gam ling and casino sector. can you confirm that is the case that the recent proposal s940 allows the casinos like mgm resorts, caesars and las vegas sans to claim the benefits while you can't? to be sure i understood correctly, i'll summarize. the proposal before us would horme american oil companies, but not harm foreign oil companies or harm gambling casinos? .. for harming those. about the know much gambling business, but i can tell you that when tax rates exceed the u.s. rate overseas, if we don't have a dual capacity tax treatment, will be

ceding to foreign rivals. even european companies, it is very important. the internal revenue service is willing to distinguish between royalties and tax benefits. there is very little that has been studied more than this subject. it may have been difficult a few years ago. >> and it's important that we be allowed to take tax credits where we've already paid taxes overseas. >> anybody else care to comment? >> i would just echo john's comments that it would have a devastating impact on our ability to compete overseas. this is one topic where you won't find the five companies aligned. two of my foreign competitors are on the table. they operate on the system. we would lose competitiveness relative to them and then in an already very crowded and

enormously competitive world we find ourselves in and the resource and development of space because of the growing presence of the national oil companies which already come to the game with other advances that we don't have, nor do we seek. we have to off set that by finding other ways to out compete them. what we'd like to have is at least a level playing feast. >> i pointed out what a small slice you are of the world that you are competing with national oil companies. national, international oil companies i should say. let me just finish with this community. mr. chairman, if i have your correctly here, what you are saying is it would be very unfair to pass the type of legislation because it would be selective taxation against me

call larly other industries benefit from. if i'm summarizing this correctly, correct me. if i'm not summarizing it in the right way. that would be unfair and make you less competitive if that happened. that would cost jobs and most importantly of all, it would cost real jobs. you employ a lot of people. if you could do your work up there in alaska, by gosh, you'd put a lot of people to work. alaska would benefit grately, constantly coming to the congress and asking for help where the oil business has really helped alaska over the years. you put the people to work and frankly if i understand this hearing and what you are all saying, it would be unfair. and probably probably -- well nt

probably, the bottom line is, i don't think any of you will disagree with this, it will not bring down gas at the pump one penny. in fact, it's likely to go up because of the selective taxation approach. am i right? >> this concludes the hearing. i'll end though where i began, namely that you remind all of us here. we have a fiscal problem on our hands. federal fiscal problem. let's get the deficits down. we have to make choices. none of them are easy. i twice a week and go over to the blair house and meet with the vice president and a couple other members of the senate and house. secretary geithner will be director jack lew, gene sterling going down the list and trying

to figure out how we do this. this is not easy. agriculture, tell me how many farmers want their commodity supports cut and the conservation programs. and food stamps, you name it. this is not fun stuff. and i urge all of you to, you know, keep that in mind and when you go back to your daily work and so on and so forth, maybe talk to the people and say maybe there's a way we could contribute here too. because we're in this together. everybody here clearly wants more jobs, more growth, wants america to be number one, and incentives to invest in the united states and foreign corporations invest in the united states. we do that more. we find the chance to do that while we reform the corporate and individual income tax system. in the other measures clearly which encourage investment are -- encourage investment.

so we -- this hearing is concluded. but to be honest with you, i'm not totally convinced that these provisions add that much to where you invest or don't invest. or if they are taken away, it's a chance we make that difference, given the huge profit margin which it is because the price of oil is so high. i raise the hat. this is not going to change the price at the gasoline pump. that's not the issue. that's not the issue at all. who shares? how much does each segment share and at the same time, develop an energy policy? we have to develop an energy policy and the company does not have an energy policy. there's a lot we have to do. we also have to figure out how to get the debt and deficit figured out. >> chairman, just one more comment. i know you are sincerely devoted

to doing that. it's an honor to serve with you. my problem is there's not a real good reason for raising this. because i guarantee you if they raise these taxes, congress will spend every dime of it. if won't go to pay down the deficit. because we don't have a -- we don't have a capacity right now or even a bill that might work better that would cause this money to go to pay down the deficit. >> i guarantee if you raise taxes -- >> i respectfully disagree. the reason i disagree, we have to. we have to get the deficits down to not bump up. >> anybody -- >> bump up against the debt limit so we can't default and bump up against that limit. we have to get our debt and deficits down so the company is in sound financial. we will do it because we have to do it. hearing is concluded. thank you.

