thermal units, 25 million btu's is roughly 12.5 billion barrels a day. you can think of transportation being roughly two thirds roughl. oil consumption and break it .own in those percentages we can see jet fuel picking up a little bit, and growth in the lopez and things like liquefied natural gas being used in transportation. a little bit of an increase in ethanol as a part of the motor gasoline consumption numbers. near 2005 was --ut 14 million billionaires barrels a day paid we are starting with their team .4

million barrels a day of transportation fuels. we see that low point roughly around 2030, and that is about 12.3 million barrels a day. again, this is the reference case. fuel efficiency rules begin to taper off around 2025 and policymakers decide to extend the fuel efficiency rules, we would see even lower numbers in there. we will run a side case on that this year, and that shows more of a decline than this plateau you're saying here. gas,ed that shale we're not seeing any punch a little.

by 2040, we will be over 100 billion cubic feet her day. per day of these productions of natural gas. these will roughly be half of the u.s. natural gas reduction. this is a remarkable development. haynesville, eagle ford, barnett about fayetteville, the big news is the marsalis orations in pennsylvania. it is now producing, estimated and are drilling productivity reports, this month and hit 13 billion cubic feet per day. in 2010 it was barely two bcf a day. so what is going on in terms of shale gas and shale oil production is a very remarkable development.

naturalned that we saw gas actually exceeding cold in terms of electricity generation i fueled. pasthappens in that period 2030, so that is a long ways away. that is based on current regulation, and it is very possible that we might see less coal and more natural gas replacing that call as we move out over time. coal as we move out over time. one of the other interesting things is allowing for, in our inels, considerable growth natural gas in manufacturing. so if you just look at that middle column, wendy 25 to buy less concentrate on that as a mirror term project in -- b

nearer-term projection about these are stacked up in terms of the coming growth. increaseing a huge actually in natural gas use in refining, and both chemicals and ddb food processing -- even food processing. even and other primary metals. this is an industrial reduction in our bottle that is group -- owing at 2.6% per year. the other industries are clearly taking advantage of this relatively inexpensive, certainly relative to oil, fuel. growth of three percent

or better per year in industries like primary metals. higher-level of manufacturing shipments leads to greater manufacturing natural gas demand. and all of that is resulting in positive impact on u.s. industrial reduction and gross domestic product, or gdp. this chart shows our projections for natural gas exports. so if you start at the top of the chart, and start to work your way down, you can see the numbers that are now a part of the aeo 2014. the biggest u.s. export of natural gas are exports to mexico by pipeline. to canada.ort gas

if you look below the line at the negative numbers which is imports, you also see canada listed there. we are currently at a net importer of natural gas from canada, but those numbers have been coming down, so we import more gas from canada than we export, but i think it is kind of an interesting fact of north america and the north american free-trade agreement, and our long-standing very positive relationships with canada as far as trade are concerned, that there's a lot of two-way movement in gas across the u.s. canadian border. for lng exports from the lower 48 states than we did last year. we still have a projection for alaska natural gas exports in these numbers. keep in mind, our forecast

basically, out of our national energy modeling system. they are not regularly based on permits above for example there is no current permit for exact -- for gas to be exported from alaska. we just think that the economics of that, as shown in our model, makes some sense abide to so we -- cents, and so we portray that. about lngere talking , and i'm sure is obvious going to be a question about this, so i would have a slight on it. that is what about roddick exports -- product exports? knowing that exporter of petroleum products. the numbers right now roughly 3 million barrels a day of raw that exports -- product

exports, and a smaller number of product imports. line shows the crossover point of being a net importer to be a net exporter. out, in the next two years we're seeing product exports moving up to be up toward one million barrels a day. as u.s.p more production continues to grow, and u.s. demand plateaus off. one of theine, theresting things about ability of refiners to export which like distillates,

are getting a very good price in the international market right now, is it is resulting in high refining utilization rate. they're running now on the upper 90's, and what that means is products are being produced in surplus, in fact gasoline, there's enough gasoline around in the u.s. now that prices have actually been relatively moderate, or below last year's levels at this time. and this brief run through of our major conclusions with a thought on energy related co2 emissions. we think that they will remain below that's 2005 -- that 2005 peak that you see when we then plateaued racially at roughly 6 billion metric tons.

roughly 6 at billion metric tons. this can, combination of several different things. for granted gdp, we know that downturn an economic in the u.s., and that hadn't impact on energy consumption, and output. but more importantly, in digging forward, weoing are assuming that economic growth in the u.s. will run at about 2.4% are your growth, but even with that growth but we are not seeing anything near that in terms of growth in co2. is aeason for this combination of less carbon ,ntensive fuels, so natural gas continuing to substitute for coal in the utility sector,

and growing efficiency in the consumption side, like comedy miles per gallon a car can get them and how that is late to the consumption of petroleum feels. a combination looking forward of fuel efficiency and continuing substitution of lower carbon fuels for higher carbon fuels, including renewables, makes a big difference to u.s. carbon dioxide emissions. , well,at, i'm going to let's see -- let me just go through a couple of these things regionally -- racially, and then we will end. we will have plenty of time for q and a. ons shows u.s. dependence

and the liquids difference in domestic supply. this is not just crude oil production which is above 9 million barrels a day. a little over one million barrels of day of refinery gave her that is a volumetric increase that you get in refineries when you put crude oil through and get white products like gasoline and at about a million barrels a day of biofuels. gas liquids, refinery gave bad biofuels, we're going to push up total liquid production in the us to not quite a bit close to 60 million barrels a day of fuel supply. and demand will be running 20 million barrels a

day, that is going to shrink the of our liquidon fuel supply to a number that is aroundto 25 are sent, 2016, 2017, from numbers that as recently as 2005 for close to 60%. that's were close to 60%. this shows that break down of productionil numbers, and you see the big impact of the yellow line by the tight oil output. other crude oil production holding relatively steady, and the net import number, including blackls import, that dark space at the top, shrinking over time. thoughts in the

transportation area is the growing possibility that we are going to see natural gas in use as a transportation fuel. natural gas in the transportation your is inspected ,o grow quite a bit of output finding its way into freight trucks as lng, as well as rail and marine uses. continuing use of compressed natural gas in light-duty vehicles and buses. on the left-hand side is trillion btus, on the right-hand side we have put in some numbers on billion cubic they today. so reaching something like 2.5 billion feet a day of use from numbers that are currently literally an order of magnitude less than that, fairly impressive growth expected there.

