Profit-taking or market shift?
By Wire
Published in News on April 25, 2006 1:50 PM
WASHINGTON -- President Bush this morning ordered a tempory halt to deposits to the nation's strategic petroleum reserve to make more oil available for consumer needs and relieve pressure on pump prices.
Bush also announced steps to ease environmental standards governing fuel grades.
The moves came as political pressure intensified on Bush to do something about gasoline prices that are expected to stay high throughout the summer.
Bush said the nation's strategic petroleum reserve had enough fuel to guard against any major supply disruption over the next few months.
"So, by deferring deposits until the fall, we'll leave a little more oil on the market. Every little bit helps," he said.
Easing the environment rules will allow refiners greater flexibility in providing oil supplies since they will not have to use certain additives such as ethanol to meet clean air standards. The suspension of oil purchases for the federal emergency oil reserve is likely to have only modest impact since relative little extra oil will be involved.
The high cost at the pump has turned into a major political issue, with Democrats and Republicans blaming each other for a problem that is largely out of Congress' control. Republicans are worried that voters paying more than $3 per gallon would punish the party in power. Democrats want to make that happen.
Bush said that high gasoline prices are like a hidden tax on consumers and businesses, although he said the nation's economy was strong. He urged Congress to take back some of the billions of dollars in tax incentives it gave energy companies, saying that with record profits, they don't need the breaks. He urged lawmakers to expand tax breaks for the purchase of fuel-efficient hybrid automobiles.
The president said Democrats in the past have urged higher taxes on fuel and price caps to control fuel expenses, but he said neither approach works. Instead, he called for increased conservation, an expansion of domestic production and increased use of alternative fuels like ethanol.
During the last few days, Bush asked his Energy and Justice departments to open inquiries into whether the price of gasoline has been illegally manipulated, said White House press secretary Scott McClellan.
It's unclear what impact, if any, Bush's investigation would have on prices that are near or at $3 a gallon or more. Asked if Bush had any reason to suspect market manipulation, McClellan responded, "Well, gas prices are high right now, and that's why you want to make sure there's not."
Republicans who control Congress have become concerned that the high cost of filling up could become a problem for them in the November elections. Polls suggest that voters favor Democrats over Republicans on the issue, and Bush gets low marks for handling gasoline prices.
The administration sent letters Tuesday to state attorneys general urging them to vigorously enforce state law "against any anticompetitive, anticonsumer conduct in the petroleum industry."
"Consumers around the nation have expressed concerns about what they have perceived as anticompetitive or otherwise unfair conduct by the world's major oil companies," said Attorney General Alberto Gonzales and Federal Trade Commission Chairman Deborah Platt Majoras. Their letter said federal agencies had substantially increased efforts to monitor, detect and prevent any violations of the law.
House Speaker Dennis Hastert, R-Ill., and Senate Majority Leader Bill Frist, R-Tenn., urged Bush in a letter Monday to order a federal investigation into any gasoline price gouging or market speculation.
"There is no silver bullet," Frist said Tuesday on ABC's "Good Morning America," but "we need to make sure that any efforts at price-gouging be addressed and addressed aggressively." Meanwhile, Frist said, consumers should take steps to conserve gasoline -- drive at slower speeds, tune up car engines for maximum efficiency and carpool.
Senate Democratic leader Harry Reid of Nevada dispatched his own letter, calling for a multi-pronged approach to restrain gas prices. Among the steps were swift enactment of anti-price gouging legislation, an appeal to oil companies to refrain from further price increases, use of more alternative fuels and increased attention to existing fuel-saving laws and regulations.
Bush has said consistently that gas prices are high because global demand is rising faster than global supply and that the problem cannot be solved overnight.