeding when the price was low, and it

is replenished. It is being managed very well, especially in your

State and in Texas.

Now, let me just say something. We are concerned about high

gasoline prices. While inflation-adjusted numbers suggest gasoline

prices are not that much higher than in the 1970’s, we still need

to work to get them down. The best way to do that is by lowering

crude oil prices, and that is what we are trying to do.

Congressman, I will also say to you, I would like to just mention

for those from energy-producing States, we have taken steps with

the Federal royalty payment, less paperwork, increased technology

in drilling, so that our drillers, through the Department of Energy

programs, can drill more effectively, efficiently, with the latest

technology.

We are aggressively pursuing that, and we will try to take additional steps to help our domestic production—I think that is one of

the messages from this problem—at the same time that we also

properly fund alternative sources of energy, solar, wind, biomass,

natural gas. This is the time to invest in those energy sources, and

we are trying to do that through our electricity restructuring, deregulation bill, by having a renewable mandate of 7.5 percent, our

funding for many of these energy conservation efforts, our joint

projects with the Big Three in Detroit to produce a more energyefficient vehicle. We have had some breakthroughs in that area.

We need the Congress’ support, especially in Low Income Energy

Assistance, weatherization. These are programs that help poor people, and what we need to do is have the States and the Federal

Government raise the eligibility requirement so that more middle

class and more average people can be helped, too.

Mr. COOKSEY. Can I make one closing statement, Mr. Chairman?

The red light just went on.

As a physician, I have to deal in the facts more so than a politician does, and I hope these facts are correct. I have been told that

the largest retailer in this country today is Citgo, and I was also

told that the controlling stock in Citgo is in the hands of the government of Venezuela. It is also my understanding that my colleague was correct about Chavez, who tried to overthrow the democracy in Venezuela a few years ago. Now he has been elected in

the democratic process. But also he was in China last week doing

deals with the Chinese and the Cubans, for whatever it is worth.

Thank you, Mr. Chairman. Thank you for being here. It has been

a good session.

Mr. ROHRABACHER. Thank you very much, Mr. Cooksey.

Mr. Payne?

Mr. PAYNE. Thank you very much, Mr. Secretary. It is good to

see you, and the fact you came right off the plane and came right

here, you are certainly in the right business. You are the Secretary

of Energy, and so you have to have a lot of energy, I guess, so we

compliment you for being here.

35

I know you are important but I didn’t know that we need to

blame you for treatment of women in Afghanistan. Maybe you are

responsible for the North Irish talks falling off, too. I mean, you are

more important, evidently, all of a sudden, than I ever thought you

were. I always thought you were important, but I hear all the

world problems are because of you—my Chairman here.

But I think that you hit on the issues. One, we need to really

become more fuel-efficient. We need to have some subsidy to build

natural gas lines to the Northeast. The Northeast, where I live, is

where we are hurting from the high cost of home heating fuel, and

that is because there have never been pipelines to the Northeast

for natural gas. So I would like to see the Administration look into

that so that we could avoid these problems in the future.

In addition to that, I think that when the prices are low, for example, the airlines have increased their fares because they say,

prices went up to $30, went up from $10 to $30, but when they

were $10, they didn’t reduce their fares. I don’t know how, what

is good for the goose is supposed to be good for the gander. If the

prices are low, it would appear to me that that savings should be

passed on to the consumer. When the prices go high, they then roll

it back to the consumer. I can’t blame you for that, either, but

maybe I should.

I think that the only answer to this problem is that we come up

with alternative fuels, that we do research, that we have cars, as

you have mentioned—Japan is putting out a car that can do 70

miles per gallon. We need to be able to do the same kind of thing.

I think, just in conclusion, I probably really don’t have a question, but I didn’t get a chance to make an opening statement either,

and the fact is that the cartels are going to do the same thing,

whether it is next year or the following year. I don’t care if we have

got 25,000 troops or no troops in Saudi Arabia or Kuwait, or if Norway drops out of the European Union, cartels are going to come

around and they are going to say, ‘‘Let’s hold up’’ or ‘‘Let’s pump

up.’’

We don’t grow wheat, and everybody buys our wheat for bread

around the world, we don’t grow twice as much wheat as we could.

We could double the production of wheat and, therefore, that

should drop the price of bread. But we don’t. We just do enough

wheat to keep prices of bread where they are. Bread prices haven’t

gone down, although we have turned the technique around, of

being able to produce more. We have got new strains of seeds. But

we don’t see a doubling of the production of wheat. We don’t see

the price of beef going down, although we shoot them up with hormones and everything, they get twice the size in half the time.

