BENTSEN: "Let me talk about another issue with respect to the oil economy. In your report, a lot of times you state what the
level of imports is with respect to oil. I didn't find it, but I may have skipped over it. Previously, we've seen imports rising to
the 50-percent level of consumption. I would assume it's greater than that now with the world oil glut.
We've discussed this before, but I'd like to raise it again. You also state in your testimony, I believe, that the decline in oil
prices, which are at the lowest level in a 25-year span, I think, ... is unlikely to recur. I guess you're projecting that you think
oil prices, and thus gas prices, will start to trend back up, although we haven't seen any evidence of that so far.
Second, as we get to 60 percent or whatever the level of imports is, and we see not just a decline of production in the United
States but an elimination of production capability through more rigs going off-line, the capping of marginal wells, where the
recovery cost goes up quite dramatically to bring those capital items back into line... Are we looking at the possibility of a
transfer of wealth in our oil production capabilities outside of the United States, and is that something we should be more
concerned about than the usual concern of comparative advantage in means of production?"
GREENSPAN: "We are merely reflecting in the oil price essentially what the futures markets are showing. West Texas
intermediate, as you know, is selling at a premium in the far distant months, and that's the best guess that we can make at this
particular point on the outlook.
But as you've experienced more than most anyone around here, those prices fluctuate because it's very tough to get a good fix
of the balance of world crude oil supply and demand because there are so many players, not only producers, but a huge
number of consumers, all over the world.
The issue of how we would deal with our resources, the clear problem that we have obviously is that the cost of producing
crude in the Middle East ... is very significantly below our marginal costs, even among our best wells and our best fields. We
have to make a judgment ... about what we wish to do about that and the general judgment is that we're allowing the market
to do what markets do: namely, allocate resources to various different places in production.
The consequence of that has been, as you point out, a fairly significant contraction in well production in the United States,
which continues. The rigs in operation are falling very significantly, basically because the incentives to find new oil or gas at
these prices is clearly far less than it has been.
It's pretty easy to define what the nature of the problem is. It's another altogether to get a rational national policy to address it,
or whether a national policy is even appropriate. I guess that's something which is always engaged in Congress, as I
remember, and I suspect that will continue to be the case."
BENTSEN: ''You're not willing to give an opinion on whether there ought to be a national policy and what that policy might
be?''
GREENSPAN: ''I, frankly, Congressman, lived through too many national oil policies which didn't work all that well that
my enthusiasm is less than terrific.''
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