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tv   [untitled]    February 1, 2012 12:30pm-1:00pm EST

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cutting back a little bit here in discretionary spending or trimming this program over here. this is all so unsustainable. it's the fault of both political parties. and the sooner we recognize that, the better off we're going to be not only in keeping commitment to people who organized on these programs, but for our economy as well. and that's the point we're trying to make. >> mr. chairman, as you know, you are fonder of our very long term projections than we are when we talk with our panel about their guidance in setting the very long term projections. they don't really even talk with us about it the they think it's a silly question to ask. so we do provide them the full 75 years as the social security medicare act is due. we do the same thing for our long term projections. but if you look back 75 years ago and picture people in 1935 would have done if trying to project health spending in 2010,
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you can see why that's a very perilous business. we folk us in the long term budget on the next 25 years. what i think there is an absolute tradeoff between putting revenues above their historical average share of gdp and cutting social security on the federal health care programs in some -- >> cut in real terms of what we're talking about or rates of groenl going down? >> cut relative to -- i should be careful. cut relative to what will occur under current law. we said this, as you know, time and time again. the economists will need to either raise revenues well above what's been the historical average here in gdp or make fundamental changes in the large entitlement programs. or some combination. even if one reaches for a combination, the changes to revenues and the large entitlement programs will each need to be large because the scale of the problem, the gap between the revenues we're used to sending to the government and the benefits that we're used to
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getting from the government is getting so large. >> and the largest one is the health care entitlements, correct? >> the fastest growing programs are the health care entitlements. medicare is a little smaller than social security. but medicare and medicaid together are larger than social security by the end of the -- well, i think today. >> and this is why the point i tried to make earlier about getting better data in research and analytical tools on ideas and reforms on bending the cost growth of health care is really crucial. because if we can get at the root cause of health inflation, that is one of the smartest, best things we can do to deal with this situation. because i think, as you've shown this your analysis, the kind of tax rates that this country would have to absorb would, growth destroying if we actually went down that path. >> and as you know, that work is very high occur rate for us.
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>> thank you. >> mr. chairman, if i may just -- i have a closing comment also. >> okay. you have the last word. >> you're the chair. there's a couple comments i made that i just needed to just respond to. in terms of hyped income in the past 50 years or expenditures that we see on the chart, these kinds -- the charts are kind of static in that we have to take them in the context of other dynamics, i think. this is what i think we're trying to be impressed upon by the doctor. in terms of the highest income or highest expenditure in the last 50 years, you know, 50 years ago i was probably making around $200 a month take home. and today, 50 years later, i have the highest income that i could ever have imagined or ever dreamed of.
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but it's because of the way the economy has changed, the cost of living has changed and things like that. so to compare today -- yesterday to today has to be taken in context of a lot of information. and so in term of numbers and budget and projections and things like that, the science and the art, if you will, of budgeting and trying to make the right decisions for the future and for our country is a -- it has to be a thoughtful process through dialogue and debate. i think that's why i appreciate today's session and mr. chairman, you may have the last word. >> okay. i'm just having fun with you. i actually will. it's a technical question i have to ask you for the record. according to the march 2011 baseline, limiting spending to gas tax levels would result in spending that would be in average of $13 billion per year below current levels. has that changed under the new
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baseline? >> so that number i think is one i'm not familiar with. i can give you, i think -- i can give you the current number. >> okay. >> we estimate -- i think the answer to your question which i was provided with late last night. >> i think that's we were asked to ask you this right now. >> over the coming decade, we estimate on average annual outlays from the highway account to the highway trust fund will be about $8 billion more than revenue and interest credited to the account. although, of course, that gap varies by year over the coming decade. >> so that's the change from last year's baseline to this year's baseline? what is the delta? >> i don't have a number for last year. i don't know what it used to be. what i know is what it is now. >> okay. >> and our current projection, the gap between this over the average of a coming day is $8 billion. >> all right. i think that answers my question. thank you. >> okay. >> thank you all. hearing's adjourned.