So I think that the economic forces of the world are really going

to be what is going to be, and the people that pump oil and gas,

they are going to slow up when they want to slow up, they are

going to pump it up when they want to pump it up. It is no different in that industry. It just hurts us more, and it hurts me tremendously up in the Northeast. I wish it wasn’t that way, but that

is the way the world is. They are not going to grow any more sugar

than they are growing, because sugar could come down 50 percent

of what the cost is.

36

So I think we are really asking, because it impacts on us negatively and I wish it wouldn’t happen, I think we are looking for

miracles, but that is really not the way the world works. You have

got a product you want; you want to keep guzzling. My friend said

we should have bigger cars, Americans should have the right to

have these big old gas guzzlers, and that is true, if they want to

pay for it and they want to buy them. But you can’t tell the guy

who has got the oil in his country that he should reduce his costs

so that Americans can have gas guzzlers cheaper.

It doesn’t make sense. I mean, it would be great if we had a

magic wand and the world worked that way. I know this is the

greatest country in the world, but we can’t make the world just

make everything so convenient, so if we decide we want bigger,

more gas-consuming cars, they should therefore drop the price so

we could do it.

So I am on your side. I think you are doing the right thing. I

think the Administration is doing the right thing. I wish, though,

that we would put more money really in serious research and technology so that we can make cars more fuel-efficient, so that we can

get natural gas up to our places. We can even help countries like

Nigeria, that flares the natural gas, even assist them to contain the

natural gas, build pipelines, so that that natural gas could be used

as an alternative for home heating fuel.

I just want to compliment you on the fine job you are doing, and

ask that you keep the talks going. As long as people are talking,

that is positive. I want you to go back, talk some more to them.

I listened to what you said. I really don’t know what you accomplished, but I want you to keep the talks going, because as long as

that is happening, I think that we are on the right track.

Mr. POMEROY. Will the gentleman yield?

Mr. PAYNE. Yes, I yield.

Mr. POMEROY. I have to run to the Floor, but I did want to make

the point specifically relative to the incredible hit this will have on

farmers, and so your talks and your efforts to leverage progress are

extraordinarily important. North Dakota State University estimates this will increase production costs significantly, adding literally thousands of dollars to farmers’ costs at a time when prices

are so low we have a crisis in agriculture. So I will send you more

information, Mr. Secretary. I just wanted to get that point in before

I had to run to the Floor. Thank you.

Secretary RICHARDSON. Congressman, I want to thank you for

your statement. You mentioned at the beginning the importance of

natural gas, and I think before you came I mentioned that the

President has asked the Energy Department to do a 60-day study

of diversifying energy supplies in the Northeast, including converting factories and other major users from oil to other fuels such

as natural gas, in order to free up oil supplies for use in heating

homes.

We also have a request to Congress to develop new technologies

that would protect against market failures, promote reliability

through more efficient technology, especially in natural gas distribution, transmission and distribution technology. So we are looking forward, and I appreciate you have a lot of diplomatic experience yourself. You know that you have to be careful, many times,

37

in that the United States is the world’s only superpower, that you

use your leverage carefully and guardedly. This is what we are trying to do.

But we will keep these conversations going. As I said, I think my

talks were successful. I am guardedly optimistic that there will be

an increase in production. We will know on March 27th. But we

have a strategy regardless, and we have made considerable

progress since 30 days ago, so I think we are moving forward, and

I thank you for your comments.

Mr. LEACH. [Presiding] Thank you, Mr. Payne.

First, Bill, let me also welcome you back to the Hill. You have

many friends up here. But I would like to comment about these

talks, and in a sense it is positive always to be talking, but there

is something that isn’t very strong about the United States of

America discussing with a cartel concerns about pricing and supply

issues, when we are being bamboozled by that cartel, and I would

like to talk to you for a second about law.

It is my understanding, and I apologize for being late in coming,

that there was earlier discussion that under domestic law a cartel

of this nature would clearly be illegal. I would like to make it very

clear, from a congressional perspective, under United States law

today this kind of cartel is illegal.

We have an act passed a generation ago called the Foreign Sovereign Immunities Act. What that act very precisely suggests is

that when a government acts as a corporation, it comes under

United States corporate law, which means United States antitrust

law. Very interestingly, although until recent years it wasn’t extensively applied, the Common Market has comparable antitrust laws

as the United States. Articles 85 through 90 of the Treaty of Rome

are every bit as strong as the Clayton and Sherman Acts.

