April 24, 2006

Wyden Statement on the Administration's "Bungled" Handling of Gasoline Supply and Pricing

Washington, DC - Unofficial transcript of U.S. Senator Ron Wyden (D-Ore.) statement follows:MR. PRESIDENT, THE SAME BUSH ADMINISTRATION THAT SO TRAGICALLY BUNGLED THE RESPONSE TO HURRICANES KATRINA AND RITA, HAS NOW BUNGLED ITS WAY TO $3 PER GALLON GASOLINE.UNLESS YOU WERE A HERMIT LIVING IN A CAVE LAST SUMMER, YOU COULDN'T MISS HOW MISERABLY THE ADMINISTRATION HAS FAILED IN ITS APPROACH TO NATURAL DISASTERS. NOW IT'S CLEAR TO ANYONE WHO FILLS UP AT A GAS PUMP THAT THIS ADMINISTRATION IS ALSO FAILING IN ITS APPROACH TO ENERGY. IN BOTH CASES, MR. PRESIDENT, THE ADMINISTRATION HAD ADVANCE NOTICE THAT A MAJOR PROBLEM WAS IMMINENT, AND IN BOTH CASES THE ADMINISTRATION FAILED THE TAKE ACTION TO HEAD OFF THE PROBLEM BEFORE IT BECAME A MAJOR CRISIS FOR THE AMERICAN PEOPLE.FOR HURRICANE KARINA, DISASTER EXPERTS HAD TESTING THAT PREDICTED IN THE SPRING WHAT COULD HAPPEN, BUT THE ADMINISTRATION IGNORED THE WARNINGS OF ITS OWN EXPERTS AS THE MAJOR HURRICANES WERE HEADING TOWARDS THE GULF COAST. ANYTHING THE ADMINISTRATION'S FAILURE TO TAKE ACTION TO PREVENT GAS SHORTAGES AND PRICE SPIKES IS EVEN MORE INDEFENSIBLE BECAUSE THEY HAD MORE ADVANCED WARNING AND GREATER CERTAINTY THAT THE PROBLEM WAS COMING. THE BUSH ADMINISTRATION KNEW LAST SUMMER, ALMOST NINE MONTHS AGO, THAT GASOLINE SHORTAGES AND PRICE SPIKES WOULD HIT HARD THIS SPRING.IF EVER THERE WAS A TIME TO BE WATCHFUL ABOUT OIL MARKETS, IT'S BEEN DURING THE PAST MONTHS AS MARKETS HAVE GYRATED VIRTUALLY NONSTOP WITH ONE INTERNATIONAL CRISIS AFTER ANOTHER. NIGERIA HAS LOST A QUARTER OF ITS OUTPUT. IRAQ'S OIL PRODUCTION HAS FALLEN BELOW PRE-WAR LEVELS TO ITS LOWEST POINT IN A DECADE. IRAN SAYS SOMETHING WAR-LIKE ABOUT ITS NUCLEAR PROGRAM AND OIL PRICES SHOOT UP $10 PER BARREL, AND TODAY VENEZUELA AND ANNOUNCES THAT IT WILL MOVE TOWARDS NATIONALIZING ITS OIL INDUSTRY AND WILL CUT OUTPUT, WHICH SHOULD PUT EVEN MORE PRESSURE ON SUPPLY AND DEMAND.YET EVEN WITH ALL OF THIS TURMOIL IN WORLD OIL MARKETS, THE KEY WATCHDOGS AT THE ENERGY DEPARTMENT, AT THE ENVIRONMENTAL PROTECTION AGENCY AND THE COMMODITIES FUTURE TRADING COMMISSION ARE ALL ABSENT WITHOUT LEAVE. NO ONE IS HOME MINDING THE STORE WHEN IT COMES TO OUR OIL AND GASOLINE MARKETS.NEVER BEFORE, MR. PRESIDENT, HAS THERE BEEN AN ADMINISTRATION WITH SO MUCH EXPERTISE IN THE OIL INDUSTRY. THE PRESIDENT AND THE VICE PRESIDENT, OF COURSE, KNOW