Skyrocketing Energy Prices
This afternoon, I'm speaking on the Senate floor about high energy prices. Unless something is done to make energy more affordable, the record-high prices will continue to reverberate throughout our economy, increasing the prices of transportation, food, manufacturing and everything in between. Skyrocketing energy prices are a threat to our economic and national security, and the time for action is long past.
One of the major causes of our energy crisis is the failed policies of the current administration. In January 2001, when President Bush took office, the price of oil was about $30 per barrel. The average price for a gallon of gasoline was about $1.50. Since President Bush took office, crude oil prices have nearly quadrupled, natural gas prices to heat our homes have almost doubled, gasoline prices have more than doubled, and diesel fuel prices have nearly tripled.
One key factor in price spikes of energy is rampant speculation in the energy markets. Traders are trading contracts for future delivery of oil in record amounts, creating a paper demand that is driving up prices and increasing price volatility solely to take a profit. Overall, the amount of trading of futures and options in oil on the New York Mercantile Exchange (NYMEX) has risen six-fold in recent years, from 500,000 outstanding contracts in 2001, to about 3 million contracts now.
Speculators in the oil market do not intend to use crude oil; instead they buy and sell contracts for crude oil just to make a profit from the changing prices. Many speculators simply buy and hold whole baskets of commodities including energy commodities, just like other speculators hold a variety of stocks in a mutual fund, in the expectation that prices will continue to rise. The number of futures and options contracts held by speculators has gone from around 100,000 contracts in 2001, which was 20% of the total number of outstanding contracts, to 1.2 million contracts currently held by speculators, which represents almost 40% of the outstanding futures and options contracts in oil on NYMEX.
In January of this year, as oil hit $100 barrel, Mr. Tim Evans, oil analyst for Citigroup, wrote "the larger supply and demand fundamentals do not support a further rise and are, in fact, more consistent with lower price levels." The president and CEO of Marathon Oil recently said, "$100 oil isn't justified by the physical demand in the market. It has to be speculation on the futures market that is fueling this."
My Senate Permanent Subcommittee on Investigations has conducted four separate investigations into how our energy markets can be made to work better. Last December, we had a joint hearing with the Senate Energy Subcommittee on the role of speculation in rising energy prices. As a result of these investigations and hearings, for several years I have been advocating a variety of measures to address rising energy costs and the rampant speculation and lack of regulation of energy markets which have led to sky high energy prices:
• Put a cop back on the beat in the energy markets to ensure these markets are free from excessive speculation and manipulation;
• Stop filling the Strategic Petroleum Reserve until prices are lower;
• Develop alternatives to fossil fuels to lessen our dependence on oil; and
• Impose a windfall profits tax on oil companies that have profited from the unjustified price increases.
Because the administration has proved itself unable and unwilling to take the necessary steps to provide affordable energy supplies to the American people, it is up to the Congress to try to jumpstart a comprehensive solution to skyrocketing energy prices.
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Memo: Reduce cost of oil to consumers.
To: Senator Levin
From: Committee to Bring Back the Horse and Buggy
1. Dissolve OPEC
2. Stop speculation on light sweet crude and all fuel related products.
2. Review price gouging, price fixing and collusion laws already on the books.
Stop paying lip service to a serious problem. Take some action! Laws that are on the books have been broken by oil companies and their subsidiaries. If you start uncovering the misconduct and publicly exposing the abuses, I think that would be a nice step toward restoring the confidence of the American people in their leaders and it may even serve as a deterrent to further blatant abuses.
Do something effective and bold. I/ We have had enough of hearing about all the reasons why nothing gets done while you people sit around in Washington collecting paychecks. If you have any respect for those of us who would get fired if we sat around telling our bosses that we can't do any work because our co-worker doesn't agree with our opinion, you and your learned and esteemed colleagues will get off your collective keasters and do what needs to be done.
how is the hell is Sen Levin is going to dissolve OPEC?
He could start by asking the Subcommittee on Crime, Terrorism, and Homeland Security
to hold a hearing on war profiteering of oil companies and their subsidiaries.
The lack of a coherent energy policy in the US is not just a failure of the present administration, it is a failure of the entire US government, your party included Senator Levin. Notwithstanding Al Gore's recent opportunistic conversion to "green" energy, Bill and Al did absolutely nothing during their eight years in the White House to put us on a path to energy independence. In fact it was Bill himself that first vetoed drilling in ANWR and Hillary has since vetoed development of nuclear power in New York. The fact is both parties have sold us out but I hold the Dems most responsible since it is your party that is beholden to the environmentalist--the very people who have stood in the way of every attempt by President Bush to develop our own energy resources.
