he understands that as well. .. parents in my constituency and indeed my honorable friend will pay for the additional security measures those found in other schools out of their own pocket after the last government refused to help.

after this funding aroundment end in 2015 can i ask the prime minister to support my campaign for education secretary to continue with this scheme? >> i will look very carefully what my honorable friend says. i'm a strong supporter of preschools and also a strong supporter of the community security trust that has provide ad lot of security for schools. i think in his constituency and neighboring constituent. my right old friend the lable power secretary we'll see how we can continue this. >> thank you, mr. speaker. >> the oil industry currently being investigated by the european union does the prime minister agree with me that it is important to be absolutely transparent about the oil and gas companies that the -- [inaudible] >> really have they got nothing to say about unemployment? about improving education? about capping welfare? let me, let me, i pains me to point this out to the honorable

lady but she has received 32,000-pound from affiliated trade unions. now this is, let me explain the difference. with linden crosby, the conservative party gives him help us get rid of labor, right? that is how it works. with labour party the unions give you money. that is the way it works. she said this, said this on her website, i'm a member of the unite and i regularly raise trade union issues in parliament. they pay the money in. they get the results out. that is the scandal in british politics. [shouting] >> mr. speaker? >> order. order. >> mr. hughes' question will be heard. mr. hughes. >> many water companies in england have paid huge dividends to their shareholders have

avoided paying tax and not properly accountable in this region of proposing an annual increase of 80-pound a year on water rates. will the prime minister make sure that no public subsidy is given to thames water or any other water company which puts profits and shareholders ahead of the interests of ordinary rate-payers and the taxpayers of his constituency and mine? >> first of all, let me be clear. i always said companies should pay the tax that they owe. i don't want to comment on an individual company's business but that is the case. any support from government must be targeted to benefit customers bills and to provide value for taxpayers. there is merit in the thames tunnel proposal. we need to look at that carefully. this would be a benefit for london and his constituents and everyone living in london. i can assure we'll use every tool at our proposal to get the december deal for london, and

taxpayers. >> mr. crosby, does he -- [inaudible] >> you mean i think we can one through this one again? we have another go at explaining, right. it works like this. the conservative party gives lyndon crosby money and he helps us attack the labour party, right? the trade unions give money to the labour party, the other way around and for that, they buy your candidate. they buy your mps. they buy your policies. they even give you this completely hopeless leader. [shouting] last but not least, mr. andrew griffin. >> thank you, mr. speaker. my constituent, kelly bridges, was diagnosed with cervical cancer at the age of 25 when she had her first smear. sadly, kelly had to have a hysterectomy. will the prime minister join me in congratulating kelly on the

drop your pants, save your life campaign to raise awareness of cervical cancer? will the prime minister agree to talk to the health secretary about kelly's wish to bring the age at which young women can have a smear down from 25 to 20? >> well, i pay tribute to our honorable friend and his constituency for bravery of raising the campaign and speaking so frankly about it. the screening programs we had in the nhs under successive governments are one of the greatest successes early diagnosis of cancer and saving lives. we should always ask what the latest evidence is for the screening programs and when they should start. i'm sure my right honorable friend, the health secretary will want to talk to him about this campaign. >> order. >> here on c-span2 we'll leave the british house of commons as they move on to other legislative business. you've been watching prime minister's question time. live wednesdays 7:00 a.m. eastern while parliament is in

session. parliament will recess this friday, returning september 2nd. the next prime minister's questions will be on wednesday september 4th. you can see this week's question time again, sunday night, nine p.m. eastern and pacific on c-span. >> apple of her a eye joe junior. in a plane crash in 1948. rose is literally seen in children almost in birth order disappear from the scene. not only that but in 1964, in the summer of six at this four, rose wrote in the journal what it was like in hyannis in the summer. gone are the presidential helicopters we would so look forward to bringing my son, the president. i would see his children run out to him. gone are those days. >> she missed some of that. >> she missed some of that and which is fully said gone, we

were said to be the most powerful family in the world. on "after words," barbara perry uses information from newly-released diaries and letters and talks about the kennedy matriarch, rose kennedy and talks about her influence over the family dynasty. part of booktv this weekend on c-span2. >> u.s. crude oil production has reached its highest level since 19926789 the senate energy committee on tuesday held a hearing on the growing domestic production of oil and natural gas and its effect on energy prices. senator ron wyden chairs this hour and 50-minute hearing. >> the committee will come to order. would i like to begin this morning by expressing my thanks to each and every member of this

committee. as of today, this committee has reported 50 pieces of legislation. half of the total number of bills that have been september to the floor of the senate and i would just like to take note of the fact this doesn't happen by osmosis. this stems from the fact that there has been a lot of cooperation, a lot of good will on this committee. a number of these bills have come out of this committee are going to resolve issues that have been pending for literally decades. and i'm going to recognize senator murkowski for her statement in a moment. i want to note this could knot have happened without her leadership. i'm especially appreciative of senator barrasso. i note senator baldwin will enjoy her time on this committee and i want to begin by expressing my thanks to my colleagues on both sides of the aisle. >> mr. chairman? >> yes, senator murkowski. >> if i may interrupt the chair

which is not something i like to do but you have brought up i think a very important reality that here in this committee we are producing, we are working, we are doing the work that committees should. as we all know these are some exceptionally tense times right now here in the united states senate as we try to internally resolve some of our rules that have impact on, not only the rules process but really on the comity, not the comedy, but the comity that goes on within this body. i think you have clearly led by example saying bipartisanship needs to be more than just picking one member from the other side and making something happen and i do hope that we are able to work forward a process in this body that allows us to

continue the work that the people in this country expect us to do but i think we set the example, we set the standard by as a committee coming together, basically doing our work, rolling up our sleeves and doing the task at hand. so i didn't want to miss an opportunity to thank you for your leadership in that vain and encouraging a process that has allowed us to be the committee that is producing half of the bills ready to be heard on the senate floor. just thank you. >> i you thank my colleague and the fact that you consistently meet halfway is a huge part of why we have been able to do this and i want to express my appreciation. today the committee will look at the changes taking place in the u.s. petroleum market and their impact not only on the oil industry but more importantly on the prices our people pay at pump. at the beginning of this congress the committee held a hearing on the dramatic changes

taking place in the u.s. natural gas market due largely to the development of natural gas from shale formations. unlike the immediate benefits that american consumers and businesses have seen from low natural gas prices, at the gasoline pump, it's been pretty much business as usual. while us economy may be benefiting from declining oil imports, prices at the pump have remained consideration tently high. for years, a number about representatives in the oil industry have told the american people that u.s. gasoline prices are at the mercy of world oil prices. that was basically the case because of our dependence on imported oil. new oil supplies from america have turned that dynamic on its head. some regions of the country like the midwest that have access to the lowest-priced crude oil have some of the highest refining margins in the nation. our committee is going to explore on a bipartisan basis why so many consumers have not benefited from these new, lower

