said it could help keep prices down. .. >> that's correct. one the implications of our, you know, reassessment of the shell gas resource base has been for significantly lower prices that we're projecting. so the -- the average wellhead

price of natural guess doesn't get above $5 per million btu until after 2020. when is significantly lower. towards the end of the period, it gets up to $7. you may recall it was at least a couple of dollars per million btu higher than that. the implications are in the electric power sector relative to other technologies. natural gas has had several other advantaging in terms of low capital, quick construction, lower conventional pollutant emissions, as well as lower co2 emissions which aren't subject to regulations but decision making. those advantaging that natural gas has does tend towards natural gas. in terms of the capacity editions that we see, the majority of those new capacity editions are also for natural

gas. the second biggest source could be renewables. so another factor that is useful to keep in mind is we reassessed our power plant costs this year. several of those went up, some came down. natural gas was roughly the same as what we had been previously assuming. the overnight capital for nuclear and coal, which are capital intensive large, projects went up significantly, 20 to 30%. renewable wind went up a little bit, but not as much as coal and nuclear. so there's been a number of things that have changed over the last several years that tend to point in natural gas in the electric power sector. we are projecting more natural gas consumption and electric power over the next decade than the last year. >> thank you very much. senator genachowski. >> mr. chairman yesterday the

renewal energy -- excuse me, released a finding stating oil pipeline out of canada into the united states would reduce our dependence on middle eastern oil. would you agree with the department of energy's findings there? >> i've briefly reviewed the study that you are referring to which was conducted in the context of xl pipeline. the main kind of issues or changing that might take place, whether or not the oil will be produced and that study seemed to suggest that would be produced regardless of whether it was a pipeline and it would likely be exported to the best to asia as opposed to south of the united states. the implication in terms of u.s. imports, you know, that study

conclusions would most likely rather than coming from canada could come from the middle east. we've had declines and are expecting further decline from mexico and venezuela crudes which would have been historically sources of that crude oil because we have complex refineries that can use the heavy oil in the united states. you know, we can refine canadian -- this canadian oil and the most likely substitute would be the middle eastern oil. >> let me ask you in the reverse, our concern up north in alaska is the continued viability of the transalaska pipeline task. as you know that put is declining to what we believe is dangerously low levels. and if we don't take some very serious steps in the very short term to add more oil into that line, within the next few years, there's a real chance that it

could be in operaable shortly after that. the question to you and anybody else that might choose to jump in is the impact. the economic impact, the national security and trade related would result if we take taps offline and our nation is in a situation where we are no longer receiving that 10% of domestic crude supply that we have been receiving for approximately the past 30 years. so if we lose a large diameter pipeline like we have up north that brings crude in to the lower 48, what's the economic impact to us? >> i'll just make a brief comment. which is in our projections, the oil flowing through taps does continue to decline as it has over, you know, the last several years. towards the end of our projections, it starts to get to a level where, you know, my understanding is the pipeline

would stop 200,000 barrels per day is roughly my understanding. it does get that towards the end of the projections. so at least through the year 2035, we don't anticipate that it would close. but after that, clearly, that looks like it's on the, you know, longer term horizon. >> let me ask about capacity. because several of you have discussed this, and mr. diwan, i think you stated that it's your understanding that there's a relatively large cushion was the term that you used of about five million barrels per day. i'm told that it maybe five, it maybe six. the question is, and as we look to what's going on in egypt and the uncertainty and the instability there, i think we look at what is available in terms of spare capacity and suggest, okay, well, that can be

what can help insulate us from supply shocks from the price shocks, because we have that spare capacity. how accurate do we really believe our numbers are when we're talking about this spare capacity? do we really know how verifiable is it? >> we have a good idea. we don't have an exact number. this is why i think we all hedge a little bit. it's probably closer to six, i'd like to say it's north of five. a large part of it is in saudi arabia. this capacity is new. it's been added in the last three years. so for once i would say that we know actually that there is a large amount of spare capacity available in saudi arabia. they have a production capacity probably closer to 12.5 million, they are producing 8.5. most the spare capacity is in one country. it's in the middle eastern

concept. >> doesn't it give us less assurance? we're talking about the concerns in the middle east. to know you are most of your spare capacity inup country. what kind of assurance does it give us? >> the problem of concept is an oxymoron. only certain countries are willing to invest and create capacity and not produce it. these countries are probably five. okay. and they are all in the persia gulf. this is the original is to be able to provide that spare capacity if something happened. i don't know a single oil company, exxon, chevron, which is willing to have capacity not producing. the concept of spare capacity is focused on the middle east at the end of the day. i have more assurance than two years ago. we know that saudi arabia did invest tremendously to increase

capacity. they have shown they can produce more than what they are producing now. in a way it's spare capacity as a number, i'm more confident about it than three years ago. because we've seen higher production numbers, a large amount of investment. as five, four, six, i don't know. but it's a large number. >> senator white. thank you to the chairman and thank you to to the panel. i want to look at the issue that financial markets are playing with regard to oil prices. i was instruct tuesday the wall street journal man a column in what's called heard on the street. it was entitled "unrest pits, old oil bulls versus the gold bugs." in effect they, talking about which area made more sense to put your bets on. should you put your bets on oil or gold? and mr. burkhard, you said something that i'm not really heard witnesses talk about here in the senate energy in the

past, that's acknowledging the role that the financial markets, you know, are playing on oil prices with your statement where you say oil has become the new gold. my question beginning with you, mr. diwan, you say the big oil producers are not going to be effected by what happened in egypt and tunisia, i assume we are talking about the sawdies. my question would be do you believe the recent price increases like the $5 a barrel increase in oil in a matter of days, do you think that is due to supply and demand? >> well, no, because we haven't seen the supply disruption. but markets do anticipate; correct? this is what they do. and they want to price risk. the way i look a little bit at oil market, i came here in the house to talk about it financial position of oil in the last three years.

it's -- money slow is like the steroid in the system. it comes in, rushes in, it has a very big impact. sometimes it's lasting, sometimes it's not. clearly when you have situation like you had no egypt, people do try to cover, or speculate or invest. but the broader question that you ask is how important are these financial player in oil markets? they are very important. oil has become more than a commodity, it has become an active class. and the -- the last three years have shown that. we've seen the money flow being the key determinant of short term oil price range. does it determine the price of $90 or $70 in the long term? it doesn't. the fundamentals will. the price movement which are very jerky have, i mean i looked very closely at oil prices. most of the time the only correlation has to do with

dollar value, gold, exchange rates, equity rather than short term proving the fundamentals. the short term moves are very much financialized. >> over the years serving on the committee, i've walked away with the judgment that you usually don't see a single factor dictating oil prices. i don't think you see just one. but clearly in past debates, i think short shrift has been given to the question of financial markets. you just said that recent short term increase was not due to supply and demand. and that suggests to me that looking at the markets and the role of speculation is going to be increasingly important. and i think that you touched on that and you touch on that as well with respect to your views, mr. burkhard. that takes us back to you, mr. jones, you don't think the marks are really what this is about. you make it clear that you think this is about supply and demand

that price increases in oil recently have been driven by the situation in egypt. let me get you so you can put it in your words what you think of what mr. diwan and to some extent what mr. burkhard has said. >> the short answer, i think i agree with a lot of what they said. i think what i'm -- what my testimony was focused on was the actual runup in prices since last september. and we saw a lot of tightness in the market. there was more demand. the big news of 2010 was a more rapid resurgence in oecd country demand that was expected. particularly in the last quarter. that's what got the prices moving up. now in the current situation where there's a crisis in the middle east, as mr. diwan said, markets don't only look at

what's happening today, they look at what they think might happen tomorrow. that's where you get the expectations in. so i don't think there's necessarily a disagreement between us. >> if you look at your prepared testimony, and you look at mr. diwan's prepared testimony, there's a sharp difference. you played down the question of anything other than supply and demand. you are saying that markets are driving this. and the price of oil is driven essentially by the supply and demand question. mr. diwan is saying, look, we're not seeing any changes in supply and demand. that's why i got into the question with financial markets. this is complicated stuff. we understand it. i'm just concerned your approach gives short shrift to the possibility of speculation, and the financial markets, mr. diwan, i think, puts it in the appropriate context there are a variety of factors. when the wall street journal is

running articles, talking about what you ought to put your bet on in the future, that ought to be a wakeup call that the congress ought to start putting some attention on those issues. my time is up, mr. chairman, i thank you. >> senator koets. welcome to the committee. >> i appreciate that. because this is my first committee meeting, i don't begin to have the experience and background of the predecessors. i'm not sure who to address my questions to. i'll let you decide who wants to respond. just two areas i'd like to pursue. one is the energy security area. the gist of what was said here, there seems to be a fairly high level of confidence relative to the flexibility of the supply lines and the ability to and the capacity production and so forth. so in unrest or interruption of supply, transmission of supply

in one part of the world where from one source could easily be compensated for by increasing production or supplying through another area. my question is not going to the specific, but to the general. do you like the military -- does anybody red team these things? do you have books on the shelf that say, you know, if the pipeline is shut down, this is what we ought to do, or this is where we should go? are there -- is there a body of study and analysis that we turn to when things like threats to the suez canal, threats to certain pipelines, political unrest somewhere in the world, what is the level of analysis that's been undertaken, and what's the level of confidence that we can adjust to these kind of things? there's always this uncertainty

out there, it's not factored in with conventional wisdom as to supply and demand and availability and price and so forth. i'm not sure what needs to advance that. >> i'll start. and i'll turn it over to dick jones. within the u.s. government, the answer is, yes, there's a very good coordination between and within the department of energy. so the energy administration which i had, we work with the office of policy and international affairs which interfaces with the international, and our office of electric, delivery and energy reliability, which in the event of things like hurricanes or pipelines tracks it, right now they are focused on the winter storm issue in the midwest. it has electricity ramifications. in the current context like the situation in the middle east, we are in close contact with other agencies. whatever analysis or background information that's necessary to

help people understand the level of spare capacity on the supply side. another issue that comes up when we are talking about egypt. different transit moments. there's suemed pipeline along with suez canal. that's about 3 million barrels per day. about 45 million barrels of oil moves around the world through marine transit. as a fraction of that, it's quite small. these kinds of -- there's about 10% spare capacity currently available in marine shipping for oil. these are the kind of issues, yes, we track closely. in the event of some kind of disruption, then the u.s. has strategic petroleum reserve which could be called upon, as well as other reserves. that's the -- that's the context in which we then start to coordinate with the international energy agency. i'll turn that over. >> thank you very much, richard.

yeah, just the iea looks at the world. we work with the world. we have 28 member countries. obviously the united states is one of the most important member countries that we have. it's not the only one. when we are looking at the world situation, particularly if we see a potential crisis brewing or potential disruption, we begin consulting with the countries that would be the most likely to be effected. and that would include the united states. but it wouldn't be limited to the united states. we do much of the same work that richard was describing. we do internationally. and then we then provide information to the member countries to keep them abreast of developments in the situation. also i mention we have emergency response training exercises. those training exercises are based on case studies, scenarios, and we look at real -- we don't make them up. we look at the real world. we say, for example, if there's a disruption there.

then we let teams come from the member countries and from the nonmember. we have several teams working on the same problem. then we see what they come up with. we then debate whether or not this person's response, or team's response was the best one or if there was one that was better. that way we all learn at the same time. we learn at the specifics of the issues. but we also learn about different points of view and how to work with one another. that comes into vary -- quite a bit of good use when we have a real crisis. >> one good example in the past that's instructed in 2005, and we had hurricane's katrina and rita, they look out a large amount of u.s. refining capacity. gasoline prices went up in the united states. that sent a market signal to the rest of the world to send gasoline to the united states. the flexibility of the oil market was important there. but also the iea members at that time, particularly in europe,

were offering their strategic gasoline reserves to the market which also helped to calm it. so i think that very real, fairly recent example of market signals combined with the insurance so to speak of what the iea members provide is a good example of crisis management. >> if i could just add one thing. our focus have been on oil. because we were founded in the wake of the '73, '74 oil crisis. but in the recent years, we were focusing more on other forms of energy as well. so, for example, we now also are doing work on natural gas security, particularly pipeline security, which is very important to the european members. we are also looking at electricity grids. we are branching out beyond oil and natural gas and electricity. and the response that jim just mentioned was coordinated by the iea. >> mr. diwan, did you have any comment?

