this committee is a heavy consumer of eia products. we always appreciate having eia share its data and analysis with us. i note president obama nominated an impressive candidate to become the next administrator of the eia. we appreciate him being here to present the eia's position. next we'll hear from ambassador jones, the deputy director of the international energy agency in paris. we look forward to discussing eia's forecast of total world energy supply and demand outlook through 2035. also note that the iea was founded as a forum for responding to oil supply disruptions and still has an important role to play in that capacity. given the current gee yoe political environment, we're grateful to have ambassador jones here today. we also are policed to have with us two leading energy analysts both of whom have been before our committee on several other occasions. they can offer their own thoughts and insights on where the oil markets are headed. >> thank you, mr. chairman. i appreciate you convening this very important hearing. it's re

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

the eia released its 2012 report last week. this hearing is an hour and 40 minutes. >> why don't we get started. the hear will go come to order. thank you all for being here. this is an oversight hearing on the u.s. and global energy market outlook for 2012. as many of you know, we often start the year by holding a broad overview hearing such as this. obviously a lot health insurance happened since last year, since the last time we had an overview hear of this this time. many countries the middle east, north africa, the key oil producing reej oochb the world had popular uprisings resulting in new governments taking charge in what is now referred to as the arab spring of 011 as a result libya spent much of the year with oil exports near zero. with libyan export now almost totally restored or mostly restored, our focus on that reej oochb the world has new compl complexity because of the multi-lateral sanctions against iran. which also is one of the largest oil exporting nations. though the u.s. has sanctioned iran since 19830. ir

if you assume a backup requirement of only 3% and use the eia estimates of capital and operations costs for coal and gas, gas generation, that works out to be about $368 per megawatt hour for backup generation, and i'm going to return to that number in a few minutes. there's the further matter that plants have to be cycled up and down depending on wind and sunlight conditions. if the wind's blowing, you don't have to have the backup capacity up and running. if the wind dies down, cycle the plants up. that means backup has to be provided by gas turbemperaturur cycle plants which are inefficient so cycle up and down. what's the result? ironically enough, more rather than less air pollution. that's the finding of an engineering study of colorado and texas. so looking at this from sort of a general level, you know, we've achieved kind of a perfect green trifecta. higher costs, less reliability, and more pollution. and we haven't talked about the environmental problems that are upon renewable power individually. you know, noise, flicker effects, unsightly use of large amount of land, dead bi

and in the eia forecast, they project gas prices going up. these scenarios are very sensitive to the price of gas. the first two are essentially about electric power. we can build electric power and supply it with renewable sources or we could use natural gas. the third scenario's different. and that is producing oil and gas within california. and there is a project that could easily be started by developing oil in the santa barbara basin. and as many of you are aware, in 1968, there was an oil spill in the santa barbara channel. it was actually a rig that got out of control. and this ushered in an era where i think it was president nixon who instituted a ban on offshore oil development. and that ban has been in place since that time. there's still a lot of oil in the santa barbara channel. in fact, i was out there a couple of years ago walking on the beach. i would recommend wearing shoes if you walk on the beach because there's a lot of tar balls on the sand and i'm not sure that's from the old spill. there's a lot of oil out there. and wha

and something that i've asked the people at eia to dig into a lot more deeply. >> mr. dewon, did you want to add a comment? >> yeah. i want to add structurally to understand what's happening here. in europe, we have declining demand which means the refining capacity they have is too big for the market they're serving. so everybody has to run a transition rate which makes the sector unprofitable. so the smaller refinery, the least profitable ones basically are under tremendous economic pressure. to shut down. the refiners are losing money, basically. in the united states, it's slightly different. we have the structural trends in demand which are shifting if you want demand and which product is in different region. at the same time, we have the shift in the crude supply was giving certain refiners location advantage and certain refiner location disadvantage. so what we're seeing here is a shift of rate or construction of refineries towards the ones who are better positioned than others. it's really location issue which is -- which has to match the changes in the supply.

