08 April 2002

U.S. Seeks Diversified Oil Supplies, Energy Secretary Says

Developing domestic resources important, he adds

The U.S. administration is trying to reduce the nation's dependency on foreign oil by working toward the broader diversification of international supply sources, Energy Secretary Spencer Abraham says.

Speaking April 8 to reporters, Abraham said that the administration is seizing energy opportunities around the world by entering into new cooperative trade agreements and developing new resources. These efforts include further integration of the North American energy market and new investment and the development of new energy resources in the Western Hemisphere, Russia and Central Asia, he said.

Noting the importance of increased international coordination of energy policies in the industrialized world, he said that in May the United States will be hosting the first meeting of G-8 energy ministers in many years.

The G-8 is the group of the most industrialized countries that includes the United States, the United Kingdom, Canada, Japan, Germany, France and Italy plus Russia.

Abraham called on the Senate to pass comprehensive energy legislation that would increase U.S. energy security by combining conservation with incentives for the development of alternative energy resources and increased domestic production.

He said that the domestic production component of the legislation currently pending in the Senate is "altogether insufficient," primarily because it does not include any provision for drilling for oil in the Arctic National Wildlife Refuge (ANWR) proposed by the administration.

The ANWR plan is strongly opposed by environmental groups.

Abraham said that oil resources in the ANWR can be explored without "any significant adverse effect on the environment."

He said that the administration is also addressing the short-term issue of rising gasoline prices in the United States by closely monitoring gasoline supplies and pricing and modifying rules to make operations of oil refineries more efficient.

(Note: In the text below "billion" equals 1,000 million.)

Following is the text of Abraham's remarks as prepared for delivery:

U.S. Department of Energy
Office of Public Affairs
Washington D.C.

Monday, April 8, 2002

Remarks by Energy Secretary Spencer Abraham
Gasoline Prices and Petroleum Supply EIA Short-Term Outlook

EIA is the Energy Information Administration at the Energy Department

Good morning. Before I turn the podium over to Mary Hutzler [acting administrator of the EIA] so she can walk you through the EIA's short-term outlook, I'd like to take a few minutes to put the outlook in perspective.

As everyone knows, gasoline prices have been increasing for the past several weeks. Although projections are that prices should peak at a level lower than last season's prices, I want to assure the American people those increases are a source of serious concern to this Administration.

Let me steal a little from Mary's presentation and briefly note the reasons for the gas price increase:

• The first is good news: our economy is growing again -- and that means increased demand for petroleum products, which has price implications.

• At the same time, the summer driving season is almost upon us. More families on the roads mean greater demand, which again translates into higher gasoline prices.

• The onset of driving season also coincides with the annual changeover at refineries from winter fuels to specially formulated, cleaner-burning summer fuels that cost more to refine.

• And because American refineries run near capacity most of the year, sudden increases in demand can constrain supply, which, in turn, has an impact on price.

• And, even as demand is rising, supply is constrained this year because the OPEC [the Organization of Petroleum Producing Countries] producing countries have cut production since the end of 2000 by a total of 5 million barrels of oil per day.

• Finally, rising tensions in the Middle East are causing greater volatility.

All of these factors have combined to push the price of gasoline up about 25 cents in just a few weeks.

As I said earlier, higher gas prices are a great concern to this Administration because they strain the budgets of America's working families, raise the cost of goods and services, and ultimately create a drag on the economy that can impact the livelihood of working Americans. No one wants that -- and we are taking aggressive action to prevent further steep price increases at the pump.

In the short-term, we have already:

• Reactivated a Consumer Hotline to closely monitor gasoline supplies and prices

• Modified EPA [the Environmental Protection Agency] transition rules to provide for increased blending flexibility between winter and summer blends, and

• We are working to improve our energy security by identifying and working to develop energy opportunities around the world. Diversification of energy supplies is basic to our National Energy Policy and we are working in every corner of the globe to encourage new cooperative trade arrangements and new resources. Here are just a few examples of what I mean:

  • Next month, the US will host the first meeting of G8 energy ministers in many years. I will be chairing the meeting and we will take this opportunity to share ideas and develop opportunities for increased international cooperation and energy development.

