Rising oil prices and dependence on hostile regimes — the urgent case for Canadian oil

[Sullivan has an interesting overview of the instability in the Middle East, which could lead to an oil shock quickly along with the economic and sky-high prices that entails. He also mentions “peak oil” and its implications, a term rarely used in house and senate meetings, where the phrase “energy security” is preferred.

A key reason for the Keystone pipeline surfaces – the Midwest refineries can’t process any more tar sands than they are now. This makes expanding the tar sands production to 5 million barrels a day by 2035 goal difficult, especially since  a pipeline to the west coast is receiving even stronger opposition from Canadian citizens.  Many opponents to Keystone have no environmental beef –they don’t want Keystone because oil refined in the Gulf would be exported to China. Much of the testimony is a plea for Keystone and is left out of what follows.  Alice Friedemann  www.energyskeptic.com]

Notes from: HR Serial No. 112–24. March 31, 2011. Rising oil prices and dependence on hostile regimes: the urgent case for Canadian oil. U.S. House of Representatives. 102 pages

Hearing before the Subcommittee on the Western Hemisphere of the Committee on Foreign Affairs. 112th CONGRESS FIRST SESSION

Paul Sullivan, Ph.D., Professor of economics, National Defense University, adjunct professor of security studies and of science, technology, and international affairs, Georgetown University


Peak conventional oil and the promise of unconventional oil

Conventional oil already peaked worldwide according to the IEA. It peaked in the US in 1973. It has been peaking and will peak in many non-OPEC countries over the years. Clearly, the world will be pushed to rely more and more on unconventional oil as time progresses and the conventional oil gets harder and more expensive to find.

Oil represents 37% of all of our energy use. Two-thirds of the oil is used for transportation. Over 91 percent of our transport fuels are oil based. Some of the rest of the fuels used for transport, like biofuels and “other”, rely on oil for their production and other aspects of their logistical networks. Our sea, rail, and air transport systems are also very much dependent on oil. Our agricultural systems are based on oil. Some of our industries are oil-intensive. About 8% of our households still heat with oil.

Most importantly, when it comes to transportation our military is almost entirely vulnerable to oil markets. We are facing increasing instability in the Middle East and North Africa, an area where over 70% of proved reserves of conventional oil are known to be.

Well over one-fourth of all the oil exported in a single day comes out of the Middle East and North Africa and this is an area of increasing turmoil. Importantly, almost all of the excess capacity in the entire world is found in the Arabian Gulf region and 80 percent of that is in Saudi Arabia. Under certain scenarios, we could be looking at $200 to $300 a barrel of oil if all goes south.

The present and future instabilities in the Middle East and North Africa are not just a problem for oil production, but also of oil transport, such as around the Bab Al Mandab near Yemen, which carries about 3 million barrels of oil a day, the Suez Canal and Sumed pipeline, which carry 3-3.5 million barrels a day, The Straits of Hormuz, which carries between 12 and 15 million barrels a day, and more. There are various pipelines and oil ports and offloading zones, such as the Al Basra Oil Terminal (ABOT) and Khor Al-Amaya Oil Terminal (KABOT) in Iraq, which send out 1.5 million barrels a day.

Syria, Yemen, and Iraq all have SunniShia tensions.

Country Exports from http://www.eia.doe.gov/countries/

  • 1 Saudi Arabia 7,322
  • 2 Russia 7,194
  • 3 Iran 2,486
  • 4 United Arab Emirates 2, 303
  • 5 Norway 2,132
  • 6 Kuwait 2,124
  • 7 Nigeria 1,939
  • 8 Angola 1,878
  • 9 Algeria 1 807
  • 10 Iraq 1,764
  • 11 Venezuela 1,748
  • 12 Libya 1, 525
  • 13 Kazakhstan 1,299
  • 14 Canada 1,144
  • 15 Qatar 1,066

SAUDI ARABIA. Most of the populations above the major Saudi oil fields including the Ghawar field, which is the size of Pennsylvania, 300 meters deep, are Shia. Iran is likely stirring up trouble in that part of Saudi Arabia. Saudi Arabia is the world’s biggest exporter of oil and has the largest conventional reserves of oil accounting for 25 percent. Then we have the Ab Qaiq facility in Saudi Arabia where six to seven million barrels a day (out of the 82 million barrels a day used worldwide) goes through for sweetening and processing. Al-Qaeda got in the first fence in 2006. Chinese demands for Saudi oil have increased considerably over the last few years . The Chinese take more Saudi oil than we do.

