Remove obstacles to increasing domestic oil and gas supplies, Bush tells Congress

President George W. Bush urged Congress to send a positive signal to world energy markets by removing obstacles to more domestic oil and gas production. He also rejected calls to quit filling the Strategic Petroleum Reserve while crude oil prices are near record levels but said he would consider suspending the federal gasoline tax through the summer and other proposals.

"If Congress is truly interested in solving the problem, they can send the right signal by saying we're going to explore for oil and gas in the US territories, starting with [the Arctic National Wildlife Refuge]," Bush told reporters at an Apr. 29 press conference.

"If we're generally interested in moving forward with an energy policy that sends a signal to the world that . . . we're going to become less reliant on foreign oil, we can explore at home as well as continue with an alternative fuels program," he maintained.

Congressional Democratic leaders immediately dismissed Bush's proposal. "Only President Bush could allow Big Oil to write our nation's energy policy, guarantee billions in oil tax breaks and refuse to stand up to [the Organization of Petroleum Exporting Countries], and then shirk responsibility for [gasoline] prices that have more than doubled and oil prices that have quadrupled since he took office," Senate Majority Leader Harry M. Reid (D-Nev.) said.

"President Bush's Rose Garden rhetoric will not lower gas prices for Americans struggling in a weakening economy. He must work with Democrats in Congress to invest in renewable energy and lessen our dependence on oil," he said in a written statement.

'Same failed energy policy'

House Speaker Nancy Pelosi (D-Calif.) termed Bush's call for more domestic drilling "the same failed energy policy that has brought record gas prices. Drilling has increased dramatically since 2000 – the number of wells on land has increased about 66% -- and yet the price of gasoline has more than doubled since President Bush took office."

Authorizing leasing within ANWR would not significant reduce US dependence on foreign oil or reduce retail gasoline prices, she continued. "Experts have concluded that opening up the Arctic for drilling would produce only a six-month supply of oil 10 years from now [but] nothing that will help consumers today," Pelosi said.

Bush said that a major reason for higher gasoline prices is that global oil production has not kept pace with growing demand. "Members of Congress have been vocal about foreign governments increasing their oil production. Yet they have been just as vocal in opposition to efforts to expand our production here at home," he said.

He said that the Department of Energy estimates that ANWR contains enough crude to allow US daily production to grow by about 1 million bbl, "which translates into 27 million gallons of gasoline and diesel every day."

Bush said that the country is making a transition to "a new era where we're going to have batteries in our cars that allow people to drive 40 miles on electricity." There will be more ethanol and alternative fuels, he predicted. "But in the meantime, we need to be sending a signal to the world markets that we intend to explore here in America," he said.

Expand refining capacity

"We can also send a clear signal that we understand supply and demand, and then when you don't build a refinery for 30 years, it's going to be a part of restricting supply. And therefore, we ought to expand our refining capacity by permitting new refineries and getting after it quickly," Bush said.

Pelosi also urged Bush to suspend crude oil purchases for the SPR before and after his press conference, but the president rejected the idea. Buying crude for the reserve represents one-tenth of one percent of total global demand, he said. "I don't think it's going to affect price when you affect one-tenth of one percent and I do believe it's in our national interest to get the SPR filled in case there's a major disruption of crude oil around the world," he said.

A full SPR is particularly necessary because Al Qaeda believes an attack on a major overseas oil production facility would disrupt US and other nations' economies, according to Bush. He said he does not see any cost benefits from suspending crude oil purchases for the reserve but feels "it costs you oil in the case of a national security risk."

"Contrary to the president's assertion, the American people would benefit from suspending these government purchases. It could reduce [gasoline] prices by 5 to 24 cents a gallon, a critical first step for America's families, businesses and the economy," Pelosi responded. She said that the SPR has been tapped previously by Bush, Bill Clinton and George H.W. Bush. "In 2000, this action brought the price of oil down by one third – from $30 to $20/bbl," she said.

Responding to a question about the proposal by Sen. John McCain (R-Ariz.), the presumed 2008 Republican presidential nominee, to suspend the federal gasoline tax from Memorial Day through Labor Day to ease upward price pressure, Bush said that he did not want to wade into presidential campaigns but added that he would consider this and other ideas.

Clinton, Obama's observations

Sen. Hillary R. Clinton (D-N.Y.), who is pursuing the Democratic presidential nomination, said on Apr. 28 that she would fund a suspension of the levy with a windfall profits tax on oil companies. Her opponent, Sen. Barack Obama (D-Ill.), told an audience Apr. 29 in Winston-Salem, N.C., that the "gas tax holiday" idea was "a gimmick that would save you half a tank of gas over the entire summer so that everyone in Washington can pat themselves on the back and say that they did something." He also supports a windfall profits tax, he said.

Responding to a reporter's statement that the World Bank estimates that 85% of the increase in world corn prices since 2002 has been due to the growth of ethanol demand, Bush said he thought that weather, increased demand for corn and higher costs of raising it were responsible for 85% of the increase and that ethanol represented only 15%.

"By the way, the high cost of gasoline is going to spur more investment in ethanol as an alternative. The truth of the matter is it's in our national interest to have our farmers grow energy as opposed to us purchasing it from parts of the world that are unstable or may not like us," he added.

"We've put a lot into ethanol. As a matter of fact, the solution to corn-fed ethanol is cellulosic-ethanol . . . and we're spending a lot of money along those lines. But energy policy needs to be comprehensive and we got to understand that we're in a transition period. The problem is that there's been a lot of focus by the Congress in the long-term steps such as hydrogen and the intermediate steps such as biofuels and battery technology research, but not enough emphasis on the here and now," Bush declared.

Pelosi said that congressional Democrats are pressing the Federal Trade Commission to use the authority it received in 2007 Energy Independence and Security Act to investigate record gasoline prices.

"The House has also passed legislation to crack down on oil price gouging, hold OPEC accountable for oil price fixing, and repeal profit subsidies for profit-rich Big Oil companies so that we can invest in a renewable energy future. However, President Bush and most of his Republican allies in Congress have opposed these efforts. Today, American consumers face more pain at the pump, paying a record $3.61/gal," she said.

Contact Nick Snow at nicks@pennwell.com

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