I would like to suggest that it is clear-cut that if matters are not

in a timely fashion brought into line, the option of the United

States is to bring an antitrust action, and that type of action is of

towering significance. It is the rule of law, it isn’t the rule of anything else. In fact, one might argue that not to bring an antitrust

action would be for an Administration to not uphold the rule of

law. So I would like to just suggest to you that when you talk with

other countries, that this is an option that is being urged upon you

by Capitol Hill and thoughtful purveyors of concern on this issue.

Now, I don’t personally think that this is something that necessarily should elicit comment, because I think comment can be

very unhelpful, but I will tell you that this is in the arsenal of the

United States. It is in the arsenal of our Common Market partners.

It is something that, when you talk about discussions, ought to be

in the discussion framework with our allies as well as with the oilproducing countries.

Now, having said that, because I am not eager for a response

that would either be dismissive or too alacritous in support, I want

to raise one other issue that I think the Administration has not

been as quite on top of as I would like them to be, but they have

not also been totally opposed. But when you look at alternative energy sources, we don’t just have wind and solar. We have a renewable source that derives from the earth, and it is called gasohol,

which is at the moment largely a corn-based product.

38

Coming from the Midwest, I would hope that this would be an

understood kind of concern, and it relates to issues the Administration is going to be making policy decisions on in the not too distant

future, relating to EPA and California. I would hope the Department of Energy would be in a position to weigh in on the side of

the development of this alternative market as a national interest

issue. Would you care to comment on that?

Secretary RICHARDSON. Mr. Chairman, let me say that I have

visited your State. We have noted, in the bio energy area, this is

a great potential in your State and the Midwest. On ethanol, the

Administration I think has a strong policy. We support the tax

credits provided to ethanol, so we have a strong alternative fuels

program at the Department.

Before you got here I was trying to say, to the Committee and

to the Congress, please fund these, because we get big cuts in them

at the end of the year. We are requesting a 45 percent increase in

funding for gasohol, biomass, bio fuels for the year 2001. What we

want to do is develop cost producing technologies in this area. The

technology that is happening in this area is very exciting.

So we hope that you can support us in this effort on research and

new technology, but we share that view, especially in the area of

bio energy. We are very bullish about this, and we ask for your

help.

Mr. LEACH. I appreciate that, but let me make it very clear. I am

asking for your help, and I want to be very specific, Mr. Secretary.

The EPA in the very near future is going to be making significant

decisions, seminal decisions, relating to an application from the

State of California, on whether California is obligated to use more

ethanol. Will the Department of Energy be weighing in on that decision?

Secretary RICHARDSON. Yes, we will be weighing in.

Mr. LEACH. Thank you.

I have a list of other Members, and in the order of appearance

I am told Mr. Crowley is next, but I am willing to go by whatever

order the Minority prefers in this. Mr. Crowley is recognized.

Mr. CROWLEY. Thank you, Mr. Chairman.

First of all, Mr. Secretary, let me thank you for staying here. I

know you have a busy schedule, and I know you once sat in these

shoes that I now have, and I appreciate your sticking around for

a question from a freshman Member of the House.

I represent a district that takes in parts of Queens in New York

City and the Bronx. The average annual income in my district is

about $30,100 a year. My notes indicate to me that although 12

percent of American homes are heated by oil, in New York State

it is nearly 40 percent of all homes that are heated by oil, and in

my district it is actually 46 plus percent of the homes that are

heated by oil, some 108,000 homes.

A little math that I have done: the average bill was about $200

a month, it is now well over $400 a month. LIHEAP funding for

New York is approximately $72 million. My district alone, per

month, will see an increase, and these are conservative figures, of

over $23 million in spending, just a little math I have done here,

doubling it. You cost that over four to five months, and you are seeing over $1,000 that is coming out of the pockets of people who

39

don’t make much money, and probably multiply that a number of

times over for congressional districts, depending on what state you

are in.

The question that is asked me a great deal when I have been out

in town hall meetings is, didn’t anyone see this coming? Did not

anyone in the Department of Energy or anywhere in this Administration see what might possibly be happening? One of the solutions

we have talked about is the creation of a separate home heating

oil reserve, and also talking about opening SPRO.

The concern I have is that while the President continues to study

the option of doing that, we will be in spring. The crisis will have,

for the most part, ended as it pertains to home heating oil, not necessarily as it pertains to the price of gas, and diesel fuel particularly, and what effect that will have on the cost of products that

are being shipped across this country.