A GREAT DEAL ABOUT THE OIL SECTOR. THE SECRETARY OF STATE WAS A DIRECTOR OF CHEVRON AND ACTUALLY HAS AN OIL TANKER NAMED AFTER HER. THE LIST GOES ON AND ON.BUT NONE OF THIS EXPERTISE SEEMS TO BE BEING USED TO HELP OUT CONSUMERS AT THE GAS PUMPS. THE ADMINISTRATION'S RECENT INACTION IN THE FACE OF SOARING PRICES IS ONLY THE LATEST IN A LONG LINE OF FAILURES. IN WHAT IS A VIRTUAL RIGHT OF SPRING, GAS PRICES TYPICALLY SPIKE AS REFINERIES SHUT DOWN FOR MAINTENANCE TO SWITCH OVER TO SUMMERTIME GASOLINE BLENDS. THAT'S HAPPENED EACH OF THE LAST SEVERAL YEARS, AND IN EACH INSTANCE, THE ADMINISTRATION HAS DONE NOTHING TO HELP CONSUMERS AT THE PUMP.BUT THIS YEAR THE ADMINISTRATION HAD GOOD REASON TO KNOW THAT A PERFECT ENERGY STORM WOULD HIT THE CONSUMER THIS SPRING. AND IT WAS CLEAR THAT SPIKES WOULD BE EVEN WORSE THAN PRIOR YEARS. FOR EXAMPLE, MR. PRESIDENT, THE "WALL STREET JOURNAL" REPORTED ON AUGUST 2, 2005 -- AND I QUOTE -- "A PROVISION IN THE MASSIVE ENERGY BILL THAT CLEARED CONGRESS LAST WEEK IS LIKELY TO SHRINK THE NATION'S GASOLINE SUPPLIES NEXT SPRING AND COULD BOOST PRICES L -- 8 CENTS A GALLON OR MORE. THE "WALL STREET JOURNAL" WENT ON THE DESCRIBE THE LIKELY IMPACTS OF ELIMINATING THE REQUIREMENT TO USE CLEANER-BURNING ADDITIVES IN GASOLINE SAYING -- AND I QUOTE -- "U.S. GASOLINE PRODUCTION WILL FALL SHORT OF USUAL LEVELS BY ABOUT 258,000 BARRELS A DAY, THE EQUIVALENT OF LOSING OUTPUT FROM FOUR MAJOR REFINERIES." THE "WALL STREET JOURNAL" QUOTED AN OFFICIAL FROM VALERO ENERGY CORPORATION, THE NATION'S LARGEST REFINER WHO SAID, "THE PRICE OF GASOLINE WILL DEFINITELY GO UP ESTIMATING THE POTENTIAL RISE AT 8 CENTS PER GALLON."BECAUSE OF THE NEW REGULATIONS FOR GASOLINE, THERE WOULD NOT ONLY BE REDUCED SUPPLY BUT ALSO LOTS OF NEW HASSLES IN SUPPLYING FUEL AT THE LOCAL LEVEL. GASOLINE ADDITIVES WOULD NO LONGER BE ADDED AT THE REFINERY AND TRANSPORTED IN PIPELINES. INSTEAD ETHANOL WOULD HAVE TO BE SHIPPED SEPARATELY AND BLENDED LOCALLY CREATING NEW CHALLENGES, NEW LOGISTICAL HURDLES FOR GETTING FUEL TO AMERICA'S GASOLINE STATIONS. WITH ALL OF THIS DISRUPTION AND ALL OF THESE NEW CHALLENGES TO ADDRESS, IT WAS CLEAR TO THE OIL INDUSTRY THAT THE ENERGY EQUIVALENT OF ANOTHER CATEGORY FIVE HURRICANE WOULD BE HITTING GASOLINE CONSUMERS AROUND THIS TIME OF THE YEAR. IT SHOULD HAVE BEEN CLEAR TO THE BUSH ADMINISTRATION, AS WELL.BUT FOLLOWING THE SAME GAME PLAN THEY'VE USED FOR LAST YEAR'S HURRICANES, THE ADMINISTRATION WAITED UNTIL AFTER THE