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>> given the fact this conversation is happening at this time is highly political debate, gas prices so high, you think there's any truth at all to the charge that was made over and over that you guys are out of touch with the american people are feeling and going through? >> well, i guess what, you know, my -- the result of hearing some of that from me is i would love to invite some of the members that participated today to get better in touch with what we are actually doing. we have doing a tremendous amount. we have people that represent every element in society involved in the companies. again, the real opportunity to have an impact on the country is let's develop more energy. we talked today about certain tax elements and several billion associated with the tax elements. when you think about the benefit and the impact of more production domestically, you are talking about hundreds of billions of dollars, if not into the trillions of dollars. it's a completely different conversation. >> you mentioned alaska.

you i think you said recently you believe optimistic based on the recent talks with them. what makes you optimistic? >> i think what i said was that i was cautiously optimistic. we've had a coordinated meeting looking at across agencies with the white house and how this is progressing, that's a positive sign. that's something we've been watching the last couple of years. i hope that means progress. we'll have to watch it in the next couple of months to see how it develops. >> what is the problem? what's holding things up in alaska? >> there's lots of individual elements. if you talked two months ago, the epa air permissions permit offshore that kept us from drilling in 2011. i think the bigger issue is the political will to make it happen. that is the bigger issue. there's lots of small reasons. with the real intent for the

country to develop the resources the right way for the country. then it would get done. >> is there a point when shell would say give us our money back. if so, are you nearing that point? >> we don't want to do that. that's why the term cautiously optimistic is an important statement. we want to move forward. it's the better thing for the country, better thing for alaska. that's our intent to try to make it move forward. >> what was your overall reaction to today? do you serve any real purpose? >> you know, e think it's always helpful to open the conversation. to the degree there's even an opportunity to say there's a bigger picture here that makes a lot more difference and impact of the u.s. than just talking about a few incentives. the bigger picture is that we is impact the economy and the federal treasury and deficit. so i'll take just the opportunity to say that to a

group of people. >> what do you think of the offer to trade more leases for less incentives? >> i think it doesn't make sense. we are building false trade off. it was good for a bit of humor. we need to look at the bigger picture. >> why the invitation to come. when you know they are going to come here, grill you, put you on the spot. >> i think we believe in the american process. i think the american governmental process. this is part of it. this is part of participating in this. i think it is supplemented by individual meetings with the members to really make the points that we want to make is something we'll always participate in. >> and to the point where, you know, there's been a debate about whether the repealing of the tax incentives would lead to higher gasoline prices. can you say dy fintively? >> it's hard to make definitive statements about the volatility

of prices. you heard one the answers was that the oil swung in a relatively short period of time was to $137 to the $30 a barrel range. there's so many factors. if you have higher taxes, you do hurt the economics of the projects and the u.s. you do because this is a very globally competitive business. you do get less investment, and that means less domestic production. regardless of how that directly and immediately impacts the price of gas, it has the other unintended consequences with significant benefits of less money into the federal treasury. it's much more valuable to make the production and get the taxes and the royalties off of the production than it is to squeeze a little bit more by taxing the large oil companies more. >> is it a possibility -- the tax incentive changed. the possibility that the money would essentially just be passed along to the consumer anyway?