Despite the comments of my good friend from Louisiana about

switching to natural gas, of the many people in my district who

represent the 46 percent, an overwhelming majority of those individuals are well over 65 years of age and I dare say are not interested at this point in making those types of changes to their home,

and won’t do that in the future, either.

That is the crisis we are facing right now. Individuals who had

a little extra money to maybe take care of some family members

no longer have that. Before, I know another colleague mentioned

people actually making decisions about paying their heating bills,

or purchasing prescription drugs, purchasing proper food. These

are realities in my district.

My first question, did no one see this coming? I appreciate the

work you have done. I have been following it, and I know the hard

work you have been engaged in and the Administration is engaged

in. But did someone in the Administration not see this coming and

not react sooner?

Secretary RICHARDSON. Congressman, you know last year we had

tremendous surpluses, inventory surpluses, and it wasn’t until late

last year that we started seeing very low stock levels. I was aware

of this, and I was alerting the OPEC ministers, and they said,

‘‘Well, we’re going to be meeting. We’ll deal with that.’’

The cold snap in January aggravated the markets, and we reacted immediately. I think as you said, we have dealt with

LIHEAP. In your specific case, we found in New York there were

serious transportation problems, and we worked with the Coast

Guard to make sure that ships had priority, vessel traffic that

would deliver some of this home heating oil to your specific part

of New York.

Let me just say on the natural gas issue, what we are suggesting

is natural gas for large users, not necessarily for homes. What we

would like to do is, with home heating oil operators, and you have

many that are small business people who have real cash-flow problems, that we are helping. We started a new loan program, an

emergency loan program with the Small Business Administration

for truckers, for loggers, and they should try to get in on some of

these problems.

We have also gotten refiners to postpone some maintenance work

so home heating oil supplies can be more rapid. We have also

40

worked with several states for Clean Air Act waivers for several

days, so that home heating oil can move more rapidly and efficiently in those areas. Several states requested that, including I believe New York, so what we would like to do is continue working

with you.

I think another thing, Congressman, that we need to do at the

Federal and State level, is some of your constituents, because of income, may not be eligible for LIHEAP funds, for weatherization

funds. We need to look at what constitutes the poverty level, the

middle class. The President has urged that states that have the

primary responsibility look at eligibility standards. So Low Income

Energy Assistance, that the President has reduced three times,

$300 million; your state has gotten, I think you said, $76 million.

Mr. CROWLEY. Right. Mr. Secretary, if you add up four months at $23 million in my district alone, we have more than the LIHEAP

for the entire State of New York. That is also part of the problem.

There is not enough money in LIHEAP coming to New York.

Secretary RICHARDSON. Right. We have asked for $600 million

more in a supplemental, and we hope that is taken up soon, and

that will be to address some of the problems that you have. We are

also worried about the summer, possibly excessive heat. We are

concerned about outages, and we want to be sure that the reliability standards of our utilities are strong so that we don’t have

these problems also in the summer, and your constituents would be

vulnerable then, too.

Mr. CROWLEY. Mr. Chairman, just one final followup.

I know you have been to several States in the Northeast. We

would like to get you to New York and to Queens and the Bronx

specifically at some point, if you can.

Secretary RICHARDSON. Sure.

Mr. CROWLEY. A lot of people want to see you.

Secretary RICHARDSON. Sure. I didn’t know I would be welcome.

Mr. CROWLEY. You are very welcome. Thank you very much.

Thank you, Mr. Chairman.

Mr. LEACH. Thank you very much, Mr. Crowley.

Mr. Meeks?

Mr. MEEKS. Thank you, Mr. Secretary, for your testimony. I, too,

want to compliment you on the job that you have been doing as

Secretary of Energy.

I just have a quick question. We talk about the marketplace and

it controlling the economy and supply and demand, and most of the

testimony that has been heard today and most of the questions are

all focused primarily on the OPEC nations. I am wondering what—

and I think dialogue, I agree with Mr. Payne that dialogue is tremendously important—I am wondering what dialogue have we had

with the oil-producing nations who are not members of OPEC,

about getting them to increase production and doing some certain

things so that we can balance this thing out and give OPEC some

level of competition so that they don’t have the dominance that

they have on the oil market right now.

Secretary RICHARDSON. Congressman, that is an excellent question. I have spent a lot of time talking to two countries that are

not members of OPEC but have been tracking OPEC production

and other levels, Mexico and Venezuela—I am sorry, Mexico and

41

Norway. I have been to Norway twice in the last three weeks. They

are a key producer. They are the second largest exporter of oil in

the world, I believe.