>> no, i want to build on what jim said. the market responds quickly. price signals changed. when you have disruption, price goes. the problem it takes time to transport oil. the system takes time to get back in shape. we've seen it crisis after crisis anywhere in the world. that you have enough spare refining, shipping, crude, right now you have the spare. just take times. it's slow to adapt. oil is bulky to transport and refine. >> thank you. i want to get it out to good start with the chairman. i noticed my time has expired and gone overtime. i won't ask my second question. >> you set a good example for this committee. we appreciate it. senator franken. >> thank you, mr. chairman. i'd like to welcome the -- my new member member -- my new mem, the new members to the committee of which i'm one.

senator hogan was governor of new north dakota, they discovered and developed tremendous oil resources, and some in north dakota say he created them. i'd like you to come over to minnesota and do the same. i want to turn to renewables. because that's something that we do really well in minnesota. dr. newell, we need to be open to a diverse array of options as we think about energy policy. but as you say in your testimony, renewals seem to be where the largest growth is in the next 25 years; is that right? >> yes, that's correct. they have the -- by far the fastest rate of growth. >> well, as i said in minnesota, we're a national leader in renewables, especially wind and biofuels. we're transitioning into renewables fast, largely due to

policy like renewable energy standard, 25% renewables by 2025. and i'm proud to say that minnesota utility met the 2010 targets under the res. in the eia reference case scenario, we see a bleak pictures for renewables in 2035. only between -- only about 10% of our energy mix by 2035. now i recognize this scenario assumes no change in our national energy policies moving forward. dr. newell, what factors in your review, both policy and other factors would most help grow the u.s. renewables sector to a much higher percentage than those projections from 2035? >> well, the key issues that have affected the growth in

renewables over the last several years and that i would anticipate would affect it over the next several years are severalfold. one is on the purely economic side. the cost of renewable technologies. so were those two come down from where we were forecasting, either due to what we are expecting and that could bring the cost down. they would be more competitive for power and natural gas coal and nuclear. the other key policies that tend to support renewables are policy such as the production tax credit for wind which just expire in our reference case. because that's what current law does. you see a kink in the curve. that's sending the signal were it not to impact. we have run policy case that is demonstrate that. the renewable standard has a big

impact. it's in our reference and growing because it's under doesn't statute and ongoing regular -- regulations in law. there's solar credits that expire. were those to -- >> sorry to interrupt. we have countries like china aggressively pursuing solar and wind? >> that's correct. there's a number of european and also particularly china have been investing heavily in all sources of electricity production. they have phenomenal growth. they are investing, you know, in solar and wind. they are also investing a lot in coal and nuclear. they are all out on all fronds. -- fronts. >> let me go to ambassador jones. i noticed that you talk about three areas that you'd like to go. strong push in efficiency, to

decarbonize electricity and advanced vehicles. let's talk about those. how do you decarbonize electricity? >> well, i mean -- promotion of renewable is one way to do that. because they obviously don't burn fuel. but you can also -- >> you don't burn carbon? they don't add carbon. >> no, they don't. but there are many other ways. for example, have a coal fire power plant running on biomass instead of coal. you have a coal fired power with carbon mass and storage. you are taking co2 out of the air. there are a lot of technologies. what's economic and what's appropriate to the political and the physical characteristics of the country? for example, a lot of countries are pushing head with nuclear power. other countries have decided not

to do any nuclear power for political reasons, because of concerns on nuclear proliferation and things like that. there's a whole mix of approaches to take. we advocate a broad spectrum of technologies on endowment of country. some countries would be wasting their money if they invested in wind power. they don't have the wind resources. similar with solar power. we think that where makes sense. the countries should invest in renews. where the renewals are and not options, they should invest in carbon capture storage if they want to get the full lifetime out of the of the power plants or use bioplants. it depends on the country. >> even in the same country, different regions will be different. >> i know i'm over my time. i want to stay in summaries that the projections of 2035, that's a fairly long way out. >> 25 years. >> and we can definitely you say

at your end, you added a personal note, which is we can do better. i'd like to add the same personal note. and just say that those three -- those three efforts strong push for efficiency, decarbonizing electricity and advanced vehicles. assuming electric cars, maybe l & g cars. >> well, hybrids. all electrics. c & g, long transput buses and so on. >> thank you all for your testimony. mr. diwan, can i ask one last little thing? did you at one point say oil prices are a mystery to me? did i miss that in your testimony? >> no, the more you know, the less you know after a while. >> okay. i'd -- that really made me feel

good. thank you, mr. chairman. >> thank you, senator hogan. welcome to the committee. >> thank you, mr. chairman. good to be with you. i'd like to thank both you and ranking member murkowski and saying i look forward to working with you on the energy committee and with our fellow members. not only the senator from our neighbor state, senator franken, but senator manchin, i go six years working as fellow governors. i worked on energy issues and national governor's association. i look forward to working with you on the important issues. the energy challenges that face your country. i see it as an incredible opportunity. senator franken was kind enough to refer to the progress. and we do produce a lot more oil and gas. we're over 100 million barrels a

year now. ten years ago, though, we were not producing much oil. we were clining in the oil production. and frankly, oil companies if they hadn't left, they were leaving. we worked very hard and, of course, a lot of the talk at that time was that, you know, that companies weren't going to do exploration in the continental united states. they were still doing great work up in alaska. but really we're going to other places around the globe for their -- not only their exploration, but also production and refining as well. we worked hard to create the right kind of business climate that would estimate late not only oil, but other types. clean coal technologies, renewables, wind, biofuels. we're making a lot of progress. and it's not just about produces more energy that we ship to great states like minnesota and

other places, electrons as well as oil and gas and biofuels. >> but it's very important for our economic growth and for job creation. so i see that same opportunity for our country. and my question to you is: what should we do? what should the congress do to stimulate energy development? what's the most effective things we can do to stimulate energy development, without picking winners and losers, oil and gas, electricity from coal, hydro, other sources, biofuels, winds, nigh -- nuclear. you name it. what are the things we can do to be most effective to stimulate energy production in this country. i'd particularly like you to focus on nonrevenue.

because we kind ourselves with a bit of a budget challenge. particularly the measures that don't cost money. so i'm not talking about, you know, direct subsidy and so forth. but the kind of legal to action regulatory measures we can put in place to stimulate energy development most effectively. i'd like each you to respond to that if you would. >> and i'll steal a phrase from the book of our chairman, when churchill 100 years switched the royal navy to oil from coal, diversity alone. in terms of pursuing different strategies, the singular approach probably isn't the most appropriate fit. but multidimensional policies that focus on supply and demand

and some of the trends in places you eluded to senator. they continue, they will help both on the demand and the supply side. north dakota is one of the -- as you well know, one the key reasons why in 2009, the united states had the greatest increase in oil and gas production anywhere in the world. the united states did in 2009. in 2010 that growth trend continued. and that due to what's happening in north dakota, but also pennsylvania, other relatively new players on the oil and gas side. in terms of continental energy security, let's not forget about canada. when we think of foreign oil, we think of something distance, far away. i don't canada, i don't think of canada that way. 21% of our oil now comes from canada. it's by far the biggest oil supplier. so thinking about continental energy security, the same trends in oil and gas continue. that will play an important role. and on efficiency, the fuel

economy standards that were renewed, strengthened in 2007 and then again in 2009, i believe. they are going to play a very large role in keeping u.s. oil demand below the 2005 peak. so i think consistency in the long term approach and multidimensional approach on demand and supplies is something to consider. >> what percent of our petroleum consumption is provided by the u.s. and canada together? do you know? >> well, canada is about 2.5 million barrels per day u.s. oil. it's roughly probably half maybe a little bit more. the u.s. and canada. >> our total consumption, what percentage do we cover between the u.s. and canada. it's higher than people realize; right? >> it's probably half. >> 50%? >> maybe a little bit more.

50 to 60%. >> if you include mexico, it's even higher. if you look at north america, cleaning mexico, canada, the u.s., you are looking at 75%. something around there. anybody else have a quick answer? >> i wanted to point the slight contradiction. 1, 2, or 3 things that would make a difference? >> the oil. and the car. this is how you produce your command. it's cheaper than producing a new barrel of oil. i wanted to point the slight contradiction. we have seen it's production increase and it's a great thing. it's because we have high oil prices. it's economics.

we always knew about the we reserve in the balkan. they were never economical. when they reached a certain trigger, they were able to change that supply function. having $3 gas and high production goes together. >> question, but the new technologies were vital and will continue to be vital in order to produce it economically. >> absolutely. >> down to maybe $50 a barrel. >> absolutely. officially, technology, i would say regulatory framework which is look at long term and allow the diversification across the energy sources. >> we have two senators here who haven't yet asked their first round. and then we'll come back around and we can get more response to that in the second round perhaps. senator udall? >> thank you, mr. chairman. good morning, gentleman, thanks for being here today.

let me start by speaking to the profits of the oil companies. it is -- it has come to my attention that exxon just announced it's profits for the last part of 2010 were over $9 billion. it's a 50% increase from earlier. exxon is not alone. most if not all of the major oil and gas are going to report huge profits for 2010. mr. diwan and mr. burkhard, what will the major u.s. oil companies like exxon do with these record-setting profits? for example, how much of those net profits would you estimate that the major u.s. oil companies are investing or will invest in domestically produced clean and renewable fuels, the price of which are not set by opec. >> i think that some context for

that one oil companies are price takers, not price makers. the revenues reflect the global oil markets. in terms of their spending, you know, oil companies a very large oil companies are capital expenditures can range from roughly 15 to $25 billion. so it's a constant -- it's a treadmill that they are on to reinvest. you have fields at plateau, or declining. so it's a massive capital intensive business where you have you know, 15, $25 billion. you know, what we are seeing right now. and a lot of these companies are part of this, what we call the shale gyle. it's lower carbon content.

>> you see them moving some of the profits into the development of gas reserves? >> yes. >> mr. diwan? >> well, we -- they are all gas companies. they invest in oil and gas. if you look at the broad trend in term of capital flow, the united states has seen a lot of investment. the global industries coming back to the united states. that's a big development of the last two or three years. it has to do everything with the shale gas. but also the onshore oil potential. so the united states because of technological change and higher oil prices have been able to track a lot of capital. a lot of the companies who have been looking abroad for years to be able to add are coming back to the united states. they are not the most nimble. they are very large. they tend to be second and third movers rather than first movers, small companies and the muscles here have already created the resources now the oil companies develop them. in term of their investment in other technologies, it's really

research and development. they are not biofuel companies. they are not solar companies. they will not become solar companies. so they are what they are. most of their investment go back into massive project where the treadmill that jim is talking about is very important. the decline rates are very steep in the oil field. they are probably 10 to 15 percent. sometimes north of that. in the way the companies are constantly seeing their -- the resources are disappearing. they need to invest. the treadmill is only getting faster. >> you see them playing an important role in continuing to produce secondary, tertiary, and energy and oil and clean will come from other sectors and other entrepreneurs, other businesses, other business models? >> i think so. i mean the model. these companies are not the most

nimble. >> uh-huh. the demand for oil is driven mostly by the transportation sector. 70% of domestic oil demand. do you have the panel -- directing this to the panel. do you have ascents of what percentage our transportation sector has to be fueled by electricity, natural gas, or some other alternative fuel in order for us to achieve energy independence in the transportation sector? in other words, at what point of the domestic supply of oil fill our domestic demand? if you want to take that question for the record too, i would be more than happy to work with you. >> i don't think it's something that we've actually sat down and three of -- down and tried to calculation. you could do the back way in terms of important and how much of a share. richard, you might have done something. i don't know. >> we have not analyzed that particular question. but, you know, under existing laws and market trends, while

there is a decline in net petroleum imports, it's sizable. if one imagined what would be the kinds of actions that could change that, one would be declining consumption because declining consumption tends to come first out of imports. and then also substitution of the remaining consumption towards something that's not imported. which if it's electricity, electricity tends not to be imported. so any source of electricity would do that if it was domestically produced biofuels. one would have to analyze the particular proposal in order to -- most anything that you look at is, you know, potentially achievable. it depends what kind of actions one is willing to take to achieve it. >> thanks to the panel. >> senator manchin. >> thank you. and thank all of you for being here. i'm sorry some of us had to go back and forth to committee meetings.