STORM HIT TO RESPOND. IN FACT, GASOLINE CONSUMERS ARE STILL WAITING FOR HELP AT THE PUMP.THE TWO MAJOR HURRICANES THAT HIT THE GULF COAST LAST SUMMER ONLY MADE THIS SPRING'S SUPPLY SITUATION WORSE BECAUSE THOSE STORMS SHUT DOWN A NUMBER OF REFINERIES AND REDUCED OIL AND GAS SUPPLY. COMING IN THE WAKE OF THESE STORMS, THE IMPACT OF THE NEW GAS RULES WOULD ONLY TIGHTEN FURTHER WHAT WAS ALREADY A TIGHT MARKET FOR GASOLINE, AND IT SHOULD HAVE BEEN CLEAR TO THE WATCHDOGS IN THE BUSH ADMINISTRATION FOR MONTHS AND MONTHS.NOW, THE RECORD IS CLEAR AS TO WHAT THE FACTS WERE THAT THE ADMINISTRATION HAD SOME TIME AGO. FIRST, IF THE ADMINISTRATION HAD READ ITS OWN REPORTS, IT WOULD HAVE KNOWN THAT GULF COAST OIL AND GASOLINE PRODUCTION WOULD NOT BE FULLY RESTORED BY THIS SPRING. CONGRESS KNOWS THIS BECAUSE THE ADMINISTRATION SENDS WEEKLY REPORTS TO THE CONGRESS WITH UPDATES ON THE SITUATION, AND YET AGAIN THE ADMINISTRATION FAILED TO TAKE ANY ACTION TO HEAD OFF THE PROBLEMS BEFORE CONSUMERS GOT HIT AGAIN.IF THE ADMINISTRATION HAS READ ITS OWN REPORTS, IT ALSO WOULD HAVE KNOWN THAT THE IMPACT OF THE NEW GASOLINE RULES WOULD BE SUBSTANTIAL, EQUIVALENT TO 2% OF THE NATION'S GASOLINE SUPPLY OVERALL AND 10% OF THE SUPPLY IN AREAS WITH SMOG PROBLEMS. THIS INFORMATION HAS BEEN AN ENERGY DEPARTMENT REPORT -- HAS BEEN IN ENERGY DEPARTMENT REPORTS, AS WELL.ONCE AGAIN THERE WAS NO RESPONSE FROM THE ADMINISTRATION. FINALLY, IF THE ADMINISTRATION HAD READ ITS OWN REPORTS AND PUBLICATIONS, THE ADMINISTRATION WOULD HAVE KNOWN THAT FINDING ALTERNATIVES TO REPLACING THESE SUPPLIES WOULD NOT BE EASY. IN FACT, A STUDY BY THE U.S. DEPARTMENT OF ENERGY ESTIMATED THAT IT WOULD TAKE FOUR YEARS FOR REFINERS TO FIND SUBSTITUTES FOR THE MOST COMMONLY USED GASOLINE ADDITIVE KNOWN AS M.B.T.E. IN FACT, THE NEW RULES ARE LIKELY TO BE A DOUBLE WHAMMY FOR CONSUMERS. THEY TIGHTEN NOT ONLY DOMESTIC SUPPLIES,BUT ALSO THE AVAILABILITY OF IMPORTS THAT WERE SO CRUCIAL FOR SUPPLYING U.S. CONSUMERS FOLLOWING LAST YEAR'S HURRICANES. THAT MEANS THE IMPACTS WILL BE SIMILAR TO LAST YEAR'S HURRICANES, BUT THE SAME SOLUTION TO ADDRESS THE PROBLEM WON'T BE AVAILABLE THIS YEAR.AS THE PRESIDENT OF THE PETROLEUM INDUSTRY RESEARCH INSTITUTE POINTED OUT LAST SUMMER, IN THE PAST THE U.S. HAS IMPORTED GASOLINE FROM EUROPE TO DEAL WITH THIS PARTICULAR ISSUE AND PREVENT SHORTAGES. BUT AT THIS POINT, WE MAY NOT BE ABLE TO DO THAT SINCE EUROPEAN REFINERS USE M.T.B.E.WHEN YOU ADD IT ALL UP, THE