Mexico is possibly our number one producer. Mexico, Venezuela,

Saudi Arabia, depending on shipping schedules, each one is number one every month, but Mexico has recognized that their economy

is very tied to ours. They have been responsive on the production

issue. I think just this morning the energy minister of Mexico said

that Mexico felt that production needed to be increased. Norway is

meeting Mexico, I believe tomorrow or today, to discuss possible additional production levels.

So we have engaged nations outside of OPEC that are producers.

There are also other nations within OPEC that we have been talking to, that I didn’t mention. There are other Gulf states. Nigeria

is a key member, Indonesia. The International Energy Agency, the

IEA, is comprised of several nations. It is based in Paris. The member nations, I would like to submit for the record, have stated their

concern about high oil prices, their need for increased production.

The European Community, and many developing nations, I know

you are very active on the developing world. Africa, there is great

need for lower prices in Africa, several countries there. In fact, in

Egypt, where I visited just a few days ago in North Africa, Egypt

has associated themselves with our position for the need for more

production, that prices are too high. So we have engaged other

countries and we are going to continue doing that.

Chairman GILMAN. [Presiding] Mr. Sherman?

Mr. SHERMAN. Thank you, Mr. Chairman.

There has been discussion of OPEC collapsing. I don’t think it is

going to collapse. It is a conspiracy in restraint of trade. I should

point out that the United States once used its governmental power

to restrict or encourage a reduction in farm production for the purpose of increasing prices, but that was never with the goal of increasing world prices.

You have talked about heating oil aid for the poor, Mr. Secretary.

I would point out to you that there are poor people in warm places,

and they are dependent upon gasoline to get to work. Public transportation is not a viable option for many poor people in states such

as the one you represented and the one that I represent. I would

hope that there would be equal attention to providing gasoline

vouchers to the poor as to providing heating oil vouchers for the

poor.

I join you in hoping that later this month we are going to see

increases in production, but I would hope that there is a back-up

plan. Unfortunately, all the back-up plans I can think of, because

using the Strategic Petroleum Reserve is a very short-term and

limited thing that we could do, involve changing some of the foreign policy of the United States.

I would hope that our friends in Indonesia know that we might

choose to support independence movements in part of Indonesia, if

they are waging war against American consumers. I would hope

that Saudi Arabia and Kuwait would recognize that the American

people are not going to be willing to continue to station ground

troops in their area to continue to defend them from Saddam Hussein, if they are waging war against us; that our position on border

42

disputes between the Emirates and Iran could be influenced by the

fact that the Emirates continues to wage war against the American

consumer.

Up until now, American foreign policy, and I have said this before, is best described as saying, ‘‘We would like the honor of defending other countries for free, and in return for that honor we

will sacrifice our own economic position.’’ I don’t know if we can

continue to ignore the fact that OPEC is waging war against the

American consumer.

Mr. Secretary, there are a few oil-producing countries that get

aid from the United States in significant amounts. Now, it is interesting that our chart shows that Iraq is getting $7 million of U.S.

aid, which seems like a waste of $7 million, since whatever food

goes to Iraq is under Saddam’s control.

But looking at more significant oil exporters, you have indicated

that there are four that are receiving significant U.S. security aid,

trade aid, or direct aid, or in Nigeria’s case is eligible for debt relief

aid, and those four are Nigeria, Mexico, Russia, and Indonesia. You

have indicated that some of these countries have paid lip service

to the idea that maybe oil production should be expanded.

But I would like you to review, for each one of those four countries, Nigeria, Mexico, Russia, and Indonesia, whether those countries are currently producing oil as quickly as they can, given physical constraints, or whether there are governmental policies, either

with the government acting as sovereign or the government acting

in its proprietary capacity. Which of those four countries is producing oil as quickly as it can, and how many more barrels would

be on the market today if all efforts of those four countries to restrict oil production were released and eliminated?

Secretary RICHARDSON. Congressman, very few countries in the

world, OPEC or not, right now have sufficient excess capacity to

supply American needs. I think we have to move very carefully as

we seek to address production levels and supply at the same time

that we encourage development in some areas.

Let me go country-by-country. Nigeria is a member of OPEC, so

they abide by the OPEC decisions. But they have, as you know, because of their internal situation, because of capacity problems, I

don’t think they have been able to produce at full capacity. They,

in their statements and their discussions with us, have acted very

responsibly, and I believe that on increased production, they would

be sensitive to the needs of other nations in Africa and the United

States.

