abundant, even if we still believe we have have a million barrel a day of growth from non-opec crude and lk wid and opec liquids. we also need to talk about irannd the impact sanctions. with when we look at the potential countries that iran could divert its european supply to, we don't see a lot of them. and we don't see a lot of countries willing to be more reliant on iranian barrels. so will's a good chance by the end of the year if the eu move the iran will have to shut down 400,000, 500,000 a day that need to be produced by other producers. forcing opec to reproduce more, reducing the spare capacity, which is not very large to start with. that would make oil and market pretty nervous. finally, from the u.s.

perspective, the development of oil production and decline in oil demand mean security and reliability of supplies rising. last year i was asked where do i believe the best place continue to vest? answered answered to many of you were surprised to it's the united states. and we see that now where we have the full revolution, if you want, in gas being translated to oil. we believe by 2020 the united states will become again the largest producer of hydrocarbon in the world, surpassing russia. and what we have seen between 2004 and 2008 in the u.s. gas market, the increase in prices has allowed the industry to crack the code and release a new golden era in the new goebbels oil. . we need to think about that what you look at investment globally right now in the last three

years the u.s. has been the key area of investment flows. if you look at the last ten years, producers in the united states used to make profit here and invest abroad because they didn't believe that they can make sustainable reinvestment in the united states. what we see right now is slabtly the the contrary the oil and gas industry is making profits all oft world and investing in the united states. that's a huge change in the industry. thank you. >> thank you very much. senator manchen, did you have a question you wanted to ask? i was told you had to leave. >> thank you. why don't you go ahead. >> thank you all for coming here. i'll get right to the point. it's the xl pipeline. i'm going to ask all of you to comment. i have a hard time understanding

why this has become a political football. makes so much common sense that you want to buy off of your friends and notion enemies. i also think in going down to where we're going to do is amount of jobs. i want to hear y'all's yes or no maybe comment. there should be jobs created in the united states by this building of the pipeline. i understand that there's a difference between what the state department has done, the environmental versus the epa in conflict, our own government, if you will, is fighting among itself for whatever reasons. and next of all the ability that alberta and canadians are going to produce this no matter what. and if china becomes a player or asia becomes a player market taking this product if we don't, what it does to our security and security should be the most factor i think the main factor of what we should be concerned about. would i ask -- i think the question would i ask and, doctor, i'll start with you, if you would.

do you believe the oil sands will be developed whether we buy it or not? >> thank you. at the prices we have in our long-term projections, the sands, tar sand, call them what you will, would likely be developed whether or not we purchase. >> does everybody agree, ambassador, you agree they're going to develop the oil sands? >> i would agree with that. >> i'm sure that everybody else agrees with that, too. and i would assume that you all think that would be a job creator for america if we build it through into america? do you all agree that there will be jobs i'm sure to build a pipeline, right, so it would be a job producers for us? >> again, this goes a little bit beyond what eia does. >> i mean common sense. you're experts.

common sense. it takes americans to build it right. ambassador? >> well, you'd have an initial spurt of construction jobs and then you'd have some jobs to operate the pipelines. i'm not sure what the numbers would be. i don't know that it would be a great percentage of increase in employment but there would be some increase, viewer. >> yes, it would create jobs and i think a broader point here is the oil sands development in alberta. there are many american companies that are involved with-from-that so the person economy does benefit from further development of the oil sands as well. >> which company with benefit most? well, i think it's likely not to be billed is the case. it's very difficult to send that identity jowl side of the united states, to take if to the west coast and poise even bigger environment an concern.

