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Bodman Testimony

April 25, 2006

Samuel Bodman
Good afternoon. I have just returned from the International Energy Forum in Doha, Qatar, in the Middle East, where I met with Ministers from leading oil-producing and consuming nations around the world. We discussed ways to improve international communication and cooperation, promote greater stability in world energy markets, and ensure adequate oil supplies for the future.
President Bush is committed to enhancing our energy security over the long term, through the Advanced Energy Initiative and the American Competitiveness Initiative--which are using the power of science and technology to develop clean, alternative energy sources, and reduce our dependence on imported oil.
We are also working to ease the burden of high gasoline prices in the near term. As the President outlined in his remarks to the Renewable Fuels Association this morning, our Administration is implementing a four-point plan:
1. Ensuring that Americans are treated fairly at the pumps, and that there is no fraud or manipulation of prices.
2. Promoting greater fuel efficiency, including expanded tax credits for hybrid and clean diesel cars.
3. Boosting our supplies of crude oil and gasoline by temporarily suspending deposits to the Strategic Petroleum Reserve, allowing waivers of special fuel blend requirements to relieve critical shortages, and streamlining the process for new and expanded refineries.
4. Investing in alternatives to oil, such as agricultural-based fuels like ethanol and biodiesel, better “plug-in hybrids,� and hydrogen fuel cells.
I will be happy to go into further details on these and other matters as I answer your questions.

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Joan, from Virginia writes:
Bush has consistently said that gas prices are high because global demand is rising faster than global supply and that the problem cannot be solved overnight. Why can't this be fixed overnight? The prices are raised several times a DAY Why not have the prices, in the least, be set that a.m. and not be raised until the next a.m.? Its been said "by the experts" that a boycott wouldn't help the situation but if the situation is a "supply and demand" issue then maybe a boycott would work.

Samuel Bodman
Thanks Joan,
It’s true that the global demand for oil continues to grow and suppliers are having a tough time keeping up. This is resulting in higher gasoline prices for all of us. President Bush is very concerned about high gasoline prices and the effect that they have on the American family. I wish there was a magic wand that I could wave that would lower gas prices. But I can’t. What I can do, however, is push for more domestic production of crude oil – this means gaining full support from our Congress to drill in the northern slope of Alaska (ANWR, as it’s referred to) and in the Outer Continental Shelf. We can continue to support investment and research and development into all kinds of cleaner and renewable sources of energy; this includes ethanol and hydrogen to power vehicles. We can also continue to work with Americans to conserve fuel as best they can – whether it’s carpooling, consolidating trips or even properly inflating your tires -– as the President said today, “every drop counts.�
As for your question regarding energy prices fluctuating several times a day, well, the world market sets the prices of gasoline. Just like the stock market changes minute-by-minute, so too does the world’s crude oil market. By being responsible market participants, enacting sound policies and fostering greater coordination through the sharing of data and information, we will serve our people and the world economy well. It’s important now that I point out that we have been decades getting ourselves backed into the corner that we are now in. And it will be years, if not decades, before we are able to get ourselves out, which is why President Bush’s new Advanced Energy Initiative is critical in reducing our dependence on foreign sources of oil.
The Advanced Energy Initiative seeks to reduce our dependence on imported oil. As part of President Bush’s 2007 budget submitted to Congress in February, $2.1 billion has been requested to invest in new energy technologies including hydrogen, hybrid battery technologies, biomass and cellulosic ethanol, to name a few.
Already there are millions of cars on the road that can use ethanol-based fuel, called E-85. It’s called E-85 because 85% of the fuel is ethanol and 15% is gasoline. I would encourage all Americans to look in their owner’s manual to see if their car is a flex-fuel vehicle and it if can run on E-85. Or, if you’re buying a new car, ask the dealer if the car can run on ethanol.
What we need to do now, and what the President wants to do, is find more feedstock from which we can produce ethanol. Currently we use about 14% of our nation’s corn crop to produce ethanol. If funded by Congress, the Advanced Energy Initiative will invest $150 million in research into cellulosic ethanol to see how we can use non-edible bio-products like corn stover (the corn stalk), woodchips, and switchgrass to produce fuel.
Already we use about 4 billion gallons of ethanol a year in the U.S. By the end of this year we’ll probably get up to about 5.5 billion gallons. If we can increase that even more, we can reduce our dependence on foreign sources of fuel and also loosen our overall need for crude oil – which we hope would have a moderating affect on prices.
More information on the Advanced Energy Initiative can be found at http://www.whitehouse.gov/stateoftheunion/2006/energy