cost sources of crude oil. in addition to the changing natural gas market, our country is going through a dramatic shift in oil and gas production. instead of relying on more and more imports the u.s. oil industry is now increasingly focused in the energy information administration's words, on absorbing the significant increases in u.s. oil production, including through export of both crude oil and petroleum products. whether it is oil from the permanent me an basin in texas or the bakken formation in north dakota, there are new supplies of oil simply not part of the energy equation five years ago. since 2007 when the congress passed the last major energy bill, our country has gone from importing upwards of 60% of our crude, to now importing roughly 40%. that is the lowest percentage since 1991. the largest sources of imports, 28%, is canada. according to the energy

information administration this trend is going to continue. the administration, the energy information administration projects that the u.s. will increase crude oil production from a low in 2008 of five million barrels a day to 2.8 million barrels a day by the end of next year. that is a 64% increase. another trend that the energy information agency administration says will continue to the decline in expected u.s. gasoline demand as cars and truckings become more efficient due to higher vehicle mileage standards. ethanol use required bit renewable fuel standard is also displacing about 10% of the gas in every gallon sold in the country. that mandate, the rfs mandate will require even higher blends if left unchanged which should also further diminish the demand for oil. so we've gone from being a net importer of petroleum products, to a net exporter of petroleum products for the first time in more than half a century.

u.s. refineries are now exporting over 2.8 million barrels of gas and diesel fuel and other petroleum products a day thanks in large part to access to new cheaper crude oil supplies and abundant low cost natural gas that is used to fuel the refineries. the u.s. refining industry clearly has a major competitive advantage over other overseas suppliers, especially, for markets in north, south, and central america. but many of our people want to know why prices are so high here at home when there is so much extra gas and diesel fuel that it can actually be exported? our people want to know why the flood of new domestic crude hasn't been lowering prices at the pump. instead refiners in the middle of the country with greatest access to the cheapest crudes have had the highest margins with the difference between the cost of the oil they buy and the

gasoline and diesel fuel they sell often exceeding 40 or $50 a barrel. in many cases these refining margins are now at record or near-record levels. some, as i say, over substantial amount a gallon. what has been good for refiners hasn't necessarily been good for the consumer. another important development in the u.s. oil and gas industry are the structural changes that have taken place. the largest refiner in the united states is no longer a major integrated oil company. it's an independent refiner. valero, who will be testifying here this morning. refiners often don't own their own distribution terminals. oil companies no longer own their own service stations. the number of oil refineries in the country also declined though total refining capacity is up, making our nation more dependent on a smaller numb by of larger, more complex refineries.

an outage at one of these refineries whether planned or accidental is now a major factor in the price at the pump. last october a minor electric power outage in a major refinery in california raised wholesale gasoline prices over 80 cents a gallon in martie of hours. in the upper midwest last month the prices shot up almost, again a substantial amount in a week as a result of refinery outages. i want to thank senator franken for highlighting this issue and his work with me for the ability to track refinery outages and reduce impacts on prices to consumers. i want to highlight again, this has been a bipartisan concern. senator hoeven is a cosponsor of legislation that involves both senator klobuchar and senator franken look at reporting in this area. senator donnelly has done very good work on it. they're all from the midwest and they're all seeking to work on

an important issue in a bipartisan way. today's hearing begins the committee's examination of all of the changes in the oil industry that i have tried to touch on here and what they mean for consumers. supply is up, demand is down but prices at the pump are still stubbornly high and sometimes are as volatile as the gas itself. some refiners have enjoyed record margins but there's been a lot less joy for millions of consumers at the pump. we've got a good cross-section of the energy market here today. they include a producer, refiner, representatives of marketers and consumers and two independent industry analyst who is don't have, i guess you would call it an official dog in the fight. one from the government, one from the private sector. mr. hume is vice chairman of strategic growth initiatives for continental resources, a very large producer in north dakota. mr. klesse is a chairman and ceo of valero.

mr. gilligan is president of the petroleum marketers association. mr. plaushin, director of federal relations for aaa. mr. energy administration at department of energy and mr. kahn is director of integrated oil and gas research at citigroup. i want to again thank my colleagues and recognize senator murkowski. >> that, mr. chairman. i was home in the state over the 4th of july recess and had the opportunity to spend a little bit of time on the rim river. i was looking out, talking to individuals at their fish camps what is happening with fishing, the price of fuel and what that means to them in their villages and it was just after the spring barge had come and delivered fuel. if you live on there you get two fuel delivery as year. you get one in the spring, which

is june and you get one in september, provided that you can get up river. sometimes you can only get one barge in. basically your price for fuel is set when those purchases are made and everyone in the village, it is not like there is any competition out there. it is what it is and when you're in bethel, which is a big hub community paying over $5 a gallon for your fuel, when the barge comes in you're hoping that it is going to go down. well the prices didn't go down, they went up 20 cents. on a monday you're sitting at 5:15 and on tuesday you're sitting at 5.35 for the balance of the sumwer no relief in sight. you go up river to aniach, and they were hit with a 20-cent increase for fuel for the summer. go 10 miles up river and there

is no fuel. there is just no fuel. you want fuel for your boat, you borrow some fuel from your neighbor and go down river to aniach and its about a 50-dollar run for that 10 miles. so, in my home state, when we're talking about gas prices, it's real, it's immediate. it directs and it dictates how you live and what it is that you do. so i appreciate the opportunity for good discussion on this and really how we, how we deal with this from a policy perspective. i appreciate mr. chairman, your approach on the basic structure for this hearing. i'm optimistic that our decision not to look not just at gasoline prices but a whole range of factors that could be influencing them would be helpful to us in our policy making options. let me also welcome our distinguished panel this morning. i know you will provide us with valuable perspective what it

takes to recover, to refine and to retail our nation's transportation fuels. hard to believe that it has now been five years, almost to the day, mr. chairman, since the price of oil rose to an all-time high of 1.47 a barrel. we're down from that, thankfully, but still $147 a barrel five years ago. almost equally hard to believe how much has changed since then. one of the brightest spots in our entire economy has been an counties -- continues to be energy production on state and private lands. after years of listening to the critics contend that the u.s. is running out of oil domestic production has risen by 30% over these past five years t created thousands and thousands of jobs, generated substantial revenues, slashed our opec imports. according to a recent analysis by "the wall street journal" it helped reduce volatility in world oil prices. while it is difficult to measure the precise benefit i believe rising american production

reduced or at the very least restrained some of what we're seeing in terms of prices at the pump. one downside that production on federal lands has not kept pace. it actually fell in both 2011 and 2012. i think that represents a huge missed opportunity. all you need to do is look to my state of alaska. we have more untapped oil than any other state. we have broad public support for new production. we've got a major pipeline that is significant at less than half full. all we're asking for is permission to produce our resources but we haven't been able to secure that at this point in time. now it's at production i think there are some other factors that are worthy of consideration. i look forward to discussion of transport tearings and infrastructure constraints and learning what we can do to help resolve those. i'm glad we're going to have a chance to hear about the importance of robust refining sector. i'm eager to examine some of the regulations that could be impacting our fuel supply, particularly the renewable fuel