Alternative energy is a great idea, but it is pie in the sky thinking if you believe that alone is the solution; it may be decades before we have a breakthrough that can replace our current reliance on oil. Since we can't count on an alternative solution anytime soon, we need a plan that exploits energy resources we currently have that work...coal, nuclear energy, and accessing our own oil resources both in ANWR and offshore...and calls for a "Manhattan" type project to discover the next "holy grail" of energy. This will not change the price of gas at the pump tomorrow, but it will put us on path to energy independence.
There is enough oil in the US without touching ANWAR; drilling there is a Republican oil profiteer wet dream, and all that demand drilling there are a part of a much larger problem, which is a total lack of respect for the preservation of our few remaining wilderness areas.
Alternative resources are much closer than you seem to think...we just have to knuckle down and do the work.
INDEED !
Will someone please help us keep the Trojan Elephant out of government?
Personally, I don’t care where it comes from...Texas, Colorado, ANWR, the moon...so long as it's under our control and frees us from the whims of nations hostile to our existence.
Alternative energy isn't a "pie in the sky" concept. It's here now, we just have to implement locally appropriate solutions. The "problem" with alternative technologies such as wind and solar power is that they work best when decentralized and the big energy companies that hold us hostage can't make money from it. We need a different mind set. We need to stop thinking of energy as a mass produced commodity and start thinking of it more like a crop to be harvested.
Small scale wind and solar could greatly reduce demand from the existing power sources. There are acres of rooftop on commercial buildings that would be perfect for solar panels. Why not? Why not small wind turbines for homes where it's appropriate? What about solar heat, hot water and PV for homes? ...and the big one: Conservation.
The truth is that we waste way too much energy. More efficient lighting, appliances and heating & cooling systems, combined with better insulated buildings, would result in a huge reduction in demand if widely adopted.
We need an energy "Manhattan Project", but we don't need it to seek out some mythical Holy Grail and answer to everything. We need it to implement what we already have available. The economical stimulus from such a project would be far more effective and lasting than the joke that is the current program.
Not to mention that environmentalist do not want wind farms.
I have no issues with solar panels and wind mills, they are good supplements to current power producing means, but if you think they alone will fill the energy deficit you are kidding yourself. Ask yourself why we these technologies are not used more extensively...and no, it's not because of some energy cabal or any such other lame conspiracy theory. It's simple economics; none of those alternatives are economically viable on a large scale. Sure, for individual homeowners are small communities in very specific locations, these methods are viable supplements, but they are not the answer--barring some major breakthrough in scalability. So yes, we do need another holy grail of energy. In the meantime, we need to maximize what we do have. BTW, it was the esteemed Democrat Senator Kennedy who recently vetoed an offshore wind farm; apparently it ruined his view...typical left-wing hypocrisy.
Repeal the second law of thermodynamics. The big oil companies insist we continue to live by the second law. If the second law is repealed, we will have cheap, abundant, carbon free energy forever. The second law is holding us back from the future.
We know how to build an electric car. Make it affordable for the public and let us withdraw from our oil addiction. Oh, silly me, if I remember correctly it's people from Michigan who killed the last electric car we had.
From where do we get the electricity for your car? When fully developed, solar 2%, Wind 2%. Coal, petrol, nuclear 96%. How expensive will this electricity be. What do you mean it will cost MORE to power an electric car than to burn gasoline?
Your data is fatally flawed. Improve on your research and get back to us.
Us Germany and Brazil as models for your hypothesis.
Senator Levin,
I totally agree that this problem is of the utmost urgency, as it has poised us on the edge of economic collapse. I don't agree on all of your ideas to solve this problem, but at least a couple of them are good. The idea of congress is to pull everyone's ideas together and come up with a general consensus. The trick is, getting your colleagues to belly up to the bar, put out propositions of their own, develop a good set of energy bills, and do it without regard to their political futures. What I need as an American is a congress that will act now, and act in our best interest, and to hell with the corporations that might not agree with legislation in our best interest and withdraw future campaign contributions.
I have to say as a former resident of LA, and traveling there frequently for business, when I see pumpjacks working non stop as hard as they can, and see droves of tanker ships heading out of the port of Los Angeles to sea (full!) I really scratch my head and wonder if anyone really knows what the hell is actually going on.
I applaud your courage to speak out on our behalf with this issue, and please encourage your fellow legislators to pull themselves up by their bootstraps and works towards resolving this issue permanently for our survival. Thanks.
If we continue to allow a world wide monopoly that controls both markets and governments, anarchy will soon engulf the planet. Unbridled greed of this sophistication and close coordination has never before been experienced in the history of the human condition, and it is insatiable.
A sound energy policy is a sound economic and strategic policy.
