Bush 'greatly' concerned about energy costs

www.planetark.org USA: March 4, 2003

WASHINGTON - Dwindling fuel supplies and soaring prices of crude oil and natural gas have President George W. Bush "greatly" concerned about U.S. energy costs, the White House said last week.

Jitters about a potential U.S. military strike against Iraq, a cold snap in Eastern states and a curb in oil imports from Venezuela have boosted energy costs.

Average U.S. retail gasoline prices may surpass a record $1.71 per gallon as the busy spring driving season approaches, according to federal energy forecasters.

"There has been a confluence of factors involving both the cold weather and a shortage of supply that have led to an increase in prices that concern the president greatly," White House spokesman Ari Fleischer told reporters.

Fleischer said the cost of energy remained "a very important issue" for both the president and the U.S. Congress, which is drafting a broad bill to encourage more energy production and conservation measures.

"There is a cyclical nature to some of this and we have seen the prices go up and down before," he added.

U.S. oil prices fell last week to $36.30 a barrel after a roller coaster ride that saw crude brush $40 a barrel the previous day, with the looming prospect of war in Iraq underpinning the market amid heated debate at the United Nations. A U.S. attack on Iraq, the world's eighth largest oil exporter, is opposed by Russia, China and France.

U.S. gasoline prices were up 54 cents a gallon this week from a year ago, according to federal data. Heating oil was up 59 cents and natural gas prices are four times higher than this time last year.

PRICE-GOUGING ALLEGATIONS

The price jump has prompted some Democrats to demand a probe into whether oil companies were taking advantage of fears of a war with Iraq to gouge consumers at the gasoline pump.

Sen. Charles Schumer, a New York Democrat, last week said U.S. Energy Department data showed major oil refineries were producing less gasoline than normal for this time of year.

U.S. refineries are operating at 87.5 percent of capacity, far below the five-year average of 92.3 percent, according to the department.

"This is a matter of simple economics," Schumer said. "Keeping supplies low raises prices and costs to drivers."

Oil companies deny they are doing anything wrong, arguing that crude inventories have fallen to the lowest levels since the 1970s, making it difficult for refineries to keep production above historical levels.

Democratic presidential candidate Sen. Joseph Lieberman of Connecticut denounced the White House's refusal to release heating fuel from the government's stockpile. A large number of Northeastern consumers use heating oil to heat their homes.

He called Energy Secretary Spencer Abraham "insensitive" for his comments earlier this week that Northeast consumers were not suffering enough from high prices or a supply disruption to use the 2 million-barrel heating oil reserve.

CRUDE OIL STOCKPILE

Some lawmakers and consumer groups have also urged the Bush administration to release oil from the U.S. emergency crude oil stockpile to rein in prices.

However, the administration has repeatedly said it would tap the 599 million-barrel Strategic Petroleum Reserve only for a severe disruption in crude supplies, not to control prices.

At a congressional hearing, lawmakers complained to Abraham that the more consumers had to spend on their heating bills or to fill up their car tanks, the less money they would have to buy the goods that keep the U.S. economy humming.

Businesses are also suffering because the cost of shipping products rises in tandem with trucking diesel fuel prices.

Chemical makers, manufacturers and other industrial plants have also been hit hard by natural gas prices, which climbed to record highs this week.

The spot market price for natural gas rose this week to $18.50 per million British thermal units, up five-fold from the average 2002 price. For every $1 rise in natural gas prices, the chemical industry faces about $1 billion in extra costs, according to the American Chemistry Council trade group.

A giant ethylene plant in Louisiana that makes plastics was recently closed and moved to Germany, where natural gas prices are cheaper and supplies are more predictable, the group said.

(Additional reporting by Patricia Wilson). Story by Tom Doggett