Senate Republicans: It's economics stupid!

New Mexico Republican Senator Pete Domenici said that the energy bill offered by his state's junior senator is "not a very big solution to a big problem." The reconfigured energy bill, written by Sen. Jeff Bingaman (D-N.M.) features a component that encouraged energy companies to "use it or lose it," when it comes to lands that are already under lease. "Use it or lose it doesn't mean anything," said Domenici at a press conference with Senate Republican colleagues.

Majority leader Harry Reid (D-Nev.) has offered little debate on the bill and is not allowing much room for amendments, said Sen. John Thune (R-S.D). Domenici said that their amendments are a good way of "finding more and using less." He cited the Repubicans' strong support for electric cars. Bob Bennett (R-Utah) said that oil shale is not addressed and that other countries, like Brazil, are taking advantage of this technology while oil shale is off limits in Utah and Colorado. He called for "massive" investment to recover oil shale, which he said is equal to 800 billion barrels of recoverable petroleum.

Sen. John Cornyn (R-Texas) said that speculators represent about 20 percent of the problem when it comes to the current energy prices. He said that he spoke with billionaire Warren Buffet, a prominent U.S. businessman and investor, who told Cornyn that this problem will be solved with the simple law of supply and demand. Cornyn said that the Senate Republicans are dedicated to addressing the problem of supply and demand by drilling for more oil in the Arctic National Wildlife Refuge and the oil shale of the American West.

Price of oil doubles, no one can explain why

The Subcommittee on Energy and Water Development held a hearing to discuss the forecasts for oil and gasoline prices and examine the Energy Information Administration’s (EIA) budget request for Fiscal Year 2009. Chairman Byron Dorgan (D-N.D.) said that the EIA is a very important organization and that their work is very important to the United States. However, Dorgan could not understand why the EIA’s projections continued to be “way, way, way off” for the past six months. Dorgan also said that he was confused as to why the price of oil and gasoline skyrocketed when nothing fundamentally changed in order to cause this.

Sen. Pete Domenici (R-N.M.) said that the U.S. must come up with solutions to increase supply and decrease the demand for oil. Domenici said that the country must produce more energy that it owns now in order to increase domestic supply. He explained that the U.S. is going to move from the crude oil economy it has now to something different, and though this process may take as long as thirty to forty years, it is a “bridge” that the country needs to cross.

Guy Caruso, Administrator for the EIA and U.S. Department of Energy, gave a testimony which focused on recent forecasts for oil prices and the factors that were considered in making these forecasts. Caruso said that since he last testified on this issue in December 2007, crude oil prices have increased from a monthly average of $92 per barrel to more than $135 per barrel. The EIA’s current forecast for crude oil prices is an average of $122 per barrel in 2008 and $126 per barrel in 2009. Caruso explained that there are several factors which combine to cause oil supply to struggle to keep up with demand growth, but also said that market fundamentals – demand, supply, inventories, and spare production capacity – are the primary drivers of global oil prices.

Caruso said that the EIA relies on a number of tools to project crude oil prices, including an econometric model of oil production, inventories, and spare capacity. He said that the EIA continually strives to improve their short-term forecasts. Caruso also said that recent experience with high and rapidly rising oil prices and large deviations of actual prices from forecast values highlight the challengers faced by EIA. He said that it is necessary for the EIA to have access to more data, which is what their Fiscal Year 2009 budget request proposes additional improvements for. However, when Dorgan asked what exactly caused the price of oil to double this past year, Caruso could not offer a good explanation.

The “inconvenient truths” of global energy

The Senate Committee on Energy and Natural Resources held a hearing on the challenges to meeting future energy needs and to developing the technologies for meeting increased global energy demand. Chairman Jeff Bingaman (D-N.M.) said that the United States is at a crossroads and now has an opportunity to develop the technologies to break the world’s dependence on fossil fuels. He explained that the final message of the International Energy Agency’s (IEA) report, the goal of reaching a fifty percent reduction in greenhouse gas emissions, is attainable by 2050.

Ranking Member Pete Domenici (R-N.M.) said that the U.S. is facing two big problems at the same time: increased carbon dioxide emissions and a growing energy dependence. Domenici explained the difficulty to agree on what options Congress should pursue in order to achieve the goal of a more energy efficient nation. He said that there are many “inconvenient truths” that the U.S. must contend with today, including the effort required to reduce domestic carbon dioxide emissions, which if not done correctly will be very costly. Also, Domenici said that no matter how successful the country is in limiting its carbon dioxide emissions, oil will remain an essential part of the “domestic energy mix.”

Neil Hirst, the Director for Energy Technology and Research and Development at IEA, gave a very detailed report on new scenarios and strategies for a more sustainable energy future. Hirst explained that a global goal should be to have carbon dioxide levels in 2050 remain equal to what they are today in 2008. This would require a huge carbon dioxide reduction; the amount of carbon dioxide reduced would have to be greater than current carbon dioxide emissions. Hirst said that the U.S. is facing an urgent challenge which needs a global solution. He also said that a global technology revolution is needed to transform how the world uses its energy.

Raymond Orbach, the Director of the Energy Department’s Office of Science, said that the U.S. needs to focus on the way nature provides fuel “so that we can follow suit.” He explained the country’s growing capability to direct and control matter down to molecular, atomic, and quantum levels. This increasing ability to control the fundamental, nanoscale building blocks of both biological and non-biological matter “holds out a promise” of eventually transforming the way the world will generate, store, transmit, and use energy.