>> more likely the economic investments in the u.s. look less interesting than opportunities to other parts, then money shifts. that's the way it works. we make those decisions on the 25 to $30 billion that we spent every year. we make those decisions on a weekly basis. >> you didn't ask -- i'm sorry. we talked about this earlier. on speculation, you mentioned the law price. do you think speculators are behind that? in the middle of the supply and demand. >> we don't have any reason to think there's any negative going on if that's the orientation of the question. i think those that buy supplies of oil going forward and those that are involved in the trading market are evaluating all of the factors which are there. which are not only the sheer kind of today supply and demand fundamentals, but also the supply fundamentals into the future as economy start to recover. there's more demand.

will the oil be there? i see the immediate disruptions in some of the north african and middle east countries as we speak. you see the impact of the tragedy in japan. all of that rolls into what is the price going to be some point and time in the future? what do i as a trader or business, i mentioned the airlines earlier. the business wants to get some assurance around what it will have to pay into the future will buy into the trading markets to lock in the price. that's a fundamental positive impact associated with trading. >> i'm talking about excessive. not people trying to hedge price or supply. do you think the hedge funds are behind the run up in prices? >> you know, i just don't have any basis. the way you put that into context, i don't have the basis to say that. what you do know, which i mentioned in the testimony, this has come up many times before. the cftc and others have looked

into it deeply before. they have not come up with, you know, an answer that says there's a negative impact here or something that's out proportion. >> we have one more question. >> one the things that senator schumer has made, industry is making profit and pump prices are high. how do you disconnect that for the consumers? >> well, let's talk about the u.s. business for the a while. this was a hearing about the u.s. if you think about the numbers, because a lot of this is about profits from the big five oil companies. you know, we just did a rough average of our income and investment in the u.s. over the last five years. and it's something like $3 billion a year profit. and it's $6 billion of investment. so higher prices, you know, when price is higher allows us to investment which has the cycle of building more supply. and all of the other benefits that potentially -- not potentially, but ultimately go

back to the consumer in terms of more jobs, an opportunity to reduce the deficit, more secure supplies, and so forth. so that's the picture that we were trying to drive to today. >> we're going to have to take off now. i'm sorry. do you have any other questions? i'll be here to take your questions. hi, how are you? >> i'm good. >> good to see you again. [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> here's a lack -- look at the primetime schedule.

>> this weekend on american history tv on c-span3, former massachusetts governor and presidential candidate michael.

a look back at jimmy carter and his handling of the energy crisis of the 1970s. richard koch, and long term building, and they will be live from mississippi from the radioth anniversary of the freedom writers. get the complete schedule or have it e-mailed to you by pressing the c-span alert button. >> this weekend on booktv on c-span2.

>> how did they transform? what series of choices do they make to become terrorists and kill hundreds of thousands of other people? >> in his new book within richard miniter looking at the 9/11 attacks. >> this is the guy that mattered. understanding him is the future. now that bin ladden -- bin laden is dead, that is what we have to fear. like sheikh muhammad. >> you can also download a pod cast available online. >> more about energy policy and gas prices now with a discussion from today's "washington journal." it's just over half an hour. >> and from yesterday's hearing,

let me introduce you to our guest. he'll be here to talk about what affects gasoline prices. richard nu -- newell is the administrator. you are the 7th person to hold the job. who was the agency formed? what are your tasking? >> guest: it was formed really in response to the oil cry -- oil crisis of 1973-'74. eia has been existence for a number of decades. one of it's initial missions it to track oil production, consumption, gasoline prices and consumption. our government role within the u.s. government is to collect, analyze, and then communicate independent and impartial energy information. and the purpose of it is to inform policymakers, inform industry decision makers, and help improve decisions, as well

as the broader public. >> host: c. -- dr. newell is a career energy economist. he's currently on leave from the nicholas school environment. since taking the job, what's it like being inside the government? >> yes, i actually have been -- was at duke university for a couple of years before coming back. i had a long career in washington, d.c. i used to be based here at a think tank in environmental and energy economics. so i'm familiar with washington. but it is very interesting to be at eia. the role that that kind of an organization can play in terms of helping to inform and improve decisions, it's very rewarding. this is a time when the need for improved energy information analysis is critical. we see it in oil markets, we see it in broader energy policy, we see it in environmental policy, not just with respect to petroleum, but electricity and

