Thursday, February 10, 2011

Another Contentious House Hearing On Energy Independence

Feb 10: Following yesterday's contentious hearing on the Republican's Energy Tax Prevention Act to prohibit U.S. EPA from regulating greenhouse gas (GHG) emissions [See WIMS 2/9/11], the House Energy and Commerce Committee, Subcommittee on Energy and Power, Chaired by Representative Ed Whitfield (R-KY), held another hearing today to examine the effects of Middle East events on U.S. energy markets. Today's hearing proved equally contentious as Republicans argued for greater productions of domestic oil and gas resources and Democrats pushed for energy efficiency and reduced consumption through programs being implemented by the current Administration.
    The hearing announcement indicated that recent events in Egypt have highlighted dynamics in global energy markets and underscored the nation's vulnerabilities to price spikes and overall energy security. Witnesses testifying at the hearing included representatives from: U.S. Energy Information Administration; Province of Alberta; Louisiana Mid-Continent Oil & Gas Association; Apollo Alliance; Citizens for Affordable Energy; and Deutsche Bank AG.
    Rep. Whitfield said in opening remarks, "We convene today's hearing to have a discussion on recent developments in the Middle East and North Africa and their effect on world energy markets. Violent protests and political uncertainty in Egypt two weeks ago caused a sudden spike in oil prices that, over the past few days, has gradually subsided. The price increase was driven by investor fears over the possible shutdown of the Suez Canal and Sumed Pipeline, which transport up to 3 million barrels of oil per day. These events provide a catalyst for deeper examination of the economic and geopolitical factors that contribute to the pricing of oil. 
    "Events in the Middle East also demonstrate a number of facts: One:  Oil is a globally-traded commodity, the price of which is influenced by basic laws of supply and demand; Two:  Political events can play a major role in influencing the price of oil; Three:  Half the world's oil is produced in OPEC member states and Russia.  Some of these nations are politically and economically unstable. In a tightening market, unreliable sources of oil will prove increasingly detrimental to price stability and international security. 
    "With these facts in mind, we should turn our attention to the current state of international energy markets. We have booming demand for oil in China. We have seen, in 2008, how OPEC spare capacity can reach dangerously low levels during periods of high global demand. We have new frontiers of oil production ranging from the Arctic to enhanced recovery technologies here in the U.S. Additionally, we have restricted vast supplies here in North America by government action, or, in many cases, government inaction. . .
    "The National Petroleum Council estimates we have upwards of 40 billion barrels of oil locked away in the Eastern Gulf of Mexico, Atlantic and Pacific Coasts, on- and offshore Alaska, that are currently off-limits for production.  These 40 billion barrels are double the proven reserves of the U.S. today. . . Any barrel we do not produce here in the U.S. or Canada will have to be produced in a remarkably less safe, less regulated, and more environmentally damaging manner in Nigeria, Venezuela, Angola, and other states where environmental quality is a depressingly low priority. . ."
    Full Committee Chairman, Representative Fred Upton (R-MI) also delivered an opening statement and said, "America's single greatest source of oil imports is our great ally Canada. Of course, any additional oil production helps keep prices down, but production that comes from a reliable source like Canada also serves as a calming influence on world markets. According to a recent study conducted for the Department of Energy, the Keystone Pipeline project could 'very substantially reduce U.S. dependency on non-Canadian foreign oil, including from the Middle East.' And construction of the pipeline would create jobs to boot. Unfortunately, a number of environmental organizations are pressuring the administration to say no to a project most of us consider a no-brainer. . .
    "There is a role for renewable energy and alternative vehicles, but we have to be realistic, and especially realistic about the timeframes involved. Developing technologically and economically viable alternatives capable of taking significant market share away from petroleum derived fuels and internal combustion powered vehicles is a long term project. Put another way, the age of petroleum is going to be with us for a while longer, so we need to take steps to ensure that supplies are as plentiful, reliable, and affordable as possible. How to achieve that is the focus of today's hearing."
    Full Committee Ranking Member Representative Henry Waxman (D-CA) also delivered an opening statement indicating that, "By requiring improvements in how efficiently we use oil, the Administration has reversed a dangerous trend." He said, "In 2008, the Energy Information Agency predicted an ever growing need for petroleum imports through 2030. In 2011, the Energy Information Agency now predicts that petroleum imports as a percentage of supply will fall significantly by 2030, largely due to the efforts of the Obama Administration." He said the hearing was used by the Republican majority in Congress to discusses its opposition to these new trends that offer hope for an energy independent America." Waxman presented Supporting Charts indicating Petroleum Import Dependency and Petroleum Consumption.
    Waxman said, "More U.S. production is never going to be enough to appreciably reduce global oil prices or U.S. imports of foreign oil. We use 25% of the world's oil, but we only have 2% of the world's oil reserves. So we could double or even triple domestic production and it's simply not going to affect global oil prices much. The key to making progress is to focus on how much oil we use. Reducing our share of global oil consumption from 25% can have a real impact -- both on global oil prices and on imports." He said, "The new motor vehicle standards promulgated by the Obama Administration are exhibit A for benefits of greater efficiency. . . This national program is projected to save 1.8 billion barrels of oil [emphasis in original]. . . Incredibly, the new Republican majority in Congress is opposed to these efforts. Chairman Upton and Senator Inhofe have proposed legislation to block EPA from setting new motor vehicle standards. . . The Upton-Inhofe bill is great for oil companies like Koch Industries, which spent millions of dollars electing Republicans. . ."
    Access a release including both Reps. Whitfield and Upton statements (click here). Access the hearing website and links to all testimony (click here). Access links to the statement and charts of Rep. Waxman (click here). [*Energy]
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