standards i think that congress needs to reform. mr. chairman, i continue to believe that we need to take every step possible to reduce and stablize fuel prices for american families and for our businesses but that is going to include increasing production on federal lands, increasing the efficiency of our vehicles and increasing the use of alternatives. it will mean rejecting, rather than seeking punitive tax hikes. it will require the timely approval of needed projects including the keystone xl pipeline and the prompt justment of any regulation that comes in conflict with our stier for abundant and affordable energy. i again look forward to the witnesses testimony here this morning and the questions that we'll be able to pose afterwards. thank you. >> thank you, senator murkowski, and i think it is very important the point you made that there are a variety of factors that go into this whole debate. we talked about it when we were together in alaska and i think it is just as correct and i think you for a very helpful

statement. for our witnesses we're probably going to have at least one vote at 11. what happens on a day like this, senator murkowski and i work together from time to time to call some audibles and how to keep everything moving and our hope is we'll be able to do it. so if each of you will take five minutes or so and highlight your principle concerns, we'll make your prepared statements part of the record. why don't we begin with you mr. sieminski. >> thank you, chairman wyden, ranking member murkowski, members of the committee, thank you for the opportunity to appear here today. eia is statistical, analytical agency at the department of energy. by law eia data and analysis and forecast are independent of approval by any other officer or employee of the u.s. government. i would like to make five main points today. first the united states is undergoing an dramatic change in domestic oil production most of which occurred in the past three

years. domestic oil out put is at the highest level since october of 19926789 texas more than doubled its production. north dakota's output nearly tripled unexpected pace as outgrown the oil refine infrastructure. it has lags in adding pipeline infrastructure and flexibility of rail shipments to serve coastal refineries. several pipeline projects are currently underway or proposed which should increase the deliveries of domestic crude oil to inland sources to major refining centers primarily on the gulf coast. second, domestic crude oil supplies are growing. refiners mace declining demand for gasoline in the u.s. market. since 2007 the demand for gasoline dropped by almost 600,000 barrels a day and at of ethanol being added to the gasoline pool increased supply

by almost 400,000-barrel as day. import blending components have declined and exports of refined products as you ♪d, senator wyden, primarily from the gulf coast have increased. infrastructure constraints within the u.s. limit the movement of petroleum products from refining centers like the gulf coast regions where product demand actually exceeds production capacity like the northwest. product exports proside a way for refining centers to optimize crude runs and operations. virtually all the new production in the u.s. is light sweet crude much of the refining capacity in the gulf coast has been optimized to run on heavy sour crude. to accommodate the change in crude slate refiners have number of alternatives ranging from little or no cost projects to major capital investments. no matter the cost of the alternative, the ability and extent which it can be accomplished is unique to each refinery and can not be estimated accurately by eia at

this time. third point in, 2012 the united states imported 11 million barrels a day of crude oil and refined petroleum products. at the same time the nation exported 2.7 million barrels a day of finished petroleum products and gas stocks. exports from the gulf coast, the u.s. as a whole is linked by a very complex logistical system which transports products and influences prices throughout the country. as with crude, refined product prices are heavily influenced by the international markets. the u.s. exports of small amount of crude oil to canada. the first four months of this year the volume was over 100,000 barrels a day, up from the 2012 average of about 60,000 barrels a day. fourth point, ethanol comprising nearly 10% of the gasoline pool has been, has to be moved mainly from the midwest to market centers along the east, west and gulf coast.

where it is blended in the gasoline pool. short-term fluctuations in regional product supply chains can cause prices in particular regions of the country temporarily disconnected from world and natural market forces. two unplanned refinery outages in midwest and delayed restarts in several others caused retail prices to increase by 26 cents a gallon between the end of april and middle of june. similar price increases in occurred in 2012 on the west coast after a series of unplanned outages. these occurrences are relatively short lived, six to eight weeks, usually and are the result of largely unforeseeable circumstances. the fifth and final point, over the last several years eia recognized significant changes to the supply and demand patterns and patterns for petroleum products both domestically and within external trade. eia collects and reports more data on your national petroleum

supply than any other comparable organization in the world. where resources permitted and some cases regional concerns with congress eia monitored, analyzed and reported on potential market changes. this committee is very important, a very important user of eia's services and i look forward to working with you. thank you. >> very good. thank you, mr. hume. >> chairman wyden, ranking member murkowsky and members of the committee. my name is jeff hume. i serve as vice chairman of strategic growth initiatives for continental resources in oklahoma city, a independent oim and gas producer where i worked for the past 30 years. this is an honor to address you at the most important subject matter at hand. just to clear up one thing the purpose statement for the oversight meeting the word is used to boom, to describe the current growth in u.s. domestic oil production.

indeed the total liquid production accelerated recently in the recent years. in fact the u.s. recently surpassed russia and running neck-and-neck with saudi arabia in the rankings of the world's largest producer petroleum liquids. however often times i hear the word boom it is used to reference era-like dot-com bubble or some other wild business cycle that inevitably end in a bust. this is not the case with recent gains in u.s. oil production. a much more accurate way to describe the current rise in production is renaissance. this rebirth of u.s. onshore oil industry is made by sustainable technology developments like horse is on the al drilling. today crude oil is indisputably a global commodity. our nation and world changed remarkably since the u.s. export oil restrictions were enacted in the 197's. this establishment of short supply controls in the wake of 1973 arab oil embargo are no

longer indicative how our petroleum supply and distribution channels function. as an american i'm proud to say the u.s. has some of the most sophisticated and complex refineries in the world. billions of dollars of investment enabled our domestic industry to efficiently convert lower priced heavy sour crude oil and imports to low-sulfur fuel as chairman widen noted in march 13th letter to the eia and today, efficiency gains in growth aggregate u.s. refining capacity have been accompanied by 25% reduction of number of refineries in operation over the past decade. this is as a result of greater marginal impact of a single domestic refinery on the supply of gasoline. planned maintenance, turn around and unplanned weather-related events are more impactful than ever. in today's environment to good ways to lower prices support domestic production on private and government land and find creative ways to make supply and distribution chains more

efficient. supporting a strong domestic oil production industry is critical for the health of our economy because it creates jobs and produce as valuable product for consumption and export. this growth in productivity and production activity over the last several years contributed to a u.s. drop in reliance on imported oil. this added high paying jobs and spurred production in the nation's large petrochemical industry. it is worth noting that the energy business is very capital intensive. without current law regarding intangible drilling costs otherwise known as idcs, percentage depletion, producers would not be able to generate capital necessary for domestics correct r growth and production activity. a repealing of producer production for idcs in 2014 could have a 15 to 20% drop in annual domestic drilling and 400 billion of investment from 2014 to 2023. consequently, 65,000 jobs per year would be lost in the oil