ADMINISTRATION'S RECORD OF BUNGLING ON GAS SUPPLY AND PRICES IS EXTRAORDINARY. THEY'VE KNOWN SINCE LAST SUMMER THAT THERE WOULD BE A BIG PROBLEM FOR CONSUMERS THIS SPRING. THEY KNEW THAT THE PROBLEM HAD GOTTEN EVEN BIGGER SINCE THE HURRICANES LAST FALL. THEY KNEW THAT IT WAS GOING TO TAKE A LONG TIME TO SOLVE THE PROBLEM AND THAT WHAT WAS DONE LAST FALL TO INCREASE SUPPLY AFTER THE HURRICANES MIGHT NOT BE AN OPTION THIS SPRING.BUT YET WITH ALL OF THE ADVANCED WARNINGS AND RED LIGHTS FLASHING, THE ADMINISTRATION STILL SAT ON ITS HANDS. AT A MINIMUM THE ADMINISTRATION SHOULD HAVE CONVENED THE NATIONAL PETROLEUM COUNCIL TO SEEK ADVICE AND COUNCIL ON WHAT OPTIONS MIGHT BE AVAILABLE TO HELP CONSUMERS IN OUR GASOLINE STATIONS THIS SPRING.BUT AS WE'VE SEEN ALL TOO OFTEN, THE ADMINISTRATION DOESN'T LOOK TO OUTSIDE ADVICE AND EVEN MORE RARELY DOES IT LISTEN TO IT. THERE IS LITTLE REASON TO BELIEVE THAT THE MAJOR OIL COMPANIES WHO HAVE SUCH A VOICE IN AMERICAN POLITICS WOULD URGE THE ADMINISTRATION TO TAKE ANY KIND OF SIGNIFICANT STEPS TO HELP THE CONSUMERS. SO WHAT CAN BE DONE NOW THAT PREDICTED GASOLINE SHORTAGES AND PRICE SPIKES ARE UPON US? WHAT MIGHT WELL HAVE BEEN PREVENTED OR CERTAINLY OUT OF THIS KIND OF PERIOD HELPED TO MINIMIZE THE HARM THAT CONSUMERS ARE FACING, THOSE STEPS WEREN'T TAKEN AND THE CHALLENGE IS TO PUT IN PLACE THE BEST POSSIBLE STEPS NOW TO TRY TO AMELIORATE A VERY BAD SITUATION THAT COULD HAVE BEEN MINIMIZED.FIRST, THE ADMINISTRATION SHOULD GRANT WAIVERS OF REQUIREMENTS TO USE ETHANOL IN GASOLINE IN AREAS WHERE IT'S CONTRIBUTING TO SHORTAGES OR PRICE SPIKES AT THE GAS PUMP. SECTION 1501 OF LAST YEAR'S ENERGY BILL PROVIDES THE ADMINISTRATION WITH THIS AUTHORITY IN CASES WHERE THERE IS INADEQUATE SUPPLY OR WHERE THE MANDATE WOULD SEVERELY HARM THE ECONOMY. BOTH OF THESE CRITERIA HAVE ALREADY BEEN MET IN A NUMBER OF AREAS ON THE WEST COAST OF THE UNITED STATES AND ELSEWHERE IN OUR COUNTRY.FOR EXAMPLE, MY HOME STATE OF OREGON ISN'T REQUIRED TO HAVE ETHANOL IN OUR GAS TO MEET AIR QUALITY STANDARDS. WE ALSO HAVE LITTLE IN-STATE ETHANOL PRODUCTION, SO ETHANOL HAS TO BE TRANSPORTED INTO OREGON LARGELY FROM THE MIDWEST FOR BLENDING INTO OUR GAS SUPPLY. WAIVING THE REQUIREMENT TO HAVE ETHANOL IN OREGON GAS WOULD ALSO FREE UP SUPPLIES FOR OTHER PARTS OF THE COUNTRY. THAT REDUCES DEMAND AND BY SIMPLE SUPPLY AND DEMAND, MR. PRESIDENT, THAT CAN SERVE TO REDUCE PRICES AROUND THE COUNTRY. IT WOULD ALSO HELP TO BRING DOWN THE COST OF GASOLINE