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With Gasoline Prices at Historic Highs, Senators Vow to Block U.S. Arms Deals With OPEC Members if They Don’t Increase Oil Production

Apr 24 2008

WITH GASOLINE PRICES AT HISTORIC HIGHS, SENATORS VOW TO BLOCK U.S. ARMS DEALS WITH OPEC MEMBERS IF THEY DON’T INCREASE OIL PRODUCTION

As Oil Surpasses All Time Highs per Barrel, Many OPEC Members Producing Well Under Their Capacity, Despite Americans Paying Over $3.50/gallon of Gasoline

In Light of OPEC Members Refusing to Increase Oil Production, Congress Will Look to Block Multi-Million Dollar Arms Deals with Bush Administration

Washington, D.C. – U.S. Senator Charles E. Schumer, Byron Dorgan (D-ND), Bernie Sanders (I-VT), Bob Casey (D-PA), and Mary Landrieu (D-LA) released a letter today calling on the Bush Administration to use its leverage with the members of the Organization of Petroleum Exporting Countries (OPEC) to increase oil supplies or risk Congress holding up multi-million dollar arms deals with Saudi Arabia, the United Arab Emirates and other OPEC members.  As Americans are paying more than ever to fill up their cars at the gas station ($3.50/gallon on average for regular gasoline), it is clear that oil production by OPEC members is below the capacity at which they could be producing.  As a result, higher oil prices are affecting U.S. consumers from the gas pump to the grocery store.  The Bush Administration has refused to be tough with so-called OPEC allies and in fact continues to provide huge arms deals, despite the economic pains taxpayers are feeling. 

Schumer said, "The Saudis have to understand this is a two-way street. We provide them weapons, our troops provide them protection, and then they rake us over the coals when it comes to oil.  The Saudis and Big Oil are in cahoots and this Administration has coddled them both for far too long."

Dorgan said, “U.S. and Saudi Arabia have had a strategic alliance for decades which anticipates that they pump sufficient oil to meet the needs of our economy and our economic growth.  And we provide strategic military support in the form of military equipment needed for their security.  In the past couple of years, however, the Saudis as part of the OPEC cartel have reduced their production allowing the price of oil to go to near $120 per barrel which has caused real damage to our economy.  Yet the Saudis expect the United States to sell them strategic military equipment to bolster their security.  I think if the Saudis expect us to fulfill their requirement for strategic military goods to provide for their security they have a requirement to be pumping sufficient oil to provide for our economic security.”
 
Casey said, "The Bush Administration has not shown leadership and has not used all tools at their disposal to put pressure on OPEC nations to increase production to provide relief from record oil prices," said Senator Casey.  "In addition to record prices at the pump, Americans are shouldering a greater burden because Iraq's oil-producing neighbors are not living up to their pledges of support for Iraq reconstruction and debt relief."

Sanders said, “We have a national crisis in terms of outrageously high energy prices.  If the Saudi’s and other OPEC countries continue to refuse to increase supply, the President should ban arms sales to them.  If they still refuse to increase production, the President should work to break-up OPEC.”

Landrieu said, “As gas prices go up, the impact reverberates through our entire economy.  It not only hits American drivers at the pump, it increases manufacturing and transportation costs which affect the price on almost every product we buy.  All the while, foreign powers with their hands on the spigot choose to artificially limit production to keep costs high – and the Administration rewards them for it.  It’s time to stand strong and bring balance to this equation.  We also need to boost energy production here at home so our economy is not as easily held hostage to foreign interests.  Louisiana and its neighbors are America’s only Energy Coast and are proud to do our part to fuel the nation.”

Klobuchar said, “Just as our gas prices are skyrocketing, the administration has fallen asleep at the wheel.  We need a foreign policy that looks at every option that could help us bring these prices down.”

The text of the letter to President Bush is below: 
April 24, 2008
George W. Bush
President
The White House
Washington, DC 
Dear Mr. President:
 
American consumers are facing unprecedented gasoline prices, with the national average price of a gallon of regular gas at $3.56, roughly $.70 higher than last year and more than double since 2001. The price of diesel fuel has increased even more rapidly - reaching a record $4.22 a gallon, over a dollar more expensive than 2007.  The price of diesel fuel not only impacts truck drivers, but it pushes food and transportation costs higher for consumers too.  The combined effect of these energy prices drags down our economy, which can serve to extend and deepen the recession even further.
 
Your administration has shown a callous indifference to the pain these high prices are inflicting on American families. At the same time, your administration has coddled Organization of Petroleum Exporting Countries (OPEC) nations whose actions have contributed to this crisis. 
 
We are writing to urge you to demand that OPEC members increase their oil production because they are currently producing well under their capacity.  As you know, the first four months of 2008 witnessed extraordinary and historic increases in the cost of crude oil, which has impacted not only the costs of gasoline and heating oil in the U.S., but food and commodity prices as well. Despite skyrocketing energy costs, OPEC members claimed that they saw no reason to increase production quotas. We respectfully urge you to call upon Saudi Arabia, the United Arab Emirates (UAE), and other OPEC members to increase their oil production immediately.
 
OPEC’s recent decision not to increase production before next fall at the earliest will surely cause prices to remain high and will lead to higher energy prices for Americans this spring and summer. Recently, Ali al-Naimi, Saudi Arabia’s oil minister, said there was no need to increase supplies by “even one barrel of oil.” And Abdullah al-Attiyah, Qatar's energy minister, said, "Is there a need for extra production? I don't think so."
 
OPEC members have no economic incentive to increase supply of oil, because that would lead to a drop in price. The OPEC cartel is reaping the benefits of record profits at the expense of the American consumer and economy.  Saudi Arabia was producing roughly 9.55 million barrels per day (MBPD) in 2005, but it dropped production down to 8.72 MBPD last year.  By their own estimates, they have the capacity to produce over 11 MBPD.  Both Kuwait and the UAE are also producing below their total capacity.
 
At a time when high energy prices are causing widespread anxiety among American households, we question the merit of rewarding members of OPEC with lucrative arms sales. The perverse incentives created by this arrangement suggest a disregard for the devastating impact on the American economy of high energy prices.
 
We question why your administration would reward Saudi Arabia for its failure to increase its crude oil production with the sale of 900 Joint Direct Attack Munition (JDAM) kits that could top $100 million.  We question why your administration would reward the UAE with a Patriot missile defense deal that could be worth as much as $9 billion. And we question why your administration rewarded Kuwait by offering $2 billion in arms sales.  All told, in the past six months, your administration has proposed selling almost $14 billion worth of weapons to Gulf members of OPEC who are contributing to the global oil crisis.
 
While some of us have concerns in general about arming this region to the teeth, should Saudi Arabia or the UAE fail to significantly increase daily production of crude oil, we would be compelled to block any and all sales of weapons from the United States to Saudi Arabia and the UAE, and would consider exploring blocking additional weapons sales to other OPEC members.
 
While we are fighting an immensely expensive war in Iraq, which the administration intended to be paid for by Iraq’s oil revenues, American taxpayers have ended up footing the bill in the form of rising energy costs. Meanwhile the Department of Defense continues to ship billions of dollars in weapons systems to the very same OPEC countries enjoying the windfall oil profits.  The American people deserve better. We look forward to your prompt attention to this matter.
 
Sincerely,
 
Senator Charles E. Schumer                                         
Senator Byron Dorgan
Senator Bernie Sanders                                                
Senator Bob Casey
Senator Mary Landrieu                                                 
Senator Amy Klobuchar
 
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