On December 3, Senator Wyden attended the 10th Annual Oregon Leadership Summit. Over 800 community and business leaders were also in attendance.
Senator Wyden is credited with coming up with the idea for the Oregon Leadership Summit ten years ago-- an idea that grew out of the town hall meetings he holds in every Oregon county every year.
“We knew this was going to be well received, but it far exceeded what we actually thought was possible,” said Senator Wyden to the Portland Business Journal about the Summit's 10th anniversary.
At this year's Summit, Senator Wyden praised the Oregon Business Plan and its aim to create businesses and industry in Oregon that sustain local economies and communities. Senator Wyden also spoke of sustained economic growth on a national level.
“So here’s my take on what has to be done in Washington, D.C.” said Senator Wyden. “We must stop patching the broken mess that creates problems like the fiscal cliff and start working on fresh reforms that will service as a launching pad for sustained economic growth.”
Senator Wyden stressed that these fresh reforms must include: investing in transportation infrastructure, transparency in trade negotiations, cybersecurity policies that encourage innovation, and comprehensive tax reform. Importantly, since all this takes an educated workforce, students and workers should be able to apply a cost-benefit analysis to their education and training.
(Note: this letter was originally published in the Washington Post on October 28, 2012)
A federal investigation has proved that China is subsidizing its solar panels and dumping those panels in the U.S. market. The Oct. 19 editorial “A cloud on trade” said there’s a good reason to let China continue to do this. I disagree.
World trade is governed by well-defined rules. Allowing China to break those rules at the whim of certain lobbying groups would turn the rules-based trading system into one based on politics. The world tried that system before. It failed. Under that system, trade was neither free nor fair, to the detriment of the United States and global economy.
Failure to address China’s practices will undercut U.S. innovation. It will also make it more difficult for the United States to act against China’s cheating in other areas on everything from the manipulation of its currency to its export restraints on resources such as rare earth minerals.
China has been clear that it is seeking to be a dominant provider of the world’s solar panels, and it is accomplishing this by breaking the rules. To accept these actions because it is helpful to consumers (for now) is to accept a world in which China chooses the industries it wishes to dominate and the
United States is forced to take what’s left. How long after the last U.S. solar manufacturer has shut its doors will China wait to use its monopoly power to raise prices for U.S. consumers?
Ron Wyden, Washington
The writer, a Democrat from Oregon, is a member of the U.S. Senate.
Senator Ron Wyden (D-Ore.) returned from a two-day tour of Louisiana over the weekend, where he visited energy industry infrastructure and coastal restoration efforts Friday and Saturday at the invitation of Senator Mary Landrieu (D-La.).
Wyden and Landrieu toured Louisiana’s costal marshes by helicopter and examined the web of energy industry facilities and support services at Port Fourchon, on the Gulf Coast, among other activities, during the two-day visit.
“I’m glad Senator Landrieu invited me to tour her home state– I saw a lot in Louisiana that I'm going to take back to Washington,” Wyden said. “The uniqueness of the state’s energy industry and the special nature of its coastal environment proved to me once again that we can’t rely on a one-size-fits-all energy policy.”
This past Saturday, Shepherds Flat Wind Energy project came online in Gilliam and Morrow counties in Central Oregon.
Shepherds Flat is one of the world’s largest wind farms generating 845 megawatts of power – enough to power more than 200,000 homes. The wind farm was developed by Caithness Energy and boasts 338 wind turbines made in the U.S. by General Electric which are creating emissions-free power.
“Shepherds Flat shows all of us what renewable energy in the 21st Century looks like, with electricity flowing, real steel in the ground, real jobs, and real economic growth,” Wyden said, in a statement.
In his May 3, 2012 column, Robert Samuelson claims “We should exorcise the politically convenient notion that high oil prices result from the market maneuvers of greedy “speculators.” But it’s hard to do that without ignoring the facts.
In an effort to disprove the role that speculation is playing in driving gas prices, Mr. Samuelson points to the following recent testimony before the Senate Energy and Natural Resources Committee by Howard Gruenspecht, acting administrator of the nonpartisan U.S. Energy Information Administration:
“The increases in crude oil prices since the beginning of 2011 appear to be related to a tightening world supply-demand balance and concerns over geopolitical issues that have impacted, or have the potential to impact, supply flows from the Middle East and North Africa.”
But just two weeks after that hearing, the Wall Street Journal reported in an article entitled “Pressure on Oil Supply Eases” that “two years of oil market tightening reversed in the first quarter as supply exceeded demand and inventories grew.” In fact, the tightening supply/demand balance had already reversed by the beginning of 2012. As the article reported “Global oil inventories grew by as much as 1.2 million barrels a day in the first quarter.” The most recent EIA National Defense Authorization Act report also confirms that a number of countries were actually producing at above average rates in the first quarter, including the U.S. Canada, Brazil, China, and Columbia substantially offsetting unplanned global production outages and reductions in exports from Iran.
When demand is declining and supply is increasing, it is textbook economics that prices are supposed to come down.