so the applications exceed the amount that eia made that study based on. they looked at about $12 billion cubic feet per day. so i want to get your sense of how you're going to objectively look at this question and i'd like you to disabuse me of the theory that you already made up your mind. when i looked at the quote from the recent meeting, i said, shoot, it looks like dr. chu has already made up his mind. to me, for example, 13 billion cubic feet of gas exported when 12 billion could raise prices 54%, that would be a huge shock to the american economy. tell me how you'll approach this issue and particularly give us a sense of how you're going to approach it objectively and look at both sides. >> sure. i think the full quote, i'll paraphrase myself, because i've said this a couple times. the full quote is that certainly we don't want to see natural gas prices rise dramatically as we have seen in the price because that has an appalling effect. it creates great difficulties for -- for businesses, for people who heat their homes with natural gas. and so --

and something that i've asked people at eia to dig into a lot more deeply. >> mr. diwan, do you want to add a comment? >> i want to add structurally to understand what's happening here. in europe, we have declining demand, which means that the refinery capacity they have is too big forward market they're serving. so everybody has to run at a low rate, that mistakes a lot of the sector unprofitable. so the smaller refinery, they're under tremendous pressure to shut down. the refiners are losing money, basically. in the united states, it's slightly different. we have the structural trends in demand, which are shifting, if you want, where demand and which product is in different region. at the same time, we have the shift in the crude supply, was given certain refiners location advantage, and certain refiners location disadvantage. so we're seeing a shift of the construction of refiners towards the ones that are better than others. it's really location issue, which has to match the changes in the supply. so you're trying to make sure that your infrastructure is adapti

gruenspecht, i wanted to follow up with regards to the eia's lower natural gas reserve estimates. indicated that they've dropped precipitously 40%, as i recall. do you expect that this lowering of the estimates may possibly discourage further exploration? is this going to have any impact one way or another? >> i would say not. again, whether the u.s. has 100 years of total recoverable resource at current rates or 90 years of total recoverable resources estimated at current rates. i just don't think it has much of an effect. i think the thing that would affect development would be the view of companies on the ground as to how much it costs them to drill a well and what they can recover by drilling the well. and the price so they care about the quantity they can recover by drilling a well. what it costs them to drill a well and what they think the price is going to be. that's really what they're focused on. you know, whether we have 90 years of total recoverable resource or 100 years. >> i would agree with that. 40% reduction is noticeable. but as you put it in those context -- let

but as you put it in those context -- let me ask, then, how much of the eia reserve estimate, then, is actually driven by the production data that's out there? >> again, i would say that usgs is the primary agency in the united states government that does resource estimates. we do the work on reserves primarily. resources is a larger concept. the usgs had not done a marcellus estimate in a long time. they had a very what we consider to be a very low estimate, one that we couldn't use. so we made up or developed our own. made up is a bad word. >> bad word. >> strike that from the record. and then after we did that, usgs came out with an updated marcellus estimate which was the 84 trillion cubic feet compared to their prior estimate. the 84 trillion cubic feet was significantly lower than the number that we had developed internally. you know, we're obviously sad that when they came out, we would update our work based on the usgs work. we did try to do that. >> so do you think that you will revise the estimate again? >> i think this is a really tough area. i think there's too much emphasi

we have a scenario similar to the eia scenario that's based on existing policies. we also have a scenario that we call the new policy scenario, which is based on announced intentions or policies. and then we have a climate scenario, that is designed to limit global warming to 2 degrees centigrade. in all three of those scenarios, energy efficiency plays a very important role. in fact, we believe in looking at climate change and the need to restrict emissions of carbon dioxide, basically we think that energy efficiency alone, with currently available technologies, can lead to at least 50% of the emissions reductions we need, if we are going to produce -- or prevent global warming beyond 2 degrees centigrade. but, of course, energy efficiency isn't just important for the environment or for climate change, it's important for energy security. it's important for economic success as well. because the more efficiently you can use your resources, the more competitive you can be in the international market. the more efficiently you use your resources, the less of them you n