thinking about natural gas, let's look at some of the numbers there. we're seeing an increase in our projection of natural gas prices from levels that are near four dollars a day reaching five dollars roughly, a little bit under, by 2018, and moving up over time. crude oil prices going up faster, and the net result of that is the oil to btusatio done in continues to favor natural gas. you end up with a number that is forecast and the what that says is that natural gas per million btu is only a third of the value of oil on a btu basis.

that is what's leaving to the ofle idea of substitution natural gas into the markets that would have typically been liquid fuels. ,et's look at the supply demand and net export numbers. we still forecast that the u.s. is going to be a net exporter of natural gas. i think last year we thought 20at it would be roughly 20 when that would take place, now given the higher metro gasp section numbers, mainly that higher natural gas ,roduction numbers, mainly

even with consumption growing, allowing for the ability of exports. by the time we get to out to 2040 we are looking at fairly significant levels of lng exports. this take a look at where u.s.s going across the economy. gasn, growth in natural being used in electric power, in the industrial sect or, and manufacturing, although it looked in our models that there was a fairly healthy spread of natural gas conception in the industrial sect or her entire group in consumption.

growth in transportation and the growth in the commercials like there. one of the reasons for that is that electric key fobs are efficient and taking market share. let's talk a little bit about electricity. the main point to be there is that the growth in electricity demand that we see looking out towards 2040 is still relatively low, and little bit less than one percent. you can see the left-hand side of the table from 2013 to 2040 it is .9% are year. one of the things we have done here is shown in electricity use, that is the blue line, and the dark blue trend line along with gdp or u.s. gross to met

the roddick, and the trend in that. se see three distinct period in this charge. the time from 1950 into roughly when electricity demand was typically outpacing growth in gdp. 80'stime from the mid-19 to 2005 where they were going -- close to each other, and then does time since 2005 where we see gdp growing faster than electricity demand. there are a number of interesting points to be made in this. despite new nuclear capacity, the share of nuclear power in , and welined slightly

will see that on the next slide. but that one percent growth in ansumption does not allow for huge increase in renewables or other fuels, unless you push something else on the system, like nuclear, or coal, or natural gas. so let's look at that length, applere is the split, grass growing from about 30% of electricity generation -- natural gas growing from about 30% of electricity generation to about 35%. renewables continuing to grow across the entire time. percentage down in timeout to 2040, and nuclear essentially doing the same thing.

what about non-hydro renewables? very strongto see growth in wind and in solar. we are going through over the next month or so take a look at the solar numbers to try to better understand improvements in solar costs that have been going on, to see if we might be not overestimating but possibly underestimating growth in solar power rate one of the things -- solar power. one of the things that keep these numbers looking relatively low in comparison to some of the other growth here is that tax credits keep going in a nd out. tax credit for

both wind and solar, and the changes they can make their, and at theatment of solar regional and local level will be another important factor. stop, -- amng to now going to stop, and if you will come to join the, we will see what kind of questions you all have. how we might be of further help to all of you here. >> we will have some mike's

coming around, i believe. we ask that you would identify yourself for asking your question. down here in the front? >> brookings. ? >> hold on one second. >> thalia manager from brookings -- charlie from brookings. renaissanceustrial we see in some of your chart, why do you think it is that gdp may not be able to grow faster than the 2.4% you used on average over your timeline? answer to think the depends on what assumptions spillover the the

benefits associated with the increase in to the rest of the economy. there are sort of two different camps in this area. gas is athat oil and u.s. economy the that is still relatively small, and therefore increases in oil and gas production don't completely change the nature of the u.s. economy. to economy is continuing move structurally away from things like manufacturing, and so that lower percentage is part of the reason. thatery reluctant to say it is small, and therefore that't matter, because

phrase, a journey of a thousand miles starts with the first up, anything we do in terms of improving out but ultimately has to show up in gdp numbers. i think that the modeling of this will just again to get underway that is just beginning to get underway. i can't hear you. let's wait until the screen goes up. if that's working, herman, go ahead.

>> congratulations on another excellent and very interesting set of forecast. i have to wetjen's, one on the oil side, one on the gas side rat. some analysts believe that we can see in the intervening time, high with aens production scenario being? ? areprices and gas prices much remaining in the range of side a littlee too pessimistic based on that assumption? theet's start with sensitivity of oil production to prices. clearly there is a sensitivity. -- thealready seeing

,orecast i had was for brent crudew more recently, prices are selling below brent. we're still getting the growth and output. a number of companies and analysts have tried to look at this on an individual company basis, and there are analysts that believe shale oil production in general is probably -- continues to be profitable below $90 a barrel, down toward $80 or $85 a barrel. from field to vary to field, and company to company.

those calculations are they stalling cost assumptions that continue to change as the check algae improves -- technology improves. getrilling rig efficiency better, and as well productivity gets better, the overall cost structure for shale looks like it could continue to come down. that could make a difference. there are also geopolitical might set a lower limit on oil prices. life could get very difficult from a revenue standpoint among some of the big oil producers around the world about as oil prices drop. for some countries it is the total social cost of producing crude oil that is important, and those numbers are probably higher than what the cost of shale production is in the u.s.

the other question that you had that three that gap ratio in the etu cost of oils -- oils, ursus natural u.s.,roduction in the y doesn't that lead to incentive for further penetration of natural gas into markets at his door coolly -- that have historically been held by your oil? the answer to that is yes. it isn mind that since mostly in the transportation sector, certainly in the u.s., we're seeing the substitution taking place over time. getting the infrastructure in place to be able to use lng and compressed gas in the u.s. takes

time. are likelyth rates to be slow, could accelerate as infrastructure begins to get built out. this is the first the first year that we have incorporated a forecast for marine and rail use of natural of, likely to be in the form lng. we know there are a number of shipbuilders and rail companies who are looking at this right now. >> good morning. thank you for coming this morning. i had a question on your ethanol data there. if there was a,

demand or consumption increase, given the reduction of emt and the current relates -- regulation with ethanol blending, i just wonder if you could clarify that for me. quick sure. we will have more to say about that once the epa comes out with their 2014 figures. that ethanolng in theow a little bit motor fuels pool, mostly gasoline, and we are basing it on a view that says that in the past the, getting blend wall is not easy among -- not easy, so growth will have to come in cars that are capable of 85.ng e-15 or e-

the answer to that is similar to the discussion we just had with the previous question, getting the infrastructure in place to allow consumption of fuels gasolinean 10% ethanol is going to take some time and there are economic issues associated with that as well. so we will have more to say about that in side cases that would will be running in 2014 when that gets published next year. >> thank you, paul connors. the net liquids imports, 37% -- i think the something andseven-

imports were five-something with a new projection of 42%. >> i'll tell you what, rather than me trying to do the math appear in my head, i will let all look through the tables and figure out what those numbers are. we could get back to you. it is clearly coming down. over the next three or four crude oil production in the u.s. in december has just gone over 8 million barrels a day. so we could look at what the total level of consumption is, 18.5.unning at currently down to 4.9 million barrels a day.