But that’s not what happened. As the graph accompanying the Wall Street Journal article makes clear, in the 1st quarter of 2012, the price of oil skyrocketed by more than 20 percent. And this occurred despite the fact that the supply/demand balance was actually loosening, not tightening. Clearly, more was at work in oil markets at the beginning of the year than supply and demand alone.
Mr. Samuelson also attributes higher gas prices to “shrinking spare capacity” and cites the testimony of another witness at the hearing, Dr. Daniel Yergin, chairman of the consulting firm IHS CERA. Here again, the facts are at odds with the testimony.
Just days before the hearing, Saudi Arabia announced plans to increase spare capacity by 2.5 million barrels per day – at least doubling the estimate of 1.8 to 2.5 million barrels per day of spare capacity Dr. Yergin had provided in his testimony.
Mr. Samuelson does acknowledge that “outside investors (a.k.a. “speculators”) have dramatically shifted money into commodities — raw materials” and that “Commodity index funds,” which invest in a basket of commodities (oil, wheat, corn), have attracted hundreds of billions of dollars.
But he doesn’t seem to appreciate how fundamentally this has changed the commodities markets. Four years ago, speculative traders held less than half of the futures contracts for crude oil. Today, according to the Chairman of the Commodities Futures Trading Commission, these traders now account for 85% of the crude oil futures market.
Because of this fundamental change in the commodities market, industry experts from the CEO of Exxon Mobil to Goldman-Sachs, the firm that practically invented the commodity index fund, have estimated the impact on oil markets from speculation at upwards of $20 a barrel, which translates to more than 50 cents a gallon at the pump.
Delta’s recent announcement that it is buying an oil refinery in Pennsylvania to protect itself against the risks of price spikes and potential fuel shortages is further evidence that the crude oil commodity market is no longer filling its traditional role of hedging risks for commodity users.
Certainly, speculation is not the only cause of high oil and gasoline prices. As Mr. Samuelson correctly points out, our dependence on a global market for oil is clearly a major factor. But it is far from the only factor driving up current prices at the pump. If speculation were not an issue, Mr. Samuelson’s prescription of “Use less, and produce more” should already have lowered prices significantly. Because that’s what occurred during the first quarter of 2012 and prices still soared to the highest level ever for that time of the year.
(Note: This blog was originally posted by Senator Wyden on Huffington Post.)
You may have seen the commercials about expanding imports of Canadian oil sands. The slick advertisements feature interviews with "regular Americans" surprised to find out that Canada is the U.S.'s number one foreign supplier of oil. The ad goes on to claim that by 2030, Canada could supply 25 percent of America's imported oil. In order to facilitate that increase, the oil industry and the U.S. and Canadian governments are pushing for the creation of an oil pipeline from the tar sands oil fields in Canada to the marketplace along the Gulf of Mexico.
These ads want you to think that constructing this pipeline is the answer to all our oil needs, but if you look closer, a different picture begins to emerge. One that I hope will have you asking: "Who really benefits from the Keystone XL pipeline?"
Like any business, the oil industry runs on the basic premise of supply and demand. The more supply -- the lower the price. The higher the demand -- the higher price. In other words, the more people who can buy oil, the higher the price of oil.
Right now, there are a limited number of customers for Canadian oil. Due to simple geography -- and without the pipeline -- it's really only cost effective for Canadian oil producers to sell their oil to North American customers, mostly American Midwesterners. This is a good deal for those of us in the U.S. because it not only gives us access to a reliable source of oil from a trusted trading partner, it helps drive down the cost of oil in the United States by adding to our available supply of oil.
Building the Keystone XL pipeline, however, would change this.
The KXL pipeline would make it easy and cost effective for oil producers in Canada to transport oil to the Gulf of Mexico where it could be shipped to customers -- not just in the United States -- but around the world. More customers for Canadian oil means that Canadian producers can charge more for their oil, which then means that American businesses and consumers will pay more for oil. That's a good deal for oil producers, not such a good deal for American families and businesses that need to pay for oil.
And there is plenty of evidence to suggest that Canadian oil producers view the construction of the Keystone XL pipeline as an opportunity to charge more for their oil. According to TransCanada, Canadian oil shippers could use the pipeline to add up to $4 billion to U.S. fuel costs. As I indicated in a letter to the FTC earlier this year, seven Canadian oil producer have already shown signs of having colluded to raise prices on gasoline for American consumers. Testimony given during a public hearing in Canada by a representative of one of the oil companies suggests that the companies collectively agreed to accept a higher tariff on their product in order to manipulate supply levels to the U.S. Midwest and raise prices. In that April letter, I asked the FTC to investigate whether those companies illegally got together and decided to use the pipeline to raise prices, but I've yet to hear back.
Are there oversees customers for tar sands oil? Yes. There are 1.3 billion of them in China.
Just last week, the New York Times reported that Sinopec, a Chinese oil company owned by the Chinese government, bought Daylight Energy, a Canadian oil and natural gas producer. This is the third major acquisition of a Canadian tar sands oil company by the Chinese government in recent months.
