terrorist attack we saw a little over a week ago does highlight the need for, not just the u.s. government, but for leaders in communities across the country to to redouble our efforts -- leaders in communities all across the country to redouble our efforts to combat violent extremism. i encourage you to stay tuned. ron, i will give you the last one. reporter: while you have been pressng, there has been a conference about police brutality. is that something -- summit something that the white house would consider? sec. earnest: i'm just hearing about this for the first time. we will have to get back to you on this. reporter: is there some level of -- i think i asked you this the other day -- about the president's level of engagement. regarding the situation in chicago, is the president, do

you think he will become more engaged? with the white house think there -- or what the white house -- or would the white house think there should be some level of engagement from the white house or the president himself? sec. earnest: he was part of the task force -- the creation of the task force on 21st century policing. it is assembled of leaders in law enforcement, including prosecutors, academics, even some civil rights and other to comes, to try together around some specific policy recommendations that could be made to law enforcement organizations around the country, steps they could do to rebuild trust between them and the communities that they serve. that was operating under a pretty tight deadline did yield some important results that have been implement if i communities across the country that have borne some fruit.

i think theknow, president has already demonstrated what i think is a pretty serious committed to this issue. i think because we have seen african-americans have been the victims of this high-profile violence, that people understandably are interested in the views of the first african-american president when it comes to discussing these issues. and the president has repeatedly spoken out about his use on this -- his views on this. his use include the belief that are overwhelming majority of viewsnd women in -- his include the belief that our overwhelming majority of men and women in law enforcement do an outstanding job. they get up every morning, in some cases walk the beach at at night.he beat

just to clarify. along with the doj investigation, i believe there are doj community relations people. do you know what level they are? not the secretary, obviously. i would think that process continues, correct? sec. earnest: it does. you highlight something that is important. i have only some topline knowledge of this, but i'm confident the department of justice could talk to you about this. in addition to the ongoing investigation into what is called a pattern of practice investigation into the chicago police department, there are officials in one division of the department of justice that are focused on essentially community outreach and working to organize the effort of both law enforcement and civil rights activists, to come together, to try to hear concerns that are expressed by either side, and implement practical, very

tangible solutions to the concerns that are expressed by either side. i know the leader of this office is a gentleman named ron davis, who has done a lot of important and good work on this issue in baltimore. i know the personnel from this department who are actively engaged in minneapolis, helping that community deal with a high-profile active violence that has raised some significant concerns -- high-profile act of violence that has raised some significant concerns. they could certainly give you about thedetail services and assistance and expertise they bring to trying to help solve these problems. ahead,going to do we then i will let you get started on your weekend, which hopefully will be a quiet one. it's been a while since we've had one of those to on monday, the president travels to the pentagon to chair a national security council meeting on the anti-isil effort.

after the meeting, the president will make a statement from the pentagon briefing. reporter: will he take questions? , withoutest: last time previous planning, he took couple of questions. that is not part of the plan, but i would not rule it out, based on our recent experience. on tuesday, the president will deliver remarks at a nationalization ceremony at the national archives. on wednesday, the president will attend a meeting at the white house. on thursday, the president will travel to the national counterterrorism center for a threat briefing. they will review efforts across our entire government to prevent attacks and protect the homeland. many of you will recall that, a week or so before the holidays every year, the president posted other his national security team, including our counterterrorism -- resident polls together his -- president

the getherlls -- together hisls national security team, including our counterterrorism officials. on friday, the president will attend meetings at the white house. if everything goes according to plan, he will depart that evening with his family for his annual trip to hawaii. we will keep you posted if the president decides to schedule a news conference. is this an indication president is going to do some serious reevaluation of his counter-isil strategy? sec. earnest: at this point, it is just an update. as you know, the president has asked his team with constantly assessing the different aspects of our strategy. if there is an opportunity for us to intensify efforts behind one aspect of our strategy, that is something he wants the team to be prepared to do. we done this in a couple of ways.