if i repeat and missed something i'm sorry. the state of new jersey is energy producer. we just have a hard time, understanding, you know, without energy policy in this country in which you just told us about, the dependence on foreign oil, the security of the nation being at risk because of our dependency on foreign oil, the uncertainty in the middle east, and growing uncertainties that could make us more vulnerable, and our economy how it's tied so tight. you are telling our dependency will grow, not become more independent. and in our little state, we have an energy portfolio. we try to use everything that we have. shell gas, natural gas as you know. we have a tremendous abundance of coal, biomass, and a tremendous wind operation which very few people know. we've done everything that we could with hydro. what i don't understand is, you know, of all of the energies that you are talking about, the subsidies, and i think that's what the senator from colorado was talking about.

the subsidies of energy, whether it be to oil, gas, wind, solar, biofuels, ethanol. the only energy source which is the greatest source that we have as far as we're dependent on right now is coal. it doesn't get a penny of subsidies. but it's been villainized by this administration and so many people. and it's the one that we dependent on the most that gives back more than what it takes. i can't figure it out. we're trying to use it in so many different forms and super critical heating and things of this sort. we are running into roadblocks from epa from every turn that we go. we're trying to use it in conjunction with natural gas productions and trying to look at the changing and the fleet. especially our commercial fleet, compress natural gas. i think that's very doable. do y'all have a comment on why that one source of energy which is the most dependent upon in

this nation has no types of subsidies, but other demand so much subsidies? does anybody want to answer that? >> i would -- >> i guess i would just say that congress makes these policies. and so i don't have any particular -- >> don't you think. do y'all have a comment? do you think it's offbalance that 50% of our energy comes from the coal which we have depended on for hundreds of years. no subsidies. then oil, the profits of $9 billion of profits. and subsidies from the natural gas and gallon of ethanol and everything else. does it not make a little bit of -- >> the one remark i'll make we have been requested to do an analysis of energy subsidies by the house. that's under way. we'll be issuing that report sometime in the next few month! do you compare it towards the

goal? and what keep of energy it receives and depends upon without any investment, expect the market forces? >> yes, it's a broad study that covering audiotape manner of subsidies. >> what and -- and the dependency that we've had on foreign oil, and the uncertainty in the middle east, i don't know y'all have talked on that a little bit. i noticeded -- you talked about the price of barrel oil and urn certainty not knowing where it's gone. what do you anticipate as far as we as a nation are able to take care of the dependency and independency as far as from our own domestic production? is there any of you that believe we can become independent with the current policies? >> well, senator, just on the coal question. i'm not an expert in subsidies. what's notice in some areas, the last decade, the strongest energy source in terms of demand growth has been coal around the

world. that's due to what's been happening in china and india. china, india, the u.s. are among the top. >> the rest of the world is using more, we're villainizing it more. >> it's a corner stone of global energy supply in this country, and certainly in china and other major players. >> do any of y'all believe we can become energy independent? >> why do we need to be energy independent? we not independent of anything. we believe in free trade. chinese shirts and computer chips. we inport -- import and export. >> you don't believe we should try to strive -- >> i don't think it's a key issue. global commodity. global price. if we can import it, import it. >> do you believe it ties to the security of the nation? >> it's an aspect.

not the only one. what it costs to fuel this economy is an issue. >> i would just add energy security and energy independence aren't -- you know, the differences between the two. the energy security is the objective, that may lead to different outcomes, different decisions. >> basically those -- i'm sorry. i'll finish. those of us who lived through the '74 oil embargo and saw what it does. at that time, i think we try to take the position to be energy independent in a short period of time in 2000. of course, that came and gone. so you all are not tieing the security of this nation towards the independency with more domestic production with all of our resources. >> the increase in continental production in canada and the united states. it's been a source of economic

growth in the places where it's taken place. it's important in job creation. it does play an important role at enhancing global energy security and consequently u.s. energy security. the growth in u.s. gas production and oil production even has an important component of that overall security story. >> i'll save that for a second round. thank you, sir. >> senator coons, welcome to the committee. you are the only one here now who hasn't asked the first round of questions. did you have questions that you want to ask in the first round? then another five-minute round. >> thank you, chairman bingaman, and senator murkowski. i'm great -- grateful for the opportunity to join us. as in the other cases, judiciary reported on the important patent that will contribute to the role that i view. this committee having a central place to play in sustaining america's leading role in energy

innovation and working together to develop the technologies of the future. i was interested in the testimony of several of the members of the panel. dr. nu -- nu nu nu -- newell, iy have missed the changes in the future. what a good trajectory to achieve and i'm interested in your views on how important it might be to america's energy future? >> sure. thanks for that question. when we look out of the next 25 years, there's a substantial decline in the amount of energy consumption that we had -- we expect to have from the current situation for a number of different reasons. if one looks at structural change in the economy, there's a significant change towards more

service oriented economy, which tends to moderate the road. we've done some analysis that suggested our consumptions is going to be 1, -- 1/3 lower. we have looked at energy efficiency. that further lowers energy consumption about 13% from where it otherwise would be. that's built into the reference that i mentioned. now the changes in efficiency come from a number of different places. one is efficiency standards that have already been prom mu -- promulgated. and standards which are built into the forecast. market prices, also play a role in reorienting consumers towards more energy efficient appliances. you also have voluntary programs like the energy star labeling which provides information to people to help them understand

what the energy consumption is from there. these also tend to affect consumer behavior. in terms of disentangling the effect of these different pieces, it becomes quite complex. i've mentioned some of the things that we've done. the other thing is fuel economy standards for automobiles. which i mention we do have in the reference case the standards through the year 2016 which get the fuel economy up to 35 miles per hour. but in a reference case, the fuel economy continues to grow beyond that, you have to 38 miles per hour by the end purely due to market incentives. they are built into automobiles, and they introduce a new model, it's introduced into the new model. it would tend to provide an incentive. there are a number of different policy and market incentives that are directing the economy to more energy efficiency. although energy consumption still grows. it grows by a significantly

lower rate than what we had seen historically. >> thank you. if i could, one other question to ambassador jones. you expect electricity and plug in. tell me what technology development are critical to achieving that. what policies we should be pursuing to help ensure the american leadership role and what are the different policy scenarios that you think would deliver the biggest advantages for us in terms of deploying that fairly significant percentage participation? >> i think the technology that needs the most work on is battery technology storage. increasing the energy density of batteries and to allow the vehicles to have greater range. one of the key points that people always raise with electric vehicles is their lack of range, the fact that the speed with which they can be

recharged, how often they need to be recharged. on point of fact, studies have shown, for example, bmw is developing electric vehicles. they brought a fleet of electric bmws. they let people drive them for a year. they followed their use. they found that most people didn't really need to recharge their car more than two or three times a week. it was easy. after a few weeks they realized it and they liked the vehicles. but there's a lot of acceptance that public acceptance is the real problem. but that can be overcome with better battery technology, cheaper battery technology. that's the key thing. most of the rest of it has already been developed. >> thank you very much. thank you, mr. chairman. >> thank you very much. why don't we do our second round here. senator murkowski, did you have questions? >> very quickly, mr. newell, i want to confirm within your projections you do not include

any assessments as to alaska natural gas. being part of the mix within the projections through 2035; is that correct? >> yes that's correct. that tends to depends heavily on the alaska natural gas pipeline who's assessment have increased and have come down through 2035. that's not the protection; correct. >> i wanted to confirm that. let me ask more generally than in terms of your assessments as they might relate to the arctic as a whole. not necessarily just to the u.s. arctic and what may not develop offshore there. as you know we've got the bp deal at play in the arctic.

do you include these prospects in your assessment even the bp deal or just anything in the arctic? i think we recognize the potential for the reserves. do we anticipate in your forecast seeing anything coming out of the arctic? >> i'd have to go back and look at the specific results that we currently have. but areas that are open for release sale would enter into our projections at some point. there has been changing over time in terms of what areas at least around alaska have been open. and i think that's even recently changed. so i'd like to go back and see exactly. we do assess those areas, for sure. >> let me ask. this is probably a question for the whole panel here. we talk a lot about what the u.s. and worldwide consumes.

the commentary is the u.s. consumes a quarter of the world's oil, but we only had 3% of the worlds reserves. i have some issues with how this is stated. first of all, the 3% figure, as i understand it, only speaks to proven reserves. which is to say they've been drilled. it doesn't reflect any of the unexplored areas whether we are talking arctic, offshore, atlantic, pacific coast, eastern gulf, much of the deepwater. i guess the question to you all would be first how important is it to actually know what our oil reserves amount to and then secondly if we here in the united states were to prove up our reserves not use them for production, but provide for that assessment, and we were to do so

within the five to ten year horizon here, what does this do to the percentage of global reserves that we know in terms of our percentage of consumption here in the united states? how does that even out? and again i'm curious it know how important is to know exactly what we have in terms of reserves? and i'll start any one of you can begin? mr. burkhard, why don't we start on your end? >> reserves are important. there's no global uniform standard that countries around the world adhere to. so it's a figure that's used a lot, but it as an uncertain definition globally. one quick example, the canadian oil sands. if you include the canadian oil sands, canada has the second

largest in the world after saudi arabia. if you don't include the oil sands, it falls down quite a bit. perhaps a more relevant example the resource bases is production. : a different price as you have more or less reserves.

one under dollar oil you have more than $10 a ton because you can exploit these resources and move them. so, i think overall it's not the key criteria and when you look at oil companies to reserves always seem limited. the united states has ten years of research for the last 50 years. so, it's not completely meaningful number and it's also how we prove and the reserves which is another factor that is complicating. >> is there an effort within the eia that takes what you have globally and tries to come up with a commonality in looking to not necessarily redefine, but just make sure that you are doing the same comparison when it comes to understanding what the global reserves are?

>> well, we have to rely on for the united states and think it is relatively well designed in the global sense, but we have been asked on other occasions by other members of congress to try to dissect and put on an apples to apples almost as much as possible basis and we can share that with you. it is a challenge and we rely on the sources in the u.s. geological service as important to the oil and gas and also, but as was stated, you have to address the treat different estimates from different places with different degrees of a share the. to give your question i think in terms of how i would impact ferc sable the work that eia does, over the long term the thing that matters most over 20, 30 year time horizon is even beyond reserves because as was mentioned reserves only proof up maybe a decade or so of production, so beyond that did this to the resource base becomes even more important. but reserves or important in the

near term because they speak to areas that companies have demonstrated and taken the effort to say that they can produce economically under the current prices and technological conditions, so it's relevant for the near-term projections. i think from the grand scheme of things if one was to more carefully assess the u.s. it could change in terms of the global balance though. i think it is likely to change in terms of sheer magnitude just because so much of the both reserves and then also beyond that recoverable resources or outside of. i think the basic high level context would not change significantly based on that. >> if i may say one thing to respond back to clarify a couple of questions earlier -- >> if you add canada and the united states what fraction, and the u.s. is about 40% now what

are liquid fuel consumption in canada would have about another 12%, to 60% if you add those two together. the other things in the record is my time is hand tailored in the united states of america. [laughter] >> you are a rare individual. we are glad to know that. >> thank you. >> senator, you have not had a chance to ask any questions. all of us have had leased one round of questions, don't you go ahead. welcome to the committee. >> thank you, mr. chairman. i appreciate you welcoming me and it's good to be here with a few of my colleagues. i apologize as a member still trying to figure out how to be at three different hearings of the same time. in this case i didn't get a chance to hear of the interesting testimony. i did read some of it. i hope this question is the one that's already been addressed but on the economy and the impact of your prediction of

increased demand and therefore increased cost of oil i looked as some of your data indicating we are going to be approaching $100 a barrel next couple of years if your projections were correct. have you all done -- i know we are not looking at the economic analysis as much as pricing and supply, but if you look at the impact on u.s. economic growth during that period assuming your projections were correct on the increased cost of oil and although we are producing a lot domestically, you said in response to the governor hoeven egypt and other countries experience issues that affect the cost of oil what will the impact of that be in the second calculated projection of the cost of oil the next couple of years? >> i open that up to any and all of our witnesses today. >> sure, i can respond. both our short-term and our

longer-term outlook really take assumptions of both u.s. domestic and global economic growth as an input into that analysis, but it does take account of oil price is within that. now one question is if there were to be changes in the oil prices what could be the potential ramifications for the u.s. economy and this is a complex question but let me give some thought to it. other things equal, every 10-dollar per barrel increase in the price of oil in this debate could his sad about $50 to the input bill and since the imports are subtracted from the gross domestic product, it tends to weigh on gross domestic products so every 10-dollar per real increase may lower gdp by .3% or so. that's one way to look of it. the kiwi to look of it is what is causing the the price increase, and if it is a demand