IRAN could be facing increasing instability. It exports 2.5 million barrels a day. There are indications that Iran is trying to stir up trouble in the Shia communities in the region, including, possibly, the large Shia population the lives atop many of the major oil fields of Saudi Arabia. The problem is not just from Shia and Sunni political differences . The problem is also from Iran stirring up trouble and from political, economic and other tensions that have been translate d into confessional stresses and resentments. Iran is trying to use the grievances of some of the Shia in the region for its own benefit.

NIGERIA is having severe internal problems with the MEND The Movement to Emancipate the Niger Delta and other groups. It also has had a very difficult past with regard to interethnic strife and other issues that could become even bigger in the future. Internal strife has led to declines in the production of oil in the country on many occasions.

VENEZUELA may also prove to be unstable in the near future. There seems to be a building resentment given unemployment, underemployment, corruption, oppression and more of the same factors that have led to uprisings and revolutions in the Middle East. China is also planning to take more oil from Venezuela in the future. The widening and deepening of the Panama Canal could also have great effects on oil trade from Latin America to Asia.

SUDAN. We saw the splitting of Sudan into two countries. Sudan is an oil producer.

TUNISIA. We saw the revolution in Tunisia which rocked the region and spurred on other uprisings and revolutions. Tunisia is not a large energy producer but its revolution has made a huge difference to the stability in the region.

EGYPT. We have seen a revolution in Egypt where the important energy transport nodes of the Suez Canal and the Sumed pipeline are found. Again, Egypt is a net oil importer but it is the most important country in the region with regard to cultural change and political impetus.

LIBYA. We are now seeing a bloody revolution and civil war in Libya, a country that used to export 1.5 million barrels a day. Its exports have been cut drastically. The situation in Libya is just one indication of the possibly bigger threats that are looming as the contagion of rebellion possibly spreads in the region and maybe even beyond.

ALGERIA could be next in line. They export 1.8 million barrels a day.

BAHRAIN is not a large oil exporter or producer, but has become a focal point for rebellion via the Sunni-Shia split, the most important region for oil production and export in the world. The situation in Bahrain as its spread into Qatif, Saudi Arabia recently is also far from comforting. IRAN is clearly behind many of the troubles in Bahrain.

SYRIA is becoming more violent by the day and it is connected in with the issues in Lebanon, the peace process, and Iran. There have been increasing violent reactions to demonstrations, especially in Dara’a in the south. These demonstrations have recently spread to many areas in the country and have turned quite violent. Syria is not a major oil producer, but its importance in the peace process, its relations with Iran, Lebanon, and other states in the region could make instability and change in this country more important to the overall situation in the region well beyond things weighted by oil production and population.

YEMEN is heading toward a possible failed state status, or even broken into many failed states, and could be one of the most complicated places right across from Somalia. On the coast, to the southwest and the west of Yemen there is the Bab-Al Mandab where 4 million barrels a day goes through a day, and 10% of the world container traffic transits. Yemen could split into multiple failed states and this could happen sooner than we can think.

IRAQ exports about 1.7 million barrels a day but 95% of its exports go through 2 geographically tiny, but strategically gigantic, facilities, the Al Basra Oil Terminal, and the Khawr Al Amaya Oil Terminal right near it. We have considerable imports from Iraq, not the sort of country that gives one a sense of long term stability, especially given the recent demonstrations and other actions on the ground. Also, almost all of its oil goes through one fairly small geographic speck, the Al Basra Oil Terminal, or ABOT and its sister oil port facility, Khor Al–Amaya Oil Terminal, or KABOT. 95 percent of all Iraq’s export revenues is from the oil exporting out of ABOT and KABOT. The entire economy of Iraq relies on these set of wharves and pipelines at sea not far from Iran. We have our Operation Sea Dragon protecting these facilities, but it may be only a matter of time before something happens there.