and gas industry. to me, these figures provide powerful evidence for the need to maintain support of the oil and gas industry as a very positive contributor to our economy and american way of life. i would also like to mention briefly the role of traditional trade restrictions on our business. in today's global economy, it no longer makes sense for our country to cling to the regulatory relics of bygone eras that restrict export of domestic crude oil. u.s. government does not restrict export of gasoline or refined fuels or other domestic energy sources such as coal. in fact, 2011 marked the first time in over 60 years that the u.s. was a net exporter of fuels. hard-working americans in businesses would be much better served if our government would take steps to remove existing barriers that distort domestic oil markets and provide does incentives for incremental domestic production. since much of the domestic like type crude oil grades like the bakken contributing to the u.s. energy renaissance are very high

quality, they're actually processed most efficiently at less complex refineries that are specifically designed to handle these low-sulfur grades. following the restructuring of u.s. refining industry many less complex refineries best-suited to efficiently process our domestic, he high grade crude are located overseas. matching the various grades of crude oil to refineries best able to process them maximizes the ability available supply of refined products. by exporting our high quality domestic crude to the overseas refiners who value it most, refiners from free trade partner countries like japan and korea to struggled to source crude oil in the wake of iranian sanctions we can reduce our trade deficit while also increasing fuel supplies the american consumer requires. to reduce costs at pump and on the monthly heating and cooling bills it makes economic sense to let the marketplace, not the federal government determine where these barrels should be processed. in conclusion i would like to

reiterate maintaining your support for the industry an opening borders for crude oil will one, lower energy costs to american consumers and businesses, two, promote job growth in the domestic energy sector, three, improve our nation's balance of trade, four, raise tax revenue through gdp growth, and five, improve national security and global influence. lastly, i would like to sincerely thank you again forgiving me the opportunity to share with you today the perspective of the u.s. independent producer. i look forward to addressing any questions you may have. thank you. >> very good. mr. klesse. >> thank you, mr. chairman and senator murkowski. i am the chairman of the board and ceo of valero energy corporation. we're an independent petroleum refiner with assets that include 13 u.s. refineries of various size and cost structures with a combined through-put capacity of 2.3 million barrels a day. we are an ethanol producer. we are renewable diesel

producer. and we have a wind farm. we have a network of pipelines, terminals, branded and non-branded wholesale customers. as an independent refiner valero does not explore for or produce crude oil or natural gas. rather we purchase these and related feedstocks to manufacture refined products such as gasoline, jet fuel, diesel and many others. refining is a global business and refined products are fungible and easily transported. because the market pleas is global, the domestic refiners compete against international refineries as well as each other. despite the drop in u.s. gasoline and diesel demand, and the addition of global refining capacity, that has been added, u.s. refiners have maintained high utilization that allowed them to produce excess gasoline and diesel fuel that then can be

exported. this is a benefit to the u.s. economy, the american worker and the consumer. the invisible hand of the market itself determines prices. with supply and demand adjusting until markets clear. our cost position acts as a floor and costs vary among companies, individual refineries and even within a refinery. prices are very visible in the commodity exchanges around the world where anyone can buy and sell benchmark crude oil, natural gas, refined products. refiners such as valero are in a position of being price takers rather than price makers. refiners like valero do not set retail prices. most retail stores are operated by marketing companies or individuals that set their own price. the price of crude oil represents by far the largest component of gasoline prices.

retail gasoline prices currently are composed of 67% crude oil, 14% refining, 12% taxes, 8% distribution and marketing. on an average of 3.61 per gallon, only 50% is attributable to refining. while $2.40 is crude oil. of even without any refining benefit we would still have crude oil over $3 per girl, gallon. we're in a world of 100-dollar crude oil. we do not expect a significant drop this summer. what is keeping prices from rising higher is the increase in u.s. and canadian crude oil production and certainly some uncertainty about economic growth around the world. however, the u.s. remains a crude oil importer. crude prices clearly reflect movements in the global marketplace and prices that we pay must be high enough to attract those barrels to our

market. american refineries are essential to our economy, the industry employs 108,000 people and many, many more in other jobs. think about all the people that our industry ininfluences and touches. there are other factors affecting retail prices some which can be affected by government, some which can not. despite the high cost of labor and regulations in the united states, increased natural gas production has resulted in much lower prices and is allowing our industry to be competitive, especially in the atlantic basin. a very careful and balanced approach to lng export policies is important for refiners. we also believe it is important to have crude oil come to the united states where the jobs are. that's why we support the keystone pipeline. but today the most important thing that's affecting us is the

renewable fuel standard. valero is the third largest corn ethanol producer but the renewable fuel standard is out of control. it is broken. are going up probably as we speak. i'm told they're over $1.30 here per rin gallon. the rfs must be fixed. this cost is just skyrocketing. it was okay when the first law was passed in 2005 but when the new law, or the revised law in 2007, the ren program was not revised. we have announced that this is going to cost valero $750 million this year and with a ren price we're talking about now it will be much higher. we support and believeth noll will be a part of fuel mix in

this country but the rfs is broken. there is no cellulosic to speak of. any other advanced ethanol has to be imported. this is not in the interests of our country. thank you very much for allowing me to speak andaway very proud to be part of this panel. >> thank you very much, mr. klesse. mr. gilligan, welcome. >> chairman wyden, senator murkowski, distinguished members of the committee, thank you for the invitation to be here today. i'm dan gilligan. i serve as president of the petroleum troll yum marketers of america. we have 48 trade representatives. majority of which are shawl businesses as defined by sba these companies are very diverse but they have all one thing in common. they all bring to market liquid fuels such as gasoline, diesel, heating oil, biofuel, jet fuel

and kerosene. our member companies are gauged in the transport, storage and sail of refined products on both the wholesale and retail level. they supply gasoline to convenience stores, diesel to truck stops, lubricants to industry and heating oil to millions of customers. not only are these companies primary suppliers of fuel they also own and operate over 80,000 retail facilities. they are also specialists in serving farmers, railroads marinas and airports with fuels they need. petroleum marketing companies do not benefit from high gasoline or diesel prices because they operate in such a transparently competitive environment, higher wholesale prices must be absorbed by retailers until street prices catch up. in order to remain competitive, retailers usually offer the lowest price for gasoline to generate volume and customer traffic in the store. when prices are unusually high, customers often reduce their store purchases and some retailers struggle with credit line limits. most vma customers are rack

buyers n industry wholesale product is loaded in terminal racks and there are approximately 1200 terminals in the u.s. companies permitted to load product must-have credit standing and plethora of state, local and federal licenses and permits. i will focus most of my testimony on one of the factors that influence wholesale rack prices and how they impact petroleum marketers. when examining the eia data over the past 15 years it is crystal clear crude oil price benchmarks, wti and brent are the primary driver of wholesale gasoline and diesel prices. because of their importance, pma has been and ardent supporter of ftc regulations to improve transparency in futures markets. it is sobering to note for every dollar increase in crude oil prices per barrel increase, that translates into a 2 billion-dollar daily increase for gasoline and diesel prices on u.s. motorists. additionally pma supports

completion of the keystone pipeline. we think the pipeline is important because it will diminish opec's cartel power to dictate crude prices. further in the event of a conflict in the middle east we'll be thankful to have crew oil supplies readily available from canada. the second driver of the refined product prices are environmental laws and regulations. with over 30 boutique fuel prices or fuel recipes, bottlenecks can develop that dramatically increase the prices at the pump on a regional basis. of course most of your aware escalating debate ongoing in congress about the renewable fuel standard. because gasoline demand has been weak, refiners have few options to meet the ethanol mandate in 2014. i'm not sure how it will affect prices there is much written and said about e-15 but need to know that e 15 can not meaningfully solve the blend problem in the short term.