IN OREGON BY ELIMINATING THE TRANSPORTATION COSTS OF SHIPPING ETHANOL FROM THE MIDWEST. SECOND, THE ADMINISTRATION SHOULD TAKE STEPS TO GO AFTER THOSE WHO ARE SPECULATING RIGHT NOW IN OUR COUNTRY'S OIL MARKETS. IN THE PRESS, FOR EXAMPLE, SPECULATION IS CONTINUALLY CITEDFACTOR IN HIGH OIL AND GASOLINE PRICES. FOR EXAMPLE, IN LAST WEEK'S "WALL STREET JOURNAL," THERE WAS A REPORT -- AND I QUOTE -- CRUDE OIL CLOSED ABOVE $70 A BARREL FOR THE FIRST TIME, HIGHLIGHTING A PHENOMENON RESHAPING THE PETROLEUM WORLD. INVESTMENT FLOWS INTO OIL FUTURES ARE SUPPLANTING NITTY-GRITTY SUPPLY AND DEMAND DATA AS PRIME DRIVERS OF PRICES. LAST FALL FORMER EXXONMOBIL CHAIRMAN LEE RAYMOND -- I GUESS HE'S THE $600 MILLION MAN -- HE TESTIFIED BEFORE THE SENATE ENERGY COMMITTEE THAT SPECULATION IN OIL MARKETS WAS INFLATING PRICES BY $20 PER BARREL./ THAT INFLATED OIL PRICE IN TURN RAISES GASOLINE PRICES AT THE PUMP BY 50 CENTS A GALLON. YET, THE ADMINISTRATION HAS DONE LITTLE TO INVESTIGATE SPECULATION OR TO STOP THIS ACTIVITY.TO THE CONTRARY, ON THIS QUESTION OF SPECULATION IN THE OIL SECTOR, MR. PRESIDENT, I QUESTION THE BUSH ADMINISTRATION'S WITNESS FROM THE COMMODITIES FUTURES TRADING COMMISSION LAST SEPTEMBER. I ASKED SPECIFICALLY WHAT THE COMMODITIES FUTURE TRADING COMMISSION WAS DOING TO INVESTIGATE REPORTS OF OIL TRADERS MAKING EXTRAORDINARY PROFITS IMMEDIATELY FOLLOWING HURRICANES KATRINA AND RITA. MY QUESTION WAS ABOUT REPORTS -- AND I QUOTE -- "THERE ARE TRADERS WHO MADE SO MUCH MONEY THAT WEEK THAT THEY WON'T HAVE TO PUNCH A TICKET FOR THE REST OF THE YEAR." HERE'S WHAT THE WITNESS REPRESENTING THE COMMODITIES FUTURE TRADING COMMISSION SAID FROM THE BUSH ADMINISTRATION. QUOTE -- "GRANTED A NUMBER OF THEM MADE MONEY, AND THAT IS HOW THEY DO THEIR JOB, THAT THEY YOUR-- THAT THEY EARN A RETURN FOR PROVIDING THIS SERVICE."SO THE RESPONSE TO REPORTS FOR TRADERS TAKING ADVANTAGE OF THE WORST NATIONAL DISASTER IN OUR COUNTRY'S HISTORY TO MAKE EXTRAORDINARY PROFITS IS, WELL, THEY WERE JUST DOING THEIR JOBS. IF THAT'S THE MARKET AT WORK, THEN CLEARLY, MR. PRESIDENT, IT IS NOT WORKING FOR THE AMERICAN PEOPLE, WHO SAW GASOLINE PRICES SHOOT UP ABOVE $3 PER GALLON AFTER LAST YEAR'S HURRICANE AND AGAIN THIS SPRING. THE REGULATORS OF OIL AND GAS MARKETS NEED TO REIN IN SPECULATION, NOT DEFEND IT. ANOTHER STEP THAT COULD HELP ADDRESS SPECULATION WOULD BE TO HAVE GREATER TRANSPARENCY IN OUR OIL MARKETS.FOR EXAMPLE, PENSION FUNDS AND OUR INSTITUTIONAL INVESTORS