WASHINGTON – President Bush’s decision to suspend oil purchases for the Strategic Petroleum Reserve and authorize waivers of some environmental fuel regulations are designed to demonstrate government action about rising gas prices, but are unlikely to slow the larger forces pushing prices past $3 per gallon, analysts said Tuesday.
The president also ordered federal agencies to watch for price gouging, insisting that he will not accept price “manipulation,” even though similar monitoring efforts shortly after Hurricane Katrina led to little enforcement against sellers.
Experts attribute the cost run-up to the nation’s shortage of refineries and a switch to more heavily blended gas during the summer months, along with uncertainties in the oil-producing nations of Iran and Nigeria and strong demand from China and India.
In such a turbulent and far-reaching global market, the marginal amount of additional oil available from Bush’s move will do little to lower the price at the pump, said Philip Verleger Jr., a Colorado energy consultant. “It’s like treating cancer with aspirin,” Verleger said.
The president will suspend daily purchases of oil for the national reserve this summer, freeing about 400,000 barrels of oil each week to be refined and sold at gas stations. The government also will delay until fall reclaiming most of the 12 million barrels of oil it loaned to refiners after hurricanes struck the Gulf Coast last year.
Bush, who criticized President Bill Clinton for drawing down the petroleum reserve by 30 million barrels to avert higher winter heating oil prices in 2000, says the 687-million-barrel reserve today is sufficient to withstand temporary disruptions in the nation’s oil supply.
So far, federal monitoring for price-gouging since Hurricanes Katrina and Rita last year has not averted price increases, and analysts see no evidence of a disparity between wholesale and retail prices.
The president has acknowledged that suspending daily deposits in the Strategic Petroleum Reserve this summer will not have a big impact on the supply of oil available for refineries.
“We’ll leave a little more oil on the market,” Bush said Tuesday. “Every little bit helps.”
Analysts say that if environmental standards for gasoline additives were relaxed nationwide, gas prices could drop significantly. But the White House is enabling regulators to waive environmental rules only regionally, with the aim of averting local shortages of gas. The Environmental Protection Agency says waivers will be granted case by case.
The move to ethanol as a cleaner additive to gasoline and a difficult transition away from the additive MTBE – which the government found was polluting water – have led to shortages of fuel in some parts of the country. Currently, only Pennsylvania has sought a waiver of the rules.
Bush “seemed to be indicating he wanted the EPA to grant waivers where there have actually been shortages,” said Andrew Weissman, senior managing director at FTI Consulting in Washington, calling a national waiver “very tempting from the standpoint of the White House.”
The president has authority to relax rules for only 20 days at a time without additional congressional approval.
“What’s most important, in terms of waiving those restrictions, is to … prevent any kind of shortage from occurring,” said Al Hubbard, director of the president’s National Economic Council.
“The president is very concerned about (gas prices) and is committed to doing everything he can to reduce the high price of gasoline,” Hubbard said. “Unfortunately, as the president said a number of times, it took us a long time to get into this situation and it’s going to take us a long time to get out.”
Jason Schenker, an energy analyst for Wachovia Bank, agrees that the hold on oil reserves will have little effect on prices. The U.S. oil industry currently has crude oil stocks of about 345 million barrels, or roughly a month’s worth of oil imports, he said.
“A few million barrels or more of crude oil are not likely to make the price of gasoline fall significantly,” Schenker said.
Gasoline production has fallen as refiners switch over to blends that meet environmental concerns, he agrees, and some refineries damaged by hurricanes still are not operating at full tilt.
Acted in 2000
When Clinton acted in the fall of 2000 to release oil from the reserve to offset a surge in heating oil prices, Bush criticized the Clinton administration for seeking “short-term political gain.” “They have had seven and a half years to develop a sound energy policy,” Bush said then. “And now they have nothing but excuses, bad ideas and – as the clock runs out – one last play.”
Bush has had more than five years to develop that energy policy. And while Congress has enacted some of his proposals – encouraging use of alternative sources of fuel for motor vehicles, for instance – the president’s most controversial goal remains unfulfilled: Opening Alaska’s Arctic National Wildlife Refuge (ANWR) to oil exploration.
“I fully recognize that the passage of ANWR (exploration) will not increase the oil supply immediately,” Bush said Tuesday. “But it’s also important to understand that if ANWR had been law a decade ago, America would be producing about a million additional barrels of oil a day, and that would increase our current level of domestic supply by 20 percent.”
Drew McConville, a spokesman for the Wilderness Society, said: “Faced with mounting pressure over high gas prices, President Bush is going hunting again in the Arctic National Wildlife Refuge. … That doesn’t sound like much of a solution.”
The White House, acknowledging that some of its plans are short-term, maintains that finding new oil and developing alternative sources of energy remains the long-term solution.
“The prices that people are paying at the gas pumps reflect our addiction to oil,” Bush said Tuesday in a speech to the Renewable Fuels Association, standing before a mural of a cornfield at the convention of a group that promotes ethanol production.
Bush, riding in a 14-vehicle motorcade from the White House to the ethanol convention and back, passed an Exxon station across the street from the Watergate Hotel posting gas prices of $3.29, $3.39 and $3.49 per gallon.
Critics in Congress maintain that other forces than the public’s addiction to oil are at work. Recent reports of record profits among oil companies have spurred calls in Congress for a tax on the “windfall profits” of oil companies.
“The prices at the pump reflect the oil companies’ addiction to greed,” Sen. Dick Durbin, D-Ill., said on the Senate floor Tuesday. “It is time we have a windfall profits tax.”