side, economic growth that is causing the price increase along with that economic growth which may be coming from abroad, our exports may be increasing because china or other countries may demand more materials, more equipment from us and so a demand in the places can be consistent with continued global economic growth. the place that tends to be more of a concern if it is a supply-side shock to the oil what causes the price increase which is pretty and in the u.s. fleet and is to be more significant headwind for the economy. the one other point i will mention is i also depend upon the state of the economy into which the price changes entering. if you're in a situation of the weakened economy or if you are in a situation where things like and monetary response wouldn't be sufficient then you could be in the more problematic situation. our sense of the current situation is that a lot of the price increase right now husted

with the demand curve in, and so that is consistent with the continued economic growth and we don't see that at least at this point providing a significant headwind for the u.s. economy. >> i would note with in your testimony you also said that the demand side dynamic is driven primarily by the emerging economies and you cited china, india and brazil, and so, our experience the last couple of years is those countries increased their economic growth and have continued to grow as was reflected on the change in our balance and trade in terms of the export and as you talk about or our economic growth certainly in 2,009 going into 2010 but i appreciate your answer and i just hope that these very important energy inputs are being taken into account as we look at what economic forecasts are going forward. any other responses from the

panel? >> that is an excellent question but tough to answer because there is no magic price that elicits a response on the part of the consumers are governments. certainly our psychological point from the oil hit $100 when oil the price of gasoline in its $3 or it were to go up to $4 you will see the high year it goes the stronger the reaction will be, and that is the united states but the oe list price different order of the world and some consumers are shielded from the high prices. others exposed so the russian globally is very -- >> other responses? >> picking up all the global response to read a lot of countries are less well positioned in the united states to handle the prices and price takers and it will have an impact on their economy. i had a chart in my testimony where i talked about the oil bird and and basically $100 oil

you're getting up to 5% of the world gdp when for oil imports and in the past when that has happened it has been a harbinger of a recession. whether or not it would occur this time nobody knows, but it's not -- if the price for sustained for all of 2011 we would have concerns in the economic impact. >> one last element is important which is the value of the dollar because a lot of countries pay for the oil and if the dollar is rising or declining it also has an impact. 64, mr. chairman. >> senator wyden? >> mr. burkhard, went to continue the line of questioning that i began with the whole question of financial markets and what is coming on in the middle east. this time turn to the question of oil that is now in storage. if you take a look at ian ta -- eia figures on inventories, with

the show is there are people out there who have been holding a lot of barrels of oil in storage significantly above the normal inventory level, sometimes tens of millions of barrels. now through the summer as the price has climbed, petroleum and storage also claims. when the oil was sold off at the end of the year the prices dipped. now we have this whole array of challenges obviously in the middle east. mr. diwan said that that is unlikely to actually impact oil supply, but the oil and storage is rising again at levels well above normal inventory level. so my question to you is breakdown for us what all of this bonding and holding in storage is all about because it suggests to me to double the theme that you touched on

earlier, oil and storage is also part of the oil as newbold which is going to the driving investors phasing out positions in the years ahead that brings a new element of speculation into this debate that we are going to have to concentrate on. so breakdown for me but you think the set of changes and storage is all about. >> the part of the oil storage story over the past year is investors, companies are responding to market signals because the oil market in the u.s., excuse me, has been generally in a state of contango. what the heck is come tinto? it is very depressed by a bill with oil today, let's say $90, in the futures market it means that six months from now, one year from now the price could be

95 or $100. that means fi vara with oil today at $90, on a lot in the price to sell it at $95.6 months down the road and can lock in their return, and so investors have been responding to that contained environment and the oil price, and what it generally is signaling is the market's expectation that supply, oil supplies will be more valuable in the future. so, by today will pay more today because the market will eventually be more valuable, and one of the drivers of that, not the only one, but the important one was and last year, 2010, we saw the second largest increase in oil demand globally in more than 30 years. so this sense that oil, the oil market will become tighter over time is one of the factors and that explains the behavior in this country -- contango

infrared to the estimate we will have to get into contango because i will tell liquigas -- senator murkowski and don't think that you were here when i leave out the plight "the wall street journal" talked about the beginning of the week they ran their heard on the street column that had the title "unrest hits oil verses the gold dust," basically making the discussion for the future is essentially where people are going to make their best. obviously the issue with respect to how oil and gas prices get set are complicated difficult kinds of questions, but to me these questions are finally making the pages of "the wall street journal" or are ones that have gotten short drifted that is why i think mr. burkhard and mr. diwan has given us a lot of valuable information, and mr. jones, i appreciate you moving towards mr. diwan's

position because when i read your prepared statement by scott a sharp difference between what you're saying and what mr. diwan was saying that to me undervalues how important this financial market issue is going to be as we try to get into the questions. mr. chairman, thank you for this additional round because - oil and storage represents yet another iteration of what mr. burkhard calls the new gold because this is going to be part of what drives the debate about the financial assets and where they are headed in the future. and one that i am certainly going to spend a lot of time on. thank you senator, did you have a set of additional questions? >> thank you, mr. chairman. this follows a little bit on my earlier question. you talked about looking at supply in this country as a continental with canada and

mexico and talked about deficiencies and technology and of course mr. diwan said the price drives that. that is important in the true in many respects. it's interesting once the tick policies of their it tends to bring down the price at which you can produce oil or gas or any other energy at a lower threshold which is very important for our production going forward. with that in light of what to ask and maybe start with mr. diwan because obviously it is price driven but we need to find ways to deploy technology that helps produce more energy and environmentally sound base and work to bring the cost down. , so how do we do that, and maybe talk in terms of countries around the world but are doing some things we should be looking

at doing and i'm talking from the production side. most of your projections you talk about the demand side which i a understand. china's incredible growing demand and so forth, but the production supply side, talk a little that to get who still refuse to produce more, who is using technology and innovative ways, this will have an impact when forward and again something we can look at. >> welcome the good news here is the bright shining a sample of how they work in the united states over the last five years gas prices increased and increasing gas prices have triggered the breakthrough. we knew about the shale gas. we had an idea of how to go about it. but what happened in the united states in terms of breaking the code if you want and be able to

produce the gap and now extending that technology is phenomenal. most oil companies, the large national oil companies natural with very few wells every year and tend to do a lot of experimentation and in the united states is very different. you have to three large entrepreneurial sector and service company. they don't think about how we are going to drill the well. they are very small and small capital is available. risk capital is available, and basically try and try and what we have seen in the gas world is these ingredients together, capital technology, experimentation, resources and we brought the code of the shale and that obligation globally which we see since.

natural gas supply increase in gas prices went down and that surplus of capital technology material wells etc, and shifted to oil and that is how we see now this tremendous development in the onshore oil and the united states which was a dead sector perceived as a debt sector with little future and, you know, a year and a half ago we were talking about what is happening and in the balkans what is happening in the colorado and expand very quickly. at these prices you can experiment, you can try. after all i think 80% of the oil in the world to deliver your arnold in the united states. so this is where you experimented this experimentation goes to reverse of the question right now is how much of the experimentation made in the united states can branch out and go and have an impact on

other resources that we know exist but we couldn't get out because prices were too high a etc and how much we can replicate the a sample of the united states in terms of technology and success. that is really the big question both for gas and oil. >> i think it is interesting the way that you described it, and right. breaking the code in terms of producing the different types of energy because it also over time brings the price down. so of your thoughts on what we can do to continue that kind of entrepreneurial development? obviously the price is one of the regulatory and firemen, what else? are there other things companies are specifically looking for or that you are seeing having an impact on the production or on the world? >> i will just expand a little on what was said we are currently undertaking that the

eia going beyond the domestic assessment of shale gas and broadening the internationally to assess the potential development of a globally. we are working on that and in that depended upon what we find would tend to enter into our outlook which we also produce each year to read some of the main prospects we already see are certainly canada close by the united states and has shale gas space which extend upward from across the border can also about china seem to be promising places. this is ury much driven by market response to high prices at what point but then encourage the application of certain technology and then there was innovation in the technology. >> any of your final comment on this? and i was going to ask the

senator you only talked about oil and ask you talk about technology in general because the world of six evils of the policies for the sample being deployed in europe and elsewhere of renewable energy. >> i really was interested in other energy sectors as well including renewable, but i do see that i am pastore time so out of deference mr. chairman, i will relinquish back. >> did you what to make a short response? >> just shortly, there are a lot of things like tariffs or portfolio standard used in various places, but the key thing seems to be us queerer consistent policies that are as technology neutral as possible but also take into account that the development stage of the technology a lot of to kill the jews need a hand up, so to speak to get across what is called the value between the r&d of the development of the technology in the commercialization of it because you've got to get economies of scale so those are areas where some countries have

demonstrated how to get across the valley by supporting the country's, the companies there are a key stage of that some of the technologies. >> if you have the six symbols of love to get them. any of them that have been particularly effective in stimulating production. thank you, mr. chairman. >> senator frank and deep -- franken. >> thank you. senator mansion last why there were not subsidies recalled and none of you seem to want to answer that and i don't know if it was a rhetorical question but it seems that it is doing pretty well without subsidies. it's very politically the very cheap and relatively as compared to other fuels and therefore we don't subsidize it. speaking of subsidies, president

obama called for a squeeze of cuts in subsidies for the oil companies and what affect, dr. newell, do you think such a cut would have on domestic oil production or gasoline prices? >> we haven't specifically evaluated the administration proposals for the changes in those tax incentives. >> fair enough but to those of my statement to the senate finance committee, i have this right here. alan krueger, assistant secretary, chief economist of the treasury department, said and i quote, because we expect little or no effect on the world supply of oil removing the subsidies would have an insignificant affect on the world oil prices tooby he goes on tuesday that of the decrease in the domestic production

duties cuts would be less than one-half of 1%. even in the long run. this might sound rhetorical but if anyone wants to pick up on it doesn't that sound like an industry that, you know, that doesn't need tax benefits and subsidies to survive? anybody? >> one thing to keep in mind as we discussed the future of the fiscal terms that governor oil and gas companies, and again i am not an expert on subsidies, but one aspect to keep in mind is american oil and gas companies are competing in a very competitive global marketplace and how they are taxed here or at home can affect how they can compete against companies from asia, europe or over places. i don't have a specific answer but i think having that --

>> the largest five oil companies in the last decade that made over a trillion dollars of profits in 2010 the profits were double that of 2009. we've seen the ads from these companies talking about how much the or doing to invest in alternative energy production. you see all the time. they are feel-good ads i think. i felt great about bp because the whole screen thing beyond petroleum, and i think everyone in america felt like bp, that is the future, that's great. i love those ads, and then we learn that bp has the worst safety record of any of these

companies. how much are these companies really doing investing in alternative energy? i mean, mr. diwan, you said that oil and gas companies are in the business of oil and gas. isn't what they are doing it negligible? >> well, they are a oil and gas company. i will repeat that. these are huge companies, i mean, exxon is the huge company of the world, $200 billion capitalization, and the renewal business is very small. so even if it is -- even if they are doing a lot it wouldn't be material for the company's. it wouldn't be material for the world of renewables. >> correct, but they are companies. they have a mission and this is what they are doing. the scale issue is you wouldn't expect these companies to be the key investor etc just from the economic perspective.