ARE BUYING OIL AS PART OF THEIR PORTFOLIOS AND THIS CREATED ADDITIONAL PRESSURE ON SUPPLY AND PRICES. INSTITUTIONAL MONEY MANAGERS HOLD BETWEEN $100 BILLION AND $120 BILLION IN COMMODITIES INVESTMENTS, AT LEAST DOUBLE THE AMOUNT THREE YEARS AGO AND UP FROM $6 BILLION IN 1999. MORE TRANSPARENCY ABOUT THESE TRANSACTIONS WOULD HELP BOTH THE AMERICAN CONSUMER AND THE INVESTORS BY REDUCING VOLATILITY WHILE STABILIZING PRICES. FINALLY, FOR THE LONG TERM, THE CONGRESS SHOULD REPEAL OIL TAX BREAKS, BREAKS THAT THE INDUSTRY EXECUTIVES TOLD ME WHEN I QUESTIONED THEM IN AN OPEN HEARING, MR. PRESIDENT, THEY SAID THEY DIDN'T EVEN NEED. AND THOSE UNNEEDED OIL TAX BREAKS SHOULD BE REPLACED WITH INCENTIVES TO USE BIOFUELS THAT CAN REPLACE SUPPLY LOSS FROM ELIMINATING MTBE FROM GASOLINE.THESE ACTIONS WOULD ADDRESS THE IMMEDIATE SUPPLY AND PRICE PROBLEMS THAT THE ADMINISTRATION HAS FAILED TO ADDRESS SINCE LAST SUMMER. IT WILL GIVE THE BIOFUELS MARKET INCENTIVES TO DO MORE RESEARCH AND INCREASE PRODUCTION OF CLEANER ALTERNATIVES TO REPLACE MTBE IN THE GASOLINE SUPPLY. MY GUESS IS, MR. PRESIDENT, AND I'M HAPPY TO SEE MY FRIEND HERE WHO HAS AN ENORMOUS AMOUNT OF EXPERTISE ON THIS ISSUE, THAT ON THE SENATE FLOOR OVER THE NEXT FEW WEEKS, WE'RE GOING TO HEAR A LOT OF DEBATE ABOUT PRICE GOUGING, EXPLOITATION AND THE LIKE. AND THERE'S NO QUESTION IN MY MIND THAT THERE'S CERTAINLY PEOPLE WHO ARE TRYING TO EXPLOIT THE SITUATION AND TO TRY TO TAKE ADVANTAGE OF THESE EXTRAORDINARY CIRCUMSTANCES WE SEE IN OUR ENERGY MARKETS.BUT WHAT I COULD TELL YOU IS THAT A SIGNIFICANT PART OF THESE PROBLEMS, SUCH AS THE CHANGE FROM MTBE TO ETHANOL, PROBLEMS THAT WE KNEW ABOUT A YEAR AGO, THAT THE "WALL STREET JOURNAL" WAS REPORTING ON, COULD HAVE BEEN MINIMIZED IF THOSE FOLKS IN THE BUSH ADMINISTRATION AT THE DEPARTMENT OF ENERGY, AT THE ENVIRONMENTAL PROTECTION AGENCY, AT THE COMMODITIES TRADING COMMISSION, IF THEY HAD BEEN ON DECK DOING THEIR JOB TO STAND UP FOR THE AMERICAN PEOPLE, THESE PROBLEMS WOULD NOT BE SO SERIOUS TODAY. YET, THE SAME PEOPLE WHO BUNGLED THE RESPONSE TO THOSE HURRICANES LAST SUMMER ARE BUNGLING AMERICA ON ITS WAY UP TO $3 PER GALLON GASOLINE. I DON'T THINK THAT OUGHT TO BE ACCEPTABLE TO ANY UNITED STATES SENATOR ON A BIPARTISAN BASIS. WE CAN FORCE THOSE WATCHDOGS IN THE BUSH ADMINISTRATION TO GET BACK TO THEIR POST AND STAND UP FOR THE PUBLIC. MR. PRESIDENT, I YIELD THE FLOOR. MR. PRESIDENT, I'D ALSO NOTE THE ABSENCE OF A QUORUM.

• Print
• Email
• Tweet