>> just under 5 million barrels a day. 7.5 today. >> thank you for the eia's annual christmas present of a glowingly optimistic forecast for the future. i'm going to play the grinch who stole christmas by noting that the trend you have noted how otherl gas is replacing fuel sources in many fields, but the trend this year has been for increase its share in electricity generation, which is obviously related to the relative price of natural gas versus coal. we have some anecdotal evidence that the current price of natural gas is not sustainable

or profitable for the producers. noted, of exxon mobil and you yourself predicted the price of natural gas will go up, though only slightly. wish -- twice this not the trend of the future, at least in regard to electricity generation, where we return to increased use of coal? i will take the first stab at that. here?n maybe we will have alan comment on that, so maybe we can pass the microphone over that way. you correctly stated that the relative price has changed 2000 -- 2012 and 2013. we had very low natural gas prices in 2011 and 2012, and that led to a big hiccup in natural gas consumption by

that soundedities to be in their interest to burn natural gas rather than coal. up,atural gas prices came coal burning electric utilities , and it's kindll of interesting to think about it this way. the market itself seems to be making a lot of the decisions about what fuels get burned at electric utilities. , even with our increases in natural gas prices over the long term, we don't see a great deal of increase in coal, and alan can tell you more about that. there just aren't a lot more coal plants likely to be built, and some of the coal plants we already have could retire on an as the utilities

decide what kind of capital investments they do or don't want to make an existing coal plants. so we see that crossover taking place, where natural gas begins coal as far as electric generation is concerned. alan, is there a little more color that you want to put on this? >> absolutely right, and 2013, coal generation relative to last or so far is up about six percent, gas is down around 12% or 13%. you have to remember that 2012 was a very odd year. warm year relatively so residential and commercial use of natural gas was down. growtha low electricity year. the net result of that was production of natural gas was soaring, the price of natural gas collapsed to under three

so a lot of coal was replaced by natural gas. we see that rebounding back. if you look at our projections, you will see that we see coal coming back in the near term, but we don't see the price of natural gas getting high enough to make new coal plants attractive. what you have utilized once you , most of the new capacity additions will be natural gas and some renewables spurred on by other programs. so cast just keeps growing where cold hits a plateau and doesn't grow any more. >> one last thing i would add to , an answer to a point that you made, i think the how is still out on exactly strong natural gas production .an be at current prices i know there has been a lot of talk suggesting that higher

natural gas prices will be required to maintain output of shale gas and our model suggests that, too. but we do know from things like the drilling productivity report and other comments from industry efficiency and drilling efficiency continue to improve, which means that natural gas at current prices might be more profitable then you would have thought a year or fact, thend in longer-term natural gas price 2013 was higher than which we are publishing today, so our natural gas rise track is somewhat lower this year than it was last year.

i think certainly from what we on theing happening productivity side, that trend might continue for a little while. >> thank you again for the very comprehensive and excellent presentation. i wanted to ask you about the electric power sector and your view on nuclear power that is contained within the forecast. it looks like you have the share of nuclear power more or less holding steady through 2040. when we look at this, it looks like the large number of the nuclear fleet are going to be retiring sometime between 2030 and 4040, if you assume, depending on what you assume about license extensions on the

existing fleet. a lot are due for additional 2040 timeframe. we have already seen a tremendous amount pressure on have announced retirements, everything from california to crystal river in florida to the upper midwest to the northeast. i'm just wondering what your views are on nuclear power going whenrd, because that -- you are talking about 45 gigawatts, it has a big impact on overall share of generation in the power sector and on emissions going forward as well. >> right, i think you're absolutely correct that we will find the key assumption that you have to look at in projecting nuclear power, especially for the last 15 or so years of that 2040, is, from 2025-

what happens with planned retirement. we are assuming that a number of companies will file for , andsions, life extensions that allows those numbers to stay relatively flat as you go out towards 2040. went out to 2050, i think you would see more of a decline. a lot is going to depend on what happens with that. the other thing that is important to have to know, but of course you can't, is what the situation will be in terms of operation and maintenance expenses at these nuclear facilities. there has been a relatively steep increase in costs over the past few years, whether that continues to make a big difference to the forecast, we are assuming somewhat of a slowdown in costs as we moved

20 30 time frame. so the, nation of knowing what operation maintenance will be an knowing what the life expansion answers going to be ultimately gives you the answer. in our side cases, where we look low nuclear, what we find is the bulk of the difference would show up in greater consumption of natural gas. anything you want to add to that? i think you are exactly right. low natural gas prices and slow demand are challenging everything right now.

that is true for gas, coal, nuclear. case, weference project natural gas price to gradually rise to the point where it makes it attractive to maintain and keep most of these is as around, but that very uncertain future. many of the things adam pointed out about demand growth and all those things could affect that and we will be running, and we have for the last several years because the uncertainty makes us look at alternative cases. issue, and if it is replaced, it will be replaced by very efficient natural gas. it is not as large as one might expect because of that. >> a question on nuclear if i

may. based on what you said, is it yourct to surmise that forecast for nuclear includes no additional new construction? >> no additional new construction. there are couple of plants that are already under construction. there are four, and there are -- or two more >> [indiscernible] >> but i think it is probably fair to say that you are not going to see a huge increase in the overall capacity numbers for , that new growth is going to be just about enough to offset the retirement. it adds a little bit. i think those numbers -- last year we had nuclear expanding by a little bit and i think this year we have nuclear contracting

by a little bit. >> a question on carbon dioxide emissions figure. i think you said we are down nine percent now from the 2005 peak. i'm just curious why 2005 was a peak year, considering it was two or three years before the economic downturn. what caused emissions to the klein from 2006 onward -- to decline. it seems almost like the zero growth in co2 emissions. when you are forecasting that, what assumptions did you make on the regulatory side in terms of what they epa may come out with on power plants, etc.? doin terms of what epa might

