- The Washington Times - Wednesday, April 26, 2006

President Bush yesterday ordered a temporary suspension of environmental rules for gasoline, which are creating bottlenecks in U.S. gasoline markets, and announced a federal investigation into potential manipulation of gas prices that have topped $3 per gallon.

Mr. Bush, responding to high fuel costs that are expected all summer, said oil companies have a responsibility to American motorists and called on Congress to strip away tax breaks the corporations are enjoying amid record profits.

“Listen, at record prices, these energy companies have got large cash flows, and they need to reinvest those cash flows into expanding refining capacity, or researching alternative energy sources,” the president said in a speech to the Renewable Fuels Association, which advocates alternate energy sources, yesterday in Washington.

The $16 billion in combined first-quarter earnings expected from ConocoPhillips, Exxon Mobil Corp. and Chevron Corp., the country’s three largest oil and gas companies, will be 14 times greater than the combined first-quarter profits of Google Inc., Apple Computer Inc. and Oracle Corp, and 19 percent more than last year.

Mr. Bush also suspended new purchases of crude oil for the U.S. Strategic Petroleum Reserve, a small move to boost market supplies.

Analysts and Democrats predicted that the actions will do little to dampen high prices this summer, even though crude oil and gasoline futures fell yesterday after Mr. Bush’s announcement.

“If you have $75 a barrel crude oil, you’re sort of at a starting point of $2.90 a gallon for gasoline,” said Mary Novak, managing director at the economic consulting firm Global Insight.

Democrats called Mr. Bush a hypocrite for making the speech because he signed last year’s energy bill that gave oil companies billions in tax breaks and subsidies. They also called for a 60-day federal gas tax holiday.

“We have two oilmen in the White House, the logical follow-up from that is $3-a-gallon gasoline,” said House Minority Leader Nancy Pelosi of California. “It is no accident. It is a cause and effect.”

Sen. Robert Menendez, New Jersey Democrat, introduced an amendment to the supplemental spending bill that would put a 60-day suspension on the 18-cents-per-gallon federal tax on gasoline to give drivers immediate tax relief — saving $2.70 to fill a 15-gallon tank.

The Senate is expected to consider the amendment, which also calls to end tax breaks for oil and energy companies, this week.

House Majority Leader John A. Boehner, Ohio Republican, called gas prices a “serious problem,” but said lawmakers should further consider drilling in the Arctic National Wildlife Refuge.

The Democrats balked at calls for offshore drilling or for exploring in ANWR.

Mr. Bush’s call for the Environmental Protection Agency to relax regional clean-fuel standards is designed to attract more gasoline imports and make it easier for supplies to be moved between states. He directed the agency to use its authority to temporarily waive air-quality laws in states if that would relieve a local gasoline supply shortage.

The EPA said it will consider fuel waivers on a case-by-case basis if gasoline supply problems become apparent. The waivers could result in price spikes or shortages of cleaner summer-blend gasoline. Pennsylvania is the only state to have asked for a waiver, the EPA said.

EPA spokesman John Millett said the waivers would not hurt air quality because they are only for 20 days, although states can request extensions.

Refiners, meanwhile, said that most of the change to summer-blend gasoline, which annually drives up prices, has been completed and waivers might not be needed — and might even be counterproductive in some cases.

Mr. Bush’s announcement came a day after House Speaker J. Dennis Hastert, Illinois Republican, and Senate Majority Leader Bill Frist, Tennessee Republican, sent a letter to Mr. Bush calling for a federal investigation into gasoline price gouging or market speculation.

During the past few days, Mr. Bush asked his Energy and Justice departments to open inquiries into whether the price of gasoline has been illegally manipulated.

The administration sent letters yesterday to state attorneys general urging them to vigorously enforce state law “against any anti-competitive, anti-consumer conduct in the petroleum industry.”

“Consumers around the nation have expressed concerns about what they have perceived as anti-competitive or otherwise unfair conduct by the world’s major oil companies,” said Attorney General Alberto R. Gonzales and Federal Trade Commission Chairman Deborah Platt Majoras.

Past investigations of price gouging have concluded that “the industry is reasonably competitive and the explanation for price increases lies in other causes,” said Bert Foer, president of the American Antitrust Institute. The chance that investigators will find anything new “strikes me as fairly low,” he said.

After Hurricanes Katrina and Rita, Mr. Bush used the enhanced authority Congress gave him in the energy legislation to waive clean fuel requirements and use the Strategic Petroleum Reserve in response to the widespread devastation of oil and gas facilities caused by the storms.

Gas prices at the pump fell from records of more than $3 a gallon to the mid-$2 range after the administration used emergency provisions to temporarily waive summer fuel regulations and rules requiring lower sulfur content in diesel fuels, which unleashed a flood of imports and fuel onto the market.

Oil prices stayed subdued in the $60 to $70 range and did not start picking up again until late January, when the standoff between the United States and Iran over Iran’s nuclear program sparked a new round of speculation. Analysts expect the administration will employ the reserves again if Iran retaliates against any U.N. economic sanctions by cutting oil exports.

Christina Bellantoni and Patrice Hill contributed to this article, which is based in part on wire service reports.

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