Chairman Bingaman on Diesel Fuel Prices

September 23, 2008
02:32 PM
“Thank you all for joining us today to talk about to very important subjects: the diesel fuel market, and the aftermath of Hurricanes Ike and Gustav in the U.S. Gulf Coast.  The recent spike in diesel demand and prices is a sign of increased tightness in that market.  While clearly the erratic price of crude oil, up $16 in a few hours of trading yesterday, is a major piece of the diesel price puzzle, it is also true that there are separate influences at work in the diesel market.  Global demand for diesel has surged while demand for gasoline has declined.
“Meanwhile, the recent hurricanes in the U.S. Gulf Coast are highlighting how little cushion we have in our supply system.  As the refineries work toward restoring full operational capacity, there simply isn’t enough oil flowing in the Gulf Coast to completely fill the pipelines. 
“While diesel market tightness is a long-term, systemic issue, and recovering from hurricanes is a short-term emergency situation, they each offer an opportunity to reconsider the appropriateness of the policies that we currently have in place.
“I know that some of my colleagues are strong advocates for increased use of diesel fuel in the U.S. passenger fleet.  I share their enthusiasm for the increased fuel efficiency afforded by diesel engines, but I believe there is a suite of issues that need to be better understood if we are to consider shifting U.S. energy policy in this direction.  We need to better understand, first and foremost, whether we will have enough diesel fuel available to support this kind of increased consumption.  The recent price surge certainly seems to suggest that the world does not have any diesel fuel to spare.
“We also need to consider whether diesel fuel really emits fewer greenhouse gas emissions than gasoline, on a wells-to-wheels basis.  While it is clear that fewer GHGs are emitted from the tailpipes of diesel cars, those GHG savings are offset by increased emissions from the refineries that make the fuel.  And, finally, we need to understand the costs associated with making diesel fuel clean enough to meet our local air pollution requirements, because emissions of some local pollutants are higher with diesel fuel than with gasoline.
“I am also eager to hear how the restoration efforts are progressing in the Gulf Coast.  As we hear stories of fuel stations in the Southeast running out of fuel, we need to understand whether the situation will improve from this point, or whether we should expect further supply problems to work their way further through the system.  With refineries still out of power more than a week after Hurricane Ike, it seems that our emergency response policy, which relies completely on crude oil stored in the Gulf Coast, is not well suited to meeting the on-going threat of hurricane-related supply disruptions.  While this is a topic that deserves a fuller discussion than we will be able to have today, I thought it would be useful to suggest to my colleagues that we should think of the current disruption in the context of what policy measures could be taken to help prevent recurrences of these kinds of disruptions.
“I thank our four witnesses for joining us today.  I am sorry that our fifth witness, from the National Electrical Manufacturers Association, was unable to join us to discuss the connection between the diesel fuel market and global electricity.  Nevertheless, I look forward to a robust discussion of all of these interrelated topics.” 
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