Immediately put 20% of the SPR on the block to domestic refiners and for domestic consumption only. Thats 140,000,000 barrels at $45.00 thats over $6 billion of revenue for a $5,000 instant rebate for any vehicle purchased that can beat 50mpg. Give the automotive industry a boost they have to work for, they'll have high millage cars rolling off the assembly lines in less than six months with 6 B in the hopper. That is a market incentive for 1 million vehicle sales in place now with dollars from an asset we have now. Match that $6 billion with a new independent individual energy fund to bring to the the manufacturing phase the numerous renewable energy projects worthy of our investment. Wind, Solar, Hydrogen, H2O splitters. We can change this economy if we have a real sense of urgency that this crisis warrants.
The Oil monopoly will be forced to compete or drown in their oil. Don't let any one try the song about how the SPR is a sacred cow with only 30-45 days supply in it. That line assumes every drop of crude we presently use domestically and imported in origin would magically disappear. Oil producers will sell their crude at $45. just as fast as they do at $125. per barrel. They sell oil, its what they do. Never before been experienced in the history of the human condition, and it is insatiable.
If you did all of that and ten times more the price of gasoline would not move a cent. The call for fast solutions is understandable but misguided. It will take fifteen to twenty years and trillions of dollars to solve this one. Even with the fastest possible adaptations we will only barely stay ahead of peak oil and I would doubt even that. But it's great to know that some people are so enthusiastic about solving the problem. Meanwhile the realists have bought a Prius already (without waiting for government subsidies they don't need) and are reaping an 8% annual return on their investment. I expect that to be closer to 10% by end of the year and probably close to 12% over the lifetime of the car. That baby basically pays for itself.
Don't ask what your government can do for you (they can't do a thing). Ask what you can do for yourself.
OPEC announces the addition of one million barrels a day and the market moves 5-10% downward. We say put 140,000,000 barrels on the market all at once. that along with the simple fact that we are at record levels of inventories in crude as well as refined gasoline in the domestic supply will stop drop and roll this market into sanity and break the monopolies grip of greed on the neck of our Nation!
Senator Levin:
Believe it or not the public is ready to hear a politician tell them that we must design methods to use less conventional energy (i.e. oil, natural gas) because demand for these products world wide has increased dramatically with 3 billion new consumers added to world demand with the fall of the Berlin War and the end of the Cold War.
There really is no sense in pretending anymore about "speculators", "windfall profits", etc.
These are just castles in the air imagined in a Congress that sees election season coming and the desperate need to feed the hungry bulldog. In fact, the speculators help us avoid shortages when they jack up the price because they ration available supply while encouraging new production.
The fact is that we cannot continue buying the gasoline hogs made in your state, Michigan.
We need leadership that says it is devoting resources to finding native sources of energy such as wind, solar, geothermal, hydroelectric.
In my town we are about to build a new utility plant to match growth. Had we built housing with solar panels (I live in Florida where the sun shines every day) I don't think we would need a new plant. However I think such building will require interference from the State because the pay-back period is very long.
Indeed. In fact, Senator Levin voted against raising CAFE standards, the last time around.
In grew up in the Detroit area, and it saddens me to say this but the US automobile manufacturers of today are completely out of touch and unlikely to survive, even in their present form, let alone revisit the great days of the past.
Detroit right now, is a wasteland. The 14 story department store was torn down, and is now a vacant lot surrounded by a chain link fence.
http://detroityes.com/home.htm
All of the automobile executives, designers and engineers live in the suburbs and have no major city nearby, as a reference point. Mass transit is rare and only used by the poorest of the poor. Meanwhile everyone else drives huge distances on a daily basis.
While the wealthier suburbs are mere are enclaves that have no edge, excitement or vision. The word pleasant comes to mind, even beautiful. But it's not a culture that dreams of pushing the envelope. The most important quality a person can have, is to be nice. There's nothing wrong with that except, when an entire industry is on it's knees, because the people in charge are either too fearful or complacent to innovate.
Senator Levin, as well as the other politicians in Michigan, who prop up the Big Three, rather than push the industry to do better, would do well to rethink their positions.
The public is ready, but Senator Levin is not. Don't waste your breath.
Thanks for the timely distraction, Senator, but you should have seen this coming as soon as Bush hit the warpath. The war is changing a lot of things, for the worse.
Ending the military-imperialist occupation of Iraq and the attempted armed-robbery of its oil resources will save the American taxpayer more than any saving the Senate will vote on oil policy.
Then, summon the courage to say "Down, Boy" to the Pentagon and the munitions makers when the next Defense budget requests are floated.
And, don't approve any more bailouts for Wall Street.