i want to show ayou a chart we put together, information taken from the eia, your own department, showing where we are as far as 2010. 24% of our energy coming from natural gas. 10% renewables, 45% coal, 20% from nuclear and other liquids. from your agency. when we got to 2035, two more decades, this is where you are. 27% from natural gas. renewables 16%. coal still at 39% and the rest at 18%. with that being said, the president's budget basically had $2.7 billion you all submitted for the energy efficiency renewable energy, increase from current levels. hold this up to see the comparison. stand up. this is where your money's gone. this is what you're going to get out of the investment. this is about your own. and then you have the office of nuclear energy. nuclear's right here. where you've gone. this is where you are. you've cut -- the greatest cut has been right here. and you're still going to be dependent on it and we can do it much cleaner. i can't figure the rationale. when you take all of the above the president said, look at energy strategy cutting funding to resources that will c

let me show you a chart we pit together and this is taken from the eia, your own department, showing where we are as far as the first through 2010, 20% is in nuclear and oil and other liquids. when we get to 2025, 27% will be coming from natural gas. renewables 16%. coal and steel, 39% and the rest at 18%. with that being said, the president's budget basically had 2.7 billion that you all submitted for the energy efficiency renewable energy at 47% increase from current levels. if you'll hold this up, so you can see the comparison. stand up. this is where your money is going. this is what you're going to get out of the investment. this is by your own -- and then you have the office of nuclear energy. nuclear is right here. that's where you're going. this is where you are. you have cut 19 -- i mean, the greatest cut has been right here. and you're still going to be dependent on it and we can do it much cleaner. i can't figure the rationale. what i would say when you look at -- take all the above, you look at the energy strategy when cutting funding to resources that will continue to pr

several weeks ago we had a presentation, eia present kind of the global picture. and i had an opportunity to ask mr. gruenespec where alaska natural gas fit into the bigger picture as we talk about domestic natural gas. senator wyden has on many occasions before this committee asked questions about the export of domestic product here. and you as a secretary have the authority to sign off on whether or not export is in the national interest. the question i hadether or not alaska was viewed simply from the rest of the lower 48 market. different type of gas, different processes, and clearly a different market. alaska is much closer to the asian market than we are, most of the lower 48. it was good to get his opinion on it. but you're the guy that ultimately signs off on export licenses. how do you view alaska's natural gas and whether or not this is differently than the domestic -- the lower 48 natural gas domestic production? >> well, given the charge of and the decisions we would have to make on allowing the export of natural gas, it would, again, have to be folded

gruenspecht, i wanted to follow up with regards to the eia's lower natural gas reserv

on the plus side, though, according to the latest information from the eia, the energy information association in the u.s., the u.s. has never had more rates producing domestic supply. it's expected to hit 6 million plus barrels a day by 2025. so questions of peak oil are now put to one side. it is a very much -- i was going to say glass half full, glass half empty, but you may say gas tank half full, gas tank half empty, and it depends on which side of the pump you are. >> very funny, richard quest. but here's a little something i want to throw at you. this took us by surprise. talk about drill, baby, drill. one of the oil publications, it's reporting that the number of active drilling rigs, you know, on u.s. soil in the gulf of mexico has quad rurupled in past three years. they've discovered all these reserves, texas, north dakota. obviously they're going after the stuff. one expert quoted, at the rate we're going now, the u.s. could achieve energy independence in one decade. do you believe it? >> yeah. and there's a bridge that i'll happily sell you which i can ship. yes, and if we look at