JORDAN has had demonstrations, but I don’t see them heading south as some other places have.

We are facing down the peaking of conventional oil resources. We are also facing peak oil at the same time and need to go to unconventional oil. We are potentially facing increasing economic turmoil and energy market turmoil globally.

Tar sands oil is more expensive to make than conventional oil s and there are more steps to ma king it useable in refineries. However, as we explore in deeper water and in harsher climates an d more difficult places to find conventional oil then the costs for extracting the conventional oil will most likely continue to rise. They have been rising for many years. The era of cheap to find and produce conventional oil is over.

One thing to understand right off is that oil markets are global markets and events that occur in even what seem to be remote corners of the world can affect oil prices and even oil supply and transport. Also, non-oil energy, minerals and other markets outside of oil are intertwined with oil markets in many ways as both substitutes and complements to oil use. Furthermore, energy systems are really systems within systems, not just one energy source after another. Oil systems are connected with electricity systems that can be connected with gas, nuclear, renewable energy and other systems. And these energy systems are in turn connected with transportation, water, industrial, residential, commercial, and other systems. We really cannot look at one energy source independently of the others. We can not fully understand the effects of energy market and energy policy changes without looking at the totality of the systems within systems connected to energy systems.

It would be best to have a full, comprehensive energy security policy, but this is unlikely to happen any time soon , so it seems we will need to settle for ad hoc improvements in the diversification of supplies and other ad hoc policy measures until the real shocks hit us in waves upon waves upon waves of economic and energy security woe–and we finally wake up to the severity of the situations we might be facing. We need to be far more diversified in our energy sources and our means and ways of using those energy sources, but all of that will take considerable time to accomplish. Anyone who thinks that we can move away from oil any time soon does not understand the complexity of the intertwined nature of energy systems within systems, and also the energy compactness that will be needed to replace oil. We would also have to change our transportation and industrial systems simultaneously with the change in the energy systems.

It would be great if we could lightweight our cars, make them more efficient in their drive trains and more, and convert most if not all of our cars to electric plug-ins, hybrid plug ins, CNG, hydrogen, methanol, and the like but that could take many years, if not decades. Another good idea is to have more of our transportation vehicles, aircraft, ships, etc. converted to flexible fuel engines in order to allow transport, other companies , the government, military, and consumers, to adjust their costs as different energy resources become more or less expensive or reliable than others. The simple mathematics of automobile vint ages could indicate how long th ese changes could take. If we wanted to get around that then would also need to refit our transport vehicles as well as our transport infrastructure to these alternative fuels. Such things do not happen overnight and could take a very long time.

If these changes are pushed too fast and too hard then we could have significant econ omic and other disruptions in the US. There could also be vastly increased risk of severe instability in the oil producing nations that might dwarf even what is going on now. So we need to phase into the new energy futures over proper time period s and in proper, thoughtful and strategic manners. However, we also need answers to our present and near term oil security issues now. In the longer run we need to change the way we do things, but these changes need to be done in a reasonable and reasoned fashion.

We need energy security now and for the medium term to help us as a nation move beyond oil within the next 50 years or so and go toward these alternatives that we have all been discussing.

Our number one source of imported oil is quiet, stable, safe, and friendly Canada. It is our closest military cooperation. Our largest and closest trade relations are with the Canadians. Our most important energy trading relations are also with the Canadians.

David L. Goldwyn, president, Goldwyn Global Strategies, LLC (former U.S. Department of State coordinator and special envoy for International Energy Affairs)

Oil remains a strategic commodity for the United States and the rest of the world. This will be true for decades to come, even if optimistic scenarios for growth in electric vehicles and advanced biofuels come to pass. As we see today from political developments in the Middle East, a natural and nuclear disaster in Japan, and as we saw with Hurricanes Rita and Katrina not so long ago, disruptions of oil supply can negatively and sometimes severely, impact the U.S. and the global economy.

