The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“THE PRICE OF ENERGY” mentioning the U.S. Dept. of Energy was published in the Senate section on pages S8872-S8874 on Sept. 21, 2000.
The publication is reproduced in full below:
THE PRICE OF ENERGY
Mr. MURKOWSKI. Mr. President, yesterday I took the floor and discussed the problems associated with the price of oil and our increased dependence on imports from Iraq and the regime of Saddam Hussein.
Yesterday, I told this body that oil had peaked at its highest price in 10 years. I am here today to tell you that oil has peaked for the second time in 2 days with the highest point in 10 years--$37.86 a barrel.
There is a reaction occurring. It is rather interesting. I am going to discuss it briefly because my intention today was to talk about natural gas.
Natural gas, as many of us will remember, 9 months ago was about
$2.16. Deliveries in October are in the area of $5.40, a 44-percent increase in a relatively short period of time. The administration is reacting.
The news today tells us that there is going to be a recommendation from the Vice President to open up the Strategic Petroleum Reserve to set up a heating oil reserve. There are a couple of things that are pending. One is the reauthorization of SPR in the EPCA bill, which is currently being held by a Member on the other side of the aisle. The administration is asking us to release the authority by passing EPCA. We are going to have to take care of that little matter first. But let's talk a little bit about the Strategic Petroleum Reserve because it is probably the most misunderstood issue on the burner today.
SPR was created back in 1973 during the era of the Arab oil embargo at a time when this Nation was 35-percent dependent on imported oil. Today we are 56-percent--nearly 58-percent dependent on imported oil. We swore back in 1973 we would never be held hostage and would never have such exposure to the national energy security of this country. So we created the salt caverns in the gulf for storage.
The question of the conceptual purpose behind this was the Mideast cartel was holding us hostage and, by having a reserve, it would act as a protection if our supplies were cut off. Congress dictated that we have a 90-day supply of oil in the reserve to offset the amount of oil we might import should it be needed if the supply were to be disrupted from the Mideast.
It is kind of interesting to go back and look at the arithmetic.
When the Clinton administration came in, in 1992, we had an 86-day supply in the Strategic Petroleum Reserve. Today, we have a 50-day supply. What has the Clinton administration done with that difference? They sold some of the SPR to meet their budget requirements. I think this is a dangerous level--50 days. I think it is inadequate to respond to any severe disruption that might occur.
The Mideast has always been a hot spot with the possibility of a conflict at any time and cutting off supplies. We are seeing Saddam Hussein now threaten the U.N. as the U.N. attempts to hold Saddam Hussein financially responsible for damages associated with the Kuwaiti invasion. They are asking for compensation. But yesterday Saddam Hussein told the U.N. where to go. He said: No, I am not paying retribution. If you make me pay retribution, I will cut my supply and my production. Then what are you going to do? We know what the U.N. did. They backed off and said: We will take it up later. He is dictating the crucial supply of oil.
As the administration talks about the merits of opening up the Strategic Petroleum Reserve, I think we have to reflect on what it was designed to do. It was to be used to give us the timeframe of ensuring that if the supply were cut off, we would have a buffer by having a supply on which we could call.
But make no mistake about it. The media completely misses this point. SPR does not contain refined product. It contains crude oil. You have to take it out of the reserve. You have to move it to a refinery and then refine it. Our refineries are virtually at full capacity now. If you take the oil out of SPR and take it to a refinery, you are going to offset other oil that that refinery would cut. As a consequence, how much more refined product have you put on the market? I think the administration owes us an explanation as they contemplate, if you will, taking oil out of SPR.
Mind you, the emergency we have is supply and demand. We are producing much less than we used to produce. Our demand is up 14 percent. Our product has fallen 17 percent. We are in a supply and demand crunch. As a consequence of that, we have a third factor many people overlook, and that is, we haven't built a new refinery in this country in 25 years. Nobody wants to build them. The reason is the permitting time, the complexity, and the Superfund exposure. And the industry simply isn't building them. We are almost up to our maximum capacity of refining. Now we are going to take oil out of SPR. We are going to displace other oil. We don't have any significant unused refining capacity.