we have ramped up our assistance to some of the opposition fighters in syria. we made recent announcement about activities in -- and some special operators in u.s. -- special u.s. operators in iraq, who could carry out some elements of our strategy that have yielded some progress in the past. my point is they are always assessing. whether or not there -- always assessing whether or not there are some intensification's that can be used. there are no announcements that i know of for monday, but we will see what the meeting is. reporter: an overhaul is not in the cards? sec. earnest: i would note that those who are most frequent invoicing those calls do not themselves have alternative solutions that they have put on the table. to cite one example, i know that after the president delivered his address to the nation from the oval office that senator cruz, in a thoughtful medium known as twitter, suggested that

if he were president of united states, he would order the department of defense to destroy isil. is the mandate, that the president has given for our entire national security team and all of our allies and partners in the coalition since september, 2014. so, it is a pretty good illustration that we hear a lot of rhetoric and a lot of, in some cases, even outrageous claims, but not a lot of tangible or specific, realistic alternatives. thanks, everybody. have a good weekend. [captions copyright national cable satellite corp. 2015] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] announcer: and a story from npr on four reasons trump supporters are not going anywhere and why the gop is worried. number one, trump supporters do not support the establishment. number two, he is self-funded. fromfeel deeply alienated

mainstream politics. read more at npr.org. we will have live coverage of donald trump's rally tonight in des moines at the iowa state fairgrounds here on c-span, scheduled to start at 7:30 p.m. eastern time, 6:30 p.m. central. the supreme court heard several cases this week dealing with restrictions getting -- dealing with redistricting. one of them challenges how texas draws districts for state senate are using the total population rather than only the number of total eligible voters. the oral arguments will be on c-span2 tonight at 8:00 eastern. announcer: this weekend on c-span, saturday night at 9:00 eastern, executives from pandora and spotify on how technology entered -- impacts the entertainment business, from this year's aspen for them --

year's aspen forum. >> the morning commute -- when you're on the subway, in your car, etc., maybe you don't only want music. maybe one some news, the weather report. if you're on the subway, maybe you want to see a clip of jimmy fallon or something like that. there is some other content you want to experience during that period of time. that's the hypothesis we are testing right now, to see if people are interested in experiencing that. sunday,- announcer: john kasich at the council on foreign relations, on rebuilding international alliances. my 18asich: thanks to years on the house armed services committee, i knew many months ago that the only way to solve this problem is to call for an international coalition to defeat isis in syria and iraq. we have to join with our nato allies and allies in the region,

jordan, arabia -- saudi arabia, to organize an international coalition to defeat isis on the ground and to deny them the territory that they need to survive. those with long experience know that in their campaign on its own is simply not enough. air campaign on its own is simply not enough. announcer: for more, go to c-span.org. every weekend, american history tv on c-span3. saturday afternoon at 2:00 eastern, historians and authors on the life and legacy of stokely carmichael, a voice for equal rights and the black power movement in the united states and an organizer for the all africans people revolution party. they are joined by charles cobb. stokely called the student

movement and apprenticeship -- movement an apprenticeship in struggle. no matter where you come out five years later -- stokely eventually moves to africa, embraces and african pan-afric -- embraces an socialism. then, a professor on the use of opium and laudanum in the 19th century. >> the attitude at the time was that a woman should not drink. why would lot of them be something that she could look to as an alternative -- would laudanum be something she could look to as an alternative? to theer: we looked back 2000 campaign of al gore as he toured the state of new hampshire. mr. gore: you have seen new hampshire change from a time when you were losing 10,000 jobs a year to a time now where you

are gaining 12,000 jobs a year. and that is partly because we have had fiscal responsibility. president clinton and i have put in place an economic plan that has balanced the budget, turned the biggest deficit into the biggest surplus. announcer: al gore went on to win the democratic nomination, but lost the general election to george bush, in one of america's highly contested presidential elections. american history tv, all weekend, every weekend, only on c-span3. announcer: the senate energy and national -- natural resources committee held a hearing on how terrorism is impacting oil markets. witnesses explained that one of isis'main sources of revenue is mainales -- of isis' sources of revenue is oil sales. this is about two hours.

>> calling the committee to order this morning, this should be an interesting and informative hearing as we do and oversight on the intersection of terrorism and the global oil markets. before we begin, i would like to take a moment and introduce a former colleagues here in the senate and -- a former colleague here in the senate and a former chairman of the energy committee, and a longtime friend of mine. that would be my father, frank murkowski, who has placed a keen interest in trying to understand the role between oil and terrorism and the connect there. it happens he is in town today. we did not do the hearing because of him, but the timing worked out. it is nice to have him before the committee. more than half of global oil production occurs in regions of the world, whether it is the middle east, africa, venezuela, russia, that are subject to