China -- like the United States -- needs to import oil and natural gas to meet its country's energy needs. Also, like the U.S., China recognizes that importing oil from Canada would be a lot more reliable and create a lot less foreign policy issues than, for example, importing oil from the Middle East. But, unlike the Unites States, the Chinese do not currently have a cost effective means of getting Canadian oil to China.
Building the Keystone KXL pipeline would change that.
Building the pipeline would make it possible for the Chinese to transport their Canadian oil across the United States to Texas where they could put it on tankers for shipment to China.
Making it possible for the Chinese government to ship Canadian oil to China wouldn't just mean that the United States would be giving up its exclusive access to Canadian tar sands oil or that U.S. families and businesses would have to pay more for oil and gasoline or that the United States would have to import oil from countries less friendly to our foreign policy than Canada. Building the KXL pipeline would also mean that we would be helping our county's biggest global competitor -- China -- meet its energy import needs at the expense of our own. Sounds like a great deal for China, but not such a good deal for the United States.
Due to its international implications, the Keystone XL Pipeline cannot be built without the U.S. State Department's approval. And, if recent news reports are believed, that could happen very quickly.
The standard the State Department must consider is whether constructing the pipeline is in the United State's "national interest." To do that, the State Department needs to look beyond the potential for short-term construction jobs and the pipeline's environmental impact (which is a whole other issue) and instead consider whether giving the rest of the world access to Canadian tar sands oil is in the U.S.'s long-term strategic and economic best interests.
Yes, building the pipeline would be good for oil producers, which is why they are paying for the commercials. And it would be good for the Chinese government, which is why they are buying the Canadian oil companies. But it's the State Department's job to decide if this pipeline is in the best interests of regular Americans who don't work for oil companies and American businesses that need oil to operate. And, from their perspective, it's not such a good deal.
(Note: This blog was originally posted by Senator Wyden on Huffington Post.)
Just one week ago the American people heard executives from the top five oil companies stand-up and explain why - despite record profits - they need the federal government to give them a break on their taxes.
We're talking about the billions of dollars in tax incentives and assistance that oil companies get for drilling in the United States. These incentives were put in place decades ago when the oil industry was just getting started and the government stepped in to ensure that Americans would have a domestic supply of oil. Back then, drilling for oil was much more of a guessing game and drilling and exploration costs were a major cost of doing business. In order to ensure that our country would have gasoline, the federal government helped cover those costs.
That hasn't been the case for awhile. In fact, in 2005, representatives of the country's major oil companies told me that they no longer needed tax incentives to keep drilling in the U.S. because oil was selling for $55 a barrel and that price gave them more than enough financial incentive to keep drilling. Well, if the oil companies thought that $55 a barrel oil was enough to keep them drilling in 2005, it would seem safe to assume that with oil hovering around $100 a barrel today, they would no longer be asking for their tax incentives to keep drilling. That wasn't the case at last week's hearing.
So what's changed since 2005? Why are some of the largest and most profitable companies in the world still telling Congress that they still need government assistance? Let's break it down.
Claim #1: Oil is getting harder and harder to find.
The truth about oil supplies:
If anything, U.S. oil supplies and prices are less tied to the global market now, and new oil supplies are easier to find, than they were in 2005. The location and technology for getting oil and gas, especially from on-shore shale formations, have not only dramatically increased U.S. oil and gas reserves, but the technology is now so well established that U.S. oil and gas production is rising rapidly as a result.
According to a recent analysis by the U.S. Energy Information Administration, oil production from the Barnett shale formation in Texas - literally in the backyards of the headquarters of these same companies--has tripled since 2005. In fact, total U.S. oil production has increased over 10% since hitting its low point in 2008 and EIA projects that because of increased production in oil shale and in the Gulf of Mexico and other sources that it will continue to grow.
On top of that, the CEO of Exxon Mobil said on CNBC in March 2011, "I am not aware of anyone who is having difficulty securing supplies of oil...there is no shortage of supply in the market."
Claim #2: Oil companies face global competition.
The truth about global competition:
U.S. oil prices are also less tied to global markets and competition now than they were in 2005, because of increased U.S. production and increased Canadian tar sands production flooding into the U.S. market. This should be of no surprise to the five major oil companies who testified last week, because every single one of them has made major investments in Canadian tar sands projects.
Claim #3: The loss of tax breaks will drive up the price at the pump.
The truth about the price at the pump:
Recalling that hearing in 2005, I also asked the CEOs about ending these tax breaks on their companies and several of them said it wouldn't affect them or would only minimally affect them. Exxon Mobil CEO Lee Raymond said "As for my company, it doesn't make any difference." Chevron CEO David O'Reilly said ending these tax breaks would have "minimal impact on our company." And, BP's US CEO Ross Pillari agreed, saying "it's a minimal impact on us."
So if taking away the tax breaks won't have much of an impact on the oil companies, why would it have much of an impact on price?
The American people should not be held hostage to the false claims that without the billions in taxpayer subsidies they currently receive, they will produce less oil and that will raise the price at the pump. It's time for the oil companies to own up to what they said in 2005: they did not need taxpayer subsidies then, and they do not need subsidies now.
