Prepared Remarks of Senator Domenici on the Global Oil Balance Hearing
January 10, 2007
10:49 AM
Washington, D.C. – The Senate Energy & Natural Resources Committee today held a hearing on the Global Oil Balance and Its Implications for U.S. Economic and National Security.
Below is the prepared text of Chairman Domenici’s statement:
“No, you are not imagining things– this is the gavel in my hand. First, I’d like to congratulate Senator Bingaman on being elected Chairman of the Committee on Energy and Natural Resources. I look forward to continuing to work with him in the fine bipartisan tradition of this Committee.
“When Senator Bingaman, with a commendable desire to get a running start on the work before the Committee, scheduled this hearing, we didn’t realize that he would not yet officially be Chairman. So, for the time being, you get to call me “Mr. Chairman”, even though the role is strictly ceremonial in this case.
“I do appreciate Senator Bingaman scheduling and planning this hearing on the Global Oil Balance and Its Implications for U.S. Economic and National Security, and, in a minute or two, I will hand things over to him to preside over this hearing. But first, I will share a few thoughts of my own.
“As I have stated many times before, energy security is a complex issue that cannot be reduced to a “sound bite.” That being said, I will briefly summarize what I think are some important issues facing this nation concerning the area of energy security.
“I think it is useful that Chairman Bingaman is holding this hearing as our first of the Congress. This is an area where there is great risk in making decisions based on what we “know” to be true from the past – while the reality is that the world has changed.
“Today we will hear about the dangers of our excessive and unprecedented dependence on foreign sources of oil. But what may be even more frightening, and difficult to deal with, is the ways in which the very structure and politics of oil markets have changed.
“While most Americans, and many politicians, focus on large multinational corporations as the face of “big oil,” today we will hear that the reality is that National Oil Companies – those owned by foreign governments – control some three-quarters of the world’s oil reserves.
“Thus, at present, we are largely dependent on supplies of oil controlled by governments in unstable regions of the world whose values and priorities are often in conflict with America’s initiatives and place in the world.
“Why do these changes in world oil markets matter with respect to our government’s policy? Because approaches that were used in the past that focus on the business practices of large investor-owned corporations will have little effect on world oil markets other than to disadvantage private investment by U.S. companies and harm our consumers.
“Private investors are already at a disadvantage, as the rise in National Oil Companies has also allowed an increase in regulating access to reserves through the use of strategic energy agreements between governments, squeezing out U.S. companies. Examples are the Chinese national oil companies’ development of energy production agreements in Sudan and Iran, and Russia’s reclaiming of oil producing assets from Yukos to form a new state oil company. Just yesterday, Venezuelan President Hugo Chavez called for the end to foreign ownership of crude oil refineries in the Orinoco region. This activity further limits investment opportunities for investor-owned oil companies.
“These trends are doubly concerning, as, in many producer nations, political instability and a lack of a legal system for the enforcement of contract rights results in insufficient capital investment in the infrastructure necessary to sustain existing production, much less bring new capacity on line. Thus, for example, the recent prediction by one scholar of the “extinction” of Iranian oil exports by 2014-2015. Will this be allowed to happen, or will it be forestalled by additional investment, perhaps from other states that are less than friendly to U.S. interests?
“One option we don’t have is to simply pretend that these trends will go away by themselves. We must take a two-pronged approach: First, we must do what we can to work toward U.S. energy security.
“In 2005, we approved a comprehensive energy bill that is already showing results in many areas, including the production and use of alternative fuels, and providing for a nuclear renaissance. Last fall, we passed OCS legislation that will open resource-rich areas of the Gulf of Mexico to production. However, there is more we can do, and we must pursue a balance of increased efficiency and increased supply. For example, I would like to re-examine CAFE standards and whether we can be more forward-leaning in our mandated levels of fuel efficiency. Among other things, I have in the past and will continue to support authorizing the Administration to increase standards on passenger vehicles.
“While energy self-sufficiency is our ultimate goal, energy is -- and will remain -- a world market, and we will always be directly impacted by production and consumption trends in other nations. Thus, it is appropriate that, at this first hearing, we will gather information on how to engage our domestic and foreign policy to deal with the world as it is today.”
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