other parts. it's an interesting place to be and important with critical decisions made over the next several years. >> host: staying with your organization, you have been one the many places in government with budget cuts. so what is the exact total of the money, what percentage would be more appropriate and what effect will it have on the numbers that you are generating? > guest: yes, we in the fiscal year 2011 we had a significant cut. it was 14 to 15% reduction over what our funds were last year. coming more than halfway through the year, it has a magnified impact. because eia, we don't make grants. all of the money goes to federal employees, or support service that is support us with the ongoing survey and analysis operation. so we have had to act very quickly in order to balance the budget this year.

unfortunately, we need to cancel a number of surveys this year in order to balance that budget. we're hoping it recovers. we have a significant increase that's been proposed with the fy2012. we are hoping to turn that around. some of the impacts which we have put up, it's clear to the survey respondents and users, there has been an impact. some are the commercial building, which is the country's sole source of data. this would be used by architects, builders, by those who are interested in proving energy efficiency. we've had to cancel that for this year. the last time that we have data is from the year 2003. it's a survey we only do every few years. unfortunately, due to lack funds, we're going to have to cancel. our annual report on oil and gas we're going to have to postpone for next year. there's other studies such as the international energy outlook

which we're not going to be able to produce. we're adjusting as best we can to the situation and we hope that the importance of the work that we do is recognized. and if not, we will do our best to be efficient and work with the information that help inform decision. >> host: let's move from that to the topic at hand. which is the gas prices the americans have been paying. can you explain to people why gas prices have spiked in recent weeks and why they are trending down? >> guest: yes, there's four major components to gasoline prices. there's the cost of crude oil in gasoline, refiners have to purchase oil to make gasoline and other products. there's the cost of the refiners and the oil in order to produce gasoline. you take the difference between the wholesale price and the cost of crude. that's two components.

then there's the cost of distributing and selling gasoline through retail. that's the component through fast and state. the federal and state taxes has tended to be constant. that's 41 to 42 cents per gallon now. and 23 cents per average on state tax. but the state tax part varies considerably by state. one the reasons that we see regional variations has to do with state level taxes. which if you compare, you know, the lowest tax gasoline state, the highest it can be is 30 cents per difference. that's stable. that's not a reason for changes in the price at the pump that we've seen. although it is an explanation for regional. the major cause of the recent increases in gasoline prices is twofold. one is increased cost of crude oil. crude oil had come up last year in the third quarter of last year. but was around 90 to $100 per

barrel as we came into 2011. since then, we've had a number of things happen. particularly unrest in the middle east and north africa. this started with tunisia, moved to egypt. but really the largest impact on crude oil prices has been since libya. because libya of those countries is the largest oil producer. since the situation in libya has unfolded, they produce normally about 1.8 million barrels of day of liquids which the principal part of that is crude oil and expert about 1.5 million barrels a day. that's all offline. they are not exporting much at all. that's been a significant supply side hit to the global oil market which has in turn raised prices, prices had come up from, you know, the $100 up to, you know, $115 to $125 dollars per barrel. they have come down. we are still seeing the impact

in the retail gasoline. that's the first component. the second component is increases in refinery margins. this is due to both planned and unplanned outages in the gulf coast and northeast. each year, typically, in the spring season, the refineries bring down the routine maintenance. this is planned outages. we've had a sunlight number of unplanned. those two types have significantly brought down gasoline stocks in most regions of the country expect for the west coast and rocky mountain area which are normal or above normal. we have deleted inventories of gasoline which have really given up wholesale prices, beyond what the oil price alone would warrant. in addition, this -- the recent concerns about flooding along

