>> 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 many 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 will, of products is now much more -- the demand growth is in the distillates. concerning senator shaheen's constituents and me since i happen to be one of the few in washington who uses heating oil. it's really that set of products, the differential between gasoline and heating oil

has grown. heating oil is much higher. and diesel is much higher than gasoline. that's driving some of these refinery changes which refineries are profitable and which ones are not that have been discussed. so a lot of these things tie together. >> ambassador jones, my final question. we just talked about global issues. i want to ask you about global coal demand. according to the world energy outlook. you say the importance of coal in the global energy mix is the highest since 1971. the port says that for all the talk about natural gas and renewables, coal, it says unquestionably won the energy race in the first decade of the 21st century. it says coal is the most important fuel after oil and that coal is the backbone of global electricity generation alone accounting for 40% of electricity output in 2010. will you elaborate on the importance of coal to china, india and other developing countries? >> well, certainly. first of all, one statistic that you didn't mention in your resume which is quite accurate

is that in that first decade, coal accounted for half of the world's growth and energy. this is truly an impressive performance. and why was this? this was largely the two countries you mentioned, china and india. where they have electrified their countries. they brought electricity service to literally hundreds of millions of people. in recent years. who have never had electricity before. and a lot of that electricity was coal-fired electricity. at the same time, china, in particular, has been wrestling with growing pollution in its cities from these coal-fired power plants. and as a result, china is eagerly looking for alternatives. they are looking at renewables. and they are looking at natural gas. but like in any country, a lot of the decisions that are taken in china on power are taken on economic basis, and coal has been a cheap competitor. and has -- and that is why it

has grown so rapidly. whether or not that will continue in the future is another question, especially now that china has aggressively decided to markedly expand their use of natural gas. but i do think th, and our projections show, that coal has a bright future as well. >> thank you, mr. chairman. >> senator shaheen. >> thank you and thank you to all of our witnesses for being here this morning. i think every one of you in your comments and projections talked about demand and how that's affecting energy projections for the future. you may be aware that senator portman and i have sponsored energy efficiency legislation that addresses a number of sectors of the economy here. can you talk about how energy efficiency is incorporated into

your projections and what increased use of energy efficiency would do to your future projections? and dr. gruenspecht, if you want to begin. >> sure. energy efficiency obviously plays a very big role in our projections. again, we, for instance, our economic growth projection for the next 25 years for the united states, i think i saw on the record of 2.5%, plus or minus. and our growth in energy use is much slower than that. like half a percent a year. so, you know, energy efficiency plays a very important role in that. i've already indicated that in our reference case projection, we build in existing laws in policies including final regulations but not new ones. in response to a question from the chairman, i indicated that even one very important proposed

likely to become final regulation would have a significant impact. there's certainly other policies that, you know, might be implemented by policymakers, which you are and i am not, that would, you know, also have potentially have effect. so yes, there's a lot of impact of energy efficiency in already. but our reference case is existing laws and policies. and so i think i would leave it there. >> ambassador johns. >> we have a variety of scenarios. we have a scenario similar to the iaea scenario based on existing policies and we also have a new policy scenario which is based on announced intentions or policies. and then we have a climate scenario that is designed to limit global warming to two degrees centigrade. in all three of those scenarios, energy efficiency plays a very important role. in fact, we believe that, you

know, looking at climate change and the need to restrict emissions of carbon dioxide, basically, we think that energy efficiency alone, with currently available technologies, can lead to at least 50% of the emissions reductions we need, if we are going to produce or prevent global warming beyond two degrees centigrade. but, of course, energy efficiency isn't just important for the environment or for climate change. it's important for energy security. it's important for economic success as well because the more efficiently you can use your resources, the more competitive you can be in the international market. the more efficiently you use your resources, the less of them you need. and therefore the less dependent you have to be on imports of foreign energy. so energy efficiency is the one thing that we see that serves all of the objectives that are important to the iaea. and we included it in our

models. we include, in the best-case scenario are the current policies. we include a relatively small improvement in efficiency. the two more aggressive policy scenarios we see stronger growth in energy efficiency. and that makes a very big difference. i can't emphasize too much how important we see energy efficiency for the world's energy future. and i want to distinguish this from conservation. conservation can be important in certain ways. but what i'm talking about is getting the same services for less energy rather than doing with less services. >> thank you. and i'm not going to ask either of you about job projections since you've pointed out that's not under your purview, but i would just editorially point out that there are also a lot of jobs created in energy efficiency. i don't know if either of you would like to add anything to what's been said. >> fuel economy