Our primary source of energy insecurity has been oil dependence. We have been vulnerable to the price impacts of oil suppy disruptions, and we have faced and continue to face foreign policy and security challenges from nations that suffer instability as a result of their misuse of their resource rents, or use oil as a weapon.

Transformation of the U.S. vehicle fleet, much less the world’s will take decades.

I heard the President say yesterday we live in tumultuous times and energy security is important. We heard from him and from each of you today that oil is and will remain a strategic commodity for our economy for decades to come. We have taken some visionary steps led by the President on the demand side on fuel efficiency, on advanced fuels, on critical research and development which in time will take us to a world where we are less dependent on oil. But we are not in that world today and we won’t be for the next couple of decades. Even with increased production from the Bakken and from other areas and revived production in the Gulf of Mexico, we will be importing 8 million barrels a day.

In terms of supply security, we have reason to be concerned. The world is going to consume a lot more energy. Mexican production has declined and while they are trying to revive it, it will be awhile. Venezuelan production has declined because of their own policies. There is uncertainty in the Middle East. Even optimistic projections for the call on OPEC in 2035 for 52% of our oil supply assume that there will be increased production in Venezuela, in Libya, in Iran. These are precarious assumptions at best. We do need to worry about whether there will be adequate investment in the world for oil supply.

Canada supplies the U.S. Midwest region with crude oil through the Enbridge, TCPL Keystone and Kinder Morgan Express/Platte pipelines. The U.S. Midwest refineries have access to more supply than they can economically refine. Gulf Coast refineries cannot access this oil and are operating well below capacity. We do not have the infrastructure to move oil from the Mid West to under-supplied Gulf Coast refineries.


Connie Mack (chairman of the subcommittee) from South Carolina. We need to immediately concentrate on replacing foreign oil from thugocrats like Hugo Chavez in Venezuela with reliable, stable allies like Canada. Doing so will ease U.S. energy concerns and provide economic stability while U.S. oil companies make greater use of their Federal leases both onshore and offshore to help increase domestic oil production. What President Obama and his administration have failed to do is increase American security. By approving the Presidential Permit for the Keystone XL pipeline this administration could create tens of thousands of jobs to help boost the ailing economy, and secure an additional 500,000 barrels of oil per day into U.S. refineries in Oklahoma and Texas.

Instead of shoring-up important national security and energy resources from a close ally, our nation continues to rely on the likes of Hugo Chavez for approximately 10 percent of our oil and the price we pay is reliant on the actions of unreliable and corrupt dictators such as Libya’s Qaddafi.

The result of the pipeline would increase productivity, but most importantly for me, it would force Hugo Chavez to realize that the United States is not beholden to fully funding his regime indefinitely. It must be made clear to leaders such as Hugo Chavez, who utilize state-owned oil companies to violate U.S. sanctions on Iran, that there are consequences for their actions.

Mr. Albio SIRES of South Carolina. We are in the midst of an energy crisis. We have a situation in the Middle East that really quite frightens me as we head into our venture in Libya. We have a situation where the price of oil, the price of gas is increasing in the United States. We have a situation where we can remedy some of this with this Keystone XL pipeline. I think that we can stop our dependency on foreign oil. Canada has been a friend. Canada will continue to be a friend and we will continue to work with Canada

Ms. Jean SCHMIDT of Florida. I could not agree more. As we look to the Middle East and the instability that continues to grow in the region and the fact that so much of our reliance on foreign oil comes from that part of the world, we really have to look to another part of the world for that oil.  Over 50% of what we use in this country today comes from a foreign source. Of that, when you look at the total pie of the foreign source, right now we are receiving about 23% from Canada. We need to grow that portion of the pie. It makes absolutely no sense to delay this Keystone pipeline, for a national security reason as well as an economic reason. From a national security reason, it is because our friends are Canadians. It is always good to do business with friends. The second is, as we see a spike in gasoline prices at the pump, my fear is with more consumption in the summer that is only going to continue to grow, it is only going to weaken our economy, so getting the opportunity out there for another good supply of oil for our citizens in the United States makes sense.

