President moves to ease gas prices
US to probe gouging, halt deposits to reserve
WASHINGTON -- President Bush unveiled a series of steps yesterday as gas prices continued to spiral, including a federal inquiry into possible price-gouging, an easing of environmental rules on gasoline production, and a halt to new purchases for the nation's energy reserve until fall.
Industry analysts warned that the moves would not immediately drive down record gas prices, a point the White House acknowledged. But Bush said consumers can cope with high gas prices through conservation while the government encourages oil production and alternative energy sources -- and does what it can to tamp down demand.
''Gasoline price increases are like a hidden tax on the working people," the president said in a speech in Washington to the Renewable Fuels Association, a group that advocates for alternative fuels. ''By deferring deposits [into the Strategic Petroleum Reserve] until the fall, we'll leave a little more oil on the market. Every little bit helps."
With drivers paying more than $3 a gallon in much of the country, the gas price issue has been thrust onto the national political scene in recent days. Democrats have accused Bush and the Republican-controlled Congress of fostering high prices through years of favorable treatment for big oil companies, and prominent Republicans have become nervous about a possible backlash in this fall's congressional elections.
Yesterday's moves represented the most significant efforts by the Bush administration to address the soaring gas prices. His call for repealing some tax breaks and his exhortation to oil companies to invest profits in production marked a change in tone for a president who has often had a cozy relationship with the energy industry.
But with a volatile global oil market at a time of year when prices traditionally rise, the steps announced by Bush may not slow the price escalation, said Peter Beutel, president of Cameron Hanover, an energy consulting company based in New Canaan, Conn.
''I don't think it's going to stop prices from going where they want to go," Beutel said. ''Something needed to be done, and I think he did all he could. But much of it is symbolic."
While analysts cautioned that Bush's measures would have no immediate impact on prices at the pump, the petroleum futures markets responded favorably yesterday. Prices of crude oil and gasoline futures fell after Bush's announcement.
Light sweet crude for June delivery settled 45 cents lower, at $72.88 a barrel, on the New York Mercantile Exchange, dropping on the heels of a 4.48-cents-per-gallon decline in May gasoline futures, which finished at $2.1291 a gallon.
The president proposed a series of renewable energy initiatives -- including more tax breaks for buyers of hybrid vehicles -- and called on Congress to repeal $2 billion of the $14.5 billion in tax breaks over 10 years for exploration and development that were part of a massive energy bill passed last year.
Bush said the Justice Department would work with state attorneys general to investigate allegations of price manipulation.
The Federal Trade Commission and the Energy Department are also working to ensure that motorists are not being cheated, Bush said.
''We expect our consumers to be treated fairly," he said.
The announcement of increased scrutiny was a disappointment to industry officials. John Felmy, chief economist for the American Petroleum Institute, said investigations of price manipulation suggest wrongdoing by the industry, though nothing has been proved.
''We've been investigated dozens of times, and exonerated every time," Felmy said.
He said the high gas prices are a function of instability in large oil-producing nations, as well as the increased demand from emerging markets. Bush's steps to control prices probably will not have much impact, Felmy said.
''A lot of this is pretty much locked in," he said.
Democrats denounced Bush's efforts as belated and insignificant. They proposed a temporary lifting of the 18.4 cents-per-gallon federal gasoline tax, and said oil companies should be forced to forgo some of their profits to help drivers who are struggling to afford the price of a full tank.
''Americans need immediate relief -- right now," said Senator Robert J. Menendez, a Democrat of New Jersey.
Menendez has filed a bill that would lift the gas tax for 60 days. ''It's crystal clear that the current spike in gas prices is at least partly due to . . . greed."
Menendez said he would ask the Senate to vote on his measure this week.
Though Bush called on energy companies to invest more in production, he ruled out having the federal government set prices. He also said he would not support a windfall profits tax on the oil companies that are now reporting record earnings.
''Those plans haven't worked in the past," Bush said. ''I think we need to follow suit on what we have been emphasizing -- particularly through the energy bill -- and that is to encourage conservation, to expand domestic production, and to develop alternative sources of energy, like ethanol."
On Capitol Hill, members of both parties rushed to introduce proposals to rein in gas prices -- and to assign blame for the current situation. Democrats denounced Republicans, saying they had ignored warning signs of rising gas prices, and asserting that they had supported policies designed to boost already profitable oil companies.
''We Democrats are ready to keep America rolling," said Senator Barbara A. Mikulski, a Maryland Democrat. ''This administration has no answers."
Republicans turned the tables, saying the Democrats' opposition to oil exploration in the Alaskan wilderness and their insistence on strict environmental standards for gasoline have caused prices to spike.
''We did not arrive at this energy crisis overnight; it is a direct result of years of unreasonable, burdensome regulations and obstruction on the part of radical environmentalists," said the House majority whip, Roy Blunt, Republican of Missouri.
Republican congressional leaders said they would begin work on another energy bill, to accomplish some of Bush's goals of supporting renewable energy and increasing domestic oil production. Any bill will take months to pass Congress.
White House officials said they did not estimate how much the steps announced yesterday would shave off of gas prices, and they acknowledged that the federal government's power to control prices is limited.
The moratorium on buying oil for the reserve, for example, would free up perhaps 30,000 barrels a day -- hardly a dent in the 21 million barrels the United States consumes daily.
The high prices are primarily a result of the nation's reliance on foreign sources of oil, at a time in which demand is spiking in the huge markets of India and China, said Al Hubbard, director of the White House's National Economic Council. ''It took us a long time to get into this situation, and it's going to take us a long time to get out," Hubbard said. ''We've got to use every tool at our disposal." 