that in part because of this enhanced security, we the united states are no longer the primary driver behind the world oil markets and prices. as our production has gone up in the past few years, oil prices have gone up as well. the u.s. became a net exporter of refined products in recent months, yet consumers are still paying higher prices at the pump. that's why i hope we can use today's discussion to understand broad energy trends in the u.s. and around the world. my view is we need to understand not only how to make the u.s. less vulnerable to all disruptions but understand what events and ambassadors actually affect world oil prices. we have a panel of four expert witnesses today who can help us understand the interrelated markets for oil and for all of our energy sources. we'll start today's discussion with dr. howard gruspecht, the

acting administrator of department of energy's energy administration and he will share the highlights of eia's latest short and long-term energy market fok forecast. this committee is a effie consumer of eia product. we always appreciate having eia share its data and knowledge with us. president obama has nominated adam somins sk ky to become the next administrator of the eia. in the meantime we very much appreciate dr. gruens sp echt being here to present the iea's position. next we'll hear from ambassador jones, the deputy director of the international energy agency in paris. we look forward to discussing iea's forecast of total world energy supply and demand outlook through 2035.

i also note that the iea was founded as a forum for responding to oil supply disruptions and still has an important role to play in that capacity. given the current geopolitical environment, we are especially grateful to be able to have ambassador jones here today. we also are pleased to have with us two leading energy analysts both of whom have been before our committee on several other occasions. both mr. diwan and mr. burkehard can offer their own thoughts and insights on where the oil marks are headed. they each have considerable expertise in the geopolitics of oil. let me defer to senator murkowski for any opening statement she has. >> thank you, mr. chairman. i appreciate you convening this very important hearing. it's really a scene setting hearing for us here on the

energy committee. in looking at the panel before us, i welcome you all back, recognize that this is a welcome back. we're almost on to ground hog's day here answered would suggest that this is not going to be a repeat of what we heard from last year. as the chairman has noted, there has been a lot that has changed from the last time we convened. the conventional wisdom here is that this congress cannot accomplish any major energy legislation now that we are into -- full on into an election year. i think that that would be a disappointing finish for us, but it doesn't mean that the rest of the energy world is going to be grinding to a halt. decisions are still being made or perhaps not being made on a daily basis about where energy can be developed, who's going to buy it, how it will be transported and all of those decisions of course have consequences for jobs, for our economy and for the prices that

we pay for our energy need. those of of you who have joined us will help us understand the major trends taking play placed in the u.s. and global energy poll spip whether we're talking about china taking steps toward proving up its shale gas resource, which by some estimates is larger than our resources in the united states or where we were talking about the strait of horm use, we can all acknowledge they could have impact on the every day lives of americans. i'm interested whether there's a challenge to conventional wisdom today. when oil prices peaked back in 2008, we here in congress talked a lot about it but you didn't see much in terms of policy changes. we should take a lesson from that experience and recognize times of relative stakt are an tonight to recall what we said in times of crisis. it's times like now when we're able to have a more reasoned discussion that i believe we

should seek to develop a coherent policy and then act on it. i'm particularly interested in whether the u.s. can holding together and truly see through this natural gas ref luce that's risen to the top of our energy discussion. technology developed here at home has allowed to us tap the abundant resources that we have and we're faced with some pretty good problems actually. what to do with all the garks how to handle its rapidly expanding development in a sustainable way and how to keep growing in this space without self-desfrukting through the misguided regulatory or fiscal policy reactions. so for obvious reasons i'm going to be asking this morning where alaska fits into this picture, our very unique geographical position, our huge resource base is well placed to satisfy some of the export demand for u.s. gas. so i want to understand the context of this against the concerns that many others, including some on this panel have regarding the lower 48

assassinateos. i think it is appropriate and timing is everything but it's interesting to talk a little bit about what we know about this resource. the president in his state of the union address just last tuesday indicated that this country has potentially a hundred year supply of natural gas. in your new estimates, the marcelis shale, which we previously thought had enough gas to meet the entire nation's demand for 17 years at current consumption rates has been revised downward to a six-year supply. so it seems like the numbers are all over the place. i think it speaks to -- it speaks to the fact that you've got changing technology, you have increased exploration that allows us to understand a little bit more about what we're looking at in terms of the reserves but it does go to the heart of what you all deal with and that is understanding the numbers, understanding what