instability of various kinds including civil war and terrorism. oil production in certain countries, such as iraq, syria, libya, yemen, and sudan, has been knocked off-line due to terrorism and violence. the indisputable fact we are dealing with is that north american barrels have largely displaced or largely replaced disrupted production so far. in tandem with the machinations at opec, the global oil supply is saturated and may be for some time. we also know that iran, one of the original and most deadly state sponsors of terrorism, will soon be rejoining the global oil market. if president obama gets his way, even as he continues to fight efforts by many of us to repeal the outdated oil expert ban that would allow us here in this country to send oil to our allies. i think it does beg the question, and part of the

discussion hopefully this morning, will be with that new source of revenue, that iran is anticipating to receive, what do -- what will they do with it? what will the intention of these mullahs be? are they going to build hospitals? are they going to direct yet additional sources of revenue to terrorist organizations? in recent months we have seen a great deal of discussion about isis' oil production and distribution and coalition efforts to disrupt this source of revenue. bottom line is that the islamic state -- this oil is helping to finance terrorism, and significantly. i have long argued that energy security is central to national security. last year we released a series of staff reports. one was entitled "oil production outages and strategic warnings." another was "iraq, through the lens of energy."

also, a report entitled, "a dark pool in the mideast, the problem with isis oil sales." today i am releasing them for public education and review. i think it is a historical walk through understanding some of the ties that we have. but it is not just funding of terrorism by isis that we will explore this morning. i am concerned about continued violence in libya, which is a significant source of light crude for our allies in europe. if we are smart enough to lift the ban on oil exports, our nation could sell it to europe. terrorists are also active in west africa. nigeria is a major oil producer and could potentially threaten vital chokepoints such as the suez canal, the street of hormuz -- strait of hormuz, and elsewhere. that is why in part i have been so determined, and i think my colleague, senator cantwell, to make sure that we don't make

reckless mistakes when it comes to sales of oil from our strategic petroleum reserve. it is there for a reason. the word "strategic" is there in a very significant place. on that front, the proposal by some to permanently ban production in a small sliver of the non-wilderness portion of an nwar which could be the , the west coast strategic reserve, is wrong. as terrorists threaten oil supplies in the middle east, and iran plans to make billions of dollars from selling to allies. that could potentially hurt american energy production. this hearing this morning is chiefly about education. members of the house and senate and administration must understand the economic and geopolitical context of a -- the national interests that we are considering. this committee has a unique perspective, given that over 90%

of iraqi government revenues are due to oil experts -- exports given that nearly 90% of syria's , oil production is off-line, and given that oil accounts for over 40% of isis's monthly revenue, according to ihs. you can expect me as chairman to continue this conversation enter -- into next year as we conduct oversight on to the federal government's energy-related activities in the counterterrorism fight. with that, i will turn it to senator cantwell for your comments this morning. sen. cantwell: i want to welcome the former chair, senator frank michalski, welcome him back to the hearing room. also welcome our witnesses and thank them for being here today. today's hearing is in an important opportunity to hear -- learn about the critical issues of the energy world, the relationship between terrorism and global oil networks, and,

foremost, energy security. i look forward to hearing from witnesses. i look forward to having the administration be a witness as well. perhaps we can do that in the future or have a hearing in a secure room to get into more detail on this issue. it is something we need to hear from them on. at the outset of the hearing i want to make sure i am making my views known about how important global oil markets are in fighting terrorism, and particularly the role of this committee to consider the impacts of these activities on infrastructure, the risk on u.s. and global energy security and supply and understanding the global picture. iran and iraq have some of the largest oil reserves in the world. by some estimates, the fourth and fifth largest in the world. control over this oil has major impacts over prices. the movement of oil to the best from the middle east to world markets is key to the stability of global supplies. global energy security depends

on diversity of supplies in different countries. what happens to that oil from the largest reserve still matters, because, in addition to the u.s., growing company's like -- growing countries like china have an enormous energy need. they will continue to look for resources for those energy needs to be met. in today's market where there is robust supply, it would take a significant disruption, maybe somewhere on the magnitude of 5% or 10% to really disrupt the market. today's global production is approximately 94 million barrels per day. the isis oil production is about 35,000 barrels. that is less than 1/10 of 1%. it is clear though that this is a constantly shifting dynamic. in a tight market, a very, very small amount of disruption can have a very, very significant impact. so, i think today's discussion is about where and when we might

anticipate disruptions and what to do about them. as i predict, we will probably talk a lot about actually following the money of where the oil revenue is going as a way to fight isis. in yesterday's armed services committee hearing, defense secretary carter laid out the administration's strategy integrating isis's oil structure -- he said, quote, " because it improved isis operations, we have intensified the air campaign against their oil enterprise. a critical killer of isis's financial infrastructure. in addition we have destroyed nearly 400 of isil's oil tankers, reduced the source of -- the major source of its daily revenues, and there is more to come." quote. we will certainly look forward to hearing more about what is to come. i will be the first to say, we do need to do more.