the mississippi river has not yet significantly impacted refineries. but there's a concern that it potentially could. that has also had upward impact on wholesale gasoline prices over the last several weeks. the two components, higher oil prices and higher wholesale gasoline due to refinery has led to increases in gasoline prices. as of this morning, the retail price of regular gasoline reported by aaa was$3.95.d it'sn while now. >> host: have a historical price chart. 16 month average from 2006 until now. you can see the wide fluctuations and when it took a big dip in 2008, is that all consumption driven? >> guest: yes, exactly. the significant drop after the financial crisis was an economic

downturn. not just the u.s., but global. it reduced the demand for products and oil. that very significantly brought down the price of oil and gasoline. >> host: we're seeing right now again from all of the news reporting that consumption in the united states is down because of high prices. so if, in fact, consumption is down, how will that affect prices? >> guest: yes, one the reasons why the price of oil has come down is concerned about the demand for gasoline and other products. it's a bit reading tea leaves. there are a number of indicator that is are pointing in that direction. we put out weekly numbers at the energy information administration which are closely tracked by markets. that has been indicating a signaling a decline in demand. how this will unfold over the next several months we still need to see. the weekly data tends to be more

than variable than the monthly data. the international agency has brought down the forecast for demand increases over the next year or two. overall though, compared to last year, we're still forecasting increased consumption of petroleum products this year relative to last year and increase next year. it's more the rate of increase maybe diminished somewhat potentially due to a higher prices. but also the other element here isn't just the price of oil and the price of gasoline. it's also the outlook for the economy as a whole. so there's two competing factors. one is how fast are global economies and the other is how high is the price of the product? those two can point in different directions and same directions sometimes. over the last week, they seem to be pointing in the same direction which tended to underpin lower prices. >> host: we would like your call and questions by e-mail,

journal at c-span.org or tweet us at c-span wj. we welcome your participation. we have a tweet from jodi tom, are we going to take questions about energy? >> just widening the conversation, can you tell our audience about alternative fuel use as a percentage of energy consumption in the united states? how with we trending? >> guest: trending upwards. so fuels like ethanol, as well as renewable for electricity, wind power, solar, those are one the fastest growing parts of the u.s. energy system. they are starting from a relatively small base, currently our overall energy system, over 80% of the energy comes from fossil fuels. and so another part of that is nuclear power and then around 9%

or so is renewables, including both things like biofuels for transportation, as well as renewable. we do expect it to increase over time. one the increases since we're focused here on gasoline is ethanol. now ethanol has increased very significantly over the last several years. and it's currently up to about 10% of our gasoline consumption. so it's blended 10% ethanol into about 90% gasoline. when you go to buy regular gasoline, it's typically mixed about 10% with ethanol. this has been driven by a number of different factors. key factors, one there's a tax credit for ethanol. which encourages ethanol production. second we now have a renewable fuel standard for ethanol and other biofuels which is slated to increase the number of biofews over the next decade or up to a significant increase.

and the third factor in the interest in biofuels is higher prices of oil, which make alternative sources of fuel. >> host: u.s. department of agriculture has a role too. i wanted to point out the column, the commodity pullback and opportunity. chris is writing also this week, the u.s. department of agriculture released the may world agriculture supply and demand which called for u.s. command to reach 13.5 bushels. that would make it the largest u.s. -- >> host: so do you work with the agriculture department because ethanol is part of the energy equation? how do you share statistics on

that? >> guest: yes, we tend to collect our own statistics on ethanol. in fact, one the things that we've been doing over the last several years, due to the significant increase in ethanol use is we've had to change our statistical elections to better incorporate into our balances of petroleum product supply. we, of course, do communicate with the department of agriculture on, you know, one the thing that is there's actually an interagency group on the statistical side is to grew coordination of agriculture and energy statistics. we do work with them. we collect our own data on biofuel use within the energy system. >> guest: beginning with luis from ohio, gene you are on the line. >> caller: hi. i have a question about the oil companies in general. how is it they come to own all of the oil? there's no american oil that's part of the commons? it's all in the hands of shell and exxon and the private owned companies. how do they get the oil?