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Dennis, from Loveland, Colorado writes:
Mr. Bodman,I know this is about the stupidest thing I could say but why doesn't the government require all states on a rotating basis to shut down all business except for medical and civil for 1 day a month and mandate a no drive day that day. There has to be a lot of thought put into this but I surely believe that over the course of a couple of years the demand for energy would drop immensely. People in this country need to start taking a good hard look at our lives. 100 mph everyday is tearing this country apart. Give everyone something to support and watch everyone climb on board.

Samuel Bodman
Thank you for your question Dennis. We’re a nation of ingenuity and it’s our work ethic that has made this country great. Although your suggestion is an interesting prospect, I’m not sure what effect it would have overall on our economy and energy sources. The President is committed to diversifying our energy supply with alternative sources such as corn-based ethanol and other agricultural products such as switchgrass, part of the Advanced Energy Initiative that he announced in this year’s State of the Union Address.
Our strategy has consistently focused on both near-term advances and long-term visionary breakthroughs that will fundamentally transform the way we produce and use energy. In the near term, the President’s Advanced Energy Initiative calls for a 65% increase in spending for biomass to make ethanol commercially competitive by 2012, which could displace up to 30% of the Nation's current fuel use. We have successfully increased auto fuel economy standards twice for light trucks and SUVs by 15%, from 20.7 miles per gallon to an average of 24.0 miles per gallon, under a reformed fuel economy system. Also as part of the energy bill signed last year, the President signed into law tax credits on the purchase of new hybrid vehicles for up $3,400, for businesses on solar energy equipment for up to 30% of the cost, and for individuals installing solar powered water heaters in their homes for up to $2,000. In the longer term, by advancing hydrogen technologies and investing in emissions free nuclear power production, we can further reduce our reliance on fossil fuels and transform how we power our homes and businesses and how we power our automobiles.
Also in the State of the Union Address the President announced the American Competitiveness Initiative – which is a doubling of the budgets for research in the physical sciences throughout the federal government. We need to reinvigorate math and science education in the U.S. It’s by honing and developing these skills that we can re-energize our manufacturing sectors and create new and alternative sources in years to come.

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Henry, from Avon, OH writes:
Mr. Bodman,If it is true that the oil industry made 10 Billion dollars the last quarter. Why are the prices of gas going so high. Thank you

Samuel Bodman
Hello Henry and thanks for your question. Gas prices are high for four main reasons.
First, the crude oil market is volatile. This has to do with geopolitical issues including instability in some parts of the oil producing world and also with increasing demand worldwide for crude oil. Oil is bought and sold on a world market. Because economies are growing around the world, so too is the need and desire for energy sources like oil. Hopefully we will see more supply come back, especially in the Gulf of Mexico where it’s been reported that one of the large oil platforms that was damaged in the hurricanes will be coming back online next month. That could add an additional 140,000 barrels of oil and natural gas a day to our domestic supply.
Second, some U.S. refining capacity is still offline as a result of the devastating hurricanes last summer. We currently have about 87% of our pre-Hurricane Katrina refining capacity back online. Some more will be coming back as refineries complete routine maintenance.
Third, the industry is phasing out MTBE as the oxygenate in gasoline and using ethanol. This is creating a problem in the transportation and distribution of ethanol. Unlike MTBE, ethanol cannot be shipped with gasoline through the pipelines from the refineries. Ethanol has to be transported by barge or truck. In some parts of the country this has led to an additional strain on supply. But as the transportation infrastructure gets worked out over the next several weeks and months we should see this smooth out.
Finally, the industry is switching from the winter blend of gasoline to the summer blend. This happens every year – as we switch blends to help reduce emissions during the summer driving season. The President has proposed that the EPA grant waivers where this is causing special difficulties. The epa.gov site might be your best bet to obtain more information.
As I mentioned to Joan earlier, President Bush has announced the Advanced Energy Initiative--a 22% increase in clean-energy research at the Department of Energy. If we are able to fully implement the Advanced Energy Initiative, we could reduce our reliance on foreign sources of oil by 75 percent by the year 2025.

