March 17, 2003
"Mme. President, I appreciate the chance to speak for a few minutes on the critical economic situation we are facing here in the United States, and the direct effect that high energy prices and low crude oil inventories are having on the American economy. "We saw nearly 3 million barrels of oil per day come off the market during the Venezuelan crisis in December. This --- combined with an unusually cold winter here in the East and refiner stock drawdowns from crude, gasoline and heating oil inventories --- has left crude oil and crude product markets extremely tight. "From a supply standpoint, we are operating on very thin margins. An accident that unexpectedly shuts-in a refinery or a pipeline is capable of causing real shocks (shortages). It's happened before; in 1996 a pipeline emergency blocked deliveries to refineries in the Midwest during a similar period of tight supplies. In 2000, a dock collapsed along the Intracoastal Waterway near Lake Charles, La., curtailing supplies to two major Gulf Coast refineries. "The sharp increases in energy prices that we have seen so far this year have damaged the economy. The nation's manufacturing sector continues to struggle and consumers across America are facing real hardships. Nearly all of the inflationary pressures are coming from energy costs, which jumped 4.8 percent in January and an even sharper 7.4 percent last month - the largest one-month jump since 1990. (If it were not for food and energy items, the core index dropped 0.5% in February.) "The simple truth of the matter is this: rising energy prices are keeping Americans from spending elsewhere. "Consumers will pay more than $200 billion in higher energy costs this year. (That's more than the President's budget says a war with Iraq will cost.) This $200 billion works out to be about two percent of our GDP, no small thing. "And where is this money going to come from? Companies aren't hiring; they're laying-off. A looming crisis that should worry all of us exists in our nation's chemical industry. We are in danger of losing our domestic chemical industry as high natural gas prices push it to operate offshore. This will result in the loss of thousands of more good, high-paying, American jobs. "U.S. oil and natural gas stocks are dangerously low, and the risk that energy price spikes will continue to significantly damage our economy is very real. "Gasoline and diesel prices are at near decade highs. In fact in my state of New Mexico and across this country, diesel prices are at an all-time high - more than $1.75/gallon. This has a direct impact on the trucking industry. An article in the Albuquerque Journal this weekend talks about the impact high energy prices are having on consumers and the trucking industry, and I would ask unanimous consent that a copy of this article be entered into the Record following my remarks. "In my state of New Mexico alone, 12 percent of the state's population is involved in the trucking industry. High diesel prices are shutting down small trucking companies in my state every day. These are the real economic effects. "These words, 'likely to cause a major adverse impact on the national economy,' the situation I have just described, match that found in the statutory provision that spells out the criteria for a release of oil from the Strategic Petroleum Reserves. "As I read this statute and I look around at what is happening to our economy -- we are in a very dangerous place. "I have repeatedly asked the Administration to clearly state its policy on the SPR. They have not. "It has become apparent that the Administration is not likely to use the SPR soon enough to correct this rapidly deteriorating situation; rather they are relying on OPEC to increase production and send it our way. "At their meeting last week, OPEC ministers asserted that they would provide additional supplies in the event of a war with Iraq, but they also made it clear that the new supplies would be costly. "The Administration appreciates the promise by the Saudis to raise production in the event of a shortage, and so do I. Some Saudi oil is already on its way to U.S. ports. But the fact is, given the present situation, this isn't enough. It's long-haul oil and we need more oil now to lubricate the system. Our refineries are literally running on empty. "We have a timing problem. If war breaks out, maybe even as early as tonight, Iraqi oil production and perhaps some Kuwaiti production will cease - causing a shortfall of somewhere between 2 and 6 percent of world oil supply. We seem to be assuming that the Saudis can make up that difference. Some analysts estimate that the Kingdom of Saudi Arabia is already close to operating at its maximum capacity, without a loss of Iraqi and perhaps Kuwaiti supply. "But let's suppose they can make it up --- they still have to get it here. And it takes 40 days for an oil tanker to get from the Persian Gulf to the United States. "We need to release oil from the SPR now in order to keep liquidity in the system (to keep U.S. refineries running) and to prevent further harm to our economy. It takes 40 days for Persian Gulf oil to reach our shores, and if those tankers set sail for example 10 days ago, then we are just 10 days into 40. "The delivery process has started, but the extra oil is still far away at sea. We need liquidity in the system now. I'm saying that the smart thing to do is to take out a little insurance policy to cover from today until that oil can arrive. "I am here today asking the President to allow private companies to exchange up to 750,000 barrels of oil per day from the SPR until long-haul crude from the Middle East reaches our ports. Companies taking part in this swap that I'm proposing would pay the Government a fee, plus a future price differential for leasing the oil, and would replace the oil with an equivalent grade of crude within six to twelve months. "This modest release should complement and not compete with the oil that is headed our way. It will provide supply at a crucial time. I recommend that this swap drawdown begin immediately and continue until the additional oil that OPEC producers have promised actually arrives. "This 750,000 barrels per day swap is well-short of the 4.3 million barrels per day of drawdown capacity that we have within the SPR. I understand that President Bush doesn't want to release all of the SPR as our nation is on the brink of war. But what I'm proposing leaves nearly 85% of the total SPR drawdown capacity untouched. We will be minimizing the damage to our economy by putting these extra barrels out there in the system now, and helping to prevent a gasoline supply shortage and further price spikes. "The U.S. refining sector already is functioning at minimum operating levels. Without new crude supplies, refiners may be forced to reduce their production levels, leading to higher gasoline, higher jet fuel and higher diesel prices and causing even more damage to our economy. "Mme. President, our economic security is at stake, and we cannot afford not to do this. The American people also can't afford for us not to do it. I urge the Administration to seriously consider this proposal. In my view it is time for us to act."