purchase the land outright and the mineral rights? was there any taxpayer money involved in subsidizing the purchase of that land? also, i'd like to know are these really american companies. do they have any obligation to act in the interest of the american people in terms of not just taking advantage of us at the pump? >> guest: so in terms of ownership of oil resources and gas resources, this varies significantly around the world. in many countries, there are what's called national oil companies which are government -- closely government-related entities which control all of the oil and gas resources. that's in contrast to what's called international oil companies, which would include companies like exxon and bp and shell who are private sector companies, traded on stock exchanges and so on. in the united states, we have a history of private sector

development of oil and gas resources, this is in particular to the oil industry. it's quite generic in the united states system, the private sector tends to control the means of production. in terms of ownership in the resources though, this varies by where the resources are located and so if you are offshore, that is -- tends to be a federal resource owned by the united states of america. it is in turn leased to oil companies that pay royalties and what are called bonuses in order to extract that oil. they pay the government for the right to extract the oil. there's also some parts of offshore resources which are close to the shore which are controlled and owned by the states. they tend to charge royalties, in order to get the public share of the oil resources. on shore, it depends on whether you are on a federal land or privately-owned land. if you are on the privately-owned land, those resources tend to be owned by

the land owner. and some cases, this maybe an oil company directly, or owned by somebody else and the oil company pays for the right to expractice those resources from under that land. so it varies very significantly internationally. in fact, the vast majority of resources internationally are owned now by national oil companies aboard. this would be companies like saudiamaco, and other countries in the united states. others it is privately held. >> host: huntington, west virginia. a republican. >> caller: hi, observation. you are using the term cost and price interchangeably. the cost to get the oil isn't changing. it's the artificial increase in price that's generated on the spot market. which is not really much petroleum transaction on the stock market.

you just said who owned the oil and such. the refineries are charging themselves more money based on the artificial stock market increase and also charges wholesale prices at a higher price based on the artificial increase. when we see at the pumps, the second the spot goes up, all of the oil that's in the tanks, the price increases automatically. because they see that's what it's worth. when the price goes down, they say we have to keep it up because it's going to cost us that much to replace. how is the artificial prices which really doesn't control the market, control the market? >> host: thank you, phil. >> guest: so you brought up two different important margins in this pricing equation. one is what determines of price of oil. the other is what determines the wholesale price of gasoline. so let's take the first one first. so you are correct that there is -- can be a very significant

difference between the cost of lifting oil out of the ground or developing oil and the price at which oil trades at any particular point in time. the price tends to be set at the marginal barrel, not at the average barrel or certainly not at the cheapest barrel. for example, particularly in the the middle east, there's some very inexpensive oil. it may cost $10 or less per barrel. that's not what determines the price of oil because that's not the incremental barrel. what tends to drive the barrel is what it costs to get the barrel. which is more expensive than the cheapest oil. if you start focusing on deep water offshore resources or start focusing on extracting oil from thing like canadian oil sand, it's significantly higher than the cheapest barrels to extract. now, in addition to these, you might think of physical fundamentally factors, there's

financial factors which can have important influences on oil prices. we've seen very significant fluctuations overt last several weeks in addition to the, you know, the raw fundamentals of the cost of oil extraction. there's also relationships at times with the exchange rates, the other movements in broader commodity markets. so there's been over the last several weeks, commodities has been moving together, oil has been moving with silver and other commodities. there's also not just current costs of oil extransaction, but concerns about future disruption. which has been something that's entered in the last couple of months in terms of what's going on in the middle east and north africa. you are correct that the cost of the less expensive oil to extract is not what's setting the price. now on the refinery end of things, there is also -- again you need to focus there on the margin. and one the key things that's