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Robert, from Pittsburgh, Pennsylvania writes:
Dear Mr. Secretary Why isn't more being done to promote and develop ethanol made from switchgrass as a gasoline additive that would help stretch our gasoline supplies and lessen our dependence on Middle Eastern oil?

Samuel Bodman
I appreciate your question Robert. And I want you to know that we are working to develop ethanol from switchgrass. In fact, President Bush, as part of his Advanced Energy Initiative proposed $150 million in FY 2007 for research into biomass based ethanol, including switchgrass. This is a 65 percent increase over 2006.

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Rhonda, from Idaho writes:
Dear Secretary,You may have already seen my question, if so please forgive the redundance. My husband has invented a hydrogen generator that works on demand. No need for fuel stations, fuel cells, etc. Is there grant money he can apply for to further his invention. He has several additional ideas to improve this product, but needs research and development monies. He has installe several units on various vehicles and the the truckers, drivers are amazed at the results. He has parties interested in Brazil and Mexico, but would like to establish the product here. We sent our only two sons over to Iraq and are straight citizens that would like to ensure the future for our sons and the environment. Any help or direction you can give us would be greatly appreciated. I know you are a very busy man, but if you could send this question to the appropriate people, I know this product would lessen our dependence on oil and you are not looking at decades before a working model could be out there. We have it now. Sincerely, Rhonda Dahlquist

Samuel Bodman
Rhonda, as you know, we are working to bring hydrogen fueled vehicles to the market by 2020 through the President’s Hydrogen Fuel Initiative and FreedomCAR. In 2003, the President announced the Hydrogen Fuel Initiative which is developing the technology for commercially viable hydrogen-powered fuel cells to power cars, trucks, homes and businesses with no pollution or greenhouse gases. Through this initiative, the first car driven by a child born today could be powered by fuel cells. We also have the FreedomCAR initiative, which is developing technologies needed for mass production of safe and affordable hydrogen-powered fuel cell vehicles. Through partnerships with the private sector and these initiatives, we will dramatically improve America's energy security by significantly reducing the need for imported oil, as well as help clean our air and reduce greenhouse gas emissions. Today the cost of a hydrogen fuel cell has been cut by more than 50% in just four years of research – so we’re making progress towards making hydrogen fuel cell vehicle a reality.

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Evelyn, from Cottontown, TN writes:
Why is gasoline so high with the oil companies netting mega bucks? Why can our country not convert to ethanol? This wold be a boost also to our farmers.

Samuel Bodman
Evelyn, I appreciate your question and also you keen awareness that the use of ethanol can help America’s farmers. As I’ve mentioned before the President has requested a substantial increase in funding for research into cellulosic ethanol in his 2007 budget. Hopefully we will get this research money so that we can find other feedstocks, in addition to corn, that we can use for fuel.
One issue with using corn solely as the feedstock for ethanol is that we use so much of it. Currently, about 3 percent of our nation’s fuel supply comes from ethanol, but we use 14 percent of the nation’s corn supply to produce that. The President and I want to see this nation increase its use of ethanol – in order to do that we need to find sources other than corn. That’s why the president has proposed $150 million as part of his Advanced Energy Initiative for research into biomass – which will help us look into creating ethanol from non-edible products like corn stalks, woodchips, and switchgrass.