we're dealing with in terms of supply. a long time before the pred agreed for those of us calling for an energy policy, it became ef the u.s. does matter in terms of influences world energy trends and determining our own fate. if an emergency or disaster does occur, there's a strong likelihood that the rest of the world will look to us for leadership and we've got to be ready for that. so i'm hopeful this hearing will help inform not on this committee but others of patterns developing and help us to see where we could act, woor we should act and where the best investments for our very limited federal resources might be. i look forward to hearing from each of you this morning and the discussion that will follow. >> dr. gruenspecht, time the time in you need to summarize your annual report, your outlook

and we'll hear from ambassador jones. >> thank you mr. chairman and members of the committee. i appreciate the opportunity to appear before you today. the energy information administration is the statistical and analytical agency within the department of energy. eia does not promote or take positions on policy issues and has independence with respect to the information and analysis we provide. therefore our views should not be construed as representing those of the department or other federal agencies. >> starting with the short-term outlook, eia expects the global market will rely on both increases in production of crude oil and non-crude liquids and a draw on inventories to meet world demand growth this year. the price of west texas intermediate crude oil is forecast to average about $100 per barrel in 2012, roughly $5 above last year's level. uncertainty, such as surprises in economic growth or geeio

political issues affecting middle east fliers that were mentioned in the opening statements could push prices higher or lower than projected. the market believes that there is about a one in eight chance that the average wti price in june 2012 will exceed $125 per barrel and about a 1 in 25 chance it would exceed $140 per barrel. on a related matter to geopolitical issues, eia is working diligently to meet the february 29th deadline to submit to congress a report on the availability and price of petroleum and petroleum products produced in countries other than iran as required under the national defense authorization act. this is a report that we are to prepare every 60 days. the first one is due february 29th. >> turning to consumer prices

and, pend turs. ia has lowered its forecast of average household heating expenditures this winter due to warmer weather. our baseline forecast for average gasoline prices in 2012 is slightly below last year's level, about a nick ale gallon. although recent options and futures price data imply that the market believes there is about a one in five chance that the u.s. average pump price of regular gasoline will exceed $4 in june of this year. the idling of three refineries orrin east coast could have an impact on regional prices, especially as the market transitions to new sflie sources. it's another issue that we are watching closely and i know there's a lot of interest in congress. i will now turn to the longer term projections from our new annual energy outlook. the reference case represents an

energy future reflecting current market and technology trends, current consumer behavior and existing laws and regulations. eia recognizes projections of energy markets short term or long term are highly uncertain and cases addressing a variety of alternative market, technology and policy scenarios will be released this spring. in the new reference case, increased domestic oil, natural gas and renewable energy production coupled with energy efficiency improvements reduces u.s. reliance on imported energy sources. in the outlook domestic crude oil production is expected to grow by more than 20% over the coming decade. again, alluded to in the opening statements. net petroleum imports as a share of total u.s. like wid fuels consumed dropped from 49% in 2010 and they had been as high as 60% in recent years, to 36%

in 2035. i should note that proposed fuel economy sand ard covering model years 2017 through 2025 are not included in the reference case and would further reduce projected liquid fuels and net petroleum imports. u.s. production of natural gas is projected to exceed consumption early in the next decade. we expect reliance on renewable energy and natural gas for electric power generation to rise and putting all of this together total u.s. energy related carbon dioxide emissions are more than 7% below their 2005 level, 2005 level of something that policy makers look at often in 2020 and remain below their 2005 level through