so, you know, we can't ask them to be what they are not. they might pretend to be something they are not but that is a different issue. >> so you can't ask them to be with a pretend? >> yes. >> okay. i will write that one down. gwen back, mr. burkhard, it is my question to have to compete on a world basis dealing in believably well cycle the right? and a relative term and believably. they are doing very well. they make $9 billion more. do they really need these subsidies? do they really need these tax preferences? >> i mentioned earlier the oil companies are price takers, not price makers come their the level of the revenue which is a

large level of the capitol expenditures it when prices are high we see what the results are, so they are a reflection of what has been happening in the global oil market. last year we saw the chinese oil demand grew 10%, 10% in one year from china. >> i think that your answer to the question is no, they don't really need the subsidies. that's what it sounds like. that is my interpretation. you don't have to nod or agree that for the record he wasn't nodding. thank you, mr. chairman. >> senator coons. >> thank you. i would like to follow-up on the colloquy with both senator hoeven and senator franken. you're talking about the value of debt and other nice ways to describe the challenges of the early stage commercialization

and scale of innovations to the exchanges with senator franken. mr. burkhard, there is a question in my mind about the appropriate role of the federal government in either subsidizing ongoing oil and gas exploration development or alternative energy technologies. the projections that are made in the world energy outlook for the makeup of the total support of global energy picture in 2035 is a reminder that this is largely a petroleum based economy and it will remain so for much of the next few decades. you mentioned a conversation with senator hoeven come he asked for some insight about how we could be more effective, what other countries are doing. i would welcome input from any member of those in front of us, the panel how we are most likely to be successful in securing capital the investment in job growth in the united states as renewable energy technologies scale up and given the numbers you gave it sounds, it seems to

me as if the wind in hydropower have the largest potential solar comes next. at vividly they are small in scale with the global economy but there's a great deal of interest in most of our home states so the question is if you have to choose between continuing to expand federal dollars and subsidizing oil and gas development drilling distribution or providing subsidies that go into rigid accelerate the development for the renewable how can we have the best bank for the dhaka in terms of employment and deployment, the creation of jobs in the united states and the deployment of technologies that have a positive long-term opportunities. i also want to clarify something i assume from these projections about the renewables sector post of the growth will come out side of the united states but the actual use of the renewable energies will be mostly in china

and less in the united states but i may have misread it in the material that i looked at before >> i appreciate your reading through and i would be happy if any of you want to take up any of these. >> i will just respond to the last part of your question in terms of the racket of the renewable energy department in the united states relative to the rest of the world. you are correct, but the u.s. is a small fraction of the entire world and so one would expect -- >> i tend to forget. >> -- so the other key factor is that the u.s. need for energy is growing much more slowly than other parts of the world and so how big we are currently in the growth is predominantly elsewhere in terms of consumption, so that those reorient the energy consumption as well as different types of energy, supply growth in other parts of the world. our assessment looking out the

next 25 years is energy consumption by the oecd countries of which the united states is one is growing modestly roughly flat, whereas overall energy consumption globally perhaps 50% growth of the next 25 years and so very significant growth most of it outside of the oecd. >> and some countries don't of the existing power distribution so that the renewable may grow more rapidly in the parts of the world where there's no existing infrastructures you were literally leapfrogging the existing petroleum based infrastructure. >> that has certainly been one of the interests in the solar technology and other distributed energy generations, yes. >> i just would like to add to the comment that there is probably a lot of head room still left for expansion in the energy consumption especially in china because even with all of the growth they have seen at

china's per capita is like one-third of the average. so, they can keep growing for a long, long time and that is i think what is going to drive the default of the energy consumption, the energy industry and everything is going to be driven because you have a huge mass of people that have basically the growth has become self sustained and they no longer depend on the imports and the disposable income has risen dramatically as we heard and they have got a lot more development to undertake and they are going to do it and it is open to change the world and they are not alone. india is the same. maybe not quite as far up the development skill less china, but they are also going through this, so that's why in the international agency we are very concerned about the growth in foot technology used. if they do school we are going to have a tremendous increase in

carbon dioxide in the atmosphere for civil and it is not just carbon dioxide is of the pollutants associated, and those pollutants can cross the pacific ocean, so we are three concerned about how china and india different or satisfy their insatiable appetite for the energy over the next two to three decades. it matters a lot for our welfare here even though we are not consuming increasing amounts of energy if they are it's going to affect our environment and our economy. >> any other comment anyone want to answer on this? what we did see senator murkowski come to you have additional questions? senator, do you have additional questions? thank you. i think it has been a useful during and we appreciate your expertise and your time today. thank you. that concludes our hearing.

thank you. >> [inaudible conversations]

the federal reserve chairman ben bernanke said today that the u.s. economy should grow in a more rapid pace this year. it also warned it will likely take several years before the on the planet revolves to historically normal levels. speaking to an audience of reporters of the national press club from washington, d.c. mr. bernanke talked about the national debt and said the federal budget is on a, quote, unsustainable path. this is an hour. >> i cover business in the economic views for the associated press and i and the president of the national press club, we are the world's leading professional organization forr journalists and committed to the future programming in the free press worldwide.rl for more information about thebe national press club please visit

our web site at www.press.org tebeau you can also findg, you c information about how to donateu to our library. library. for all of our members worldwide, i would like to welcome our special speaker today and all of those attending the event include guest of the speakers as well as working journalists. i would also like to welcome the c-span and public radio audiences, and you can follow the conversation on the twittered with the hash tag npslunch. i will last as the questions as time permits and i would now like to introduce the head table guests from your right. we begin with keith epstein managing editor for the center of public integrity with the washington post investigative fund. space is a producer with cnn. rick bunning, one of our former presidents up washington bureau chief of the houston chronicle. donna leinwand also a former nbc president. timothy all in is the washington economic senator for reuter.

and michelle smith, assistant to the chairman with the federal reserve. melissa chavanel, over the podium, with news hook media and chairman of the speaker's committee. we will skip the speaker for a minute. bob carden with cardin communications and a speaker committee member who organized today's event. thank you. david skidmore, public affairs with the federal reserve board. allyson fitzgerald, a reporter with bloomberg. she's also a vice chairman of the npc committee. during the hirsh, nightly business report. and steve betner with market news international. that's our head table and you can give some applause. [applause] >> it has been quite a journey for our guest speaker today. the middle class some of the pharmacist and schoolteacher, he has been an economics professor, the head of the council of economic advisers under

president bush, and now our nation's chief central banker. he became the chair in 2006, just in time for the great recession. he was leader renominated by president obama to serve another four year term as chairman. reflecting his stewardship in the face of crisis, he was named time magazine's man of the year and 2,000 lung. but the journey started well south of washington, d.c.. if you ever driven south on i-95 you can't help but notice the billboards and screening letters as you approach the border between north and south carolina, talking in unusual roadside enterprise known as quote kosoff of the border." that is where our guest waited tables after graduate from high school in south carolina. [laughter] he got his bachelor's and economics from harvard and a ph.d. from mit. he taught at princeton and stanford as well as nyu and mit. along the way he became an expert on the causes of the great depression, it that expertise was key and responding to the 2008 economic meltdown.

mr. bernanke's willingness to use the power of the fed to intervene in the financial markets is credited by many with keeping the recession from becoming the great depression. those measures have been controversial. the texas congressman ron paul is reintroduced legislation the would require a full audit of the fed. and his son, rand, from kentucky is joining and this legislation is seen as a challenge, the fed's goal and the tradition of political dependents. some conservative economists and even some of his fellow governors think mr. bernanke's efforts to have gone too far, including the decision to inject another $600 billion into the economy to foster the recovery. the issue was whether the fed is courting inflation as it responds to persistently high unemployment. just today, the european central bank expressed the view that longer-term crisis pressures remain contained, despite rising energy and commodity costs. the president repeated the very close monitoring of inflation is

warranted. i am particularly grateful that chairman bernanke agreed to be our first one to nseries speaker of my national press club presidential term. please give a national press club welcome to chairman ben bernanke. [applause] >> thank you. thanks, and good afternoon. i am very pleased to have the chance to be here of the national press club, and i am especially glad to have a conversation with journalists who write about economic policies from the nation's capital. your job is not easy but it is essential. virtually every american is affected by developments in economics and economic policy. the contemporary economic issues are highly complex and a few non-specialists have the time for the background to master these issues on their own. the public has to rely on diligent reporting, clear

thinking and lucid writing of reporters determined to go beyond the dillinger bumper stickers and sound bites to help people understand what the need to know to make good decisions, both in their personal finances and at the holes the couples to read these our responsibilities and the journalists i know to country seriously. so thank you for what you do. today i'm going to provide a brief update on the economy and how i expected to evolves in the near term and then all i will turn to some implications for monetary policy. and finally, i would like to briefly discuss some of the daunting fiscal challenges that we face as a nation. the economic recovery that began in 2009 appears to have strengthened in recent months. although to date, the growth has not been fast enough to bring about significant improvements in the labor markets. the early phase of the recovery in the second half 2009 and early 2010 was largely

attributable to the stabilization of the financial system, the effect of the expansionary monetary fiscal policies and a strong boost of production from businesses rebuilding their depleted inventories. the economic growth slows last spring as the impetus for the inventory building in the fiscal stimulus diminished and as problems roiled the financial markets. more recently however, we have seen increased evidence that a self sustaining recovery consumer and business spending may be taking hold. notably we learned last week households increased their spending in the fourth quarter in real terms at an annual rate of more than 4%. although a significant portion of the pickup or such a strong sales of motor vehicles the consumer spending looked to have been reasonably broad based. business investment and the new equipment and software also grew robustly over most of last year as firms replace aging equipment and as the demand for the

products and services expanded. in contrast, in the housing sector, the overhang or the vacant and foreclosed homes tends to weigh heavily on both home prices and residential construction. overall, however, including household and business confidence accommodative monetary policy and more supportive financial conditions, including an apparent increase in the willingness of banks to make loans seems likely to lead to a more rapid pace of economic recovery in 2011 than we saw last year. while the decatur suspended production had on balance been encouraging the job market has improved only slowly. following the loss of about 8.5 million jobs in 2008 and 2009, private sector employment showed gains in 2010. however, they were barely sufficient to accommodate the inflow of recent graduates and other entrance to the labour force and therefore not enough

to significantly reduce the overall allin plan agreed. recent data provide ground for optimism on the employment front. rick symbol an issue for a mint limit insurance of generally been trending down and indicators of job openings in firms hiring plants have improved. even so, with output growth likely to be moderate for awhile and with the reluctance to add to the payroll, it will be several years before the unemployment rate is returned to more normal level. until we see a sustained period of strong for job creation, we cannot consider the recovery to be truly established. on the inflation front we have recently seen significant increases in a highly visible prices notably gasoline. in the prices of many commodities have risen largely as a result of the strong demand from the fast-growing emerging market economies coupled in some cases with constraints on supply.

nevertheless overall inflation remains quite low. over the 12 months in december the crisis for all the goods and services purchased by households increased buy only 1.2 per cent down from 2.4% over the prior 12 months. to assess the underlying trends and inflation the congress also followed several alternative measures of inflation. one such measure is the core inflation that excludes the volatile components and therefore can be a better predictor of their overall inflation is headed. core inflation was on the 0.4% in 2010 compared with around 2.5% in 2007, the year before the recession began. wage growth slowed as well with average hourly earnings increasingly 1.8% last year. these downward trends in the wage and price inflation are not surprising given the substantial slack in the economy. in some although economic growth will probably increase this

year, we expect the unemployment rate to remain above and inflation to remain persistently low level of the federal reserve policymakers have charged to be consistent over the longer term with our mandate from the congress to foster maximum employment and price stability. under such conditions the federal reserve would keep up the east and monetary policy by reducing the target for the short term policy interest rate. however, the target range for the fund has been near zero since december, 2008 and the federal reserve indicated economic conditions are likely to work in exceptionally low target rate for an extended period. as a result for the past two years we've been using alternative tools to provide monetary accommodations. in particular over the past two years the federal reserve has further east monitoring conditions the purchasing longer-term securities on the open market. from december, 2008 to march, 2010 we purchased almost

$1.7 trillion in longer-term treasury agency and agency mortgage-backed securities. in august, 2010 we began reinvesting the proceeds from all securities that richard or redeemed into the longer-term treasury securities. so the security holdings roughly constant. another the same time we began this to signal to the markets we were considering providing additional monetary policy accommodation by considering further asset purchases. in early november we announced the plan to purchase an additional $600 billion in the longer-term treasury securities by the middle of this year. all the purchases are settled to the banking system with a result of the deposit reinstitution told a very high level of reserve balances with the federal reserve. although large-scale purchases of larger securities are a different monetary policy tool, then the more familiar approach of targeting the federal fund rate, the two types of policies affecting the economy in similar

ways. conventional monetary policy works by learning market expectations for the future path of short-term interest rates which reduces the current longer-term interest rates it contributes to the easing of broader financial conditions. these changes by reducing the borrowing costs and raising asset-price bubbles for household and business spending and increase economic activity. by comparison, the federal reserve purchases of longer term securities have not affected short-term interest rates which remain close to zero, but instead put downward pressure directly on the longer term interest rates. by easing the conditions in credit and financial markets, these actions encourage spending by households and businesses to essentially the same channels as conventional monitor a policy thereby strengthening the economic recovery. fisa a wide range of market indicators supports the view to the federal reserve security purchases have been effective at easing financial conditions.