, we don't have a projection for that in the reference case, because the reference case is based on existing law and regulation. cases,o look at side those want be published until early next year. of what was so special about the year 2005, i would have to actually go back and look to see if there were any weather effects, light was a cold winter? i can't quite remember what was going on in 2005, but i would say generally speaking, that was in the run-up -- we had a fairly decent time of economic growth from 2001-2005, and there was a lot of consumption of fuels in general, including oil and coal, that would have added to the growth in energy related carbon

emissions. >> the only reason 2005 was two thousand and five are virtually identical in terms of carbon emissions. it's just that the 2005 is a reference point that is often .sed in the united states we think it is a useful reference point, but 2007, you get the same kind of result, and that is immediately before the economic downturn that occurred. i wouldn't read too much into that. >> thanks, howard. >> all the way in the back. >> i want to follow-up on the

question raised regarding ethanol. i appreciate your earlier clarifications because the 5% figure doesn't seem to align with the volumetric requirements that are 36 billion gallons after 2022, which is more than doubled where we are now. a large part of that growth is supposed to come under current fuelhrough the increase of production. i'm just wondering if you could speak to the forecast in that realm. >> eia has been saying i think or 2008, that007 it was going to be very difficult, if not impossible, to reach the 36 billion gallons number. i testified that up on the hill, and i think at least two eia administrators prior to me have done the same thing. at in oure looking reference case forecast, what we

think can practically be achieved through the combination of what can go into the gasoline and what can be produced in terms of cellulosic fuels. there will be more on that coming up. john maples, who does a lot of transportation work for us, is here. howard looked at these issues in detail. i think either one of those would be happy to speak with you after the session here, but basically, what we are saying is that here is what we think is ,oable in our reference case and we are as eager as everybody doe to see what epa will with the 2014 ruling coming up.

right. in the back, far >> thank you. i wanted to summarize some of the things you did today that were different than what i remember from last year and then ask you questions about those trends. if the have the numbers right, bcfd ofe about 20-22 demand growth when you factor in exports, seven or so of industrial growth, three or four of industrial and maybe a little less of power. when you add it all up you got 10-12, maybe 12-13, something like that domestic and about 10 for export. it's about one third growth, quite substantial, and more than you noted in the past. on the shale oil, you have

-- a plateau and then declining production profile. the shale gas just keeps going and going. like we and many consultants sort ofusiness see this constant ability of shale gas to feeding demand and serving the growth, but as feeding demag the growth, but as a matter of scenario analysis, maybe this is jumping at to where you will be in the new year with scenarios, but what other risks that that story doesn't play out the way we are forecasting, and the -- or it justeach starts to constrain the amount of demand growth possible. >> let me see if i can summarize the question and then provide some thoughts on it. is it possible that the growth gas we see in shale

production will not be a strong as we are suggesting? sure, that the possibility. it is also a possibility that we might see more oil production than the rise and plateau and then gradual decline that we are seeing on the oil side. one of the things that we do know is that the resource base for shale gas in the u.s. is very strong. in fact, the resource base, in terms of the level of production gas,it would support for looks better, at least at this point, to us than it does on the oil side. john and michael who are here closely withvery

advanced resources international resources at shale both in the u.s. and globally, and of course we also look at what work the u.s. geologic service does for the u.s. and other countries. that know physically natural gas molecules are than crude oil and condensate molecules, so when you hydraulically fracture one of these continuous resources, , it is not always shale. there are cases where hydraulic fracturing is being applied to shale, that differs from but the low permeability , very high water

pressures open up crack in the rock. they are typically sand that are part of the hydraulic injections, and sand keeps the crack from closing back up again. it turns out that it's easier for natural gas molecules to squeeze their way through the crack that you get from hydraulic fracturing that it is for oil molecules to do the same ring. so that's one of the geologic a rise, let we see so, and then fall for oil, but we don't see the same sign -- same kind of constraint associated with natural gas. one of things -- i can think of at least three things that could make a difference in the forecast that our knowledge of the geology changes that gives you either higher or lower that rules on hydraulic fracturing change that could add

to the cost structure associated with producing oil or gas from these continuous formations, and that could make a difference. finally, there are timing issues associated with things like infrastructure. one of the reasons we are beginning to see this big pickup in marcella's production is not that there is a whole lot of riggs drilling right there. a lot of the riggs left to go to eagle ford, but what is happening is that wells that have already been drilled that were producing are finally being hooked up to pipeline infrastructure that is being built, so infrastructure issues lowerlead to higher or numbers, depending on how all of that works out. one thing i'm pretty sure of is technology and prices

really, really matter when you likely what the production numbers for oil and gas are going to be, and that it's not just trying to estimate what the resource level is in the ground, but rather what is the price signal giving you and allowing in terms of capital and what kind of progress is being made on the technology side that might lower the cost structure. >> we can take one or two more questions. in the back. >> wondering if you could talk a little bit about true exports, not from a policy perspective. i know it's not your department, but the report shows an increase

in exports of refined products, which is one way of u.s. crude reaching a global market. there's a report as it stands now -- does it see that as the only way, or do you see an increase in crude exports to canada or swabs of one type of oil for another, which are currently allowed? thank you. onone thing to think about the oil export side is, first of all, eia is not a policy organization, so i don't have a recommendation associated with whether there should be more or less exports of products or crude oil. job is to try to assess what we think the economics drive things towards and to show that within the framework of existing law and regulation. side, product export there really is not a whole lot

in existing wall that would prevent -- in existing law that would prevent further increase in product export. there is kind of a natural limit in a sense that refinery , 17 millionthe u.s. barrels a day, would have to be further increased if you're going to see rodda exports continuing to rise at the kind of level or rate that we have seen over the past couple of years. is kind of a natural limit that would come from capacity in the refining industry itself. on the crude oil export side, to are correct that exports canada or permitted fairly easily, as long as the oil is being refined or otherwise used in canada, so oil cannot go to -- forfor export

reexport from canada. it's got to be used there. that number has picked up recently. it had been running at something like 50,000 barrels a day and it toward 150,000p barrels there have been some reports of crude from texas going to eastern canadian refineries for example. the very first public talk i gave at e.i.a. administrator last summer, what i said was the growth in light sweet crude oil production in the u.s. looked like it was going to to want rise, that the refinery configurations in the gulf of mexico especially so the gulf coast area were really set to re easily and economically

process heavy higher sullfercrudes and that at some point policy makers might want to look at the possibilities of swaps with a country like mexico or others. typically you do it with somebody that is nearby on transportation issues so mexico comes up in that regard. might want to look at the possibility of whether it would the ome sense to allow light sweet crude to go to refineries in mexico that need that and have more heavy sour crude from mexico come into the refineries in the gulf of mexico. so that does require a policy decision but you can see that the trends are pushing things in that direction. that's not the only thing.