according to secretary carter, what made the new strategy possible was new intelligence. he said it allowed us to identify those parts of the oil infrastructure that are being used to actually fund isil. i was recently briefed by a state department special envoy for energy. over theased to hear past year we have eliminated almost all of isis refining capacity. i was also glad to hear that the raid in may produced actionable intelligence about following the money and more effective targeting of that. whereas previously isis could repair the damage from airstrikes within a matter of days, the current targeting inflicts damage that could take many months, even a year to repair. another piece of news is that isis no longer controls any of the fields in iraq. so, while progress has been made, it is very important to understand how adaptable isis is.

that's why it is important for us to adopt, too. it is clear that isis adapts their strategies. they have continued to look at this as a main resource, so we need to act swiftly and decisively as well. isis is supported by fuel purchases by the assad regime. to me, that needs to end. one of the most troubling realities of the situation is that the isis oil is being purchased by their enemies, the assadregime, -- the regime, either paying cash or other means. a u.s. treasurer sanctioned a u.s. individual for helping. instead of focusing on alleged oil smuggling in turkey, russia needs to use their influence to stop the assad regime from buying oil and gas from isis. i know secretary kerry is traveling there today. maybe that is a conversation he can have. back to our larger issue here, the large and troubling issue is that for years, terrorist

, organizations have been funded through oil sales. the chairwoman mentioned a few of those incidents. in nigeria, for example, oil has fueled conflict since 2005. boko haram, the group that bound the united nations building and kidnapped 270 schoolgirls and killed over 10,000 people is likely funded through crude oil theft and sales. nearly 40% of u.s. oil demand is met by oil. 93% of transportation is field -- fueled by oil. i also think it is important given these facts that these terrorists organizations -- we need to diversify our economy in the interest of national security. in the past, roughly 6% of our nation's gdp went to purchasing petroleum. 40 years ago we created the strategic petroleum reserve to of crude oilmpact

disruptions. the chairwoman and i remain committed to making sure the strategic oil reserve is a strong asset for the nation. we recently worked to make sure the quadrennial review's identification of infrastructure investment needed for the strategic petroleum reserve, given the shifts change we have seen in the u.s. over resources and where they are that those investments into the made -- need to be made. in the 2005 budget agreement, -- theere authorized spro. it needs to be protected from further shredding. it is important we have this as a resource for us to protect against instability in oil markets. while i am sure really here -- we will hear discussion from panelist about the national security and dependence on oil, we need to to continue to make sure we are doing every thing here at home to make sure we are secure, and isolated to the greatest degree possible from these impacts. i thank you, madam chair.

i look forward to hearing the witnesses. chairwoman: welcome to each of the panelists who have joined us here today. we appreciate you giving us this time and the attention on the subject of the day -- terrorism and global oil markets. the panel will be led off by dr. crane. he will be followed by mr. peter harrell. welcome. dr. sarah vakhshouri is the nonresident senior fellow for the atlantic council. we will wrap up the panel with mr. janie webster, the senior -- jamie webster, the senior director for ihs. we appreciate you being here

this morning. we ask that you confine remarks to about five minutes. your full statement will be part of the record. once you have concluded your testimony, you will have an opportunity to answer questions from the members. dr. crane: thank you for the opportunity to testify today. i am going to talk about isil the insurgency. isil has a large number of affiliates. we know, unfortunately, many people swear allegiance to it. we know it has been used for afghan and asking -- elsewhere. terrorist operations tend to cost very little. i will focus on the big money, the insurgency. we will talk about what it costs isil to run operations, how does it cover those costs? what can we do to reduce those revenues?

and we will talk about how effective those measures are likely to be. what are isil's major costs? the major costs are salaries especially for fighters, and there are large numbers of other people, police and intelligence operatives. roughly there could be 80,000 of those individuals. u.s. intelligence agencies think there are about fighters. 31,000 if you assume $400 a month, we're looking at $400 million there. personnel costs are only a fraction of what they spend. there are other costs for hospitals and schools, and ammunition, and other supplies. so, total costs are substantially higher. how does isil cover the cost? oil and sales of oil and refined products are the single most important source of income, running at about $500 million a year.

