Bush, Big Oil, Slammed On Pump Prices

President Bush Proposes Oil System Changes, But Will Gas Costs Go Down?

(CBS/AP) 
As Mr. Bush said he would halt deposits of oil to the nation's strategic petroleum reserve until the fall, analysts said that measure would have next to no impact on crude prices and certainly would not help make gasoline any cheaper. Even the fuel-specification waivers will have a marginal impact, analysts said, given that the main force behind today's soaring pump prices is the near-record price of crude oil.

"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.

Light sweet crude for June delivery settled 45 cents lower at $72.88 a barrel on the New York Mercantile Exchange Tuesday, dropping on the heels of a 4.48-cents-per-gallon decline in May gasoline futures, which finished at $2.1291 a gallon.

Mr. Bush's other proposal, easing the environment rules, will allow refiners greater flexibility in providing oil supplies since they will not have to use certain additives such as ethanol to meet clean air standards.

The suspension of oil purchases for the federal emergency oil reserve is likely to have only modest impact since relative little extra oil will be involved.

Analysts said a floor remains underneath oil prices, which are 33 percent higher than a year ago, for a variety of reasons. First, oil traders are nervous about geopolitical tensions ranging from violence in Nigeria to the West's nuclear standoff with Iran to the move toward greater nationalization of natural resources in energy-rich Venezuela.

Also, the global economy is expanding, and that means the thirst for oil is only going to grow. And speculative investors are piling into energy markets as a way to profit from soaring prices and geopolitical turmoil that could potentially be bad for equities prices.

In a further escalation of the war of words between Iran and the West, Iran threatened Tuesday to begin hiding its nuclear program if the West takes any "harsh measures" against it — Tehran's sharpest rebuttal yet to a U.N. Security Council Friday deadline to suspend uranium enrichment or face possible sanctions.

Mr. Bush said Tuesday that Congress should make all hybrid and clean diesel vehicles eligible for tax credits, as automakers and the ethanol industry touted the benefits of alternative fuels in the face of rising gasoline prices.

In a speech before the Renewable Fuels Association, Mr. Bush said consumers have responded to new tax credits of up to $3,400 per vehicle, but he noted that the program was limited. The tax credits can be applied to up to 60,000 vehicles produced by each manufacturer.

"Every little bit helps," Mr. Bush said, outlining steps the administration plans to take to address high energy costs. These included ordering a temporary suspension of environmental rules for gasoline, making it easier for refiners to meet demand and possibly dampen prices at the pump.

In a conference call with reporters today, National Economic Council Director Al Hubbard said there wasn't an urgent need to pursue a federal price-gouging law, CBSNews.com reports.

"The important thing is that we have very good anti-trust laws, and it's very important that those laws are adhered to. Those laws prevent collusion ... companies getting together to regulate supply, to regulate pricing," Hubbard explained.

He noted that states also have the authority to enforce those federal laws.

Concerns about tight refining capacity and gasoline supplies in the U.S. ahead of the summer driving season are also propping up prices.

In the seven weeks ended April 14, gasoline stocks declined by more than 23 million barrels, according to last week's U.S. Energy Information Administration report.