one of the things that i think that analysts in general, the public and policy makers need to realize is there are lots of things that can happen short of that. refinery configurations could change. you could build facility that is would allow a topping or removal of the lighter ends and export of resulting products. we're already seeing a huge change in how oil is being transported. there is oil light sweet crudes are making their way to the east coast to be refined in the refinery there is that like the light sweet crudes and similarly there is some making its way into california. there are also light sweet crudes coming down into the gulf

of mexico and feeding into systems there. a lot of that is happening by rail. there is crude moving around by barge. whether you export crude or products or recon figure refineries or change the way that oil is being transported to get these lighter sweeter crudes to areas that are capable of using them are all fairly complicated infrastructure issues that require capital investment and lead times. and i think the system is adjusting. ultimately if you think about the time frame during which the ules on many of the policy rules on crude oil were set was

in the 1970's and early 1980's when the general thinking was petroleum mand for would only go up and u.s. supply would only go down. so policy makers are struggling with the fact that the whole basis for a number of the rules that were put in place has been turned upside down and they are trying to figure out the best way to deal with that. and with the following, policy makers have a really hard job trying to think about these things. they've got to look at what the economic impacts are. they have to look at what the national security impacts are and they have to look at what the environmental impacts are in changing any of the energy policy that is they review. and that is a lot of issues to keep up in the air and to handle

effectively. and i think it's just terrific that e.i.a. doesn't have to get nto those policy issues. >> i think time is running on here. i think we'll close at this point. you show great dexterity as usual taking a range of questions. > thank you very much. [applause]

>> the senate is in session today this. afternoon they will work on two of president obama's executive branch nominations. an patterson and jay johnson, president obama's choice to head the homeland security department. two other items on the agenda is week include the 2014 defense bill. the senate has enough votes to pass the bill this week. the house wrapped up its legislative year last week. it's on recess. they will return on january 7 for legislative work. you can watch the house as always here on c-span. >> i wish you both a very happy

ristmas and a bright and prosperous new year. >> it's a pleasure to meet you mr. santa claus and help you en sales which begins on thanksgiving day this year. >> would you mind autographing some of the seals as a favor for santa claus? >> i should be delighted. it's one of the things they do best. >> it's a good thing you've got santa claus. >> yes indeed. gave father santa claus tony: me. >> and it's got some of the dog's hair anytime. >> first ladies influence and image season two. this week weeknights at 9:00 on c-span.

>> f.c.c. was the first -- provided the first country in monitoring provide of vital signs without having to .ave intrusive monitors >> we are a remote wireless remote patient monitoring solution to be able to put devices in patient's homes. to be able to monitor and keep them well and have better outcomes and keep them out of the hospital. >> this is an anti-coagulation device. and typically a patient that is on come din would have to go to their doctor once a week to get a blood reading. then the data goes into this device and goes to our service center where they can monitor the patient. if there is a problem they can alert the patient's doctor.

>> we are working on providing a model notice for health apps. so for example when you go to uy a can of soup there is an f.d.a. label. some people care about sodium or sugar or fat. similarly we are developing a tool and we've done this for personal hement record but we are expanding it. this can help you say okay these folks do not resell my information or this is how they use it so a consumer can navigate this newly growing and exploding field. >> the government's role in supporting mobile healthcare technology tonight on the ommunicators on c-span2.

>> we'll speak with former . nator blanch lincoln "washington journal" airs live every morning beginning at 7:00 eastern on c-span. >> last week the university of minnesota held a discussion about the bipartisan budget agreement and what it means for compromise between democrats and republicans. among the speakers were two congressmen. his is an hour and 15 minutes. >> good afternoon.

i would like to welcome you to the university of minnesota. we have a terrific program here today talking about the significance of the budget deal reached in washington in terms of the political implications for both the democratic and republican parties as well as the origins of some of what we have been seeing in washington. e have a terrific panel. i would like to introduce the panel. we have gil gutknecht, he served in 12 -- for 12 years in the minnesota house and 12 years in the united states house of representatives.

we have martin sabo, who served for a long time in the minnesota house of representatives, including a speaker from 1973-1978. he went on to washington, where he served for 13 terms, i believe, in very important positions. it passed a budget act that played a major role in the reduction of the deficits during the 1990s. we have a colleague of mine and teaches courses as well as working with us in some of our other programming. he was a representative in the minnesota house from 1979-2000 seven. he was also speaker of the house rom 1999-2007.

i want to begin by recognizing my colleague, who would like to ask a few questions. then we will broaden the discussion how to include stephen the conversation with our panelists. >> thank you, larry. around the country, the conversation has changed a little bit since yesterday afternoon. congress has had some action on a bipartisan budget agreement, which i think is very good for the country. i would like to look at my two friends. gil gutknecht was my right arm on the house floor. beaker -- speaker sabo, as of yesterday, being the chair of he budget committee in

washington, we have had to bring people together. he agreement yesterday, rather than talking about the specifics, let's talk about the tone of it and what it means for the future. does it signal an end to this hypersensitive partisanship? to the discourse that has happened in washington? should we see as -- should we see it as a sign of some cooperation in the future? >> i think it is a plus. it sets the framework for iscretionary spending for this fiscal year and the next fiscal year. there are major problems that remain unresolved.

those will remain difficult. we will find a little bit more will we get to the question of extending the debt ceiling next spring. clearly, that is something that has to happen. >> congressman, being in the epublican side, now in control of the house, you read some accounts where it is not harmony. maybe because of what is not in the bill. this is your caucus. i did not want to turn this into winners and losers. hopefully, how can republican be against this deal? t is going to reduce the

deficit. it does not raise taxes. it is $200 billion less. > it is not good enough. in the end, it will pass. the more conservative members of the caucus will do some public harping about the deal. both of you were in leadership n the legislature. ertain elements of the caucus, they are always unhappy with whatever deal is worked out. i suspect that will be the case this time. it does appear the republicans have given up quite a bit.