  • We have launched, with Canada and Mexico, the North American Energy Working Group, which is reviewing ways to further integrate the North American energy market and make it more effective.

  • We are using our Western Hemisphere Energy Initiative to work with our other partners in the rest of the Americas. We, along with our hemispheric partners, aim to create opportunities for new investment and the development of new energy resources.

  • Finally, I had the pleasure last fall of traveling to Russia for the opening of a new Caspian Pipeline. While there I had the opportunity to meet with my counterparts from Russia and other former Soviet states, all of whom are intent on developing and expanding their vast energy resources.

• All of these initiatives, discussions and cooperative efforts are aimed at fulfilling just one part of our national energy policy: the diversification of our international sources of supply.

Closer to home, I will be meeting this week with AAA [the American Automobile Association] to identify ways to encourage Americans to drive smarter, prepare their cars to operate more efficiently -- and save fuel and money. Aware Americans can help to protect themselves from volatile gasoline prices.

I also intend to meet with both refiners and gas station owners to ensure that our distribution system works well from the wellhead to the fuel pump. A flawless distribution system will help to minimize price spikes this year should disruptions occur.

Beyond these short-term activities, this Administration is looking down the road to a future when oil supply instability and rising gasoline prices are no longer a recurring feature of everyday American life.

In fact, we presented our vision of the energy future eleven months ago, when the Administration introduced our energy policy whose principal goal was increased energy security.

President Bush's energy plan is comprehensive. It combines conservation, incentives for the development of alternative energy sources, and increased domestic production. An energy policy without all of these components will not be effective.

Since that time, the Administration has taken steps to get some far-reaching programs underway.

• Last January, I announced the FeedomCAR initiative for hydrogen fuel cell powered cars and trucks, which will revolutionize transportation in America.

• The Department of Transportation is moving forward on the consideration of new CAF��[Corporate Average Fuel Economy] standards, and

• We are working to streamline regulations to reduce barriers to increased refinery capacity.

But there is more that needs to be done, and for that we need the cooperation of Congress.

America needs a long-term energy policy. The Senate must pass comprehensive legislation now. And the legislation must encompass the three elements of conservation, alternative energy, and production that I outlined earlier.

On conservation, the Administration has proposed -- and Congress is now considering -- a $3 billion tax credit for the purchase of hybrid fuel cell vehicles. We urge the Congress to include this important proposal as part of a comprehensive energy package.

This week more than any other we have the proof of the need for legislation to permit the United States to produce more oil at home and reduce our dependence on foreign sources of supply.

Unfortunately, the domestic production component of the legislation pending in the Senate is altogether insufficient. Most importantly, it does not include any provision for ANWR.

The American people know that we are too dependent on foreign oil. And they know the most promising means of reducing that dependence is to open up ANWR to environmentally responsible exploration and production.

I therefore take this opportunity to renew the Administration's call for the inclusion of a responsible ANWR component in the Senate energy bill. ANWR has the potential to produce over one million barrels of oil a day from perhaps 10 billion barrels of recoverable reserves -- without any significant adverse effect on the environment. Here is one way to measure its potential impact: at a time when Iraq is calling for an OPEC embargo on oil sales to America -- and has just announced a 30-day halt of oil sales -- ANWR production could replace more than 35 years of Iraqi oil imports.

Today's announcement by Iraq should remind us again of how our economy and national security are vulnerable to decisions made by countries abroad. That is why it is crucial that the Senate pass a comprehensive energy bill and send it to conference.

We have a responsibility to the American people to address these challenges head-on. Next month will mark the one-year anniversary of the announcement of the President's National Energy Policy. The Senate could and should have acted last year. It must act now.

end text