Bush Calls for Gas Price Investigation, Lifts Clean Gas Rules

By J.R. Pegg

WASHINGTON, DC, April 25, 2006 (ENS) - In response to growing public and political pressure over soaring gasoline prices, President Bush today called on federal agencies and state attorneys general to investigate whether oil companies have unfairly manipulated gasoline prices.

"This administration is not going to tolerate manipulation," said Bush, who also ordered temporary suspension of federal clean gasoline standards and called on Congress to ease environmental and permitting restrictions on oil refineries.

Speaking at the annual conference of the Renewable Fuels Association, an industry group that represents ethanol producers, Bush said the Federal Trade Commission (FTC), U.S. Department of Justice and the U.S. Energy Department are conducting inquires into illegal manipulation of gasoline prices.


President George W. Bush addresses the Renewable Fuels Association at the Marriott Wardman Park Hotel in Washington, DC. (Photo by Paul Morse courtesy The White House)
In addition, the FTC and the U.S. Attorney General are contacting all 50 state attorneys general to urge them to also investigate possible market manipulation.

"Americans understand, by and large, that the price of crude oil is going up and that the prices are going up, but what they don't want and will not accept is manipulation of the market," Bush said. "And neither will I."

The move comes amid growing public anger about high gasoline prices and falling approval ratings for the President.

As of last week, Americans were now spending on average $2.96 for a gallon of regular gasoline – the highest price since early October.

Democrats have consistently blamed the Bush administration for high gasoline prices and for failing to investigate price gouging, but on Monday Republican leaders in Congress also called on Bush to investigate possible price manipulations.

Bush said the prices at the pumps "reflect our addiction to oil."


Humorous sign by Wilkie Manufacturing of Oklahoma City, Oklahoma was an award winner at the Illinois Sign Association 2005 sign competition. (Photo courtesy ISA)
American consumers should expect high gasoline prices to continue through the summer, Bush said, and need to realize there is little the federal government can do in the short term to provide relief.

Higher taxes on fuel and price caps will not work, said Bush, who outlined a long-term strategy centered on conservation, new domestic oil production and increased use of alternative fuels.

Bush also called on Congress to expand tax credits for hybrid and clean diesel vehicles and to revoke some $2 billion in tax breaks for oil companies.

"Record oil prices and large cash flows also mean that Congress has got to understand that these energy companies don't need unnecessary tax breaks," Bush said.

Democrats today unveiled a new plan to ease the burden on America’s drivers with a 60 day holiday from the federal gas tax.

"For years, Democrats have been fighting to get tough on Big Oil and protect Americans from being exploited when they fuel their cars," said Senate Democratic Leader Harry Reid.

"Unfortunately, for years Republicans have been more interested in protecting oil companies’ profits than the American people’s pockets. Now that gas prices are skyrocketing and Americans are struggling just to fill their gas tanks, Congress must act to ease the burden," said Reid. "Passing a federal gas tax holiday and repealing the tax giveaways in the Bush energy bill is a good start."

The Menendez Federal Gas Tax Holiday Amendment, an amendment to the Supplemental Appropriations Bill now under debate in the U.S. Senate, would give Americans immediate relief from gas prices at the pump by removing the $0.184 per gallon federal tax on gasoline and the $0.244 per gallon federal tax on diesel for 60 days.

To recover the lost revenue, the amendment repeals what Reid calls "huge and unnecessary subsidies for large oil companies included in the Bush energy bill and other legislation and handed out at a time when oil companies were enjoying record profits."


Senator Robert Menendez of New Jersey is proposing a measure to repeal oil company subsidies. (Photo courtesy Office of the Senator)
"Last year, the big oil companies hiked gas prices and blamed an act of God, but it’s crystal clear that the current spike in gas prices is at least partly due to an act of greed," said Senator Robert Menendez of New Jersey, a Democrat. "We must provide American families immediate relief by suspending the federal gas tax for 60 days and making up for the lost revenue by getting rid of some unnecessary tax giveaways to oil and gas companies."

"I am pleased that the president has finally reached the sensible conclusion that major oil companies do not need tax breaks," Menendez said in response to comments made by the President today. "What we’re left wondering today is why it took President Bush over five years in office to realize this."

In his effort to boost gas supplies, President Bush would suspend provisions of the Clean Air Act that protect the environment. Bush said he is directing U.S. Environmental Protection Agency (EPA) Administrator Stephen Johnson to grant states waivers from federal requirements that they use cleaner burning gasoline.

"I do that for the sake of our consumers," Bush said. "If Johnson finds that he needs more authority to relieve the problem, we're going to work with Congress to obtain the authority he needs."

The President also has instructed Johnson to form a task force on the different fuel blends used by states to meet clean air standards – known as boutique fuels. The task force will explore ways to reduce the number of boutique fuels and increase cooperation between states on gasoline supply decisions.

"We also need to ensure that there are not needless restrictions on our ability to get gasoline to the pump," Bush said.

Frank O’Donnell of the Clean Air Trust said short-term waivers are "not the worst possible outcome" but warned that the environmental and public health community would fight long-term weakening of gasoline standards.

"I think the oil companies could have anticipated this problem and planned for it better," he said, in reference to a switch from gasoline blended with MTBE to fuel blended with ethanol. " Instead, they are taking advantage of the situation and they are about to announce some pretty big profits. I suspect that’s the real reason the President went out today to try to change the subject.

Bush said consumers could get some relief at the pumps from his decision to halt deposits to the U.S. Strategic Petroleum Reserve.

"By deferring deposits until the fall, we'll leave a little more oil on the market," he said. "Every little bit helps."

But how much it will help is uncertain – the federal government had been depositing some 2.2 million barrels into the reserve each month. The nation consumes some 20 million barrels of oil a day.

"Deferring deposits to the Strategic Petroleum Reserve is more symbol than substance," said David Sandalow, director of the Environment and Energy Project at the Brookings Institution. In the Clinton administration, Sandalow was assistant secretary for oceans, environment, and science and senior director for environmental affairs at the National Security Council.

"Such deposits are tiny in comparison to total oil consumption," he said. "According to several reports, planned deposits for May were roughly 2.1 million barrels - roughly 0.3% of likely U.S. oil consumption for the month."


Diamond Shamrock refinery in Commerce City, Colorado. (Photo by David Parsons courtesy NREL)
Bush said tight supplies are also the product of oil refinery regulations and the failure to open the Arctic National Wildlife Refuge to oil drilling.

"We haven't expanded refining capacity," said Bush, who criticized the bureaucratic and environmental hurdles oil companies must navigate to expand capacity or build new refineries.

The last new refinery was built in the United States in 1976. Refinery capacity in the United States has dropped by some 50 percent in the past two decades and existing facilities are currently operating at close to 100 percent.

Congress should streamline the permitting process and environmental review that refineries must complete before they modify or expand existing operations and for new plants, Bush said, "and guarantee refinery construction permits will be processed within a single year."

Environmentalists say Bush has got the refinery part of the equation dead wrong and contend the industry has not built new plants – and has in fact closed refineries – in order to take advantage of a tight market and to increase profits.

Sierra Club President Carl Pope said Bush’s speech ignored solutions – in particular tighter fuel economy standards – that could make a serious dent in the nation’s demand for oil.

"No investigation is needed to understand that America deserves a better energy policy," Pope said. "The Bush administration has allowed its energy policy to be controlled by its friends in the oil and auto industry."