in the past, syria used to produce about a third of what north dakota produces today, maybe 400,000 barrels to 500,000 barrels per day. that has collapsed over the course of the civil war. we are now looking from anywhere -- looking anywhere from 35,000 to 50,000 barrels which isil controls. most of those sales actually go to small entrepreneurs who run what they call "teapot refineries" in iso-controlled territories -- in isil-controlled territories. there are a ton of these. they refine products. they go everywhere. they go into iraq, syria, they are sold to isil enemies. they go into turkey. in addition to that, as the chairman mentioned, a substantial number of barrels of -- go to the syrian government. is the most important

source of revenue. in addition to that, isil has been selling antiquities, which it has stolen from palmeiro -- elsewhere, which could run up to $100 million per year. the largest source of revenue is actually the other category which consists of extortion, theft of cars, kidnapping, and "taxes" and tolls. what can we do to reduce those revenues? we have been targeting oilfield facilities like loading depots and tanker trucks. we can put financial sanctions on local businesses in the region that are dealing with isil. we can focus more on dealers and individuals purchasing antiquities. we can also use the oil trading network to try and locate and neutralize isil. how effective are these measures likely to be? it appears that our strategy of

hitting oil separation in loading facilities and empty tanker trucks have put a dent in terms of revenues from oil. sanctions -- there are larger -- in addition, the financial sanctions -- there are larger companies in syria, and the kurdish regions and elsewhere which have been dealing with isil that we could push back on. we could put under sanction or threatened to do so -- or threaten to do so. there are a limited number of dealers who deal with people who have the money to purchase these artifacts. that is another area where i think we could clamp down on. i think that our intelligence agencies, the u.s. military can continue to focus on these networks. that said, these measures will not lead to the financial demise of isil. there are other opportunities, ways that they can do work arounds.

to conclude measures to reduce , funding for isil is an -- are an important part of the strategy to degrade the organization. sales of oil and refined oil products are the most important single source of revenues and the tactics of focusing on that are an excellent way for the country to go ahead. that said, we are not going to halt all sources of revenue that the organization obtains. thank you. sen. murkowski: thank you, dr. crane. welcome, mr. harrell. push the button. mr. harrell: there we go. thank you. honorable members of the committee, thank you for inviting me here today to testify. it is a privilege to share my perspectives with you on the subject of today's hearing,

terrorism and the global oil markets. i intend to focus my comments on the islamic state oil trade, which as dr. crane said is a principal source of revenue for the organization, and one that must be shut down. i will keep my oral remarks brief. i have submitted a longer statement for the record. in my view, oil is actually probably the second-largest source of revenue for the islamic state. when you add up all of the things that dr. crane said as other, i think those probably amount to slightly more than the oil revenue. to give one example of the scale of what is in the other category of isil revenue, treasury assistant secretary daniel glaser estimated earlier this year that, based on intelligence, the u.s. government had received -- isil has managed to collect $1 million in cash out of bank vaults from the territory.

when you add that, the taxes, the extortion, all told, a significant source of revenue. clearly the oil revenues are critically important. like dr. crane, i estimate the islamic state earns about $500 million per year from the oil trade. mostly through the sale of crude oil in syria. most, if not all islamic state oil production occurs at small wells in syria. there may be small amount of oil production in iraq, but the vast majority occurs in syria. the oil is sold by isil at the wellhead for perhaps between $15 and $40 a barrel. it is sold to independent distributors who then sell it to the small refiners that dr. crane talked about or move on -- it on elsewhere in the territory. according to most estimates, isil is earning between $1 million and $1.5 million per day in oil revenue. those estimates are up to about three or four weeks ago when the

u.s. military began their escalated campaign against oil targets. until about three or four weeks ago, those estimates had been stable for about a year. if you look to a year ago, the estimates were about a million or more per day. if you look three or four weeks ago, broadly stable oil revenues in isil territory. as dr. crane said, this is not high-tech business. these are very rudimentary techniques isis is using to extract oil. the refiners and distribute as are using the same to refine and distribute. i assess that most of the oil produced in isis territory is consumed in isis territory. there are more than 5 million people living in that territory. there is certainly ample local demand to consume virtually all of that production. that said, there is clearly some smuggling. sales to the assad regime are

actually probably more natural gas and crude oil. -- actually more natural gas than crude oil. there is also ample evidence of smuggling into the kurdish autonomous regions of iraq, and potentially jordan as well. i assess most of that oil smuggled out is consumed locally in those countries and is not entering, in a meaningful way, global oil markets. what can the u.s. and our partners due to further attack this revenue? i think the most important step the u.s. government can take is to continue to escalate military targeting of isil oil installations and the distributional network. the fact is the oil is being sold in isis territory. it is being sold for cash. there is not a lot of leverage international sanctions can have on those operations within their the -- that take place within their own territory. taking out their infrastructure is probably the most important