Mr. Eliot L. ENGEL of New York. We are speaking here about energy dependence, international commerce, jobs, and more. We are talking about oil, hostile regimes, foreign relations, and geopolitics. We are discussing greenhouse gases, groundwater pollution, and pipeline safety. We must consider all of these factors, not just some.



Events in North America and the Middle East, as you have already heard, and rising gas prices once again underscore our dangerous addiction to oil and the high price we pay due to the instability of global oil markets. America needs energy security, so the question is what is the best way of getting there. As much as we may wish otherwise, there are no quick fixes by switching suppliers of our oil imports from one country to another and turning to extreme oil such as Canadian tar sands. There is only one way out. We need to get serious about the innovation and our transportation and fuel sectors that will create jobs here at home and provide Americans a healthier, cleaner, and more secure energy future.

One myth that I often hear is that Canada will find a responsible way to mind tar sands. Years of experience have proven otherwise. I have been there. I have seen the damage. I have listened to courageous people who have suffered as they have stood up to big oil and the oil companies up in Alberta. Alberta tar sands operations are the most destructive source of oil on the planet. It can take five barrels of clean water and four tons of sand to squeeze out just one barrel of tar sludge. This tar sludge is so thick and heavy it must be diluted and pressurized to transport it through pipelines to refineries.

Last year I flew over the tar sands — what was what forest wilderness has been turned into barren strip mine waste land and lakes full of toxic waste that stretch as far as the eye can see, mine after mine after mine. The scale was shocking and difficult to imagine.

Air pollution from tar sands production also causes 3 times more carbon emissions than conventional oil, escalating greenhouse gas emissions when we should be moving in the other direction. In Alberta I met with First Nation communities and listened as they told the heartbreaking story of how cancer rates have increased as the tar sands operations have expanded. One elder told me that they pull their kids indoors whenever the air gets too noxious. Large volumes of toxic waste leaks into the Athabasca River every year contaminating the water supply and fish. So this is what you expected me to say. You might not have known the extent of the damage but you knew there was an environmental price. The question really comes down to is it worth it. Is it a price that we have to pay?

I have to say, though, we are really seeing Canadian oil as some sort of mirage for our energy security. The idea that expanding Canadian tar sands production provides energy security is really just an illusion. Let us look at what has happened in the past month since outbreak of violence in Libya. The price of Canadian oil has increased by $20 a barrel. That is actually twice as much as the jump in the increase in global oil prices. Twice as much as what we have seen in Saudi Arabia. Nobody likes getting oil from the Middle East, but why is getting oil from Canada better when the oil companies who control it will take advantage of a crisis anytime there is one anywhere in the world to increase oil prices, and speculators will make us pay at the pump. This isn’t about Canada. This is about being loyal. Every hour Americans are now spending $2 million more for Canadian oil than we did 1 month ago. Where is the economic security in that? Oil produced from Canadian tar sands is some of the most expensive oil to produce in the world. As we drive up global oil prices, countries that don’t like us will profit whether we buy their oil directly or not. Where is the energy security in that?

We currently have surplus pipeline capacity to carry all the oil Canada can provide to America’s Midwest. So why do oil companies want to rush to build the Keystone pipeline? Because they want to access the deep water ports down in Texas so they can export the oil that we are bringing in.

We are actually exporting twice as much for fine oil products than we were just 5 years ago. Chairman Valero just said that the future of Iraq refining in the U.S. is in exports. Why do we want to move oil that is coming in from the Midwest down to Texas so it can be exported to China or other places and want to call that energy security? Those refineries in Texas, by the way, are owned by Venezuela and by Saudi Arabia.