2035. shifting to the outlook for global energy use, our latest international reference case projects world wide information consumption growing about 53% by 2035 with china and india accounting for half of the increase. while fossil fuels continue to dominate, renewable energy is projected to be the fastest growing sourt of primary energy. natural gas has the fastes growth rate among the fossil fuels and developing countries really dominate the growth in all categories of energy use. there are both similarities and differences in the international energy outlooks developed by the eia and the iea, my colleague here. starting with similarities in both eia's reference case and iea's current policy scenario to which it's most directly

comparable, world liquid production reached similar levels over the next 25 years and developing countries account for the vast majority of the growth in global energy growth. turns to differences the iea projects the opec supplies would increase to 50% by 2035. nd similar price assumptions, iea anticipate the opec narkt share would remain near its current level of about 42% and conventional and unconventional oil production outside of opec will continue to increase and a big wild card is certainly what happens with tight oil or shale oil as it's called. will that become a world wide phenomenon. also the gap between projected u.s. natural gas prices and the latest eia and iea outlooks has narrowed as the iea has cut its

price adjustment for the u.s. market over the last several years but its import prices are still more than 40% above e ima's reference case priced. at the end of the projection, our -- this concludes my testimony. i would be happy to answer any questions you might have. >> thank you very much. ambassador jones, go right ahead. on the other hand we think that non-opec oil supply and opec gas liquids, which are not subject to production restraints will

bound by as much as 1.6 million barrels per day combined. at current opec production levels, this would imply some slack in the market and recovery in world oil stocks, which are well below five-year averages after near a year of steady decline. however, it appears more likely that opec producers will trim supply by around half a million barrels per day to produce at 30 million barrel per day. this would hold inventory levels roughly where they are now, which, as i said, pretty short supply. although huge uncertainty surrounds the ability of non-opec supplied to rebound from the awful year it suffered in 2011, a lot of unplanned outages, me and many of our analytical peers believe it can. higher oil prices have put some expansion projects elsewhere back on track the application of shale technology has transformed u.s.

upstream oil prospects as the doctor said. light tight oil alone could grow by 250,000 barrels her day to reach 870,000 barrels per day in 2012. increased supply from the united states, canadian oil stands and deep water output accounts for much of the growth we see in 2011 with russia, biofuels and natural gas liquids making significant contributions. while there are of course down side risks to this forecast of non-opec supply growth, oil demand might also fall short of our expectations. recently announced revisions to the imtf world's outlook pos it's gobld gdp growth at 3.4% compared to previous forecasts at 3.9%. arguably down side risks for

demand and non-opec supply might balance each other so. opec may well try to navigate through 2012 pref duesing at or around 30 gallons per day. now this estimate of spare capacity will come under scrutiny as another looming supplyside issue for 2012 unfolds. i'm speaking of iran. the recently nanced sanctions on entities having fings dealings with the iranian central bank and the new european union embargo on oil imports from iran will clearly affect the meks of crude supply available on a regional basis, even if absolute levels of global crude supply may be impacted to a lesser gree agree. iran personally exports around 2.5 million barrels a day of crude oil with 65% going to asia and 30% into europe, mostly to refiners around the

mediterranean. a significant portion of the 1.3 million barrels per day of iranian crude imported by iea countries, which include some countries in asia like japan and korea, anyway, increasing a significant portion is likely to be affected by these measures, even if refiners will have until june or july to source alternative barrels, most are already looking for incremental supplies from outside iran, which is exactly the intent of the sanctions. in terms of crude quality, buyers are likely to seek extra barrels from saudi arabia, russia or iraq to make up for lost sales from iran. saudi arabia has publicly reassured customers it will meet their requirement, analysts raised questions over the kingdom's spare capacity, the pro torgs of arab medium and the kingdom's logical -- logistical

flexibility to reorient its exports to european refiners. ultimately refiners denied the ability to import iranian oil will most likely find the extra barrels they need but it's perhaps at higher prices than might otherwise have been the iranian authorities have threatened to institute an embargo and restrict trade through the strait of hormuz to a degree some factors have been factored into market prices. the likelihood of a hormuz blockage seems fairly low. this suggests all of those eke seeking a more tranquil market

in 2012 will be disappointed. the agency will remain vigilant and stands ready to act rapidly and decisively in f a major disruption occurs. thank you, mr. chairman. >> thank you very much. mr. burkehard, go right ahead. >> mr. chairman, senator murkowski, other members of the committee. thank you for the opportunity to share some thoughts with you today. mr. chairman, as you mentioned, 2011 was quite turbulent in the oil market because of the lebian civil war, eurozone crisis, raund the slowing global economy. at the same time in 2011 we saw the highest annual oil price ever an annual average basis. butt energy story is not just limited to high prices and geopolitical concerns. that's very important. i'll talk about those in a little bit.