let me try to answer a little bit differently. i think what we're see hearing between the development of the oil sand and the united states -- >> i hate to rush you, i don't have much time. they only give me so much time here and i'm going to have o run. but you're saying you think they're going to be held captive and we're standing that the alberta province is already meeting right now with china in order to develop this. >> correct. but it's -- from all the economics, if you look at it, this oil is most like will to come to the united states. we still capacity for the next four, five, six years to absorb in the present infrastructure of oil. >> i'm going to southern the n sourcing. we want to rebuild things in and i just talk about it west virginia has been a big player

in marcelis and the cole and all the resources we've been blessed with. if that's been down dld graded to the point of the cost of what we would marv, do you see the supply having a big impact on pricing? again? >> i think this resources story is more accurate way to phrase it because i think the numbers we're talking about are total recoverable resources, not reserves, which is a much smaller number. i think sometimes too much emphasis is placed on the estimates of recoverable resources. in fact despite this downward adjustment that we made, in fact our natural gas production and price projections are actually lower in the new outlook than in

the previous one. i would say that, you know, our -- we rely very heavily on the geological survey for informing when after we published our last year's outlook, they raised their estimate of marcelis 40 fold to 84 trillion feet. we had been using a number like 400 trilian feet. after looking at what they had done, looking at the latest well productivity data, we came somewhat higher it's lower than what we had in the last outlook

but it's higher -- recently it's a lot of energy gas, our view is that the -- our production would exceed or con sum unalso aers are -- i understand the desire to puck i think this will be an issue that we face for a long time, fotly -- totally recoverable resources is inherently a squishy concept of what's totally under there. but i think the united states has a very bright future with natural gas. >> thank you. if i may just one second, mr. chairman, if i could just ambassador, real quick. i'm concerned about the jobs that we're being capable of even producing here, manufacturing and so on. with the rising cost of our nfrg, making it more difficult to use the resources at --

>> now with the increasing supply in the domestic united states, gas prices have fallen. answered think oil prices in the united states may also be -- i mean right now wti, the kind of the marker crude for the united states is running under brand by about 10 bucks a barrel. the differentiate has been even greater in the last year with pete to 24 or 27, something like that. so relatively speaking, u.s. prices are relatively low. if prices go down that, could be a stimulus to the economy. but prices in the united states are generally lower than in other markets. already. >> thank you.

>> senator murkowski. >> thank you. there's an article come coming out of a local alaska paper saying the alberta pipeline has been taken out of the outlook reference case because it determined that the project would not be economical based on the price forecasts through 2035. and then there is another statement that says that the final 2012 outlook, which is to be issued in the spring, will in fact include some aspect or -- or will include alaska in -- alaska continues to seek to

bring its national gas to market but the full picture won't be blown until this 2012 outlook. >> in terms of the piping natural gas from alaska, it had already been out of the reference case. >> right. >> which again is just a protection. it last year's outlook and still at the prices of natural gas are -- from. >> do you take into account alaska's national gas potential and the expore opportunities for it for export. >> going forward. >> several of you have discussed the issue of spare cassity --

capacity, i think it was you that indicated $2 billion barrels per day down to five million barrels -- $2 million barrel per day and is our previous supplies. >> you have mentioned some of the supply risk fooktors that are out there. whether you're talking about iraq and their ability to move things online. we don't know with nigeria and nine strikes. you mentioned suedia when they're talking about ply rising. so i guesses question is is how far are we that we do have spare capacity in the numbers that you have referenced. and given the volatility that

you have with the supply risk out there, how are we dealing with this? you had mentioned mr. dewon. >>, keys mu. >> to a degree threat the likelihood of a large charge for hormuz transit is unlikely. perhaps what we don't know is supply risk. what -- to what degree, miss ambassador joness has the uncertainty already been priced into the market? how do we know that? these are some pretty that we're dealing with of the reliability of any kind of nsaa ascentment.

ambassador jones, if you want to sturt first and we'll go down the line here. >> well, when we look at the situation to market, we basically tonight u. prices peek around 120 i think it w they've been oscillate willing between 120 and 100 ever since. >> but if you had price stability last yeek are getting forward is a different help. >> baes been going on? we chase the corn for des rupgss have put a about the floor in the level and the concern -- y,

the -- that's -- then a ceiling is put on pryces it pro do you see -- prices. i said last year before this committee that self major recession himself been presided by an oil import bill of 5% in more. in 2007 we had an oil import girl of the world for 5 percent or. you can't look at in it ice lace. and of course if there's a supply shot arj and prices go up, that puts more burden on the economy, which incries the likelihood there will be a demand short fall because of economic activity.