step we can take. that said, there is, as i mentioned, some smuggling that is occurring into adjacent countries. i think adjacent countries, such as turkey and the kurdish autonomous government in iraq, need to step up efforts to crack down on oil. currently they are turning back trucks were they can. i think those countries should increase their efforts by moving towards a posture of seizing and destroying. to create a deterrent, rather than the current situation where the trucks will maybe be turned around at the border and then try again to be smuggled across. third, i think we need to escalate our efforts to target isis' ability to import oil -- ability, using sanctions, to import oil export equipment. as isis suffers more bombing of its equipment, it will look to procure replacement parts. the region is awash in replacement parts. but i think there are sanctions

efforts that the u.s. government and our allies can take to prevent those replacement parts from flowing into isis territory. in closing, i would note that while i have focused my remarks today on isis and the oil trade, there are clearly, as both the chairwoman and the ranking member mentioned, other linkages between terrorism and global oil markets that need to be considered as we look at the global oil security posture. i would like to thank you very much for inviting me here to speak. sen. murkowski: thank you. dr. vakhshouri? ms. vakhshouri: thank you, chair murkowski. i would like to thank you for the opportunity to be here. i am looking forward to discussing these issues. i will focus my remarks today on iran's oil policy and the oil -- and returned to the global --

and return to the global oil market. i also should mention that these , notks are my own views the islamic council's. iran reached a final argument. under different economic and energy sanctions, it is getting ready to reintegrate into the energy market. in 2012, the eu put a ban on the import of iranian crude oil. also, some complementary sanctions on the tankers that were carrying iranian crude oil. these sanctions were coupled with u.s. sanctions on iran's oil revenue and export and all of these caused iran's oil export to be cut in half. iran's oil export in 2011 was about 2.5 million per barrel and it dropped to 1.5 million barrels per day in 2012. production cut by

17% compared to 2011. the overall sanctions, nuclear related sanctions imposed on investment2012, the around oil and gas were hurt. despite all of these sanctions, iran has successfully increased its natural gas production. in for the first time, the 2014, balance of its natural gas trade was positive. after the nuclear deal, iran is going to come back to the market with a totally different approach. despite allnessed, of its oil and gas resources, many ups and downs with relation to international oil companies and countries. to theime it responds challenges it was facing, it came out more with a policy and effort of being more resilient. this is going to be the case this time, too. iran's supreme leader, in 2014,

announced the idea of an economy of resistance. the economy of resistance was in response to the 2012 sanctions iran possibler -- exports ands oil revenue. the goal and aim of the economy of resistance was to create more value added domestically by referencing crude oil and natural gas domestically and export the product instead of raw materials. we are not going to see a huge amount of exports from iran coming to the market after the nuclear deal in the next decade. iran's focus will be on refinery capacity, downstream, and also on petrochemical sites. these are the important measures iran will take in order to reduce its dependency on crude oil revenue. the current state of iran's of iran's oilfields indicate iran is producing 2.9 billion barrels of crude oil

today. it's natural gas production is about 692,000 to 700,000 barrels per day. the plan after the deal -- it's -- its production will gradually rebound. we are expecting, by mid-next year iran's crude oil production , 2016, is expected to reach 400 to 500 more than today and they will have additional 200,000 barrels of crude oil. iran's oil minister is expected to announce that iran will increase its exports about $500,000 -- barrels per day, a 500,000 day after sanctions are removed. as i mentioned, in the long-term, iran is going to increase mostly it's natural gas because it is going -- mostly its natural gas because it is

going to produce more of that. also, it can convert it into electricity for domestic use and export. what would be important is that if iran comes out of isolation, it is not going to be dependent on its oil export revenue as much as it was before. energy administration information forecasts that prior to 2011, net revenue from its oil export was about $92 million -- $92 billion per year. this number dropped to $65 billion after that. also, one thing that is important is the very low cost of production in iran and the --orm of their upstream as which could create opportunities for investors to invest in iran. iran has access by land to neighboring countries and could potentially be a transit point

for the energy production, especially the oil and gas production, in the north of caspian for countries like azerbaijan or kazakhstan. my other fellow panelists mentioned in detail the middle east oil being transferred by isis and terrorist groups. iran could potentially be a transit point and this could make iran a significant point for import and export of crude oil to these countries. the other issue that would be important is that iran is going to expand its electricity export to these countries -- neighboring countries like iraq, afghanistan, or pakistan. even turkey. export of electricity instead of export of natural gas or crude oil would be significant. once again, i would like to thank you for having me here today.

