Oil Prices, Gas Prices and Domestic Production

(US Senate Committee on Energy and Natural Resources) Jeff Bingaman, chairman of the Senate Energy Committee, has a well-deserved reputation for focusing on facts. He worries about the many myths surrounding gasoline prices, oil prices and domestic production. Today, on the Senate floor, he called out some of these fictions and refocused attention on the facts.

“I wanted to speak for a few minutes about gasoline prices, which my colleague from Utah just talked about a few minutes ago. Also, about domestic oil and gas production and also about access to federally-owned oil and gas resources. These are issues that have been raised by numerous senators on this Transportation bill. They are issues of critical importance to our country’s economy, to national security and to resource management. And I’ve been increasingly concerned that the issues that we’re debating, and the facts that are being put out there are often not the true facts. There is widespread misunderstanding of what needs to be done to deal with this set of issues, in my opinion.

“Let me start with the issue that’s most important to most Americans – and that is, the price of gasoline at the pump, and the price of oil. We need to understand clearly what is causing this, and we need to be direct with our constituents about what is causing this.

“Let me state this as clearly as I can – what I believe is really without dispute among experts. That is, we do not face cycles of high gasoline prices in the United States because of a lack of domestic production. We do not face these cycles of high gasoline prices because of lack of access to federal resources, or because of some environmental regulation that is getting in the way of us obtaining cheap gasoline.

“As was made clear in a hearing we had in the Senate Energy Committee in January, the prices that we are paying for oil and the products refined from oil, such as gasoline, are set on the world market. They are relatively insensitive to what happens here in the United States with regards to production. Instead, the world price of oil and our gasoline prices are affected more by events beyond our control, such as instability in Libya last year or instability in Iran and concerns about oil supply in Iran this year.

...It is clear that we are increasing our domestic production significantly, but that gasoline prices continue to rise. So we need to look for other solutions. This does not mean we are powerless to help reduce the price of gasoline. We know what we need to do.

“If we want to reduce our vulnerability to world oil prices and to volatility of world oil prices, the most important thing we can do is to find ways to use less oil. One of our colleagues gave a good speech a few years ago in which he advocated that we ‘produce more and use less.’ Well, we are doing a pretty good job of producing more and we need to do a better job of using less.

“We could do much better on the ‘use less’ part of the equation without affecting our quality of life. We can do that by being more efficient in our use of fuel and by diversifying our sources of transportation fuel away from oil.

“We have taken some first steps along this path, notably in the Energy Independence and Security Act of 2007. It passed the Senate with a strong bipartisan vote. That law required us to make our vehicles more efficient, and to shift toward relying more on renewable fuel. And it is working. Demand is down, biofuel use is up, consumers save money on fuel for their vehicles and our percentage of imported oil has dropped by over 10%.

“So how do we continue on this path toward reduced oil use and dependence? I think there are three areas we can focus on. First, we need to enable further expansion of our renewable fuel industry, which is currently facing infrastructure and financing constraints. Second, we need to move forward the timeline for market penetration of electric vehicles. Finally, we need to make sure that we use natural gas vehicles in as many applications as make sense, based on that technology.

“Every barrel of oil that we are able to displace in the transportation sector, and that we therefore do not need to consume, makes our economy stronger, obviously it helps our personal pocketbooks and makes us less vulnerable to the volatility of the current marketplace.

“This is not to say that we should not keep drilling and that the Obama Administration should not move forward with its plans to bring even more supplies into the market. We lead the world in innovative exploration and production technology, and it is helpful to our economy and our national security to increase domestic supply, and that’s exactly what’s happening.

“But in the many debates that we will have in the future over issues related to gasoline prices, we need to recognize that the key issue very clearly is not lack of access to federally-owned oil and gas resources. Our public lands contain many resources and uses that Americans value, and we don’t need to sacrifice science or balanced protection of those other resources and economic interests in order to have robust domestic production.

“The long-term solution to the challenge of high and volatile oil prices is to continue to reduce our dependence on oil, period. This is a strategic vision that President George W. Bush, who previously had worked in the oil industry, clearly articulated in his State of the Union speech in 2006. We subsequently proved in Congress in 2007, the year after that State of the Union speech, that we have the ability to make significant changes in our energy consumption, and that it is possible to mobilize a bipartisan consensus to do that.

“The bipartisan path that the Senate embraced in 2007 is still the right approach today. As part of whatever approach we take to energy and transportation in the weeks and months ahead, we need to be honest with our constituents about what works, and we need to keep moving in that direction with that 2007 bill. We need to allow the facts, and not myths, to be our best guide.” READ MORE Charts