others may disagree with me. in the end, it is an agreement that we will get the 218 votes in the house and it will pass. there will still be some posturing and there will be some angry people. >> i understand you are focused on the immediate, but i am curious about what you think about the longer-term implications. we have now gone through a government shutdown. we had almost default on the

government's debt limit. is this deal -- does this deal signal a larger change in the nature of governance? are we getting back to regular order in congress where you will get give and take? >> the short answer, i think it is progress. the longer answer, and i hate to be cynical, there is more about politics relative to policy. the politics have changed ramatically since october when obamacare started trying to enroll people on the website. if you look at the polling numbers, in some respects, the republicans will be driven to compromise, not only on the budget, but on the debt ceiling. the old adage in politics is when your adversary is committing suicide, do not get in their way. as the numbers for the president and the democrats look so bad, i do not think the republicans want to pick fights that they may not be able to win anyway.

i would say that this is a good budget agreement and it will pass and you will see some arguments on both sides. i think the deal will be struck on the debt ceiling. it has more to do with the olitics than the policy. > when you look at this deal and the dynamics within each party and the divisions within the democratic party between the mainstream and the more progressive elizabeth warren side of the party as well as within the republican party and what is the death grip by the tea party and the liberty movement led by rand paul, does this strike you as a return to the power of the leadership?

>> i do not know how to read the republicans at this point. my hunch is that the leadership is going to win on this one. in the time of the continuing resolution, the leadership lost control. politically, they paid a price for that. i do not know how to predict the uture. in the long term, we still have to deal with some very tough revenue and expenditure issues. i do not see that -- those are off the agenda for the next two years. i do not see anything happening on those issues. at some point, we need to get to hem. > congressman, you mentioned

how this was a prime attic -- pragmatic political move by the republicans. it is interesting the reaction from the right wing of the party. red state refer to this deal as capitulation and they were upset that the budget deal for two years moved important leverage over obamacare. is this the sign the mainstream of the party is not ready to get tough with that 25 hard-core right-wingers in the house? is this just a temporary tactical disagreement? >> i think it is somewhat demeaning to refer to people as right-wingers? we do not have left wingers on

the side and you call them progressives. i went to washington in 1994 and we were looking at deficits of more than $200 billion for as far as the eye could see and we were very serious about controlling spending. and allowing americans to keep more of what they earn so they could reinvested in the economy. you are going to hear some real gnashing of teeth from red state, tea party types. he more conservative wing of the party will not be happy with this deal. in the end, i believe they won't capitulate, but they will not try to block the deal. if that means that cooler heads

are prevailing and leadership is prevailing, so be it. a all understand that -- they all understand that if the objective focuses on what will happen next november, he could not be preoccupied with what is going on here in december. this is december and i thought it was january. >> i think the republicans won the issue on discretionary spending. the cuts are in real. -- unreal. even the republicans who worked on the appropriations committee say, i could not understand the decision on the continuing resolution. instead of declaring deadlock, they declared victory. in terms of dealing with budget deals, i was involved in 1993, going back to where we had no

republican votes, even going back to 1990 when bush was president, divided control of congress, and we passed mportant budget bills, and overwhelming number of democrats r for it -- were for it. if they were there in 1990, they were part of the no vote. in terms of dealing with the budget issues in a bipartisan realistic fashion, the history n the 1990s was most democrats supported it, some republicans. i would be very surprised if

that pattern changes in the future. i expect there has to be a major deal and it will have to be significant. hopefully enough republican voters to make it possible. -- passable. >> it sounds like you to agree. the republicans have a big victory. they have been able to shift the goalposts. the spending in the ryan-murray deal on the discretionary side s less by what president obama roposed. it is even less than what paul ryan proposed. would you agree with the

congressman that republicans -- > i agree with marty that on the discretionary side that significant progress has been made to the sequester and this budget deal. the issues that remain that are the big issues that we continue to kick down the road are on the mandatory spending. they are the ones that we just cannot get our arms around. unless you deal with the entitlements, you can/discretionary spending another 50%, but you can never really get to what i think we all want and that is a fiscally responsible government today that does not -- >> you have to deal with long-term retirement costs. any real solution will be a combination of the two. box that has been the holdup. -- >> that has been the real oldup.

resident obama got hammered. the head of the house republican ampaign committee came out instantaneously and slammed him. he was quickly followed by progressives who solve this as another betrayal by the president. on the issue of long-term deficit challenges, medicare, social security, do you see trends in health care spending or with reform that might provide some reason for caution in going too far in edicare? >> i think social security is

the least complicated of the two. health care is much more difficult. the trends have been down lately. whether that continues, i hope hat is the case. i am optimistic about that, but not certain. if that is the case, it would help immensely. what you need is to figure out how we deliver our health care in this country without that rapid escalation of costs. >> if you are in congress today and involved in budget discussions, would you be rushing into the debate?

would your attitude be, let's give it a little bit more time nd see how severe this is? >> i would be trying to deal with them. if i could write my ideal, i would have one bill with more spending for stimulus that is eeded in the short term. some long-term modifications to the tax system and the entitlement system. >> i would go further. i will credit president obama for really making health care a focal point of the national debate. i disagree with the plan he came up with. the truth of the matter is, if you do not get your arms around ealth care spending in the

united states of america where we are spending 16% of the gdp, most of our competitors are spending less than 10%. it is eating us. it is not just medicare or edicaid. when you think about the federal employees, the federal government, you the taxpayers are the largest buyers of health care. i think we have to be objective and honest with ourselves and ay, despite the fact that we spend twice as much as any other society in the world, you cannot argue that we have longer life expectancies, that people in the united states are healthier than

the people in switzerland. i believe -- and i started this debate while i was in congress to talk about what americans pay for prescription drugs. those kinds of studies, that kind of analysis has to be done. it should be done on a bipartisan basis. it cost so much more to have a hip replaced in the united states than it does in germany or anywhere else. we need to get to the bottom of some of these costs and figure out ways. i am not sure what the answer is. you could never really get control of the federal budget until you get your arms around health care. >> there is a lot of agreement on that. that is the area of nonpartisan agreement. the issue the congressman is raising is when you look at the last four or five years, the rate of increase has fallen dramatically and there is a debate as to why that is happening. is it the economy slowing down? is it affects from obamacare? the change in expectations among some of the stakeholders? i do not think anyone has a firm handle on it. the rate of increase has come down and has helped to ontribute.