driving wholesale gasoline prices right now are historically low inventory for gasoline in everywhere basically east of the rockies. and a significant part of this is due to refineries being down. if you have a refinery that's down, you are not earns a lot of money. if you are a refinery that's money, you are making better than typical margins. the reason for that is because we have restrained refinery supply and very low inventories. this is something that we expect to work out over the next several weeks and months. i would think if conditions stay the way they are right now, i think retail gasoline prices have peaked and would go down. of course, things could change. if the impacts of flooding in the midwest turn out to be worse than people -- than markets think they are going to be, that could have an affect.

or it could bade and prices could fall faster than what we think. >> host: here are some statistics. if you can imagine, there are many on the administration's web site. this is on u.s. crude oil and petroleum imports. let's look at 2009 countries. canada at 21%, mexico, 10; venezuela, 9.1 -- >> host: now let me move on to where oil is produced in the united states. and this statistic, the largest oil producing state is texas at 21, alaska 12, california 1, north dakota 4, louisiana 3.5%. this is the chart that you have about the sources. we can see the united states in 2009 got 51% from western hemisphere as we just detailed. this question comes by twitter,

how much of the oil drilled in the united states is sold overseas? how much of it stays here and how much of it is sold? >> guest: yes, we don't really sell. we are a significanter importer. there was a small amount of oil exported from alaska because it's significantly far away from the lower 48. but my recollection is that in recent months and years, we don't export any oil. the one caveat, there maybe some small cross border flows with new mexico, because if you have a new mexicoen refinery, it would go over to mexico and come back to the united states in form of the refined products. if we do have any net exports at this point of crude oil, they are very small. we are a significant network importer of crude oil. >> host: ted, democrat. >> caller: good morning. i guess my question would be as all american business has been

forced to become more efficient, become more cost effective, comore with less, i'm wondering where's the last time an american oil company has built a brand new state-of-the-art refinery in the united states? thank you, i'll take your answer offline? >> guest: yes, well, there particularly a few, look back to 2004, 2005, 2006, this was a tight refinery capacity in the united states. this was a time when there was a significant concern that the u.s. didn't have enough refining capacity. at that point in time, there were a number of projects put into place. there's a significant new refinery that i believe at this point has opened. it was the motiva refinery, down in the gulf coast. significant capacity there. joint venture between u.s. and international companies. but over the last several year, we've seen a decline in need for

u.s. refinery capacity. while we were concerned about not having enough, that has rebated. it has come down and we've seen some -- you know, both actual and announced retirements. at to point in time, we're not expecting that we'll need a significant amount of additional u.s. refinery capacity. one the reasons is that the growth in u.s. demand for liquids to run transportation has flattened out significantly. if you look at our longer term projections, we're not expecting the demand for liquid fuels to increase a lot. in fact, the demand for the petroleum part of that, we expect to be basically flat. any need for increase demand for gasoline and diesel fuel is likely to be met by biofuels. we do not see a significant need for additional refining capacity in the united states. >> this is another graphic from

the u.s. energy information administration, based on 2009. and the graph shows 61% of what we pay comes from the crude oil cost. 18% federal and state taxes refining costs and profits. 11%. distribution in marketing. a lot of people are very interested in the profit question. for example, this viewer by twitter says why are you afraid to ask what the profit per gallon is? what percentage of the 11% is to profit as opposed to refining costs? and may i also add, this is at 231. will that 11% stay constant now? >> guest: no, in fact, it's almost better rather than to think in terms of percent, how many cents per gallon. >> host: okay. >> guest: part was it stay very stable. like federal and state taxes stay stable at 40 cents per gallon. the distribution and retailing costs and profits tends to be fairly stable, let's they 25 to

