'We'd like to see members think a little bit more long-term'

Tony Fratto, deputy White House press secretary, during the July 10 daily briefing, responding to House Speaker Nancy Pelosi's (D-Calif.) suggestion that President George W. Bush release oil from the Strategic Petroleum Reserve to bring gasoline and diesel prices down.

Tony Fratto, deputy White House press secretary, during the July 10 daily briefing, responding to House Speaker Nancy Pelosi's (D-Calif.) suggestion that President George W. Bush release oil from the Strategic Petroleum Reserve to bring gasoline and diesel prices down:

Q: Tony, there's been some talk on the Hill about maybe accessing some of the SPR, just putting extra oil in the marketplace to drive down [prices], looking at nearly $5/gal for most people at this point. Has there been any consideration for that?

A: Look, I think it's good that there are members who are interested in increasing supply of oil here. I think what's disappointing is that the only place they can seem to want to access that supply is in this storage of oil that we set aside for dealing with national emergencies.

Now there are other supplies of oil out there that we'd like to access, and that's the Outer Continental Shelf and [the Arctic National Wildlife Refuge]. These are places that, were we able to explore and eventually bring to market oil from these sources, have a long-term impact on prices, rather than some very minimal short-term impact, and at the expense of a resource that is here for us to deal with an emergency.

We did it dealing with an emergency after Katrina, where we had a supply disruption. If there were an attack on a major pipeline somewhere that would disrupt global supplies of oil, that's what the Strategic Petroleum Reserve is for.

It is not there to try to market-time and to try to manipulate prices in the market. Unless you wanted to do very large withdrawals . . . it wouldn't have a lasting impact on oil prices. So we'd like to see members think a little bit more long-term and take advantage of the opportunity that we have to do drilling from our domestic sources.

Q: Would you want to do sort of a concert thing -- take some from SPR and if -- (laughter) -- in one hand watches the other, they say, okay, maybe we can get a little bit of ANWR, let's get some oil in the marketplace now because it's hurting families, it's hurting people, and they need it in the short term.

A: Yes, I haven't heard that discussed, but you are obliquely talking about something that we have heard members who may have previously been against opportunities for drilling. We're getting some signals that they may be interested in looking for ways . . . to increase exploration and drilling in some of the areas that the president talked about. And that would be a good sign because we would like to try to get something done on this issue.

Q: Has President Bush been told that $4/gal is now the new normal? Does he expect prices to fall below . . .

A: I don't think anyone would have told the president that $4/gal is the new normal, and we certainly hope it's not the new normal. It is very, very difficult to try to predict gasoline prices as to where they're going in the future. No one was predicting that we would continue to see gasoline prices increase beyond where they are today.

Q: So does President Bush believe that gasoline prices may fall below $4 or go back to $3 or back to $2?

A: No, no, the president isn't making those kinds of predictions. What he's saying is that we have a situation where we have rapidly increasing . . . global demand for oil. And right now as long as we keep the sources of oil off the market, we're not going to see increases in supply. As anyone who has taken an Econ 101 course knows, if you don't increase supply and you only increase demand, prices are going to rise.

Q: Does the president believe there is a chance the price of [gasoline]t would drop below $4/gal?

A: All I could say is that we hope that it could. The best way to ensure that it does is that we take some of these necessary measures and send a signal to the market that we intend to bring supply on and that we intend to continue as we've done on the conservation side through increased fuel economy standards and through the increased use of alternative fuels, so that we can try to lower the demand on oil as we're increasing supply.

Contact Nick Snow at nicks@pennwell.com

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