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we'll have more tomorrow when ben bernanke will be on the hill testifying and we'll have live coverage here on c-span3. president obama attends the national prayer breakfast tomorrow morning here in washington. we'll have his remarks for you live starting at 8:00 a.m. eastern on our companion network, c-span2. >> we as explorers of literature, we have a responsibility. okay? and for those of who you are discovering the creation of literature, you have a responsibility. do you not? okay. can you create anything you want in the world you created in literature reflecting history or not and feel comfortable in that creation? or must you precensor yourself to say i can't offend myself. >> this weekend from lectures and history, professor william foster on the n words place in american literature and culture saturday night at 8:00 eastern. also on american history tv, he
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changed the reading habits of americans, a look at the influence of time incorporated founder, publish of time, fortune and live magazines saturday morning at 9:30 eastern and sunday at 5:00 p.m., january 1901, the oil boom hits and the lucas gusher quickly makes texas a leading oil producing state. visit the wealth why i homes and infamous streets of beaumont, texas. that is american history tv this weekend on c-span3. >> this is c-span3 with politics and public affairs programming throughout the week. and every weekend american history tv. 48 hours of people and events telling the american story. get our schedules and see past programs at our websites and join in the conversation on these social media sites. energy officials said the u.s. oil and gas industry is in the mitdst of a major revival. during a senate energy and
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natural resources committee hearing yesterday, the energy information administration estimates that domestic crude oil production will increase over 20% in the next decade reducing oil imports from 49% to 36% by the year 2035. they released the energy report last week. this is about an hour and 45 minutes. >> the hearing will come to order. thank you for being here. this is an oversight hearing on the u.s. and global energy market outlook for 2012. we often start the year by holding a hearing such as this. obviously, a lot happened since last year. the key oil producing region of the world had popular uprisings resulting in new governments
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taking charge in what is now referred to as the arab spring of 2011. as a result, libya and important opec member and exporter to europe spent much of 2011 with oil production and exports near zero. our focus on that region of the world has a new complexity because of the multilateral sanctions against iran which also is one of the world's largest oil exporting nations. although the u.s. has sanctioned iran since 1980, it has not imported iranian oil since that time. iran remains an important source of asian and european oil imports. so as europe now works to implement its own sanctions against iran, we can anticipate some dislocation in crude oil
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flows as the world adjusts to this new situation. these gee yoe political uncertainty serve as a reminder that oil markets and to be more specific oil prices are a very important factor in our country's economic security. that's why it's so important to fully understand the connection between u.s. and global oil markets. the oil market outlook in the u.s. is brighter than we would have thought possible, even a few short years ago. our oil production is up. our production of alternative liquid fuels is up. about the same amountment our reliance on imported petroleum is down. at the same time, our cars and trucks are using more -- using that oil more efficiently than before. the united states has successfully reversed what seemed to be an inevitable trend of becoming ever more dependent on imported oil.
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so this is an accomplishment we can all be grateful for. however, it's important to note that in part because of this enhanced u.s. security, we in the united states are no longer the primary driver behind the world oil markets and prices. as our oil production has gone up in the past few years, oil prices have gone up as well. the u.s. became a net exporter in recent months and consumers are paying higher prices at the pump. that's why i hope we can use today's discussion to understand broad energy trends in both the u.s. and around the worldment my view is we need to understand not only how to make the u.s. less vulnerable to oil disruptions, but understand what events and actions actually affect world oil prices. we have a panel of four expert
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witnesses to day who can help us understand the interrelated markets for oil and for all of our energy sources. we'll start the discussion with the acting administrator of the department of energy's energy information administration. he will share the highlights of eia's latest short and long term energy market forecasts. 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.
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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.
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>> thank you, mr. chairman. i appreciate you convening this very important hearing. it's really a scene setting hee hearing for us on the energy committee. in looking at the panel before us, i welcome you all back. i would suggest this is not a repeat from what we heard last year. there has been a lot that changed from the last time we convened. the conventional wisdom here is this congress cannot accomplish any major energy legislation now that we are into -- full on into an election year. it doesn't mean the rest of the energy world is grinding to a halt.