but the energy story in the united states is also about creating jobs and economic growth and more domestic supply. one of the most significant stories or developments in energy markets in recent years has been what we call the great rerifle. the great revival in u.s. oil production. the long decline in u.s. production was never supposed to end but it has come to an end and between 2008 and 2011 over that three-year period, u.s. liquids pro, did yous so that he crude oil, natural gas, liquids, some biofuels, u.s. liquids production grou by 1.3 balance barrels per day, the biggestin crease during that time by any country in the world. the number two source of growth was russia, which grew by about 500,000 barrels per day. north dakota is an important part of this story.

today north dakota produces about as much as ecuador. ek what door is a member of oaf peck. i don't want to suggest north dakota is going to join opec but it gives you a sense of how big the increase has been. looking out over the next decade, when we look at the potential for the u.s. and canada combined, we see the potential for u.s. and canadian production from 2008 to 2020, over that 12-year period to grow by more than 40 billion barrels per day. that's the potential. it's significant specific we've seen peek demand. we deblooe demand fo -- imports in 2020 are likely to be well below what they were as they were in 2005. have you seen the price of oil

was $20 in 2020? given the demand supply trends, the import bill for oil could be about $182 billion less than what it would otherwise be. that $182 billion is about one third of the 2011 trade deficit. this increases in u.s. production and canadian production are not guaranteed. impacts on local communitiesnd the environment obviously need to be address appropriately. there are new questions that have been raised about the face of growth in the canadian oil stand, w important part of of this continental growth story. but the potential is significant. if it were to be realized and spread to other places around the world, it would be a -- there's a tug of war right now between slowing global economic growth and geopolitical

concerns. oil demand concern is weak, the global economy has slowed over the last year, which would seem to be a recipe for lower prices yet prices are high. why is that? limited spare capacity and geo political concerns. the oil market's shock absorber is write lowe. we estimate it's and 2 to 2.5 billion per day. so it is significantly less. in 2012 the nur annian -- the tighter u.s. financial sanctions and embargo on -- mis calculations could dead to grave

consequences. it's the supply anxiety which is a key support for high prices amid weak economic and oil demand growth. assessing the course of the market is a challenge. if the euro. >> the zone were to worsen, we can't rule out a recession this year. any oil market outlook faces uncertainties but in 2012 the uncertainties are perhaps broader than usual and fraught with risk. however, the great retrifle in u.s. oil production and gas production are sources of growth and secure production at a time of heightened anxiety. thank you.

>> thank you very much. mr. dawin, thank you for being here. go right ahead. >> good morning. it's an honor to speak to you. i will focus on what is happening in the united states. the way i'm looking at the oil market and the way to summarize what the panelists before me said is really we have a bipolar crude oil market where we have significant down side risk because of the economic conditions in europe and on the other side we have significant up side risk because of tensions with iran and the possibility to lose some supply from this market. and the implication of losing barrels from the persian gulf. >> if you look at forward looking balance, we will see

acute market tightening experienced in 2011 is not likely to be in store in 2012. demand is underperforming. we believe will be smaller whan what the iae believe, probably below a million barrel per day with significant down side. when we look at oil demand globally, all the growth is decelerate, particularly in asia it's decelerating and growth is only focused on three regions in the middle east, latin america and emerging area. the bulk of the near term weaknesses in europe and also in the united states where we have significant be structural trends of declining demand. on the supply side we had a very disappointing year last year because we had obviously the problems in libya but also a

number of problems during the summer, which we all believe are not recurring so 2012 will see a recovery of a lot of these supply and new project come online, mostly from the u.s., canada and russia. we don't believe actually brazil will be able to lot a barrels this year. there is one uncertainty we haven't talked about, which is iraq. baghdad maintains an optimistic growth on iran for 2012. in our review the iraqi government forecast is overoptimistic given the security condition on the ground. we also have to remember we're chase country last two small countries in the recent months from production, recently sudan and syria a couple months ago. we might still have problems in libya and nigeria. they're not solved. so the supply