President Bush on Tuesday halted until fall the purchase of crude oil for the government’s emergency reserve. The move came as political pressure intensified on him to do something about gasoline prices, which are expected to remain 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.
Wholesale gasoline futures prices for June delivery dropped 8 cents a gallon to $2.10 on the New York Mercantile Exchange immediately upon Bush’s remarks.
In a separate development, Bush ordered a temporary suspension of environmental rules for gasoline.
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 since relative little extra oil will be involved.
Bush asks EPA to grant waivers
In his speech on Tuesday, Bush called on the Environmental Protection Agency to grant waivers to clean air requirements if necessary to ease bottlenecks. The EPA said it will consider fuel waivers on a case-by-case basis if gasoline supply problems arise, which could result in price spikes or shortages of cleaner summer-blend gasoline.
EPA spokesman John Millett said the waivers would not adversely impact air quality because they are only for 20 days, although states can request extensions.
So far, Pennsylvania is the only state to request such a waiver, according to an EPA spokeswoman. That request is still being reviewed.
Refiners, meanwhile, said that most of the change to summer-blend gasoline already has been completed and waivers may not be needed — and might even be counterproductive in some cases.
“You’re going to have to be careful that you’re not upsetting a plan that already is in the last stage of implementation,” said Bob Slaughter, president of the National Petrochemical Refiners Association.
Political cost of gas
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’s control. Republicans are worried that voters paying more than $3 per gallon would punish the party in power. Democrats want to make that happen.
Democrats sought to turn gas prices — like Hurricane Katrina and the Iraq war — into an issue that hurts Bush’s standing with voters. “What happened to Iraq oil, Mr. President? You said Iraqi oil would pay for the war. Ain’t seen no money. Ain’t seen no oil,” Sen. Barbara Mikulski of Maryland said.
“Families are gripped by the fear of rising gas prices,” she added.
At the same news conference, New Jersey Sen. Bob Menendez proposed a 60-day suspension of the gasoline tax, saying the money could be recovered by repealing tax breaks for energy companies. He scoffed at Bush’s call to curb tax breaks for the oil companies.
“What we’re left wondering today is why it took five years” for Bush to support tax increases on the energy industry, Menendez said.
House Minority Leader Nancy Pelosi, D-Calif., condemned Republicans for their oil plans.
“These people can’t help themselves. They are so tied to big oil that they can’t grasp what energy independence is,” she said, according to NBC News.
Pelosi and other Democrats called for more development of biofuels and other alternative energy sources.
“Let’s look to the Midwest, not the Mideast,” she said.
Taking aim at tax breaks
Bush, in his speech, urged Congress to revoke about $2 billion in tax breaks over 10 years that Congress approved and he signed into law to encourage exploration. “Taxpayers don’t need to be paying for certain of these expenses on behalf of the energy companies,” Bush said.
He also 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.
Bush said high energy prices are disturbing.
Bush condemns ‘addiction to oil’
“Our addiction to oil is a matter of national security concern,” the president said in a speech to the Renewable Fuels Association, which advocates alternate energy sources. “After all, today we get about 60 percent of our oil from foreign countries. That’s up from 20 years ago, where about 25 percent of our oil came from foreign countries.”
Bush said gasoline prices are expected to remain high throughout the summer and “that’s going to be a continued strain on the American people.”
Bush said the Federal Trade Commission, the Justice Department and the Energy Department were investigating whether the price of gasoline has been unfairly manipulated. The administration also contacted all 50 state attorneys general to offer technical assistance to urge them to investigate possible illegal price manipulation within their jurisdictions.
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.
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, White House press secretary Scott McClellan responded, “Well, gas prices are high right now, and that’s why you want to make sure there’s not.”
Checking for price gouging
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.