>> i want to ask both of you and get my colleague into the conversation. is there something about the agreement today on the budget that gives us any hints as to how other pieces of legislation by be handled by this congress? a lot of concern about the defense budget. enormous concern about the farm bill and getting a past. - and getting that passed. speaker, you are a farmer. a lot of our farmers in minnesota are very concerned about the farm bill. when you look to washington and the agreement that was reached

to have a two-year budget on discretionary spending, does it give you hope or realistic sense that congress is going to be able to move on the farm bill? >> it gives me hope that we will be able to move on to the farm bill. it is a path of success that can be built upon. meeting people's expectations is a very difficult thing. it is especially tough to meet expectations of members in a caucus. it is even more difficult to meet expectations of special interest groups outside the caucus. the farm bill has only a few days left before esch of decision-making. -- a few days left of decision-making. everybody has to tone down their expectations. this empowerment of murray and ryan, this empowerment of a bipartisan working group, i hink it does create a path for us to be -- the defense budget.

there are 12 different budget bills that have to be addressed. i think this is an historical agreement, modest as it is. it does not include the big-ticket items, medicare, social security. >> once the appropriators have the top number, i think they will work out those appropriation bills in a ipartisan fashion. i think the farm bill will pass. >> it comes into some of the

things that we have been talking about. you have conservative epublicans who are worried about spending and looking to the farm bill to bring some of the spending down. you have democrats that are offended by the magnitude of the cuts in the food stamps. if this scenario where this kind of murray-ryan compromise can work out the differences? or will they return to some of the deadlock? >> i want to strongly agree with marty on this point. something that is not understood by most people, once you have the number, once you have the budget number that the appropriators can work with, once you determine how big the

ie is going to be, it gets a lot easier to work out how big each slice is going to be. once you work out how much the committee gets to work with, then it becomes a much easier to work out the details of the budget. i agree with both of these gentlemen. once they have a master agreement they know will pass the house and senate and there is the will of the leadership of the house and senate to pass appropriation bills, all of this becomes a whole lot easier. it also becomes harder for whichever side, it gets harder for them to really fire live ammunition at the target because the deal has been struck and we are just arguing how big a slice everybody gets. let me just say this about the farm bill. steve should have said, when we

have record farm income and we have farmland is selling for $20,000 an acre in northwest iowa, it becomes hard for us to rationalize why we ought to be making these large federal payments to multimillionaire farmers. the whole argument about the farm bill, it a number of nuances to that. while i think it has been extremely ham-fisted the way the republicans have handled this, the whole issue of food stamp programs, the fact that we have 48 million americans on food stamps when it was designed for two or 3 million americans, it is an issue that deserves serious attention. why is that? what are we doing? i understand why it becomes incredibly partisan. we do need to have a dialogue about 48 million of our fellow citizens who have become dependent on the government for

something as basic as nutrition. > i agree. that is the question we have to deal with. it is also related to the reality of where our income has one in this country. people at the bottom end of the income scale, that is a polarized this. -- polarizes. illions of americans are working hard and they are not aid enough for the basics of life. they need subsidies for housing,

food stamps. t is uniform for everyone. housing, some get it and some do not. in the case of health care, the very lowest are on medicaid. and then you have the problem of cost of insurance. that is part of the cost of what the affordable care act deals with. as long as we have that kind of olarization of income, those costs will increase. >> now that we are away from the issue of does the government stay open or not, we will get into the debate about what do we invest in? a national institute of health, food stamps, reform of how the money is going into food stamps?

t seems like we will see a shift in the debate and how we are focusing our attention. >> let me raise another issue. i think it is complicated. less and less have the committees been doing their work. when they do do their work, they are overruled by central leadership. the committees produce a project -- product and then they get etoed by leadership. my observation is that it is not nearly -- leadership is not nearly as smart as they think they are. this issue goes beyond appropriations. this has been a major problem with the farm bill. > speaker, i will give you a

chance to way back in on the farmers. --weigh back in on the farmers. minnesota, the upper midwest, the farm bill is big news. a lot of people are very anxious and i am sensing some increasing frustration and anger that this has not been worked out. >> we are talking about the wrong bill. we should not be talking about the farm bill. we should be taught -- calling it a nutrition bill. this is not necessarily over the farm 25% of it. it is more about the 75% part of it, is it not? we should be focusing the disagreement on where it is.

congressman peterson and his republican counterpart have come together on the egg part of it. larry, can i ask a question? this overall discussion of this modest agreement, when you bring people together, it is tough. nobody is ever totally satisfied. what item or what issue or what funding mechanism was not in this bill that you think could have been added with bipartisan support? >> i do not know enough about the specifics of the agreement. i am six years removed from hat.

> i do not know. >> this agreement yesterday, i think it is foretelling of the future. maybe the boat has sailed on edicare and social security. this is an historic agreement. this is a good agreement for the ountry, i believe. hen you're trying to put a package together, you form the coalition.

i do not know there is an issue -- not extending unemployment benefits, that was an issue, right? not tax reform. there are things you could have added to bring more democratic support or more republican upport, but bipartisan support -- i think this was a pretty ood agreement. >> can i come back to the point that marty raised? i was on the budget committee before president bush was elected and i was on the budget committee through part of his presidency. once you have an agreement between house and senate that we're only going to spend whatever the number is, 1.7 trillion, whatever the number. once you have the agreement, it everything get so much easier. one of my frustrations was when the bush team came in and we had the house and the senate and the white house under republican control, i just assumed that we would have one number to start with. it would have made things so much easier. the senate had a budget. the house had a budget. the president had a budget.

to use a very simple analogy. we were at this number, the senate was at this number, the president was about at the senate's number. we ended up compromising at this umber. the critical point of this agreement is they finally come together and have a number. then you can have legitimate and honest debate about how much should go to this or should go to that program. that is part of the legislative progress. leadership, in recent years, has lost track of a very important theme that margaret thatcher advanced 30 years ago.