we estimate there are 700,000 gasoline dispensers in use in the u.s. an only 5,000 have been approved for e-15. i'm only talking dispensers. there are also underground tanks and underground lines that have not been approved for e-15. it will require many years and lots of money to upgrade 160,000 gas stations to handle e-15. one estimate i saw was $3 billion. many of our member companies have significant investments in ethanol blending and would love to offer e-15 but they simply can not easily resolve the liability infrastructure problems. a few months ago a major investment bank on wall street predicted ethanol rens will go to 3 dal next year. that will likely significantly increase gasoline prices what they normally would be. we're urging the epa administrator to adjust the ethanol mandate as needed to ease potential economic harm. in april of 2007, several refineries in the midwest all serving the same region were closed for maintenance.

the price shocks in minnesota, south dakota, north dakota were so severe, senator dorgan authored anment to the 2007 energy bill for eia to have coordinate to approve communications. it is six years later and congress has not appropriated fund for that position. ironically just two months ago the same region was hit with a similar situation. for most of may motorists in north dakota, south dakota, minnesota paid 40 to 80 cents a gallon more as a result of the refinery problems. we hope you will support funding. lastly, i have to mention credit card fees. interchange fees imposed on fast stations is not a cents per gallon charge but a percentage of the total. when minnesotans were paying $4.50 a gallon in may if they were using their visa credit card they were likely paying 11 cents a gallon to visa. now the federal gasoline tax is 18.4 cents but you've got a build and maintain road with that. visa gets 11 cents a gallon for

what? to make matters worse, visa charges interchange fees on federal excise taxes. so they get a cut on that as well. we continually believe credit card fees need to be addressed. thank you very much. >> thank you very much. let's go now to mr. plaushin. >> thank you, chairman wyden, senator murkowsky, members of the panel. as the nation's largest motoring group as gas prices rise we hear from drivers increasingly frustrated and will often look to aaa for explanation. for more than a dozen years aaa provided an accurate and comprehensive resource, aaa's fuel gauge which tracks national, state, local gas prices. additionally aaa educates the public on steps they can take to get more miles out after gallon of gasoline. we arm our consumers with factual information and you know biased perspective. unlike others that frequently comment on gasoline prices aaa has no part in the refining

shipping blending or sale of gasoline. we seek to educate consumers on the factors that result in price swings and urge policy makers to find solutions that will result in more stable and more predictable prices. aaa's called on the federal government, policymakers and other industry stakeholders to work to make sure gasoline prices and supplies are stable and less subject to large fluctuations. it is difficult for many americans to predict, understand, and ultimately adjust to price changes that are regional, sudden, and dramatic. often been the case in recent years. a host of factors can impact the price at the ump. local variety of refinery disruption in wisconsin or heavy storms in the great plains we experienced this year. global variety of unrest in egypt this year. factors range from the expected seasonal demand changes, shifts in summer and winter blending

requirements. to the unexpected, hurricanes and refinery outages and other geopolitical tensions. the result of these myriad factors is a new normal. the days of the national pump price below $3 is likely a thing of the past and state and regional price spikes that see retail prices move sharply in a span of days are now all too common. the national average hasn't been below $3 per gallon since 2010. but since that date, motorists in 16 different states have registered a one week spike of at least 25 cents. looking at 2013 the national average price for a gallon of gasoline on january 1 was $3.29. this is the highest ever to begin the year. but they have also peaked earlier and lower than previous years. in 2011 the peak was $3.98 on may 5th. in 2012 the peak was 3.94 on april 5th. this year the peak came at 3.78

on february 28th. and following that the national average declined steadily to the recent low of $3.47 on july 7th. but as we have seen, wholesale gasoline prices have followed crude oil prices higher in recent weeks. the prices at the pump and in the majority of the states is again on the rise. and barring an unforeseen market development is likely aimed higher through the end of the summer driving season into mid-september. the rise and fall of the national average during the first half of 2013 was obscured by the high degree of state and regional price volatility most notably on the west coast and in the mid continent. in both of these cases even as national average price of gasoline was falling, refineries that were off-line for planned or unplanned maintenance meant a tightening of regional supplies and subsequently sharply higher prices for drivers. while pump prices if these markets did drop sharply as

production came back on line, motorists are understandably frustrated and squeezed. and these dramatic price swings underscore the volatility that has become all too familiar in recent years. unfortunately there is no silver bullet solution to the high prices or market volatility that consumers are experiencing. the federal government should adopt a national energy policy which combines increased production, the efficient use of traditionand alternative fuels, elimination of lengthy roadblocks to the development of new sources of energy, so long as we're not precluding the appropriate level of environmental review. aaa remains committed to providing our members and the traveling public with accurate prices and fuel conservation tips. much attention has been given to the production side of the equation there is a demand aspect as well. informing consumers must be a necessary element in any strategy and how you use your car is just as important as which vehicle you choose to use. thank you, mr. chairman, for the

opportunity today. i look forward to any questions you might have. >> mr. plaushin. thank you. mr. kahn. >> thank you. chairman wyden, ranking member murkowsky and distinguished members of the committee. my name is faisel kahn, managing director of citigroup in the regional research department. i fundamental research analysis of integrated oil and pipeline industry in north america. i'm honored to be here today to discuss this important topic. the u.s. refining industry has evolved and restructured over the last 20 years. currently 70% of the u.s. refining capacity is owned bit independent refiners compared to 40% 15 years ago. industry evolved to be one of the largest industrial manufacturing sectors in the u.s. from one simply tied to primary energy production two or three decades ago. it is characterized by high degree of competition from domestic and foreign independent refining companies, integrated oil companies and national oil companies competing to deliver gasoline to the u.s. market. therefore, gasoline prices in the u.s. remain tied to the

global markets adjusting for the cost of transport tearings. there are a number of key trends that continue to develop in the u.s. fuels an primary energy production centers of north america. first after peaking during the middle. last decade, gasoline demand appears to be in secular decline. we estimate gasoline demand could be reduced by 600,000-barrels a day through the decade simply because of c.a.f.e. standards in place. high sustained oil prices and higher sustained oil prices in the last decade is resulting in price elasticity. second, diesel, jet fuel, heating oil should see constructive global demand growth in the decade the situation in the u.s. is evolving w heating oil demand replaced by cheap natural gas supply and natural gas beginning to compete with diesel for short haul trucks and potentially long haul trucking. we estimate 50% of long haul truck sales could be cng or lng by 2025 assuming price difference between the natural gas and oil remains in place. this scenario could result

displacement of 1.8 million barrels ever diesel demand in the u.s. over next 15 to 20 years. third on the supply front, both natural gas and oil production are growing in the lower 48. canadian oil production also continues to grow of the we estimate u.s. and canadian oil production could go by five million barrels a day through this decade. the growth this lower 48 production which began in the middle of 2008 he resulted in price discounts on u.s. and canadian crude and global benchmarks of 20 to 40%. however as more logistics capacity has been added we've seen a moderatings of these differentials more recently. 4th, the growth in oil supply is resulting in a record buildout of pipeline, rail and marine infrastructure to deal with changing flows of crude oil in the u.s. and canada. despite the delay in keystone xl pipeline, the industry is working around the issue. crude oil movements by rail have grope exponentially over last few years and continue to grow.