There is another factor in this consideration. What kind of signal does this send to Saddam Hussein? What kind of signal does it send to OPEC? It sends a signal that we are now dipping into our emergency supply. As we do, what does that do to our vulnerability? The Senator from Alaska believes it increases our vulnerability. It gives them more leverage. What are we going to fall back on then? What happens if we pull oil out of SPR and Iraq reduces production? We have a calamity.
This isn't just something that is happening in the United States. If there is any question about the severity, ask Tony Blair. The Government of Great Britain is teetering on the issue of oil. Germany, Poland, and many areas of Europe are coming to the United States. There is absolutely no question about it.
High oil prices have caused many Members, therefore, of this body to call for the release of SPR in a way to manipulate the price of crude. Some suggest as much as 30,000 barrels. One Senator was saying this action would bring OPEC to its knees. I think it will bring OPEC to its feet. They will say: Hey, there goes the United States; they are dipping into their reserve; now we've got them; we've have got the leverage.
I think it is highly unlikely that this action is well thought out. This is not what the reserve was intended for. It is not what the reserve is to be used for. I hope the administration will not weaken our national security by releasing oil to drive down prices because it won't necessarily drive down prices.
You are saying, well, the Senator from Alaska is from an oil-
producing State, and he is just one man's opinion.
Let me for the record submit an article from the Wall Street Journal of September 21. I ask unanimous consent that it be printed in the Record.
There being no objection, the article was ordered to be printed in the Record, as follows:
Summers Slams Plan to Sell Oil In U.S. Reserve
(By Bob Davis and Jacob M. Schlesinger)
Washington.--Treasury Secretary Lawrence Summers advised President Clinton in a harshly worded memo that an administration proposal to drive down energy prices by opening the government's emergency oil reserve ``would be a major and substantial policy mistake.''
Mr. Summers' vehement objection--which, he wrote, is shared by influential Federal Reserve Chairman Alan Greenspan--doesn't mean the prospect of using the Strategic Petroleum Reserve is dead, as the White House scrambles to contain the economic and political fallout from oil prices that yesterday neared $38 a barrel for the first time in a decade.
Indeed, today Vice President Al Gore--in his role as Democratic presidential candidate--plans to call on the administration to conduct ``test sales'' from the SPR as part of what he called ``a major policy speech . . . outlining a specific course of action'' to address what could become a serious threat to his campaign.
Yesterday, a week after the Summers memo was dated, White House spokesman Joe Lockhart told reporters ``all options remain on the table'' to address energy prices, the SPR
``being one of them.''
signal to markets
In continuing White House deliberations on the matter, two of Mr. Gore's top aides have backed serious consideration of test sales as a way to signal markets that the government is willing to act, one administration official said.
Along with Mr. Summers, the official said, other economic and diplomatic cabinet members were reluctant to tap the SPR, a buffer created after the 1973 oil embargo that has been used only once during the Gulf War in 1991. But this official added that many of those advisers, including Mr. Summers, have grown more sympathetic to that option during the past week as oil prices have continued to climb.
Mr. Summers' Sept. 13 memo did leave open the possibility of accepting a limited test sale, which could involve selling as much as five million barrels from the 570 million-barrel supply--far less than the 60 million barrels the memo said the Department of Energy advocated. ``There are alternatives available involving the SPR that are focused and targeted,'' he conceded.
Neither Mr. Summers nor his office would cooperate for this story or discuss his memo.
candidates' scapegoats
Yesterday, Candidate Gore gave several interviews to the major television networks to preview today's address, blasting the Organization of Petroleum Exporting Countries and what he called the profiteering of ``big oil''--the latter a not-so-subtle swipe at the Republican ticket of George W. Bush and Dick Cheney, both of whom have ties to the oil industry.