first you win the debate. then you win the vote. what we have seen going on in congress, and why there is so much rancor, leadership on both sides no longer think they have to win the debate. they just have to get enough votes. if they have to break knuckles, promise bridges, that is all considered fair game. if we can get back to the basic notion of having legitimate debate about legitimate issues and not allowing personalities to be allowed in the debate, i think you will see a much more -- you will see a washington that can work. >> let me give you an example of that we have heard in response

to the murray-ryan deal. big mistake to give up the equestration number. it was better to stick to that number and cut spending from their. once you move away from sequestration, the republicans have given up the game. now it is back to the usual give and take. was it a mistake of the republican leadership to give up the argument about spending that was tied to sequestration? >> it was a big give. it was the one club that senator mcconnell had gotten into the budget agreement. it was an awful lot to give up. in the end, is the agreement hat was reached worth what was

given up? both sides had given up a good deal. that is why you will see some gnashing of teeth. >> i want to invite members of our audience who would like to submit a written question to do so. congressman, i want to pick up on this theme and ask you to put on your hat as a strategist. think about where the underbelly of the democratic party is right now. was this a smart strategic play by the congressional republicans to say, let's shift off of this debate over government shutdowns and the budget and clear the decks to go after obamacare with oversight hearings and a 24/seven watch? >> history will tell us. my observation is that most large computer programs in the federal government have had a great deal of difficulty getting set up.

that does not relate to the bama administration. that relates to the bush administration, the clinton administration. all the way through. it is beyond me why they pay more attention to that particular issue. the hardware is great we have a little bit of a program problem -- a little bit of a software problem. i think eventually, that problem gets work out. at that point, i think the republicans will rue the day they made that a central issue. it will be working for millions of people. right now, it is a plus for them, but they cannot count on computers to be troublesome a year from now. that a leader of a caucus

was quiterambunctious when you were trying to lead them. does this strike you as a smart leadership move to get control back? but the budget issues on the back burner, but the committees work their way and put the spotlight on what is the underbelly of the democratic party right now, the troubles hat obamacare is having? >> that was part of the strategy. republicans had to get off the crisis to crisis management. they received most of the blame for the shutdown. it was not fair, but they did receive most of the blame. now the slate is a little bit clean. there is bipartisan movement on the budget. republicans have won the day on

discretionary spending. $200 million less than president obama recommended. how could you not consider that a victory? clear the deck and move on to an issue -- websites will be corrected. whether it is two weeks or 30 days. to me, the underbelly is the law itself. obamacare itself. the websites will be corrected, that is not the issue. my kids and grandkids have to live with the law. hat is the underbelly. >> the strategic lay by the republican -- play by the republican leadership, let's put the budget issues on the back burner. let's clear the way for obama

care to be front page news. it is going to move well beyond the website. all sorts of issues relating to the insurance companies and he was getting covered and who is not eating covered -- who is getting covered and who is not getting covered. ask a lot of people -- >> a lot of people will say, the shutdown in october was a dumb fight dumbly fought. it was a fight that had to be fought from a republican perspective. there is this polar division between those who really believe that obama care would work and those who believe it is a train wreck.

democrats and the country will rue the day we went down this path. time will tell who is correct. we think we will have a pretty good verdict by next november. republicans did make the calculation that they had made their point on the budget and on obamacare with the last government shutdown. it lasted 12 days. it was forgotten by the end about tilburg i most republic -- it was forgotten by the end of october. there is nothing left for republicans to gain. there are so many other issues happening and is not just health care. as steve suggested, when the website is fixed, i think the

problems become even worse because you will have -- millions of americans, we do not know the number, they will lose the insurance they have today. are they going to get better insurance? >> these are issues are going to play out over time. his is a major battle. the key question is simply agenda control. what is the issue being debated? the underlying politics of the budget agreement was, let's get these budget issues off the front page. let's allow obama cares to have the space on the front page. > a quick rejoinder. i think we look forward to a

debate. illions of american people are now eligible at the lower end of the income scale. millions more who have health problems and millions more find they get a fairly reasonable deal on the affordable care act. the focus is there. >> it is a great debate, but we will not have it today. i want to ask each of you this question. you are a shrewd leader in innesota of the republican party. have you been surprised that the republicans in washington have

not been a victory dance in the end zone? they swept into power in 2010 with a very coherent argument that spending was out of control. the budget deficit was unsustainable. here we are with the fastest decline in the government's budget deficit in washington since world war ii. the cbo is reporting that for the next decade, the budget deficit will be in the two or three percent range. why isn't that republicans seem unable to make that victory dance? >> you are correct. left-wing democrats should be shaking their heads. they cannot believe that this has happened. the spending level is one trillion, far less than any left-winger would've ever imagined two or three years ago.

they should be declaring victory on the budget. i was going to respond earlier. declare victory while you clear the deck. republicans have won the day on the question of discretionary spending. that should be something that we should be able to take to the american people. spending is less. let's not eat our own. it was a victory from a conservative standpoint. >> you made some tough calls on the spending side, decreasing spending, raising revenue. it was not particularly popular. do you think republicans have now won the debate on spending?

>> the long-term spending, it it still gets to be a question how you solve that long-term. entitlement programs and what you do with the revenue ide. his cautionary spending -- discretionary spending is not what was driving the deficit. n the short term, those cuts are severe. >> part of the art of negotiation is even when you believe you have had a big win and you know you will have to have democrats votes in the senate and republican votes in the house, you do not want to pound your chest too much. >> it is helpful to the republican leadership in the house to have a lot of grumbling about this budget deal. it helps them pass it in the

senate. you always have to have -- be a little bit humble about the results of any negotiation. in the end, that is how it will play out. >> grab the victory, but do not do the victory dance. >> never try to embarrass the ther side. we do want to give it away -- the republicans want to pivot away from talk about a shut down. that is part of the strategy, but it is not just to have hearings about obama care. there are other things going on in the united states of america nd around the world. we have a problem in syria. we have a problem with iran. >> there is no doubt the republicans will have a strong

set of talking points. the democrats will have their talking points about strengthening the economy.democr talking points about strengthening the economy, as the congressman said about the millions of people who are being helped by obamacare, this will get played out in the campaign. we have a question from the audience. do you think it is possible to convince an urban legislator to vote for a farm bill that will make significant reductions on the level that house republicans have talked about which is more than $40 billion of cuts? do you think that urban legislators in the house or in the senate would ever go along with something like that? >> those cuts will be let mecally reduced. also add for the farm bill in general, there are also disagreements