for a simple, since august when we now start the policy of reinvesting the securities and signaled that we were considering more purchases equity prices have risen significantly, volatility in the equity market has fallen a corporate bond spreads have narrowed and inflation compensation as measured in the market for inflation securities has risen from low to more normal levels. yields of five-to-10 treasury securities initially to point as the market's priced and prospective purchases. these subsequently rose as investors became more optimistic about economic growth and as the traders still lack their expectations of the future security purchases. all of these developments are what one would expect to see when will the republicans more accommodative. in a more conventional means. interestingly, these developments are also remarkably similar in the following months

in the march 2005 announcement of significant expansion of the security purchases. the markets responded in similar ways to each of these policy actions when this credence to the view that these actions had the effect on the financial markets and are thereby providing said the tickets support to job creation and the economy. to my colleagues and i said we would review the purchase program regularly in light of incoming information and will adjust as needed to promote maximum employment and stable prices. in particular, it bares emphasizing that we have the necessary tools to smoothly and effectively exit from the asset purchase program at the appropriate time. in particular, our ability to the interest on reserve balances will allow us to put upward pressure on the short-term market interest rates and thus the tight monetary policy would required even if the bank reserves remain high. moreover, we've developed additional tools that allow us

to drain or mobilize bank reserves as we facilitate the smooth withdrawal of policy accommodations when the conditions warrant. for and by redeeming or selling the securities we told. let me turn to the fiscal policy. fiscal policy makers also face significant challenges. the federal budget deficit has expanded to an average of more than 9% of the gross domestic product over the past two years. up from the average of 2% of gdp during the three years prior to the extraordinarily wide deficit largely reflects the weakness of the economy along with actions that the administration and the congress took to ease the recession and the steady financial markets. however, even after economic and financial conditions return to normal the federal budget will remain on an unsustainable path with the budget gap becoming increasingly large overtime unless the congress enacts sycophant changes in fiscal

programs. for the civil come under plausible assumptions of fiscal policies might evolves in the absence of major legislative changes, the congressional budget office projects the deficit to fall from about 1% of gdp currently to roughly 5% by 2015 but then to rise to about 6.5% gdp by the end of the decade. after that, the cbo projects the budget outlook to deteriorated more rapidly with federal debt held by the public regionalist 90% of gdp by 2020 and 150% of gdp by 2013 from about 60% at the end of the fiscal year 2010. the long-term fiscal challenges confronting the nation are especially daunting because they're mostly the product of powerful underlying trend is, not short-term temporary factors. the two most important driving forces to the federal budget are the aging of the u.s. population and rapidly rising health care costs. indeed the cbo projects the

federal spending for health care programs which include medicare, medicaid and subsidies to cruce purchase health insurance and new entrants exchanges will roughly double as a percentage of gdp over the next 25 years. the ability to control health care costs while still providing high-quality care to those who need it will be critical for bringing the federal budget onto a more sustainable path. the retirement of the baby boomer generation will also strain social security as the number of workers paying taxes into the system will rise more slowly than the number of people receiving benefits. currently there are about five individuals between the ages of 20 to 64 for each person age 65 and older. by 2013 by most of the baby boomers will have retired the ratio is projected to decide about three. overall system and pressures as a seat with social security are considerably smaller than the pressures associated with the federal health care programs but they are still mobile.

the projections by the time do not account for the likely economic effect of high debt and deficits. but the government debt and deficits were to grow at the pace and envisioned the economic and financial effects would be severe. sustained high rates of government borrowing would drain the fund away from private investment and increase our debt to foreigners with adverse affects on the u.s. income, output and standard of living. moreover, diminishing the investor confidence the deficits will be brought under control will ultimately lead to the sharply rising interest rates on government debt and potentially broad financial turmoil. in a vicious circle, i rise in interest rates would cause debt service payments on the federal debt to grow even faster, causing further increases in the debt to gdp ratio making fiscal adjustment all the more difficult. how much adjustment is needed to report to be cut restore to the

united states? to help answer this question it is useful to apply the concept of the primary budget deficit, which is the government budget deficit excluding interest payments on the national debt. to stabilize the ratio of the federal debt to the gdp of convenient benchmark for assisting fiscal stability, the primary budget deficit must be reduced to about zero. under the cbo projected that i noted earlier the primary budget deficit expect to be 2% of gdp in 2015 and then to rise almost 3% of gdp in 2020 and 6% of gdp in 2013. these projections provide the adjustments the will be necessary to attain fiscal sustainability. to put the budget on a sustainable trajectory, policy action either reductions in spending or increase in revenue or some combination of the two must be taken eventually to close these primary budget caps. so by definition, the unsustainable trajectory of the

deficit and debt is a cbo outlined cannot actually happened because creditors would never be willing to lend to a government whose debt relative to the national income is rising without limit. the economist herbert stein simply described the situation he said if something can't go on forever it will stop. [laughter] one way or the other fiscal adjustments, sufficient to stabilize the federal budget must occur at some point. the question is whether these adjustments will take place through a careful and deliberate of process that ways priorities and gives people adequate time to adjust to changes in the programs or tax policies or whether the needed fiscal adjustments will be a rapid and peaceful response to an elite or financial crisis. acting now to develop a credible program to reduce the future deficits would model the enhance economic growth and stability in the long run, but could also yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business

confidence. plants recently put forward by the president's national commission on the fiscal responsibility and reform and other prominent groups provide a useful starting point for a much-needed national conversation. although these proposals differ on many details, they demonstrate the realistic solutions to the fiscal problems are available to the of course the economic growth is affec on ..taxes and spending, but also y their compositional structure. i hope that in addressing our long term fiscal challenges the congress and the administration will seek reforms to the tax policies and spending priorities that will serve water only to reduce the deficit but also to enhance the longer term growth potential of our economy. for a simple, by reducing disincentives to work and save by encouraging investment in the skills of the work force as well as the new machinery and equipment, by promoting research and development and by providing

necessary public infrastructure. our nation cannot expect to grow its way out of our fiscal imbalances. but a more productive economy will ease the trade off that we face. thanks for your attention and i look forward to taking your questions. [applause] >> thank you, mr. chairman. first of all we are extremely grateful for your decision to return to the national press club where you were here just a short time ago. we need it is important as a journalism organization that we have transparency in the government and to give reporters and others, the american public the opportunity to hear your thinking and respond to questions and real time as you are doing that, so think you. in that regard i ever see these discussions have also sort of been occurring behind the scenes at the fed with your colleagues and there was a notation from a video conference of october 15th which said, and i love how some of the official languages displayed here, but it is

participants discuss whether it might be useful for the chairman to hold occasional press briefings and provide detailed information to the public regarding the committee's assessment of the outlook and policy decision making that is included in the committee's short statements. so it seems as if that is a very official way of saying should we be holding more news conference, should we go into places like the national press club. your colleague and central banking so to speak in europe told the news conference, what is your thought about regular news conference this as opposed to the piecemeal approach we are seeing right now? >> i think that sentence spoke for itself, don't you? >> absolutely. [laughter] >> let me say first -- transparency is very important. it's important because we live in a democracy, and the public needs to know what you're doing and why we are doing it.

it's important because our policies work better if markets participate and understand the actions we are taking and what is likely to cause changes in those policies and the like. the federal reserve has come at enormous distance. you may not be aware but in 1994 the fed didn't even announce when it changed the rate target and now of course we have an after meeting statement with folks of like the european central bank in almost any other bank we have detailed minutes that release the weeks after the meetings. we release full transcript of a five-year lag. we have extensive speeches and to some of these and other mechanisms, so we are a transparent central bank and we have made a lot of progress in that front. on press conferences, it has been a difficult decision as we thought about it. on the one hand, the real time transparency is very important and valuable piece of it all the other hand we don't want to create unnecessary uncertainty and volatility in the financial markets by saying things that may be misinterpreted if they

are to ad hoc. that being said, as i said, i put a lot of vow to the entrance currency. we moved in the direction that we are looking very seriously at whether we have a committee in fact headed by vice chair janet yellin looking at the chain of command occasions and i know they're looking seriously at the idea i would give a more regular press conference and the hope that would further increase the fed's transparency. >> suggest to update us on where that stands, how far into the future do you think a decision might come on that? >> not too far -- [laughter] the committee is working on it, and i think they will have some recommendations pretty soon. but never comes out the words or to the additional steps to make us more transparent and clear about what we are doing and they will share those with us, right? >> absolutely. >> the next question is sort of about the personal side of the question and that is this comes from the audience. one of the most frustrating

things about being the chairman of the fed is in the world is hanging on your every eyebrow and the possibility of the financial market, i eat exuberate as your predecessor had to deal with way back when. >> and what is your that seriously. this is a very challenging job that we face, a very challenging period. we have had enormous problems and issues with the financial markets and financial stability we have had to address. i believe the address them adequately in terms of stabilizing the system. now we have to implement a new set of laws rules to make sure that in the future we don't have this kind of instability again. at the same time, the economy although it does look to be growing more quickly is still in a deep hole and very far from where we would like it to become a and we need to manage policy of monetary policy and as i

talked about today fiscal policy to try to bring us back to the employment and get back to work in a way that is consistent with stability and in particular the continued low inflation so it is a challenging job and i have a great staff at the federal research and great colleagues on fomc and in that respect is challenging and interesting from my perspective but it's frustrating because it takes a long time. it takes awhile to meet the progress in the economy that we would like to make. >> from today's headlines question from the audience do you believe any of the growing unrest and lead the world especially to nisha and egypt is linked to higher food prices which the questioners as results from the fed's large scale purchases. >> i'm not going to address the first part of that. i don't have much insight into the sources of the unrest. i would guess thinking about asia for example but there's a lot going on including issues

about democracy and representation and the broad economy and the like so i'm not sure i accept the premise of the question of what about food prices in general. when you talk about other prices you need to talk about the slide demand, and in some cases sued for civil there are constraints on supply and there have been issues and so on but the most important development globally is the fact the world economy is growing more quickly. particularly in the emerging markets. we have essentially to speed recovery where the industrial economies like the united states are growing relatively slowly in the attack the industrial economies are just now coming back to the level of output and demand we were in before the crisis three years ago. so the countries are growing slowly the emerging markets are growing much more quickly. now, the federal reserve's three policy is aimed at stabilizing the united states economy and in the united states i don't think

anybody can argue the economy is overheated and it is going to quickly it is short of resources. we are using our policy to address stability in the united states. so the question is where is the demand coming from? it is most the coming from the emerging markets. the markets are growing quickly for a couple of reasons. one is the factors will long-term trend for the emerging markets to develop quickly and that of the whole is very positive development because it means millions of people who are in poverty are not moving closer and closer to a more middle class standard of living which is of course a very good thing but as people's dalia it's become more sophisticated and they eat more fish and beef and was greens the demand for food and energy and the like grows and that is the primary long-term factor affecting the price of commodities and food. the other factor is that in some

cases some of the emerging markets are facing inflationary because their own economies are growing perhaps even faster than the capacity that is the policies haven't been such to keep the growth in capacity balanced which means inflationary pressures are rising from those emerging markets. but i did it is entirely unfair to attribute excess demand pressures in emerging markets to u.s. monetary policy because the emerging markets have all the tools they need to address excess demand in those countries. they can, for civil, use monetary policies of their own. they can adjust their exchange rates which is something they've been reluctant to do in some cases. so it is really up to the emerging markets to find the appropriate tools to balance their own growth. that being said, even the inflationary purchase in the markets the continued growth is continuing to put pressure on the prices of commodities including food arnold the world.