what we're searing is the interplace of these two has kept the price within this range. and we think basically the price is quite high when you consider the availability of oil in the market and that's why we think that the market is including a premium for this threat of the disruption in the iranian case. >> my time has expired. but mr. burdenhard, mr. diewarn, briefly expectations about the future play a big royal ol' in oil price formation. when you look at the ted amount of swear post -- it's that limited amount of spare cassity and this fear and concern about

disrupted oil supplies that are keeping prices high. they could even i go g higher despite the weak economy. >> mr. diwan? >> i largely agree with ambassador jones. i think that men who have been working between 100 and 120 with a floor due to -- it's exactly what we're in. we have two risks going on. one is the financial disruption in europe, the other is the conflict in the middle east. that's the risk we're fairing in 2012. neither of which occur, we're very likely to stay until that band. >> thank you, mr. chairman. let me ask dr. gruenspech stlau in your sm here that they're a fuel of liquid fuels dropped from 49% last year -- not last

year but 2010, to 27 percent in 2014 and 23 by 20, by. >> this was made not including as a result of the fuel economy standards. you have calculated if these fuel economy sand ard which have been announced by the situation and which the auto industry and -- if those are included, what does that do to the percentage of liquid fuels that we have to import? >> dhaeng you, mr. chairman. we are certainly going to include that in our -- a case like that in our pulls can it

makes a significant i'd say in the 2035, liquid fuel consumption would probably be lower by million -- 1.4 million barrels a day, roughly. i'm trying to remember the number. and most of that would come out of imports. so it's a pretty big deal. >> so instead of it being then 36% by 2035, what percent would it be? >> i would need to calculate that. but i would be glad to get back to you with that, or maybe one of my colleagues will calculate it while we're talking. >> that would be a good figure because i think a lot of the effort here in congress and in the administration has been to try to put in place policies that would reduce the amount of petroleum we had to import. dr. dejuan, you referred, i think, in your comments to structural trends of declining demand in the united states.

could you elaborate on that you're talking about there? >> yeah. there's obviously gasoline story where we have more car efficiencies but also we're seeing the residential heati ii fuel oil also declining and other product. cheap natural gas, cheaper coal and the extension of the gas network will reduce the heating oil consumption, too. so you have a number of trends here for different fuels which are on the decline. but the biggest gain is obviously on the gasoline side structurally. >> okay. let me ask about the closing of refineries. we've seen refineries being closed in the united states and hawaii and the virgin islands, even in europe. what is the -- both the impetus

for this and the results that we're seeing? are we in a circumstance where we're going to see higher prices for gasoline at the pump because of shortage of refined product, even while we've got an ample supply of oil being produced? i mean, what is going on here with refinery closures? dr. greenspuch, you have do a perspective? >> i have something of a perspective. we sent -- we put a report on our website right before christmas, a little short report on northeast u.s. refining. we are expecting to provide a much more detailed piece probably by mid-february. but i guess the short answer is that certain types of refineries, you know, in certain regions are not economically very attractive. i would point out that in the gulf, there's significant

expansions of refinery capacity. and in the midwest, there have been significant expansions of refinery capacity. so in the strange eia speak, it's really pad one, or the east coast, and some places in europe, and i know also the refinery in the caribbean that -- but there's some areas where refineries are being closed, but there are other refineries where capacity is being added. you know, our concerns, which we expressed in the preliminary report we released in december is really about the transition. there's a lot of petroleum products in the world. and there's some pretty, you know, demand trends as discussed are some sense moderating with fuel economy standards, with increased use of biofuels, which reduce the substitute away from petroleum-based products. but, you know, potential