Mr. Bush yesterday tried to turn the tables on his rival, saying the Clinton-Gore administration ``needs to be held accountable for a failed energy policy.'' In an interview with MSNBC, Mr. Bush also said he would do more to encourage domestic oil exploration, and he chided the White House for failing to use American ``diplomatic leverage'' more effectively to get Persian Gulf allies to increase production.
Yet there is no clear, quick answer to the problem, as Mr. Summers's two-page memo argued. He wrote that using the SPR would have, at best, ``a modest effect'' on prices, and would have ``downsides . . . that would outweigh the limited benefits.''
``dangerous precedent''
He warned that the DOE's 60 million-barrel proposal would
``set a dangerous precedent'' by using the SPR to
``manipulate prices'' rather than adhering to its original purpose of responding to a supply disruption, and added that the move ``would expose us to valid charges of naivete'' for using ``a very blunt tool'' to address heating-oil prices.
Noting the potential sale's ``proximity to both [an upcoming] OPEC meeting and the November election,'' the Treasury Secretary also said it ``would simply not be credible'' to claim, as some proponents have, that an oil sale could be portrayed as a technical inventory management of the reserve.
Such a move, Mr. Summers argued, also would hurt the tool's effectiveness in the event of a real oil-supply crisis, diminish the ``psychological value'' of using the SPR again if Iraq makes good on implied threats to cut oil output, and undercut Saudi Arabian cooperation with the U.S.
greenspan's clout
And he took the unusual step of invoking Mr. Greenspan, whose prestige has increasingly been used to influence economic-policy issues far beyond his purview of monetary policy. The letter begins: ``Chairman Greenspan and I believe that using the Strategic Petroleum Reserve at this time, as proposed by DOE, would be a major and substantial policy mistake.''
Energy Secretary Bill Richardson has staked out the opposite side of the debate from Mr. Summers, and prepared his own two-page memo urging use of the SPR. Both letters were presented to Mr. Clinton along with a brief summarizing the pros and cons of the issue prepared by Gene Sperling, head of the National Economic Council.
Spokespersons for Messrs. Greenspan, Richardson, and Sperling declined to comment on the memos.
Mr. MURKOWSKI. Mr. President, this article is entitled ``Summers Slams Plan to Sell Oil In U.S. Reserve.'' ``Treasury Secretary's Memo Says Greenspan Agrees It Would Be a Mistake.''
The Washington by-line of the Wall Street Journal:
Treasury Secretary Lawrence Summers advised President Clinton in a harshly worded memo that an administration proposal to drive down energy prices by opening the government's emergency oil reserve ``would be a major and substantial policy mistake.''
This isn't the Senator from Alaska. This is our Treasury Secretary.
Mr. Summers's vehement objection--which, he wrote, is shared by influential Federal Reserve Chairman Alan Greenspan
. . .
Indeed, today Vice President Al Gore--in his role as Democratic presidential candidate--plans to call on the administration to conduct ``test sales'' from the SPR as part of what he called ``a major policy speech . . .''
We have had a tradition of test sales from SPR under this administration.
In 1991, we offered 32 million barrels; in 1996, decommissioning Weeks Island, 5 million; 1996, the recession bill, 12 million. We had swaps, appropriations in 1997. What we did is we bought high and sold low. We lost hundreds of millions of dollars on our sale. I only assume the government figured they would make up the difference on the volume.
Our experience hasn't been very good. Let me get back to the other sale. Summers says it is a dangerous precedent.
He warned that the DOE's 60 million-barrel proposal would
``set a dangerous precedent'' by using the SPR to
``manipulate prices'' rather than adhering to its original purpose of responding to a supply disruption, and added that the move ``would expose us to valid charges of naivete'' for using ``a very blunt tool'' to address heating-oil prices.
Such a move, Mr. Summers argued, also would hurt the effectiveness of SPR in the event of a real oil-supply crisis, diminishing the
``psychological value'' of using the SPR again if Iraq makes good on implied threats to cut oil output, and undercut Saudi Arabia's cooperation with the U.S.