30 cents per gallon. and the parts that fluctuate, the oil part fluctuates the most. whereas in that chart it maybe -- what is it 60 -- >> host: 61%. >> guest: 61%. it's higher than that now. because the oil price has gone up while other parts stay constant. and then again, the refinery costs and profits also tends to fluctuate now. it would be higher than it is in the chart right now. the two reasons are because the price of oil has gone up. the share of the overall price of gasoline is going to be higher. refinery costs and profits have gone up. and the big reason there is due to the low inventories and refinery shutdowns over the last couple of months. >> host: so people are wondering if you can dissect the percentages. which part goes to refining and which part to profit? >> guest: yeah, you can do

this with some lag. it's difficult to do it in real time. because you have to dissect how much the refineries are paying for inputs like crude oil. there's a notion called the refinery acquisition cost of crude oil. which is how many they have to pay for the slates that industry buy. they also have other input, changing labor, they maybe building or expander or changing their capacities. and so there is -- there are pieces of this that come with the lag. i think it's safe to say that refineries who are still operating now that haven't experienced shutdowns, their profit margin has certainly increased. they are able to operate at a point where there's significant constrain in other sources of supply. you can see this in a measure that's called -- it's called the crack spread. which is where you take the difference between the wholesale price of gasoline and you subtract off of the cost of crude oil inputs and look at difference. that's increased since the beginning of the year.

>> host: "houston chronicle" is probably called the hometown paper of the oil industry, it's big in texas. hearing front page news. >> host: we're talking with dr. richard newell, he's an economist specializing in energy economics and we're learning more about price at the pump and overall u.s. energy supply from him. next is a call from san antonio. this is mike, an independent. >> caller: yes. thank you for c-span. my question is if a barrel of oil is 32 gallons and a gallon of gasoline is $4, all of the oil in the barrel is $32 gallons is $4 a gallon, that's makes $128 a barrel. how much gasoline do you get out of a barrel of oil?

>> right. so you are on the right path there. one thing is that there's 42 gallons per barrel. if you look at -- if you are trying to translit retail gasoline prices which are around $4 on national average and try to understand the role of oil in that, you are going about it the right way. but it's 42, not 32 gallons. if refineries are paying around $110. measured in gallon, divide by 42, you get $2.60 per gallon of oil cost. so then you've got to -- you know, you've got another $1.40 between that and $4 retail. the other components there, as we've talked about are -- 41, 42 cents per gallon per state and federal taxes, you've got the retail and distribution costs and profits, 25 to 30 cents, and

the refinery margin, what they have to pay for crude oil and sell at the wholesale gasoline price. that amount is atypically high right now. due to shutdown and low inventory levels in gasoline. >> host: the "washington post" has a related story. >> host: and the cost of making more fuel-efficient cars and buying them. last question for you, jim hines who says please ask mr. newell who the eia's financial stance on peak oil is? >> guest: yeah, so peak oil is a concept that has different meanings that have evolved over time. the earliest manifestation has to do with supply site.

we didn't have enough oil in order to meet the demand. we at eia don't think that when you take into account conventional oil resources if you take into account unconventional oil resources this would include things like canadian oil sands, heavy crude, biofuels, other sources of unconventional oil. we don't see an issue over the next couple of decades. our projections go out to 2035. we think there are significant oil resources to meet oil demand over that period at the prices that we project. so you have the price balancing oil supply and demand. now there's also oil notions of peak oil which have more to do with peak oil demand as opposed to peak oil supply. we have seen in the united states our highest petroleum consumption was back in 2005-'06. in our projections, we don't actually see petroleum consumption getting back up to that level over the next twenty

years or so. there's a general notion in the oecd, which are advanced country, which oil demand may have peaked. that's difference from the notion that we have running out of oil supplies in the ground from which there are very significant hydrocarbon resources. the main question is what is the cost of producing them and whether or not the environmental consequences of producing some types of resources are acceptable to society? >> host: lots of big questions. thank you for adding more information and understanding to all of the debate over oil prices. appreciate it.

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