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decisions are still being made or perhaps not being made on a daily basis about where energy can be developed, who's going to pie it, how it will be transported and all of those decisions, of course, have consequences for jobs, for our economy, and for the prices that we pay for our energy needs. those who joined us today will understand the trenz and events taking place in the u.s. and global energy policy. and whether we're talking about china taking its first steps toward proving up its shale gas resource which by some estimates is even larger than our resource here in the united states, or whether we're talking about the straight of hermaz where there are a number of unforeseen circumstances. i think we would all acknowledge that they could have impact on the every day lives of americans. so i'm interested in whether there is a challenge to conventional wisdom before us today. i can tell when you oil prices peaked at $147 per barrel in 2008, we here in congress talked a lot about it. you didn't see much in terms of
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policy changes. we should take a lesson from that experience and recognize that times of relative stability are an opportunity to recall what we said in times of crisis. it's times like now when we're able to have a more reasoned discussion that i believe we should seek to develop a coherent policy and then act on it. i'm particularly interested in whether the u.s. can hold it together and truly see through this natural gas revolution that's risen to the top of our energy discussion. technology developed here at home has allowed us to tap the abundant resources that we have and we're faced with some pretty good problems, actually. what to do with all the gas? how to handle the rapidly expanding development in a sustainable way? and how to keep growing in this space without self destructing throughout the regulatory or fiscal policy reactions? so for obvious reasons, i'm going to be asking this morning where alaska fits into this picture. our very unique geographical position, our huge resource base
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is well placed to satisfy 70 export demand for u.s. gas. i want to understand the contempt context of this against the concerns of those that we have regarding the lower 48 scenarios. i think it is appropriate and timing is everything but it's interesting to talk a little bit about what we know about this resource. the president in his state of the union addressed just last tuesday indicated that this country has potentially 100-year supply of natural gas. in your new estimates, the shale which we previously thought held enough gas to meet the entire nation's demand for 17 years of current consumption rates has now been revised downward to a six-year supply. so it seems like, you know, the numbers are all over the place. i think it speaks to -- speaks to the fact that you've got changing technology.
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you have increased exploration that allows us to understand a little bit more about what we're looking at in terms of the reserves. but it of the reserves, but it does go to the heart of what you all deal with, and that is understanding the numbers, understanding what we're dealing with in terms of supply. a long time before the president agreed with those of us calling for an all of the above energy policy, it became evident that the u.s. still really does matter in terms of influencing world energy trends and truly determining our own fate. if an energy or a disaster does occur, there's a strong likelihood that the rest of the world will look to us for leadership and we've got to be ready for that. so i'm hopeful that this hearing will help inform not only this committee but others of patterns developing and help us to see where we could act, where we should act, and where the best investments for our very limited federal resources might be. i look forward to hearing from each of you this morning and the discussion that will follow.
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>> all right, why don't we go ahead. dr. gruenspecht, why don't you take what time you need to summarize your annual report, your new outlook, and then we'll hear from ambassador jones. >> thank you, mr. chairman, and members of the committee. i appreciate the opportunity to appear before you today. the energy administration information is the statistical and analytical department within the department of energy. eia does not appropriate or take issues on policy issues and has independence with respect to the information and analysis that we provide. therefore, our views should not be construed as representing those of the department or other federal agencies. starting with the short-term outlook, eia expects that the global market will rely on both increases in production of crude oil and noncrude liquids and a draw on inventories to meet world demand growth this year. the price of west texas
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intermediate crude oil is forecast to average about $100 per barrel in 2012, roughly $5 above last year's level. uncertainties, such as surprises in economic growth or geopolitical issues affecting middle east suppliers that, i think, were mentioned in the opening statements, could push oil prices higher or lower than projected. based on recent futures and options data, the market believes that there is about a one in eight chance that the average wti price in june 2012 will exceed $125 per barrel and about a 1 in 25 chance that it would exceed $140 per barrel. on a related matter to geopolitical issues, eia is working diligently to meet the february 29th deadline to submit to congress a report on the availability and price of