i am looking forward to the questions. thank you.ski: mr. webster, welcome. mr. webster: thank you. i appreciate the opportunity to testify before you today on global oil markets and the potential and actual impacts of terrorism on oil prices and energy security both globally and here in the united states. today, i appear before you in my capacity as senior director for ihs. i leave the company's global oil markets -- i lead the company's global oil markets team. ihs is a research consultancy that specializes in energy, capital intensive industry data and analysis with a worldwide presence. the current era of oil abundance and low oil prices does not eliminate the issues with geopolitical and terror risks emed tothey may have se fade. isis and the of

gaining of significant syrian and iraqi territory in 2000 18 and an increase in terrorism globally, this interest will be growing over the next few years. and the risk premium or fear premium in oil prices is likely to return. so, this temporary measure, where we don't have that, is as a result of low oil prices, due to the united states bringing on increased production, as well as opec deciding not to change its policy both at the thanksgiving meeting last year and the most recent meeting last friday when they decided not to have any sort of production level at all. itsead, opec has increased production by about 1.5 million perils barrels per day. with significant increases from saudi arabia and iraq, this has helped to push down prices even further, but they are coming at

a cost. that is lowering opec's spare capacity or the amount of additional production that a country could bring on should it choose to do so. this past summer, the increased production out of opec caused their spare capacity to reach levels as low as 2.6%. the historic rule of thumb for opec's spare capacity for stable prices is generally 4%. the reason it has been able to go so low without price spikes is precisely because we are in a very oversupplied market, and this is partly due to the united states. this calculus however may shift as soon as the middle of next year. y,en the daily oversuppl the amount of barrels that we are putting into global stocks around the world stops building and we actually start potentially drawing. at the same time that opec's spare capacity effectively

vanishes and moves back down on a seasonal basis. this spare capacity level means that, at a time of heightened supply risks, it will be incumbent upon available stockpiles, both strategic and commercial, as well as the ability to bring on incremental supply, most likely from the united states, to assuage any real or perceived shortfall. this shift from opec spare capacity to a new form of supply security that is provided in part by u.s. productive capacity -- capacities will take time for the market to calibrate and clear signals in terms of policy standpoint would be greatly appreciated by the market at this particular time. the flexibility of u.s. production growth comes with a -- from a timing issue on both the up and down side. they can increase production quite quickly because the amount of time needed to bring production on is only four must -- months versus conventional , production where it can take

several years to bring that production on. this means it can have a much greater effect in terms of bringing production back online. these production outages that have plagued the oil market for the last several years are likely to increase in the future. right now, since 2012, we have had an increase in terrorist attacks, per ihs, of about 25%. this means that over the next couple of years, geopolitical risk is very much going to come back into the market. in order to address these or now that the shift from the opec to -- toward the united states comes with it a huge for the united states to shore up not just national energy security but global energy security. the two ways i would say it would be most helpful is by

allowing u.s. crude oil exports , one, and allowing u.s. crude -- crude oil exports gives exporters an opportunity to export oil to allow them to increase their own production and be able to get more oil out to the global market. the other aspect is one of having a very clear stockpile -- stop policy both on the commercial side and on a strategic stockpile side. by having significant stocks within the united states that are in areas that we know are safe, we can actually increase overall energy security. with that, i appreciate chairman murkowski, your leadership, and ranking member cantwell, your leadership as well. sen. murkowski: thank you, mr. webster. a lot of issues raised here this morning. it seems to me that we could have two separate hearings. the points that you have hit

upon in your testimony mr. webster, talking about energy security implications of all that is happening within these oil markets. that is one aspect. but then, following off of senator cantwell's words of following the money in terms of what is funding terrorist activities is certainly something that again we could spend all day trying to understand how and where we can make a difference. mr. harrell, i went to begin -- i want to begin with you because you have helped break it down in terms of how we see the financing. oil is a significant piece, as we have mentioned. 40%. this other category is also quite substantial. you have suggested that one of the better ways to choke off the supply of funding is to as the -- escalate military targets, but you also indicated that