pipeline bottlenecks in the midwest and south are unlocked with new and expanded infrastructure. as more domestic crude arrives in the gulf coast by pipeline and other markets by rail, regulations such as jones act increase cost of delivering crude to u.s. ports and potentially increase price of u.s. gasoline most notably on the u.s. eastern seaboard. increase of crude by rail could result in safety incidents. third party data, rail has four times the incident date than pipelines. fifth, the ethanol mandate continues to grow however gasoline demand continues to contract and u.s. pushing mandate toward the blend wall. as a committee knows refiners meet their mandate through the ren system. currently there are winners and losers in the market we estimate the liability to the industry to grow grow pushing prices up and potentially gasoline prices as refiners pass on the call of the rin through it is relatively traded and few participants compared to other commodity markets. unless the supply increases

through more e15 sales or reduction in the mandate we see rin prices continuing to rise through next year. growth in hydrocarbon production is positive for u.s. economy. put the independent refining industry on the low end of the global cost curve resulting in massive increase in exports. infrastructure is being built out to deal with production growth resulting in job growth and higher economic activity. the crude oil and products market appear to be functioning normally and providing the right incentives which we estimate will push the u.s. into energy independence by the end of the decade. regulatory hurdles such as delaying keystone xl and higher rin cost add friction to the market. nevertheless the ine industry workings around issues with higher cost in doing business. thank you for the opportunity to testify. i look forward to answering any questions you may have. >> thank you very much, mr. kahn. i want to thank all of our witnesses. we have had 10 senators come in and out on a hectic morning. we'll go back and forth and i

believe it will be possible to keep things going. let me start with the question of why the lower cost new oil supplies is not packed on to the consumer? i want to start with you, mr. sieminski using a chart from the energy information administration. the chart shows that on average 67% of the cost of a gallon of gas at the pump is the cost of the oil that goes into it. and for diesel, that's 62%. now the second chart, that i want to hold up shows what industry leaders call the crack spread. that's the difference in price between what a refiner pays for crude oil and a price a refiner gets for selling the gas in the diesel fuel it makes. now this chart was based on analysis that was done for the

committee. i ask unanimous consent to insert this congressional reserve service analysis in the record. without objection that i will will be done. now the refineries in the midwest and the rockies, what are called pad 2 and pad 4, which have access to the lowest cost oil from north dakota and canada, have the biggest margins. $39 a barrel compared to $14 a barrel on the east coast or $25 on the west coast. those are the annual averages. in some months, for some refiners the spread in pad 2 and pad 4 has been considerably higher. in the $40 and $50 range, roughly a dollar a gallon. 42 gallons of course in a barrel of oil. so we are talking about record level refining margins. let me repeat that. record level refining margins and while they are not all

profit, certainly a lot seems to be. so the flip side part of the story, lower crude oil costs from these new sources of production are not packed through the consumer. so mr. sieminski, to begin, why aren't consumers seeing the benefits of these lower crude oil prices when two thirds of the cost of a gallon of gas is the cost ever the oil used to make it? >> senator, the purpose of that graphic, of the gasoline pump is to try to provide some illustrative knowledge to any user of eia's data as to how the price of gasoline has to include the cost of inputs like crude oil and ethanol as well as refining and distribution margins and state and local, federal taxes. so we try to provide some

breakdown for that. if you, if you come back to the basics of your question it's virtually every group that know that has ever studied product markets believes that product prices are are being set in the global market. so the price of gasoline in a sense is a global price. it's not a local or regional price in the u.s. so what that means is, is that, if there are lower crude prices in the midwest region of the u.s., that is going to be reflected in refining margins as your chart i will list straits. so what the difference in price does allow is some ability of those refiners to begin to upgrade their facilities to do things like make better use of light sweet crude oil that's being produced. one thing i do want to say.

i think consumers are benefiting from the growth in domestic oil production. two million barrels or so we've seen just in the last few years has added to global supplies. increases in oil production from any source around the world including from the united states tend to hold oil prices down. in your opening remarks you talked about prices having reached $147 a barrel back in 2008. i think that, that it's fair to say that spare capacity in opec, which was very low back in that time period, is rising because of increased u.s. oil production. that means international oil prices are lower and consumers are probably benefiting. if you said, if they were $21 lower, that would be 50 cents a gallon of gasoline lower. prices that consumers are benefiting, if you could say that international prices are $20 lower.

>> my time is about up, mr. sieminski. let me perhaps just ask it in this context. having been on this committee for a long time we've always been told that the price of gas is related to the price of oil. my sense is based on this kind of evidence that we're seeing, that may no longer be necessarily the case. >> well it is related to the international price of oil. >> and we're going to be asking about that in the context because my time is up about keystone as well. i just am troubled with the basic proposition that really questions with what we've been told around here, and that is, when you have have new oil supplies, you have new oil supplies, the consumer at the pump is supposed to benefit and

we're not seeing that in too many instances and we'll explore that. senator murkowski. >> let me just continue on that vain because in my opening statement i alluded to the belief that increased american oil production or domestic production here, which i mention is up 30% over the past five years, has reduced or at least restrained prices at the pump. we can speculate as to what it might be but, it has been my contention we've been at least able to hold it down. mr. sieminski you have clearly indicated that you would agree with that statement. i would ask the rest of you, if you agree or, with where i'm coming from on it. do any of you think that supply is irrelevant to the market price that we're seeing? any disagreement there?

okay. i will take that as ascent. let me ask about the issue of what we're seeing with these spiking ren prices. i think a lot of us are concerned about what we're seeing here. i written to the epa on what has prompted this rise. mr. klesse, in your comments you mentioned that valero may see $750 million increase this year alone due to the spike in ren. i ask you, i ask mr. kahn as well.

mr. kahn, you said the rin price could cut refiner margin by 35 to 50% this year. explain to the committee, if you will, where we are going with prices to not only to the refiners but ultimately then to the consumer if we are not able to get this under control to use your terminology, mr. klesse. and mr. kahn, if you would also comment. >> so the obligated party under the program as refiners and importers as was mentioned, gasoline demand has been falling. so now it's flat but down a lot from the 2007 law. so, because we're the obligated party, we can only blend up to e10. that is the accepted in the marketplace. car warranties.