we've got a better than expected eia member, and today we get a count from baker hughs that nat gas rigsre down to 2009 levels. and they actually have fallen now for the sixth straight week. maria, nat gas producers trying to fix that equation on the glut of nat gas by cutting back on production. it looks like others are shutting in. >> thank you so much, bertha. let's look at some of the stocks we're following on the ticker tonight. oppenheimer raises its price on the stock on apple because of higher expectations for sales of iphones and ipads. stock today flat at $502.12 a share. solar shares shining today. the panel maker saying it has resolved issues at a new plant near los angeles, clearing the way for more than $600 million in federal loan guarantees. the company sold off last week, you may remember, after warning that a loan could be in jeopardy if the permit issue was not resolved. the stock up better than 7% today. freak car america, one of the biggest performers on the upside, swung to an $8.5 million fourth quarter profit after losing $3.5 million a year ago. it was significan

nat gas is on tap tomorrow for eia. we are expecting a drawdown of 112 to 120 billion cubic feet. glut there continues to be the problem. we'll see if we get tomorrow's report, whether we will hold that $240 support level. >> thanks very much, bertha. here are some of the stocks we're following on the ticker right now. lower than expected q-4 revenue. weight watchers disappointing with the full year profit forecast. as you can see, it shed more than 3%. elsewhere, safeway upgraded to outperform from neutral. raising the price target to $26 a share from $19. fourth-quarter sales continuing on west coast trends. the shares, as you can see, up nearly 2%. and dean foods moving to higher ground after the ceo of the u.s. dairy giant told analysts he expects flat volume sales this year, while the rest of the industry is breaking for declines. dean foods was able to grow its q-4 revenue by 4.5%. even as commodity costs rose basically by passing on the higher costs to us, the consumer. dean foods jumping over 10%. big move. >> i love the sound of the ticker going. does anybody have a ticke

eia is saying anywhere in the coming decade.e're hearing reports of gas extraction companies now pulling their rigs out, because prices are too low. so what we need to do -- first let me assure you my mind is not made up, and if you read the full quote -- >> i did, mr. secretary. there does not seem to be anything in the article with respect to what you are saying. it makes it out at exporting natural gas is an unmitigated plus. says exporting natural gas means well for the united states. >> the article you're reading from does not capture the full -- >> fair enough. >> certainly, our minds are not weighed up -- made up, and we will not make up our minds because before anything -- first, let me quickly say that there are two classes of countries, countries where we have free trade agreements with, countries we do not. the countries we have agreements with we are obligated to say yes. but the countries we do not have agreements, we have to say what is in the best interests of the united states. before we do anything, and i have t

that is the latest eia statistics.re and more, we are shifting some of our refined products overseas because we have the competitive industry to do so. we are primarily shipping them to the european market. our refineries are more competitive. we've invested over $300 billion in the last 15 or 20 years and we're able to refine diesel as mr. green pointed out, some out, some of the distal it feels than we actually can be competitive in the european market. that is a good thing, not a bad thing. the gentlelady from the virgin islands has been talking with a plant that of the refinery and her reach into shutting down. i think it's a 500,000 rail per day refinery. it's a little bit older. they are not competitive in its demand for some refined products has declined in the united states, which is the primary market. apparently they are not competitive enough to ship into the european market. it is going to cost her, her territory quite a few very good jobs. but mr. marquis once too often a amendment to change the young amen

. >> what's interesting to note, too, want to go to sharon epperson with some eia inventory data. >>. the number very interesting. last night from the industry we got a very big draw when it came to oil. today we've got really a very small build in terms of crude of about 300,000 barrels. that's well below the expectation of about 2.7 -- or about 2.5 million, let's call it, that a number of analysts had been looking for in te. in terms of the gasoline, we did have a build more in line with expectations of about 1.6 million. right now crude coming off a little bit. still, it is holding in there at $99. that smaller than expected bill quite likely because we've seen some import numbers. over the last few weeks, imports were growing. refinely utilization was also fairly flat. refinery utilization went up about 1% here. that's a huge move. so that may have helped in terms of the drawdown. what's very interesting, a lot of traders are also talking about the backdrop that we continue to have here that is likely to be supportive of oil prices of the saber rattling between iran and the u.s.