you don't feel international sanctions may not be that helpful. you did indicate though that sanctions on import of oil production equipment is one area where we can specifically target it. we try to figure out here what sanctions may or may not be effective. can you go a little bit more into detail about other areas where you think sanctions are helpful or they are not helping, given the situation on the ground? mr. harrell: thank you very much, senator murkowski, for that question, giving me a chance to elaborate. i certainly did not mean to imply that sanctions are not useful. i think sanctions are absolutely useful in this context. but i think that, given the majority of the revenue that isis generates from its oil sales is generated internally, sanctions are going to have to

play a supporting role. an important role, but a supporting role, with the military effort being the most important way of targeting the income. a couple of areas where i think sanctions can and should be deployed, and i should begin by noting that i think that my former colleagues at the treasury department are working very actively on this set of issues. first, as i discussed, there is some oil seeping out from isis-controlled territory into adjacent countries. clearly, both the u.s. government and our partners should be taking every step we can to seal the borders and to destroy the oil coming out and should also be working to impose financial sanctions on the buyer that oil whether it is in the kurdish-autonomous part of iraq, turkey, jordan, or elsewhere.

another area that i think sanctions could be quite useful is to go after isis's procurement networks, especially for spare parts related to oil infrastructure. as the military tempo increases, isis is going to be seeking to increase its procurement of replacement parts. now, as i discussed and as dr. crane discussed, a lot of this is fairly low-tech equipment that they need. the middle east, syria, iraq, and turkey are awash in oil equipment. this is not going to be in easy task, but clearly sanctions should be imposed on anyone looking at selling oil-related parts into isis-controlled territories, to keep those out of isis. final area that i think sanctions could be useful is in ensuring that isis continues to be cut off from the international financial system. most of their revenue is cash. they are piling up increasing quantities of cash in their own territory.

in cash houses and elsewhere. it is a cash-based economy. they probably want to eat most -- to keep most of their revenue in cash. as they try to support affiliates and allies outside of their core territory, they will clearly be looking for ways to move that money, some portion of it out of their territory into the international financial system. sen. murkowski: i want to ask a question about libya. we talk a lot about what is going on in syria, iraq, iran, and libya, as we all remember, was a very difficult place and is still a very difficult place with the level of violence and civil unrest. mr. webster in terms of what, , -- how libya represents a potential source of revenue for isis, how does that factor in to the discussion today? mr. webster: thank you for your question. it is quite important.

libyan production before the civil war was 1.6 million barrels per day which dwarfs the 30,000 or 40,000 barrels a day that isis is controlling now. right now, because of a variety of issues within the country country, it is about 300,000 barrels or 400,000 barrels a day. there is still an immense amount of upside in terms of production out of libya. libyan production is light, sweet oil. a shortage of that was a driver for driving up prices in 2008. my understanding is that isis has got a foothold and is seeking to control some of those terminals and those other access ways for oil. so, it is a big concern in terms of both the amount of oil and then what isis could potentially do with that. particularly as that could then be pushed into allowing them to -- pushed into and allow them to create additional energy attacks in algeria, egypt, and other

places from within libya. sen. murkowski: senator cantwell. sen. cantwell: thank you, madam chair. i guess, in continuing about vulnerabilities. i have two questions. one to you, mr. webster, about transportation infrastructure. that there are other things to worry about, like the strait of hormuz. i would assume that would represent an opportunity for someone and concern. how important is it when you look at the transportation infrastructure, overall vulnerabilities and targets we need to harden, that we keep the strategic petroleum reserve modernized? mr. harrell, back to a very specific regional question, mentioning that the refining

capacity and the isis region has been taken out but refining is a -- the hardest to rebuild. but the actual actual oilwell production -- you can bomb them, but it is not difficult to continue to get the oil. following the money and its impact to get the assad regime off of the oil from an economic perspective. mr. webster: thank you. the importance of transport and the importance of being able to get oil and refined products to people is very critical. that is particularly critical for the strategic petroleum reserve. we have just under 700 million barrels residing there currently. while it would appear that right now there is no use for it at all, in that we have plenty of

of supply here in the united states, it is important to be able to hang on to that and access it. because of the ride he of changes in terms of logistics in the region, as well as the changing in terms of the types of crude we are importing and the types of crude we are making , and being able to tap into that in terms of volume and timing is incredibly important. sen. cantwell: ok. but in general, making sure that we are protecting -- if you were looking at terrorism overall, protecting these transportation sectors of the major supply is something we should be concerned about. senator cowan absolutely agree with you. senator harwell: if you look at the external buyers of isis oil, assad regime. it is front and center. as you said senator in your remarks, it would be incredibly useful for russia which has played a destructive role in syria to date, to use its leverage over the sa