Greenspan's Clout
And he took the unusual step of invoking Mr. Greenspan, whose prestige has increasingly been used to influence economic-policy issues far beyond his purview of monetary policy. The letter begins: ``Chairman Greenspan and I believe that using the Strategic Petroleum Reserve at this time, as proposed by DOE, would be a major and substantial policy mistake.''
I ask Members to consider the mechanical function of what has to take place. There are some people in this body who just assume you pull it out of SPR and, bang, it is there for the heating oil requirements of the Northeast Corridor, or it is there to relieve our pricing. It isn't. It is not a refined product. It has to be refined. It has to go to refineries. The refineries are operating at nearly full capacity, and when you pull it out of your reserve, it is like taking it out of your savings account. What do you do for an encore when the savings account is gone? We are certainly not going to replace SPR during this timeframe when oil prices are at an all-time high. We increase the vulnerability of the United States; we increase the potential for further increases in the price of oil.
There is one other point I want to make. The idea of a government-
operated heating oil reserve, we don't really know what it means. But if I am in the business of storing heating oil, if I am a jobber in the Northeast and I know the government is going to store, I am not going to build up my reserve. Why should I? The government is going to take care of that. What does that do to the incentive of the private sector to build up reserves?
We have to think this thing through. I hope that the press will question the Vice President a little bit on the mechanics of what the net gain is. What does it do to our national security? Does it make us more vulnerable to OPEC? I also request the media to check on whether we have the authority or not--because the administration is begging us to pass EPCA, which gives us the authority, allegedly, to reauthorize the Strategic Petroleum Reserve. We have a lot of bits and pieces that we haven't taken care of.
It will be interesting to see what kind of explanation the American public is given because so often it is very easy to spin the story that the answer is SPR. Do you know what the administration is doing? They are buying more time, hopefully, to get through this election because that is the bottom line. We are heading for a train wreck on energy.
I will throw a little bit more water in my remaining 2 minutes, not on SPR but on the realization of what is coming in the second show. The second show is natural gas; $5.35 per thousand cubic feet, October, next month. It was $2.16 6 months ago. Inventories are 15 percent below last winter's level. We will not have any new supply this winter. Fifty percent of American homes rely on natural gas and nearly 18 percent of the Nation's electric power.
There we have it. The administration doesn't have a plan. We have introduced legislation to get this matter back on course, the bottom line, as Senator Lott and a number of us have joined together in coming down with what we think is a responsible energy plan that would increase the domestic supply. It would increase certain tax benefits that would ensure that we have the incentive in order to relieve the supplies associated with the realization that the next crash is coming on natural gas.
I wanted to identify the specific mechanics associated with the issue of opening up the Strategic Petroleum Reserve and remind my colleagues that gas is right behind us in the crisis area, and the American taxpayer will bear the brunt of this. I hope the administration will rise to the occasion with some real relief.
I yield the floor.
The PRESIDING OFFICER (Mr. Roberts). The distinguished Senator from Pennsylvania is recognized.
(The remarks of Mr. Specter pertaining to the introduction of S. 3086 are located in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'')
The PRESIDING OFFICER (Mr. Bunning). The Senator from Texas.
Mr. GRAMM. Mr. President, it is my understanding that Senator Biden has time reserved to speak. He is not here. I ask unanimous consent that the Senator from Maine and the Senator from Kansas be recognized for 20 minutes; that if Senator Biden is here at that point, he then be recognized; and that I be recognized for 20 minutes when Senator Biden has completed his remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SPECTER. Mr. President, I have been advised that Senator Biden's schedule will not permit his arrival at this time, so I suggest holding his time in abeyance. I have no objection to the request by the Senator from Texas.
The PRESIDING OFFICER. The Senator from Maine.
Ms. COLLINS. I thank the Chair, and I thank the Senator from Texas for arranging the time this morning.
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