Maybe get a peek at the minutes of Cheney's Oil Policy meetings.
By your remarks, can one assume that you do not call for Iraq to pay for their reconstruction, since that reconstruction is primarily done by foreign contractors? Otherwise, you are merely echoing the "attempted armed-robbery of its oil resources", aren't you?
Semper fi
> Put a cop back on the beat in the energy markets to ensure these markets are free from
> excessive speculation and manipulation;
I think this makes a lot of sense. Have you considered making the purchasing of energy futures contingent on the ability to take delivery of the final product? (or produce the final product). Perhaps if traders had to have (or lease) the infrastructure to buy and sell the real product, they wouldn't trade as much.
> Stop filling the Strategic Petroleum Reserve until prices are lower;
This is a nit, and detracts from your credibility on the issue. Don't insult us by trying to convince us that the 400k barrels a day of oil would make much of a difference in an 80 million barrel a day market.
> Develop alternatives to fossil fuels to lessen our dependence on oil; and
By??
- Actually investing in our energy R&D budget? What' percent of the federal R&D budget goes to energy?
- Creating policies that promote the creation of reasonable alternatives? (e.g. no more biofuel fiasco's without some thought)
- Increasing CAFE standards (again).
- Taxing "high energy" users and rebating "low energy" users.
> Impose a windfall profits tax on oil companies
This is a bad idea. These companies legitimately purchased land, developed it, and are selling what they made for a market rate. One of the hallmarks of american society is the idea that property rights are protected.
Mike
> Stop filling the Strategic Petroleum Reserve until prices are lower;
"This is a nit, and detracts from your credibility on the issue. Don't insult us by trying to convince us that the 400k barrels a day of oil would make much of a difference in an 80 million barrel a day market."
I disagree. We import about 9 million barrels per day. And if we stop filling our reserves, we might be able to convince other countries to do the same. We're not the only ones doing it, you know.
If we not only announced we were going to stop filling, but made it plain that we were prepared to release oil from the SPR if there is any hint of supply disruption, it would put the breaks on a lot of the rationale speculators are now using to blow up this oil bubble today.
Oops, I meant 13 million per day, and it would put the "brakes" on the speculators.
Other countries don't have this problem. They don't even have strategic reserves that need filling. The outrageously high oil consumption of the US is unique. If you want to have an effect on gas prices, you need to take serious money off the table. Serious as in $150 billion annually. Which is no more than $1/gallon gasoline tax. Of course, if you want to do a really good job, you make it $3/gallon in tax. Good luck getting that legislation passed.
They key point you make is "supply disruption".
No supply disruption, no release.
Right now there is plenty of supply, just at a higher price then we are used to. Continuing to fill the SPR makes sense. If there is a disruption, then we want the oil to be able to continue to get oil to key parts of our economy.
If anything, we should increase the amount of oil going into the SPR. We are legally obligated to have a 6 months supply. (we don't quite have that much). Perhaps we should go to a 1 year supply.
"High Price" is not an emergency. It's an inconvenience (for most people in this country).
I'd rather see a consumption tax on high energy users combined with a rebate to low-income or low-energy users to offset high prices, and help steer people towards conservation. Excess funds from this tax could be used to fund the SPR.
Mike
Right on, Sir!
Senator, hope your efforts are successful and their outcomes will be what you expect.
However, think you might acknowledge that the U.S. is playing in a rigged game when it comes to the international oil industry. The biggest players on the supply side, and many on the consumption side, are state run monopolies, not the private monopolies we are forced to contend with. Their advantage over us is that they are in a better position than we are to control supply, demand, and pricing. Insofar as this is the case, we (the U.S.) are going to continue to get whipsawed by market and price manipulations. Until we get our ducks in a row in terms of creating the ability to control our own markets and pricing, we'll continue to play the game at a disadvantage. Time to nationalize our oil industry and start getting a fair deal.
Why doesn't Congress release the technology they've been suppressing for so many years? Technology that would free us from the mid-east and the oppressive oil companies.
www.watercar.com
You can download the plans for $29.95. Or so I think. Maybe you could try Google. The answers are out there.
The real criminal in this entire oil debacle is none other than RONALD REAGAN. Reagan stripped out
all energy saving programs of the Carter administration and turned the country over to the Oil Corporations. This is REAGANOMICS coming home to roost. Obiviosly the COLOSSUS of CHAOS,
W. Bush has accelerated the process exponentially.
And of course the now worthless democratic lead house who won't even allow a vote unless clinton and obama are in town. Yes washington politics are in a worthless state. Let's just blame Bush, that way everybody elses bad ratings won't look so bad.
He wasn't blaming Bush. He was blaming Reagan, the guy who really messed it up.
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