Mr. SHERMAN. But are they producing as much oil today as they

could?

Secretary RICHARDSON. No, they are not, because you know they

had a serious civil war there.

Mr. SHERMAN. No, I want to say as they could. I mean, are they

producing as much as they can, given their physical and political

and security problems, or are they restricting oil production in

order to help OPEC achieve its pricing objectives?

Secretary RICHARDSON. No, I think with them, they don’t have

the capacity, so what they are doing is consistent with their capacity to produce.

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Now, the others you mentioned, Mexico is not a member of OPEC

but has been abiding with the OPEC pact. Mexico I believe has

been extremely responsible, recognizing the need of international

demands. I was in Mexico about 10 days ago, and the energy minister and I agreed that prices were too high. I believe earlier this

morning Mexico made a statement saying that they would favor increased production, so that is very positive.

Mr. SHERMAN. But they are not producing as much as they physically can at the present time?

Secretary RICHARDSON. The answer is yes with Mexico.

Mr. SHERMAN. In adherence to OPEC’s desire to wage war

against the American consumer, the Mexican government is preventing oil production today from being as high as it otherwise

would be?

Secretary RICHARDSON. Mexico is abiding by the OPEC pact.

Mexico is not a member of OPEC, but it has agreed with the OPEC

position. But of all the countries that I visited, because of the tiein to the Mexican economy that we have and Mexico has, Mexico

has been, I believe, quite responsive. But also they have had serious budget problems when prices were $10, and they are balancing

their needs. But I would say Mexico has been responsive to the

international economy and they are not——

Mr. SHERMAN. Their rhetoric has been responsive but they have

not increased production in the last few weeks in order to——

Secretary RICHARDSON. No, but Congressman, they can’t. They

can’t until they formally meet as OPEC and non-OPEC members.

This is why this is all very sensitive. They can’t independently act

of each other because they have——

Mr. SHERMAN. Mexico is not a sovereign country? It doesn’t have

the right to change its government policy and increase oil production? Their loyalty to OPEC exceeds their loyalty to their NAFTA

partner, and they feel bound to participate? Their rhetoric is good,

but their practice is to participate with this OPEC squeeze?

Secretary RICHARDSON. I just look at what the energy minister

has told me and what he said this morning, and I am encouraged

that they say that OPEC and they would be ready to increase production.

Russia, you mentioned Russia. Russian oil and gas infrastructure

is in bad shape. They could deliver more, and we could benefit if

we encouraged investments in Russian energy infrastructure upgrades. We have tried to get the Russians to have what are known

as production-sharing agreements, where issues like transparency

and other factors operate more efficiently for our investors. But, as

you know, Russia has had difficulty in getting some of their economic problems straightened out.

Congressman, you asked me another country?

Mr. SHERMAN. Going back to Russia, I realize that they need a

lot of investment, longer term, but today are they producing as

much oil as they practically can with today’s——

Secretary RICHARDSON. No.

Mr. SHERMAN. Is their government preventing their enterprises

from producing oil?

Secretary RICHARDSON. No, I think it is just a matter of their

economic condition.

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Mr. SHERMAN. The final question was Indonesia. Are they underproducing as part of the OPEC effort?

Secretary RICHARDSON. Indonesia is a member of OPEC. I believe our information is that Indonesia first of all has been sensitive to our concern for increased production. Whether they are operating at full capacity because of their, as you mentioned, internal

problems, the answer I will supply for the record. I do not believe

so.

[The response in detail to this appears in the appendix, on page

??, as insert B.]

Chairman GILMAN. Thank you, Mr. Sherman.

Mr. Secretary, we want to thank you for your appearance today

and your patience. I welcome the opportunity to meet further with

you to discuss the legislation I am introducing today, that would

reduce, would terminate and suspend assistance and arms sales to

countries determined by the President to be fixing oil and gas

prices to the detriment of our own economy. I think it could be to

your benefit to have this measure before you as you go to discuss

and negotiate with the oil-producing nations. You can blame it on

these bad guys here in the Congress, but we think it is an important vehicle for you to make use of. I will send you a copy of our

bill after we introduce it later today.

We thank you once again, and we hope you will continue in your

efforts to provide a better energy policy for our Nation. The meeting stands adjourned.

[Whereupon, at 12:50 p.m., the Committee was adjourned.]

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A P P E N D I X

MARCH 1, 2000

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