The only certain impacts to the Keystone XL pipeline are that it will help oil companies manipulate gas prices in the Midwest and that it puts to risk the Ogallala Aquifer in Nebraska which provides irrigation for much of America’s bread basket and drinking water for over 2 million people. In seeking the Canadian permit, TransCanada actually said to the Canadians, they said that they will increase gas prices by $4 billion a year on the U.S. That was the purpose, $4 billion for oil we are already getting and not another drop. I know that I am running out of time, Mr. Chairman, so let me just say that there has also been a huge spill last year in the Kalazmazoo River in Michigan where we saw 800,000 gallons from a tar sands pipeline because tar sands are corrosive and we have not updated our pipeline regulations for tar sands as need to be before we build a new pipeline so we really appreciate that the State Department is taking a proper look at the safety of these pipelines and the environmental impacts before they rush forward. Thank you very much.

Mr. ENGEL. I often hear calls for energy independence to reduce our reliance on our adversaries in the Middle East and elsewhere. I hear pronouncements about the need for more solar, wind, clean coal, and nuclear power. It seems to me that no amount of new electrical power will make us anymore independent. The U.S. already gets nearly 100% of our electricity from our domestically produced coal, natural gas, nuclear, hydroelectric, wind, and solar. Do you agree that the problem is not energy independence, it is oil dependence? Before you answer that, I want to tell you why. It seems to me that the reason we are not all independent is because of our transportation sector. Virtually every car, truck, bus, train, ship, and plane manufactured and sold in the U.S. runs on oil. The transportation sector is by far the biggest reason why we send $600 billion per year to hostile nations in the Middle East and to Venezuela.

Mr. SULLIVAN. We can’t change it that quickly without serious disruptions in the economy and the overall energy situation. Yes, it is oil security. That is the key here. We have enough coal. We certainly have enough natural gas considering the unconventional gas that is now being discovered day by day. Uranium is another issue. Actually about 10 percent of the lights coming into this room right now probably come from ex-Soviet missiles. We import a lot of uranium so maybe there is an issue there but we certainly have the capacity here to produce that. Also, rare earths, an issue I am sure you are all interested in, is also a major part of our energy security situation. We need rare earths for refining oil but also for the new technologies that you are talking about. Clearly these things can be part of our energy future and our energy security future but they are going to take time. They are going to take a lot of time.

Mr. SIRES. My concern is that if we don’t move in, China is going to move into the Western Hemisphere, China moves in. I keep saying to people when I was in Columbia and the president of one of the most prestigious universities said to me that the second most studied language in Columbia today is Mandarin. So, you know, sometimes we have to make a difficult decision.

Mr. SYMONS. Sure. I understand that. This idea that Canada is sort of holding a gun to our head and saying, ‘‘If you don’t take our pipeline, we’ll take it somewhere else’’ is another one of the myths that the oil industry is perpetuating here. We already have more than enough pipeline to take all the oil Canada can produce into the U.S., according to Canadian petroleum industry, and according to the Department of Energy all the way through 2025. We have the pipeline to bring it here. It’s coming to the Midwest and keeping gas prices down in the Midwest. They want to get it to a port where they can export it.

Mr. SYMONS. The purpose of Canadian oil is to fill the capacity that has already been vacated by Venezuela and other producers and to fill new capacity that is being built by Saudi Arabia and others. Valero is the company that has bought into this pipeline. It was their CEO that said that week that they are moving to exports from those Texas refineries. That is the future. It is a massive growth that is happening there. It is hard to believe because we import so much crude but oil companies are global companies and they are just focused on profits. It doesn’t matter where the oil is. It is their oil, not our oil.

Mr. PAYNE. The whole question of consumption of fuel is something that has been on the table for a long time. Let me just ask, Mr. Symons, 25 mayors addressed a letter to Secretary Clinton last week expressing their grave concern about the prospects of expanded imports of tar sand oil from Canada. The mayors indicate fears over increasing dependence on high carbon fuel for decades to come at a time when local governments are working hard to decrease dependence on oil. The mayors believe that expansion of high-carbon projects such as the proposed Keystone tar sands pipeline will undermine the work being done in the local communities across the country to fight climate change and reduce our dependence on oil. Would you comment on how this pipeline would affect such efforts in your opinion and will the small communities be hampered in their efforts to build clean energy economies?