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petroleum and petroleum products produced in countries other than iran, as required under the national defense authorization act. this is a report that we are to prepare every 60 days and the first one is due february 29th. turning to consumer prices and expenditures, eia has lowered its forecast of average household heating expenditures this winter due to warmer weather. our baseline forecast for average gasoline prices in 2012 is slightly below last year's level, about a nickel a gallon, although recently options and futures price data imply that the market believes there is about a one in five chance that the u.s. average pump price of regular gasoline will exceed $4 in june of this year. the idling of three refineries on the east coast could have an impact on regional prices, especially as the market transitions to new supply
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sources. this is another issue that we are watching closely, and i know there's a lot of interest in congress. i will now turn to the longer term projections from our new annual energy outlook. the reference case represents an energy future reflecting current market and technology trends, current consumer behavior, and existing laws and regulations. eia certainly recognizes that projections of energy markets, whether short-term or long-term, are highly uncertain and cases addressing a variety of alternative market, technology, and policy scenarios will be released this spring. in the new reference case, increased domestic oil, natural gas, and renewable energy production, coupled with energy efficiency improvements, reduces u.s. reliance on imported energy sources. in the outlook, domestic crude oil production is expected to grow by more than 20% over the
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coming decade. again, alluded to in the opening statements. net petroleum imports, as a share of total u.s. liquid fuels consumed, dropped from 49% in 2010, and they had been as high as 60% in recent years, to 36% in 2035. i should note that proposed fuel economy standards covering model years 2017 through 2025 are not included in the reference case and would further reduce projected liquid fuels and net petroleum imports. u.s. production of natural gas is projected to exceed consumption, early in the next decade. we expect reliance on renewable energy and natural gas for electric power generation to rise and putting all of this together, total u.s. energy-related carbon dioxide
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emissions are more than 7% below their 2005 level, 2005 level is something that policymakers look at often, in 2020, and remain below their 2005 level through 2035. shifting to the outlook for global energy use, our latest international reference case projects worldwide energy consumption growing about 53% by 2035, with china and india accounting for half of the increase. while fossil fuels continue to dominate, renewable energy is projected to be the fastest growing source of primary energy. natural gas has the fastest growth rate mooamong the fossil fuels and developing countries really dominate the growth in all categories of energy use. >> there are both similarities and differences in the international energy outlooks
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developed by the eia and the iea, my colleague here. starting with similarities, in both eia's reference case and iea's current policy scenario to which it's most directly comparable, liquid production reached similar levels over the next 25 years and developing countries account for the vast majority of the growth in global energy use. turning to differents, the iea projects that the opec share of world liquid supply would increase to over 50% by 2035. under similar price assumptions, eia anticipates that the opec market share would remain near its current level of about 42%, and that conventional and unconventional oil production outside of opec will continue to increase, and a big wild card is certainly what happens with tide oil or shale oil, as it's called, will that become a
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worldwide phenomenon? also, the gap between projected u.s. natural gas prices in the latest iea and eia projections have narrowed. but iea's natural gas import prices are still more than 40% above eia's reference case price at the end of the projection. our price remains under $7 per million btu, in today's dollars in 2035. this concludes my testimony, mr. chairman, and members of the committee. i would be happy to answer any questions you might have. >> thank you very much. ambassador jones, go right ahead. >> well, thank you very much, mr. chairman, members of the committee. i'm going to keep my remarks short and focus on the oil market today. my longer prepared testimony also includes remarks on gas and coal markets, as well as the outlook to 2035. our base case view for 2012
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envisages global oil demand growth of just over 1 million barrels per day. on the other hand, we think that non-opec oil supply and opec black gas liquids, which are not subject to production restraints, will rebound by as much as 1.6 million barrels per day combined. at current opec production levels, this would include some slack in the market. however, it appears more likely that opec producers will trim supply by around 500,000 barrels per day to produce at 30 million barrels per day. this would hold inventory levels roughly where they are now, which is, as i said, pretty short supply. although huge uncertainty surrounds the ability of non-opec supply to rebound from the awful year it suffered in 2011, there were a lot of unplanned


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