it is a well-accepted product. we do have some e85 in the market. however when the law was passed the amount of ethanol is going up and it is increasing every year. because we're at e10, you can not and the amount of gasoline in the marketplace, you are not able to blend to the mandated volume. now, we are an obligated party as importers. blenders are not the obligated party. blenders generate the run. we have a situation where we're the large merchant of spot market gasoline. then we have to do that we have to have a rin, because we have a renewable obligation. blenders generate the rin. to level the playing field it should move to blenders should

be the obligated party t would be a level field. however, that would still not solve this difference between the mandated volume and the blend wall. and then in going to e15 just does not make any sense for the consumer. car warranties do not approve it. so you would be asking us besides the pump question and other questions, to sell a product that actually is not approved bit car warranties. >> go to mr. kahn. >> thank you. there are two-pieces of legislation that are causing the situation to happen. the first is the rfs mandate which initially envisioned higher gasoline demand for the foreseeable future. so we were able to inincrease the amount of renewable fuels into the gasoline pool. the c.a.f.e. standards envisioned sort of declining gasoline demand. so you have two opposing pieces of legislation that are causing what we call a short position to take place in the rin market.

as we get into next year and as we pass the blend wall, what we end up see something this increasing short position and liability that refiners end up with. and that in theory can be passed along to the, to the retail, retail buyer of gasoline as refiners try to pass along the cost of rin producing gasoline into the market. >> and as, my time has expired. mr. kahn, have you updated your numbers to reflect the impacts that we could see if the rin remains at the current price of above a dollar? >> no, we haven't. in our previous, in our testimony we stated it could impact the earnings of our the refiners we cover by five to 15%. that was at a much lower rin price. certainly rin prices have moved up. those prices could move much higher than we have in our numbers. >> thank you, mr. chairman. >> thank you, senator murkowski. i believe we have time to get in questions of our next senator, senator baldwin. as i say we'll try to keep this,

keep this going. senator baldwin. >> thank you, mr. chairman. i want to start by thinking you, mr. chairman and ranking member murkowski for such a warm welcome to the committee. i'm delighted that my appointment to this committee as coincided with two hearings, last week, and this week, that are so incredibly relevant to my home state of wisconsin. on the topic of today's hearing, it's particularly timely for people that i represent in wisconsin. residents of milwaukee saw a gas price changes over 60 cents per gallon during the month of june. and,. i want to go into a little more depth on a topic a number of you

referenced in your formal testimony of refinery outages. the energy information administration has attributed the recent price hikes in the midwest to refinery outages. analysis by the federal trade commission concluded that a planned shutdown of a refinery adds two to seven cents per gallon to the price of gasoline and in the event it is an unplanned outage of refinery it can be twice that amount. we also know that recent planned outages put an unnecessary squeeze on prices when multiple refineries go off-line at the same time as has happened in the midwest. meanwhile the impact on consumers who are planning their budgets, their tight budgets, month to month, planning on

travel needs and businesses that are trying to predict their expenses, this is extremely disruptive to them. we've heard through testimony and discussion of these temporary outages that they were the result of a lack of information, a lack of transparency. and i think we should be able to do better and so i would like you to perhaps touch in greater depth than you did in your opening testimony of what information-gathering and planning can be done in a transparent way to make sure that consumers aren't bearing the cost of these kind of refinery outages, the planned ones that we saw earlier this year. i know there is policy in the 2007 act that the information collection has stopped in recent years as issues of funding for that role. if you could please elaborate.

i know my constituents are eager to hear. can we start with you, mr. sieminski? >> sure, senator baldwin. first of all, you're absolutely right and back to senator wyden's concerns about gasoline prices, eia found recently in a study that we published on, today in energy page that gasoline prices for consumers are reflecting the highest percentage of their budget that they have all the way back to the 1980s. so it's a very high price that consumers are paying and it definitely is impacting their budgets. on the federal tray commission study what "the ft" c found was that the spring and falling when margins are particularly low,

the last plant turn around is generally associated with more unplanned outages. if you try to delay repairs to meet exigencies that come up it can be worse. it is very clear outages have an impact on gasoline prices and it's a worse when utilization rates are high. eia was asked by law to collect information on planned refinery outages. so we had a report that we did twice a year just ahead of the turn around seasons in the february and and in the fall. what we found was that that report, although it helped provide some information, really wasn't sufficient to enable consumers or anybody else to manage the pricing situation. we had to stop doing that

because of a huge budget cut that eia suffered in 2011 and we just had to rank the things that we were doing in priorities and, if we could get that going again i think it would help us understand the markets better. i'm not sure that it would completely address the situation of dealing with the volatility that is inherent in markets like these. >> here's where we are. we have three of us who need to vote. i want to say i'm going to work with senator from wisconsin. she is making a very logical point about transparency and information-sharing. senator barrasso will try to get a question or two in. he needs to vote. we'll see if we can keep this going and i thank my colleagues. senator barrasso. >> thank you very much, mr. chairman. i have a number of questions, perhaps, with your permission, mr. chairman i will allow to submit these for the record. i wanted to ask mr. klesse. you cited problem with the

renewable fuel standard. i introduced legislation to repeal the entire renewable fuel standards. you and senator murkowski both mentioned higher rin prices related to the fact that the renewable fuel standard requires refiners to blend fuels specifically, embryonic stem cell ethanol that is not in large did, cellulosic ethanol. they were refining a product that wasn't available. could you spend a little built of time how valero arrived at the position that congress should now repeal the renewable fuel standard? >> i do support that. we should repeal and start over. the situation has completely changed as was highlighted on the panel. gasoline demand, energy security, is entirely changed. >> you have a specific level of, i believe, additional credibility on this because of valero having a number of different components of your

markets. >> yes. and we are the third largest ethanol producer. and we actually do believeth noll will continue to be part of the fuel mix. it is just this continuing drumbeat for more and more of products that are nonexistent and, if you think about it, there are implications if we went to e15. it will be corn-based driven, which sure works in our interest but there is some responsibility for food prices around the world. >> i regret i'm going to have to run and vote two. there is only two minutes remaining. if we can stand adjourned until senator, chairman wyden returns. thank you.