Mr. SYMONS. First of all, everybody has to do everything they can to reduce emissions and deal with the important threat of climate change. Mayors have been leading the way and should, regardless of what happens, continue to lead the way. But buying into a 50-year pipeline for oil that is 3 times the greenhouse gas emissions of conventional oil makes a mockery of the efforts that we all are pursuing to reduce our own emissions, pursue clean energy here at home. Canada agreed internationally and signed an agreement to reduce their greenhouse gas emissions and they have completely ignored. Not only will their emissions go up but Canada is undermining the value of global cooperation through technology and other pieces on addressing the important threat of climate threat, protecting our environment for our kids’ future.

Mr. PAYNE. We do hear this question of energy. We use nuclear and we say that it is safe today and, of course, Japan goes up. I asked the question a couple of weeks ago at a conference out of the country, ‘‘What are you going to do about spent fuel?’’ ‘‘Don’t worry about it. Not a problem. Got it contained.’’ Look at Japan. We look at our good friends in Canada, and they are our greatest allies. However, I guess making a buck is making a buck. If the price of oil goes up coming from Saudi Arabia and Bahrain is up in flames and Libya, they say, ‘‘Hey, might as well jack up the price and stick it to our American friends because, hey, that’s business.’’ You know, you have a fiduciary responsibility to your stockholders. You know, with friends like that, who needs enemies? I just think that this whole picture has to be looked at a little bit more carefully. Water is being destroyed. I don’t have the answer. That is for sure. One thing we have to talk about is conservation. We don’t talk about the sacrifice. Everybody has—my time has expired, but especially down in Florida, the air conditioners are up very high in the summer. I mean,

Mr. SYMONS. The real question there is where is the oil coming from. You are actually hearing, if you listen closely, people are kind of having it both ways, ‘‘Oh, we are going to get more oil from Canada,’’ as in Canada is going to produce more oil. The fact is they are not. This oil is going to come from the pipelines where it is already going into the Midwest, much closer, of course, to the northeast. It is going to go all the way down to Texas. Then it has to work its way back up. Why would oil companies spend $12 billion to build a pipeline to take it further away to take it back up? Well, they are going to be able to charge more because once they get it out of the Midwest to a deep water port, they can send it anywhere and charge higher prices. Those higher prices are what are going to fill the coffers of Chavez at the end of the day because Canadian oil is one of the most expensive oils in the world to produce. If we bet on it for 50 years, we are betting on high oil prices and that is going to make Chavez rich.

Mr. SULLIVAN. Yes. That would go back to Mr. Sires’ question about China. China is actually building refineries to use Venezuelan oil and China is building 17 large super tankers to bring that oil through the Panama Canal which China is, part of, widening and deepening. So things are changing in the east as we are talking about the west. China is also looking at a pipeline going from Alberta tar sands to the west coast of Canada to export the tar sands oil to China. There is a direct competition going on here.

If we could take a look at the transport charges, which brings the Chinese are building capacity to use this sort of oil. They need this kind of oil. They need oil from all over the world. They are growing at 7 to 9 percent. Hu Jintao, when asked by our previous President George Bush what kept him up at night, his answer was 25 million jobs. They have to create 25 million jobs every single year. Now the question goes to, and this is rather complicated, do we want them to have the 25 million jobs? I think the answer is probably in the main part yes because we don’t want instability in China and what that could bring to us.

Mr. SYMONS. Let me just say the idea of the Canadian western route to get to China, the Canadian people are rejecting it because of the results. They know what is in the results of this report by Pipeline Safety Trust and others that Alberta pipeline spills are 16 times as common as spills down here because harsh sands oil is not like conventional crude and it is much more dangerous to transport by pipeline. Think about the question you are asking before we all stand up and sing the Canadian national anthem. Canada is threatening and blackmailing us with that. Canadian oil companies are holding a gun to our head. Think about that before we make a 50-year bet that Canada is going to be our friend with oil.

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