Washington – President Bush announced a series of short-term steps Tuesday intended to ease energy prices, including a suspension of government purchases to refill the Strategic Petroleum Reserve, a relaxation of environmental rules for the formulation of gasoline, and investigations into possible price gouging and price fixing.
In addressing the issue in a speech, Bush joined a chorus of lawmakers who have been advocating populist-sounding initiatives to respond to surges in gasoline and crude oil prices and the threat they pose to Republicans in this fall’s congressional elections.
Bush did not go as far as some members of his party, who are floating the possibility of a “windfall profits” tax on oil companies. But, speaking as the major oil companies prepared to report their quarterly earnings this week, he said he was directing the Justice Department to join an existing Federal Trade Commission inquiry into possible price manipulation.
Bush urged oil companies to reinvest their profits in expanding refining capacity and in developing alternative energy sources. And he called for the reversal of relatively small tax breaks and incentives for oil companies engaging in specific types of exploration. Those perks were included in an energy bill Bush signed into law last year.
He also called for an expansion of the tax break consumers receive for buying hybrid cars, which combine gasoline and battery power, a move that could first benefit two major Japanese-owned manufacturers, Toyota and Honda, which have led the market.
The rise in energy prices has undermined the administration’s effort to build a case that its policies have led to economic prosperity and has given Democrats an opening to portray the White House and congressional Republicans as allies of the oil industry.
With Bush’s poll numbers sagging and his party on the defensive over the Iraq war, Republicans have been scrambling to show they are taking action to help consumers.
Oil prices are hovering around $73 dollars a barrel, and consumers are paying more than $3 a gallon for gasoline in some places. The sharp price increase in recent weeks has been driven by several factors, including concern about a confrontation with Iran, one of the world’s largest oil suppliers.
At various points, Iran has threatened – and withdrawn the threat – to slow production if the U.N. Security Council imposes sanctions against it for its nuclear enrichment program, which the United States says is part of a secret weapons program. Bush alluded to the issue in his speech, saying for the first time that some countries were playing on what he termed America’s “addiction” to oil, and that this “reduces our influence” in the world.
Bush said that the decision a decade ago by the Clinton administration not to permit oil production in the Arctic National Wildlife Refuge was costing the country more than a million barrels a day of lost production.
Bush also said he had ordered some short-term steps, mostly involving the Strategic Petroleum Reserve. He gave U.S. oil companies more time to pay back emergency loans taken from the reserve after the production disruptions of the last hurricane season.
The Energy Department says the petroleum reserve has 688 million barrels on hand; it has room for 727 million barrels. The oil company paybacks would amount to a little more than 2 million barrels.
“Our strategic reserve is sufficiently large enough to guard against any major supply disruption over the next few months,” Bush said. “So by deferring deposits until the fall, we’ll leave a little more oil on the market.”
Oil experts, though, said that these steps were small and that Bush’s ability to affect gasoline prices was limited.
Over the longer term, Bush said he was asking Congress to repeal $2 billion in tax breaks and incentives put into last year’s energy bill. White House officials insisted that he had never advocated the incentives for the oil industry.
But on Capitol Hill, GOP negotiators have decided to eliminate provisions in a major tax bill that would force the oil companies to pay billions of dollars more in taxes on their profits.
Bush also advocated expanding the tax break for buying hybrids, which are more expensive than gasoline-powered cars but look more attractive to consumers today than they did a year ago. The break diminishes as soon as more than 60,000 units of any individual hybrid model are sold, but on Tuesday, Bush pressed to eliminate that ceiling. The Toyota Prius is the first model most likely to exceed the current limit.
On Capitol Hill, Republicans accused the Democrats of blocking legislation to boost energy supplies by increasing domestic nuclear power and oil drilling. Democrats charged that Bush and Republicans in Congress had failed to address the short-term cost of gas in the energy bill passed last year, and they dismissed the president’s call for an investigation by the Federal Trade Commission as a toothless ploy.
After Bush’s speech, Sen. Ken Salazar, D-Colo., suggested a bill that would prompt the government to set new fuel standards for automobiles based on their model years, accelerate improvement of hybrid technologies and force federal agencies to reduce fuel consumption in their fleets by 30 percent by 2016.
Many parts of the country have been experiencing particularly high gasoline prices – and some shortages – as refiners are scrambling to switch to an ethanol-blended gasoline instead of using MTBE. Refiners have decided to drop MTBE, a popular oxygen additive but one that has been blamed for water pollution. Ethanol is in use in Colorado.
The rapid shift has created vast logistical challenges for refiners and distributors, mainly because of ethanol shortages and the difficulties linked to transporting it. Refiners are also completing their seasonal maintenance, during which they switch production from winter- grade to summer-grade gasoline.
The decision announced by Bush on Tuesday to let the Environmental Protection Agency waive environmental restrictions on gasoline supplies could encourage a smoother transition this summer by allowing imports of lower-grade gasoline from Europe and helping refiners produce larger quantities of lower- quality gasoline to meet demand.
The Washington Post and Denver Post staff writer Anne Mulkern contributed to this report.
Bush’s plan
President Bush’s proposals probably won’t have a major immediate impact on gasoline prices.
The proposals include:
Cease filling up the nation’s emergency oil reserve this summer. That would provide a little more oil to the market, which could lower crude prices slightly.
Investigate whether there is price manipulation or gouging. That could spur some companies to lower prices, but oil companies have been investigated dozens of times and never charged.
Open up the Arctic National Wildlife Refuge in Alaska to oil drilling. The Senate has blocked that several times. Even if passed, oil likely would not flow for a decade.
Waive fuel requirements that create a patchwork of gasoline blends throughout the United States. That could reduce prices and possibly prevent a price spike to a region unable to obtain its own blend of fuel after a pipeline rupture or refinery fire.
Remove $2 billion in tax incentives to oil companies to purchase equipment or drill in deepwater areas. That might save taxpayers money but it wouldn’t lower gasoline prices.
GANNETT NEWS SERVICE