but just one final comment on why the federal reserve policy cannot be primarily responsible was just that you asked about the middle east. food in egypt is priced in pounds, not dollars. if the dollar is weaker, the egyptian pound is strong per commesso clearly what is happening is not a dollar affected is a growth of six premier li and the emerging market that is creating this demand for commodities which is driving up the relative prices of commodities. >> to lead the correlation site for the moment, as you will get these unfolded of the world you see the price of oil rising, how do you see that as presenting risk to the u.s. economy as you try to do your job? >> will we pay very close attention to the prices and the of the commodity prices because they do present really two kinds of risks. the first is the higher oil

prices are kind of a text. we are trying to stimulate the economy, trying to get consumers to become more confident, the able to spend more, and to help put people back to work, to the extent that part of their income gains are drained away by higher gas prices or exceed all that's going to be negative and is going to slow the recovery, so as the international factors lead to higher oil commodity prices that is a - from the perspective of consumers and household budgets and economic growth. the other place where it is an issue yet we are watching very carefully is what withstanding and i think a commodity price increase is primarily come from the global economy rather than the u.s. per say. nevertheless we have to pay attention to that because we also have a strong commitment to the stable prices and low inflation. right now inflation overall including food and energy prices is quite low in the united states and in fact almost any other industrial country not to

mention the emerging market economies. that being said we have to make sure that it stays that way. higher energy prices add to the inflation because they raise the price of heating oil and gasoline and the like. even more serious, if they begin to feed into other prices, so ford sibling they begin to feed into the wages or goods and services that are produced using energy than you might get a broad inflation problem and we are absolutely determined that we will do whatever is necessary to keep inflation low and stable in that in that respect that is a challenge we have to address. islamic in your speech you talked about the bond program. there was a time when the was thought to have referred to an ocean liner and now the first reference to the program somebody is asking do you attribute the stock market rise since late august and if not, why not and as a follow-up i might say the process of helping the u.s. economy filtering through various sectors of the

economy as you go about engaging in that process? >> first to be very clear, the preface of the monetary policy is not to increase stock prices per say. the purpose is to strengthen the u.s. economy to put people back to work and create price stability, but the way the monetary policy always works is through interest rates and asset prices. that's how it works by changing the prices in the financial markets. so yes, i do think that by taking these securities out of the market and pushing investors into alternative assets we have led to higher stock prices and lower stock market volatility. by the way, when the last time we did this in march, 2009, was about a week before the absolute minimum where the standard was in the 600 following our actions the standard of the stock market grows quite considerably, yes,

the policy is affecting the stock market really into ways. one is by lowering the essentially long-term yields and forcing investors into alternative assets, but also because as this process has been working through and we have seen both in the earlier episode that a few months after we began the process to see the stronger economy, this time we began the process in august and no four or five months later we are seeing a stronger economy. as the markets see the strong economy materializing, that is incorporated into the expectations of the future economic activity, and that causes the market to rise as well so it is a circle in that respect. as i described in my remarks, the whole idea here is to move interest rates, moved the price is in the direction to stimulate more economic activity, put more people back to work and get rid of the risk of the inflation and create a stable price environment and if you look at

the development, since august i think things have moved in the right direction. >> is in the course of the extension from that is people want to know what you look at to decide whether to extend the program etc. i think you said that it's possible the there were the extension beyond the current in the of the program, so what kind of things to you look at to decide where to go from here? >> welcome the first of all, as we noted in our statements and our commentary, we are reviewing the program on a regular basis. we want to make sure it is working as intended and it's not having any adverse side effects. to answer your question more generally, the approach is more or less the same as we always used. how we make decisions about the federal fund rate? what we do is our best to create an outlook for the economy. to say where are things going, where output going, where is

inflation going, and we ask ourselves given the level of the monetary compensation we have now is the economy on a trajectory that will give the best possible outcome in the medium term. if not, if inflation looks to below or the deflation is there or the output is low and unemployment is too high the would be a situation that requires stimulus. vice versa it becomes increasing problem of the economy is growing quickly that would be the reason to scale back. so in the same way that we addressed the monitor policy under normal circumstances in the short term interest rate by looking at the outlook and trying to gauge whether the economy is growing at the pace consistent with the eventually returning to full employment and stable prices, by the same approach we look at that all halgand based on that we will either provide more stimulus as necessary or scale back or stay with what we have, so really not a simple answer. we have to use the best we can in terms of the forecast models to try to assess where the

economy is headed. and get the same time perhaps the most politically charged question, that of the unemployment situation you said it may be a matter of years before the unemployment goes down to the level that is considered to be a more normal. is that something that you look at as you decide whether to extend or not? >> well, certainly. half of our mandate is maximum employment, and we want to get the labor market's coming you know, working again, and better if we can. it's very important because not only is 9.5% unemployment a very large waste of human resources and a very taxing burden on many families around the country, but about 45% of all of the unemployed had been unemployed for six months or more. and what that means is that if they don't find work in the next six months or two years, if they find work again in the future it could very well be at a much reduced wage or part time. people who are not employed for

long periods of time lose their skills and connections and their knowledge of what is happening in their particular line of work. so the consequences could last a long time so it is important to put people back to work as quickly as we can. it's going to take a while. the very nature of this is that the economy has to grow about 2.5% just to accommodate people coming into the labour force, so in order to keep the unemployment rate constant we need about 2.5% growth. back in august when we were thinking about the policy, growth was looking like it was around to come so we are looking at a situation where the rate would begin to rise again. so in order to get the growth above the 2.5% mark, we embarked on these new policies and we are looking forward in 2011 we think it will be about 2.5%, therefore we expect to see it declining over time. it is not going to be as fast as we would like the of the other hand as i mentioned, there is good news. i think there are a lot of

indicators including we had once again this morning the new claims for unemployment insurance which is a pretty good number looking at whole range of statistics on the labour market. the sense is that employers are becoming more willing to hire and i feel we will start seeing some stronger payroll reports and lower unemployment rates pretty soon. >> another question from the audience talking about the same program said you announced purchases before the congress passed the tax cut extension, the payroll tax holiday and several other significant stimulative measures. as that given the fed any reason to consider ending your latest program early? >> as i mentioned earlier we try to mcginnis as that of the outlook and based on that we decide whether or not we are where we should be or whether we should do less for so long and in this particular case when you are making our projections we have already taken into account most of what is in that package.

we had anticipated the bush tax cuts would most likely be extended if least in large part. we had participated in the insurance would be extended at least in large part. part of the package that was surprising and thus create additional stimulus is the payroll tax rebate. as we factor that into our analysis and of course on the margin we will respond to the way that fix the outlook but it wasn't that we were surprised by this package. we expected a lot of it to happen and the was built into our forecast when we need now for policy decisions. >> you referenced the jobless claims numbers and obviously the data flows on the nearly daily basis. what do you think is the single biggest thing if there is such a thing holding back the companies from increasing the hiring right now? >> there's a lot of factors.

it isn't simple. certainly one issue is, and perhaps one key issue is the uncertainty about how much the demand is going to be. remarkably, at the beginning of the downturn firms lay off large numbers of workers and they were able through very significant productivity gains to meet existing demand with fewer workers and only as the demand had began to grow beyond the level before the recession began has there been any pressure on the firms to begin to add the work force? swahili now they are beginning to see women that we are now seeking enough increase in our sales, and we have already exhausted the obvious productivity gains it's time now to start bringing on new workers, so that uncertainty about the duration and the stability of the recovery has been the key factor explains why, for the disabled, they have been using a lot of temporary

workers because they can bring temporary workers if the economy weakens again they can let them go. it will be a really good sign when we see the tiberi signs been converted into permanent jobs, and i am hopeful that is where we are going to be headed in the next couple of quarters. >> so, you have been exporting congress and essentially the federal government to attack the fiscal situation sooner rather than later. we have seen what happens in europe if you don't do that. what do you think the risk is that indeed the financial markets force the solution before the lawmakers and our administration to it themselves? >> it's really impossible to give a projection. right now the markets seem to be behaving as if they think these problems will be addressed in the sense the u.s. government can still borrow at reasonable interest rates. so, evidently investors believe that the u.s. economy is strong

enough and that our political system is able to deliver stability in our budget situation over the medium term. in one respect certainly they are right in that this is a very, very wealthy productive economy and there is say no sense that we are economically unable to find a solution to these problems. we are rich enough and have enough resources that we can find those solutions. no question about that. some of the commission's we have seen for a simple we have put out some plausible possibilities. i am not endorsing any particular one of the demonstrated here are various ways we could go about doing this without reading the part of our social safety net and without radically raising the taxes etc., etc.. so it can be done. i think the question will be do we have the political capacity, the political will to do it, and i think that is what the markets will be following, and indeed in europe it has been less a question of resources.

everyone believes that europe has the resources to meet the sovereign debt claims and it has been a question of will the country's demonstrate that they have the will to collaborate together to solve these problems. i believe they will. but it's really that political uncertainty which is the key issue for the markets, not so much the economic capacity. >> have you seen any evidence of any time in the past that there is political will of that magnitude to attack a problem of this size? >> it's difficult to say. i think there is a lot of interest. there has certainly been a number of members of the senate and the house who have for years been talking about these issues and have pressed for taking steps to address them. clearly there is considerable interest in the general public and trying to address these questions. so i wouldn't -- i am not a political prognosticator and i wouldn't try to make an

assessment but i know there's an increasing understanding of representatives in congress and in the administration and in the public that these are important issues and that there is only so far we can kick the can down the road. we have to address this and the sooner we do it the less painful it will be and the better it will be for our economy. some of them there are more near-term issues. the one questioners as to not become a true policy but will the fed policy have to be adjusted if there were shut down of the government house some politicians are threatening does the fed had enough options to get friends of the government shut down the private sector to the contractors leave off workers and adversely impacting other channels. >> just to be accurate i think is being complicated is not a shutdown of the government, but a refusal to ratify the debt limit extension and this is a very serious matter because under the current law, if the

debt limit is not extended for a time the treasury has various resources that it can use to make payments on a national debt, but beyond a certain point it wouldn't have those resources and the united states could conceivably i think this is very remote but it's not something you want to play around with the united states would be in a position of defaulting on its debt, and the implications of that for a financial system, our fiscal policy, for our economy would be catastrophic. so i would very much urge the congress not to focus on the debt limit as being the bargaining chip in this discussion but rather to address directly the spending in the tax issues that we all have to deal with if we are going to make progress on the fiscal situation. the debt limit itself is again something where we need to be very careful the we don't create any impression that the united

states is not going to pay its creditors the interest on the national debt. that would be again a very far that outcome. >> we talked of the legislation percolating on capitol hill. can you talk about where the policy stands now by virtue of the dodd-frank legislation and what you think some of the proposed legislation is not the right thing to do? >> the dodd-frank legislation with the fed cooperation and a lot of other fed is initiatives has basically created a completely transparent fed as far as financial concern. people say all that the fed, with the need is open the books. what is the transactions. currently, every program that we initiated during the crisis has been completely open to the gao. all the information has been provided to the public. december 1st we put out a record

of all 21,000 loans that we made during the crisis. all 21,000 which by the way were paid back with interest explain what the program was and what the criteria, the bar were, the collateral, when was it repaid, we provide a weekly statements of our balance sheet, we have an outside auditor which comes in and audits the books and publishes all the information every year. so every aspect of the fed financial dealings are wide open and we have invited the gao to come in and look at all of our activities come extraordinary activities during the crisis, and all of our ongoing activity. so there is no sense in which the fed has a secret financial dealings. all of our assets and transactions are open to the public and will be open to the public and i've committed to that transparency. no, what audit the fed means in the language that has been used

by some members of congress is not about the financial fed rather it is about auditing the monetary policy which means the gao would be assigned by the congress to look at the monetary policy decisions to take the material prepared for the meeting to depose potentially the members of the meeting to essentially provide an evaluation to the congress in a very short horizon of whether or not the fed was making the right monetary decisions. i feel this is different from what most people think about 20 feet above an audit, and what this is basically is a very sick again challenge to the notion that while the congress has every right to set the goal and objective of the federal reserve and the tools of the federal reserve it should be up to the fed to make monetary policy decisions independently of short-term political influences and with him on towards a long-term objective of the economy.

and with that kind of legislation would do is nothing to do with financials. would be very much a psychiatrist at words direct congressional oversight of the decision process itself and personally, i think that would be very bad outcome. we have seen around the world that in the empirical evidence and practical evidence to support this the the central banks the independent in their decision making and have a clear mandate provide a much better outcome both in the economy and financial market than a central bank which is dictated by whose decisions are dictated by the political considerations of that is something i think is extremely important principle. >> is this sort of pressure coming from the outside helping to you might you with your colleagues on the federal reserve board at all? clinical this issue every member of the federal reserve both current and past fighting would

be extremely united. this is a fundamental bedrock principal of the banking, and if the federal reserve becomes essentially an arm of congress seeking monetary policy decisions i think that would lead to worse outcomes in terms of inflation and stability in the u.s. economy. >> here's a banking question. bankers say the leaders and regulators in washington are telling them to lend more of the bank of lovell the senators and life deal with on a day-to-day basis are concerned with the financial health and less with promoting lending. what are you doing about the disconnect? >> this is an issue that we have been very focused on for quite a long time. there is a problem here which is we don't obviously want banks to make bad loans. we don't want lone star not wait to get paid back. we want sound loans. on the other hand, when you have a creditworthy borrowers coming and asking for credit it's in the interest of the bank and the

borrower and of the whole economy that they get made. so we need to find the appropriate balance between loans that are appropriately proven safe on the one hand but the creditworthy borrowers are able to get credits. and we have, working together with the other bank regulators going back several years now we have been providing extensive guidance both to the banks and examiners about how to make an appropriate balance. we have done a large numbers of training class is, we have asked the fed banks to call in and talk about their concerns. we've had meetings all across the country to meet with bankers and small businesses to talk about issues that have arisen as we have put an enormous amount of resources into trying to find the right balance and i feel we've made a lot of progress frankly and i would suspect as we look forward to 2011 and on

that we would see increased willingness to lend and examiners wouldn't be an issue if there are good loans to be made it's very clear the should be allowed to make them and we would encourage them to make them. seabeck some housekeeping matters we are almost out of tibet before asking the last question very important matters to take care of. i want to remind members and future speakers the comedian and humor is the voice of the simpsons will discuss media myths on march 14th. we might even try to get into a few voices for us and then the voice of taxation the commissioner of the irs will be here before the tax deadline. second, i have some walking away gifts for you. more than one. i would like to present you with the traditional coffee mug which my understand you have had once before but nevertheless we would love for you to perhaps share that with a loved one. [laughter] we will be watching each day to make sure that it doesn't show

up. [laughter] than we thought to have been so kind to join us on multiple locations we want to provide you with the unusual highly coveted national press club baseball cap. [applause] the last question, having you here today is a big deal for us, for me since i've been covering business and economics for many years now it is a little like the super bowl for business journalists speaking of which the super bowl this weekend and i'm wondering first do you watch football and you have a favorite in the game between pittsburgh and green day which will be in dallas. >> i definitely do watch football and baseball season is in there of any way and i am looking forward to the game. the redskins didn't make it this year once again unfortunately. [laughter] so i will be objective although i do know one of the teams has a quarterback named ben.