transportation, bottlenecks, logistical issues. you know, it's a challenging environment. and something that i've asked the people at eia to dig into a lot more deeply. >> mr. dewon, did you want to add a comment? >> yeah. i want to add structurally to understand what's happening here. in europe, we have declining demand which means the refining capacity they have is too big for the market they're serving. so everybody has to run a transition rate which makes the sector unprofitable. so the smaller refinery, the least profitable ones basically are under tremendous economic pressure. to shut down. the refiners are losing money, basically. in the united states, it's slightly different. we have the structural trends in demand which are shifting if you want demand and which product is in different region. at the same time, we have the shift in the crude supply was giving certain refiners location

advantage and certain refiner location disadvantage. so what we're seeing here is a shift of rate or construction of refineries towards the ones who are better positioned than others. it's really location issue which is -- which has to match the changes in the supply. so you're trying to make sure that your infrastructure is adapting to your growth of supply in the united states while in europe or the overall sector is declining and need to shrink. >> all right. thank you very much. let me go to senator brasso. >> thank you very much, mr. chairman. i graciously appreciate the opportunity to hear from his experts today. i want to thank them for sharing their knowledge. if we're going to grow our economy, we need to have access to affordable supplies of american energy. we heard that in this room when we sat and visited with bill gates not too long ago. to me this means coal, uranium, natural gas, oil and renewable

energy. so i was pleased at the state of the union when the president said, quote, this country needs an all-out, all of the above strategy which develops every available source of energy. my concern is that the president's rhetoric doesn't match the policies that he pursues. just a week before the state of the union, the president rejected the keystone excel pipeline. that's a pipeline that is estimated to create tens of thousands of direct jobs, will facilitate oil production in north dakota and will improve our energy security. it's my hope that congress will reverse the president's decision soon and get americans back on track to a more secure and prosperous future. mr. burkhardt, in your written testimony, you specifically talk to the issue of the denial of the permit for the keystone excel pipeline. you said that raises the level of uncertainty regarding the long-term growth and disposition of major sources of world supply growth including the canadian oil sands and the american on-shore output.

i wondered if you could expand on that and specifically with regard to u.s. oil production. >> sure. canada, over the last decade, has become the most important source of foreign oil to the united states by far. and the oil sands has been the principal reason for that. and so the oil sands are not just an important source of supply to the u.s. market. they've been a major source of global oil supply growth. in fact, if you look at the oil sands alone, the u.s. imports about as much oil just from the oil sands as we do from mexico or some other leading suppliers. the denial of the keystone permit does raise a question about the future pace of growth of oil sands production where it is sent. it is leaning canadian decision-makers to put more effort into exploring potential export routes to the west coast of canada which could open up the asian oil market. the more immediate question with

regard to the keystone excel pipeline is there is the u.s. mid continent is the principal market for oil sands going into the united states and that u.s. mid-continent, the midwest, is nearing a saturation point for the oil sands. there's only so many refineries in the u.s. midwest. there's only so much crude oil from canada they can take. so to expand the reach of canadian oil into the u.s., you need a pipeline to the u.s. gulf coast which is the largest most sophisticated refining center in the world. in fact, it's been an important source of export growth for the u.s. this denial does raise an uncertainty about whether that growth will continue as previously thought. >> thank you. dr. gruenspecht, i'd like to ask you about diesel prices. i noticed in montana it's higher than regular unleaded gasoline.

it's my understanding that this difference can be attributed in part to a shortage of diesel in the west and the upper plains. i know a lot of diesel is being shipped toed north dakota. can you help me understand why diesel prices are so much higher than gasoline prices in wyoming? >> thank you. i couldn't specifically speak to wyoming without, you know, without doing some more research. but i do know that this issue of diesel and gasoline prices is a broader phenomenon. there may be special circumstances in wyoming. but really in part because of some of the issues we've been discussing, demand for the petroleum components of gasoline has been sort of depressed with fuel economy and switch toward biofuels. you know, the developing world is driving a lot of the increase, you know, the oil increase is in the developing world. it's much more heavily oriented toward diesel than towards gasoline. the world mix, if you