Bush administration talking to OPEC about oil output

On the eve of an Organization of Petroleum Exporting Countries meeting next week in Vienna, US President George W. Bush is holding "quiet diplomatic conversations" with the cartel. A White House spokesman also defended the president's resistance to price caps on wholesale electricity in California.


Maureen Lorenzetti
OGJ Online

WASHINGTON, DC, May 31 --The White House's domestic agenda continues to be dominated by energy issues.

On the eve of an Organization of Petroleum Exporting Countries meeting next week in Vienna, President George W. Bush is holding "quiet diplomatic conversations" with the cartel over the effect oil production cuts have had on US prices, a White House spokesman said Thursday.

"There are conversations that are going back and forth with OPEC, and those conversations continue, and they will be treated as quiet, diplomatic conversations. The president believes that's the most effective way to conduct those conversations," the spokesman said.

House Democrats, led by Minority Leader Dick Gephardt (D-Mo.) want the president to be more vocal with OPEC, but the White House says that approach will simply anger key US allies like Saudi Arabia.

In the past, Vice-Pres. Dick Cheney also has suggested that OPEC alone is not to blame for the current high gasoline prices. Instead, he has indicated US clean fuel regulations and constrained refinery capacity also contribute to higher prices.

White House officials would not spell out the tone of the more recent "quiet" talks, although the spokesman said that the president reminded "oil-producing nations that we are interrelated economy, and that to the degree that energy prices go to unacceptably high levels in the US, that it hurts all nations as a result of our interconnections economically."

California
The White House reiterated the president's position made during a trip to California this week that electricity price caps are counterproductive.

"The last thing that anybody should do at a time of energy shortage is to make the shortage worse. And price caps will result in increased demand and in lower supply and therefore have the exact worse effect you could want to have, if your goal is to help people, and if your goal is to protect the economy," said the spokesman.

White House officials also suggested that the position on price caps was not a partisan one.

"The [Federal Energy Regulatory Commission] is an independent agency, and makes its determinations based on what it views as right or wrong. But let me remind everybody here, that this issue is not new to this administration. In early January, Californians came calling to Washington, in the last days of the Clinton administration -- and as you know, the Clinton administration was rather busy in its final days -- and they, too, sought price caps. And price caps were not granted by the Clinton administration at that time," the spokesman said.

"So it is notable that the same argument that was received by -- we presume, much more receptive ears, but they made a decision also based on facts and on merits, and had taken the same position that President Bush has taken. So this is nothing new coming from California. But the president's position will remain the same -- that he wants to be helpful to California. And one of the worst things you can do is make the situation worse in that state."

The White House will likely be called upon several times to defend that argument when Congress returns from a week-long holiday break.

Senate Democrats say FERC has failed to ensure that ratepayers are protected from alleged price gouging. Democrats, who will control the Senate, are expected to hold hearings and consider legislation, industry sources predicted.

Contact Maureen Lorenzetti at maureenl@ogjonline.com

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