>> the senate energy commit will come to order. as our colleagues return from a vote. we'll start the hearing. restart i should say. thank you all for being patient for the vote. senator franken is next. we'll let you go with your line of questioning. senator franken. >> thank you, senator. first, i think it has been pointed out by the, in testimony, there are many reasons for gas price volatility. senator baldwin brought up refinery closures. the chairman gave me a bit of a shoutout to keep an eye on that. needing more data to monitor those. so what happened in minnesota didn't happen. there is geopolitical issues,

hurricanes. speculation. supply demand factors. and i don't think it's fair to blame the renewable fuel standard, which is the backbone of our renewable energy policy and, i don't think it is the time to attack the rfs when a number about sell you loss sick plants are expected to come on line -- celulosic. the policy is helping to wean us off foreign oil and i think that's a good thing. speaking of weaning us off of foreign oil, mr. sieminski, you testified and so did mr. hume to the dramatic growth in oil production in this country over the last several years. can you tell us how much of this increase from onshore production is coming from shale and related

type geological formations? >> senator, we think that virtually all of the growth that is coming from light sweet crude oil production that is being produced with, from the shale formations. >> and i think mr. hume would agree. and you spoke of this renaissance in oil production. can you tell is whether hydraulic fracturing and who are respond al drilling are the -- horizontal drilling are the primary tools to fracture these geologic formations to get hydrocarbons out? >> yes, senator franken. the greatest thing that has made the change is horizontal drilling. we've been fracture, treating wells, since before i was born. it, when i was a, i grew up in oklahoma and they were driving frac trucks in front of my home when i was very young. so hydraulic fracture something not new and horizontal drilling

is. it allowed us to economically access low permeable rocks. started with the shale gas and we're in tight sandstones where finding this light, tight oil. we have very repeatable opportunities to continue growing this source for the next 10 to 20 years and beyond. >> well, i would like to point out to my, to my colleagues that the reason we're seeing, and we all go back and read the testimony. we read the record very thoroughly, all the members. we, the reason we're seeing the dramatic increase in production is because as early as the 1970s the federal government invested in the research and development that led to hydrofracking. some of my colleagues frequently criticize the government's role in developing new technology but as it turns out the federal

government played a huge role in developing the technology that is being used today in the bakken formation and in other areas. the federal government supported research and development of this technology as far back as 1970s through the eastern gas shales project. in fact, micro seismic imaging, critical tool used in fracking, was originally developed by san diego national laboratory a federal energy laboratory and a horizontal drilling as well. and, and that's what we have been experiencing. that's the reason for this renaissance, is it not? >> that is correct. >> mr. hume, can you tell me what fraction of shale oil resources in the bakken formation happen to reside on

non-federal lands, roughly speaking? >> i think it's very small portion is on federal lands. i would estimate, less than 20%. the majority of the acreage we hold is on private lands. >> i think that's consistent with data from the center for western priorities which found that around 90% of all onshore shale oil and mixed oil and gas resources are found under non-federal lands. so the reason we're seeing a bigger increase of production on private and state lands is really because that's where the majority of the shale resources are and that was technology again that was developed by the federal government. i see my time is up and i will back to chairman can't well. >> thank you, senator franken. i want to thank the chairman and ranking member for holding the hearing and it is a very

important issue and for all of you being here today. obviously high gas prices on the west coast and supply and demand issues is something i've spent a lot of time, my office spent a lot of time on and here we are again with prices approaching $4 per gallon in washington state and it is starting to, when it gets to that point it starts to eat into our economic growth. so up nine cents in the past week, washington state prices are among some of the highest in the nation. 27 cents above the national average. a new report by ma cull law research confirms something we suspected all along. during the past year, west coast prices have ceased to follow the crude oil price. i think my constituents would get it if there was a supply and demand formula they could follow here but they can't follow one. i would like to enter into the record the report to illustrate some of the peculiar behaviors on the west coast petroleum

markets over the last year. the report also underscores the need for continued real oversight and investigation of refinery shutdown announcements. we found last year that in a west coast refinery fire that everybody said, oh, well, this is the cause of the spike when in reality data showed that refineries weren't off-line but actually were still emitting, which raised a lot of questions about who was actually following these markets and the transparency. i believe that eia should play an even bigger role. but what we need to know now what has caused these recent spikes. on october fist a seeming minor problem at exxonmobil's torrance refinery, led to almost instantaneous increase in wholesale prices in california, adding up to 50 cents in less than a week. a power problem that only briefly interrupted operations is supposedly blamed for one of the highest price spikes in a

decade. i agree you when the implosion happened in the gulf, if the prices spiked that much the nation would have taken action. so my question is, when these prices spike to this level, in both cases crude oil prices were either level or falling and during the highest price spike inventories were either increasing or remaining at a historic five-year averages. we're not following supply and demand here. my constituents very much want to see more transparency there. mr. plaushin, in your testimony you mentioned high degree of volatility due to refineries. mr. gilligan and you cited reasons. but just as these shutdowns seem to be hitting the press, what do you think we need to do to get more transtear currency in the -- transparency in the market? >> we supported senator dorgan's

amendment in 2007 to try to get eia more involved in communicating about refinery scheduled maintenance and outages. it is really, it is the unplanned outages that really tear up the market. i think in the upper midwest there were two or three refineries that were down for maintenance and generally that was understood. then all of a sudden you had i think a serious problem in bp refinery in whiting. and then another refinery outage and all of sudden you had a catastrophee on your hands. we think, we think we need to take baby steps to see what can be done to improve communication and planning so people are more aware of what potential problems could be. so we, we're ready to sit down and talk with, with you and committee staff about what kind of things eia might be able to do to help, to help everyone

accommodate those changes, the outages that are scheduled. >> i mean do you think that the country would have stood for, if we had the gulf implosion and everybody being shut down, 10 other refineries in the united states saying, oh, i had planned maintenance. so i'm going to go down? do you think we would have put up with that? >> i think certainly to some extent, and certainly valero knows more about that than i do, there is a life safety issue. they have to go down for maintenance or they could risk injury to their employees if they don't do the right, so you have to weigh that into it. it's not, it's, it's not that simple and it can be very complicated. >> four or five refineries going down at the same time? >> well -- >> first off, valero announces its turnarounds, planned turnarounds. we announce them actually for the financial community because

they're very interested in them. there are also services that actually aggregate them and put them together. but i think your question was addressing more of, we have a spot situation and all of a sudden the markets move dramatically. and it is actually the expectation. supply and demand is there but it's the expectation. so when torrance in your example had an issue, or an i'm not sure what actually happened in washington, when you have these issues because refiners are larger today, we have inventory in the system but there is immediate expectation in the wholesale markets that then goes through to the retail markets of how long are they going to be down? because this is a commodity we're largely imbalanced in the system. so when some of the supply comes off, the expectation it will be tighter and all of a sudden you get prices moving. and then if you will notice, over time, the, depending on

getting it there, the prices come back down. >> well i think it is one of america's most important commodities and probably least-regulated. hamburger probably has more regulation on it than gasoline. the fact that this price spike can happen without real supply and deman issues is a problem we have to address. i see the chairman has returned. mr. kahn, i wanted to mention, the fact that you bring up the jones act as something of a price increase, citigroup has been under investigation and paid penalties both for fraud in the mortgage market and is now under investigation by the fsa for manipulation in gas prices. the fact that you come here and blame the jones act as some reason why we have high gas prices is just amazing to me. thank you, mr. chairman. . .

served the great state of michigan well, and i would have supported those things. not the same thing on by yo