[laughter] i'm looking forward to the game and i think the gdp will drop to nothing during that three hour span. [laughter] -- before, mr. chairman. [applause] >> thank you for being a good sport. we would like to think the national press club staff including the library and broadcast center for organizing today's event and for more information about joining the club or how to acquire a copy of today's program please go to our website at www.press.org. thank you, we president obama attends the annual national prayer breakfast the senate homeland security committee releases the results of its investigation into the 2009 fort hood shootings. the senate energy committee holds a hearing on the energy

and oil markets. >> the whole environment of politics has come apart. i mean it has become polluted and destroyed in violent. >> q&a sunday documentary producer mick koets on hubert h. humphrey the art of the possible. >> part of the reason for doing the documentary was to show another side of this because everyone remembers someone who is looking lyndon johnson's boots and had no mind of his own and people didn't understand the pressures he was under which was it runs for the vice presidency into the. >> q&a sunday night at 8:00 on c-span.

>> the president obama spoke today at the annual national prayer breakfast in washington. established in 1953, the prayer breakfast is organized by the fellowship foundation, nonpartisan christian group. after the president's remarks, we will hear from the husband of arizona congresswoman gabrielle giffords. this is a half-hour. >> ladies and gentlemen, the president of the united states, a rock obama. [applause] >> thank you. thank you so much. thank you. [applause] thank you very much. thank you. thank you very much. please, please have a seat. thank you.

thank you so much to the co-chairs, jeff and ann, to all the members of congress who are here, the distinguished guests who have traveled so far to be here this morning, to randolph for your wonderful stories and powerful prayer.to to all who are here providing testimony, thank you so much for having me and michelle here.or h we are blessed to be here. i want to begin by just saying a word to mark kelly, who is here . we have been praying for mark's wife, debbie guilford's, for many days now. i want the entire family to know

that we are with them for the long-haul and god is with them for the long haul and even as we pray -- [applause] -- even as we pray for gabby in the aftermath of the tragedy here at home we are also mindful of the violence we are now seeing in the middle east and we pray the violence in egypt will end and the rights and aspirations of the egyptian people will be realized and a better day will dawn over egypt and throughout the world. for almost 60 years going back to president eisenhower this gathering has been attended by our president. it is the tradition i am proud

to uphold not only as a fellow believer but as an elected leader whose entry into public service was actually through the church. this may come as a surprise. for as some of you know, i did not come from a particularly religious family. my father, who i barely knew, i've only met once for a month in my entire life, was said to be a non believer throughout his life. my mother whose parents were baptist and methodist, grew up with a certain skepticism about organized religion. and she usually only took me to church on easter and christmas. sometimes. and yet my mother was also one of the most spiritual people

that i ever knew. she was somebody who was instinctively guided by the golden rule. she hounded because subtly about the values like honesty and hard work and kindness. and fair play. it is because of her that i came to understand equal work of the lead women and an ethical life and the necessity to act on your beliefs. it is because of her example and guidance that despite the absence of a formal religious upbringing my earliest inspiration's for a life of

service ended up being of a face leaders of the civil-rights movement. there was martin luther king and the baptist leaders, the ways in which they helped those who had been subjugated to make a way out of no way and transform a nation through the force of love. there are also catholic leaders like theodore hasburg and jewish leaders like rabbi abraham, joshua hassle, muslim leaders and hindu leaders. caracol to fix what was broken in our world, a call routed in faith, is what led me just a few years out of college to sign up as a community organizer for a group of churches on this

outside of chicago. it was through that experience with pastors and lay people to heal the wounds of neighborhoods that i came to know jesus christ for myself and embrace them as my lord and savior. that was 20 years ago and my journey had its twists and turns. it hasn't always been a straight line. i have thanked god for the joys of parenthood and michele's willingness to put up with me. in the wake of failure and disappointment i have questioned what god had in store for me and been reminded that god's plans for us may not match our shortsighted desires.

let me tell you these past two years may have deepened my faith. [applause] the presidency has a funny way of making a person feel the need to pray. abe lincoln said as many of you know, i have been driven to my knees many times by the overwhelming conviction that i have no place else to go. i am not alone in my prayers. pastor friends like joe and and jake's come over to the oval office every once in awhile to pray with me and pray for the nation. chapel at camp david has

provided consistent respite and fellowship, the director of our neighborhood partnership office, joshua do what. the young minister himself, starts my morning with meditations from scripture. most of all i have friends around the country, some who i know and some who i don't know but they are friends who are out there praying for me. one of them is an old friend named k. wilson. we call her mama k. she happens to be malia and s h sas sasha's grandfather and -- godmother. she started small with her own bible study group. once i started running for president and she heard what they were saying about me on cable she felt the need to pray

harder. by the time i was elected president she said i couldn't keep up on my own. and was having to pray nine times a day just for you. so she enlisted help from around the country. it is also comforting to know that people are praying for you who don't always agree with you. tom coburn for example is here. he is not only a dear friend but also a brother in christ. we came in to the senate at the same time. even though we are on opposite sides of a whole bunch of issues, part of what has bound us together is shared face, recognition that we pray to and serve the same god. i keep praying that god will show him the light and he will vote with me once in a while.

is going to happen. a ray of light is going to been down. my christian faith has been a sustaining force for me over these last few years. all the more so when michele and i hear our face questions from time to time we are reminded that ultimately what matters is not what other people say about us but whether we are being true to our conscience and true to our god. speak first his kingdom and his righteousness and all these things will be given to you as well. as i travel across the country folks often ask me what is it that i pray for? like most of you my prayers sometimes our general.

give me the strength to meet the challenge of my office. sometimes they are specific. give me patience as i watch m i malia go to her first dance where there will be boys. have that skirt get longer as she travels. to that dance. will i petition god for a whole range of things there are a few common themes that do recur. the first category of prayer comes out of the air and sea of the old testament and the gospel itself. i pray for my ability to help those who are struggling. christian tradition teaches that one day the world will be turned

right side up and everything will return as it should be but until that day we are called to work on behalf of a god who shows justice and mercy and compassion to the most vulnerable. we have seen a lot of hardship the past two years. another day passed when i don't get a letter from somebody work meet someone who is out of work or lost their home or without health care. reynolds told about his problem, that is a problem lot of americans have gone through over the past couple of years. sometimes i can't help right away. sometimes what i can do to try to improve the economy or curb

foreclosures or to help deal with the health care system sometimes it seems so distant and so remote, so profoundly inadequate to the e enormity of the need and it is my face and then that biblical injunction to serve the least of these that keeps me going and keeps me from being overwhelmed. faith that reminds me that despite being just one very imperfect man i can still help whoever i can however i can wherever i can for as long as i can. that somehow god will buttresses these efforts. it also helps to know that none of us are alone in answering this call. it is being taken up each and every day by so many of you,

back home your churches, temples, synagogues, so many faith groups across this great country of ours. i came upon a group recently called charity water, a group that supports clean water projects overseas. this is of projects started by a former nightclub promoter called scott harrison who grew weary of living only for himself and feeling like he following -- wasn't following price as well as he should. because of scott epps good work charity water has helped 1.7 million people get access to clean water and in the next ten years he plans to make clean water accessible to 1 hundred million more. that is the kind of promoting we need more of. that is the kind of faith that

moves mountains. their stories like that across this room. sometimes face groups can do these on their own. sometimes they need a partner whether it is business or government. that is why my administration is taking a fresh look at way we organize with faith groups. the way we work with faith groups through our office of faith based and neighborhood partnerships. through that office we expand the way faith groups partner with our government. we are helping them feed more kids who otherwise would go hungry. we are helping fatherhood groups give dads the support to be there with their children. we are working with nonprofits to improve the lives of people around world and doing it in ways that are allied with our constitutional principles and in this work we intend to expand it in the days ahead and rooted in

the notions of partnership and justice and the imperatives to helpful for. of course there are some needs that require more resources than face groups have at their disposal. there's only so much a church can do to hope all the families in need. all those who need help making a mortgage payment or avoiding foreclosure or making sure their child can go to college. there's only so much a nonprofit can do to help the community rebuild in the wake of disaster. only so much the private sector will do to help folks who are desperately sick get the care that they need. that is why i continue to believe in a caring and justice sine die -- just society government must have a role to

play. our values, our love and our charity must find expression not just in our family, not just in our places of work and worship but also in our government and in our politics. over the past two years the nature of these obligations, the proper role of government has obviously been the subject of enormous controversy. the debate have been fears. one side's version of compassion and community may be interpreted by the other side as irresponsible expansion of the state or unacceptable restriction on individual freedom. that is why a second recurring theme is a prayer for humility.

data and to disperse early on by having me married michele. [applause] because whether it is reminding me of a chore undone or the wisdom of watching my third football game in a row on sunday, she keeps me humble. in this life of politics, in debates are so bitterly polarized and changes in the media lead so many of us to listen to those who reinforce our existing biases it is useful to go back to scripture to remind ourselves than none of us have all the answers. none of us no matter what our political party work station in life, the full breadth of human knowledge is like a grain of sandor station in

life, the full breadth of human knowledge is like a grain of sand in god's hands. there are mysteries we cannot comprehend. god's voice thunders in marvelous ways. he does great things beyond our understanding. the challenge i find is to balance this uncertainty, this humility with the need to fight for deeply held convictions. to be open to other points of view but firm in our core principles. i pray for this wisdom every day. i pray that god will show me and all of us the limits of our understanding and open our ears and hearts to are brothers and sisters with different points of view. such reminders of our shared hopes and dreams and shared limitations, children of god will reveal a way forward that we can travel together.

the last recurring theme that binds all prayers together is that i might work closer with god and make that what my first and most important task. in our own lives it is easy to be consumed by daily worries and concerns and it is even easier at a time when everybody is stressed and everybody, our culture is obsess with wealth and power and celebrity and often it takes hardship or tragedy to shake us out of that, to remind us what matters most. we see an aging parent withering under a long illness more we lose a daughter or a husband in afghanistan, we watch a gunman

opened fire at a supermarket and we remember how fleeting life can be and we ask ourselves how have we treated others? have we told family and friends how much we love them? it is in these moments when we feel most intensely our mortality and our own flaws and the sins of the world that we most desperately seek to touch the face of god. my per this morning is that we might speak of faith not only in those moments but each and every day. that every day as we go through the hustle and bustle of our lives, whether it is in washington or hollywood or anywhere in between because the we might every so often rise above the here and now and kneel before the turtle so that we

might remember the fact that those who wait on the lord will soar on wings like eagles run and not be wary and they will walk and not fail. i asked the lord to help me do straight by the people and when i go to bed at night i wait on the lord and ask him to forgive me my sins. and look after my family and the american people and make me an instrument of his will. i say these prayers hoping they will be answered and i say these prayers knowing i must work and sacrifice and must serve to see them answered, but i also say these prayers knowing tt