Watch CBSN Live

Bush, Big Oil, Slammed On Pump Prices

As President Bush relaxed clean-fuel standards and ordered a temporary halt Tuesday to deposits to the nation's strategic petroleum reserve — ostensibly making more oil available for consumer needs and relieving pressure on pump prices — Democrats are blasting the administration's response to high gas prices.

Senator Chuck Schumer, D-N.Y., said big oil companies are the culprits behind runaway gas prices which he says go "way beyond what supply and demand would merit."

He said Mr. Bush refuses to "get tough on big oil."

Also Tuesday, crude oil and gasoline futures fell after Mr. Bush gave the Environmental Protection Agency the authority to relax regional clean-fuel standards to attract more imports of gasoline to the United States and to make it easier for supplies to be moved from one state to another.

But in an interview with CBS News, New York Attorney General Eliot Spitzer said acting only after prices skyrocket at the pumps shows a lack of preparation and insight by the administration.

With daily global demand roughly 85 million barrels per day, the world's oil producers have less than 2 million barrels per day of spare production capacity. So amidst a tight global market, both tensions with oil-rich nations and increased demand particularly in China, have severe effects on the commodities market — and at the pump.

"I would suggest that in the international markets, there is a disequilibrium," Spitzer told CBS News correspondent Russ Mitchell. "We have seen demand for oil increase dramatically year after year, especially due to the increase in demand in the Asian markets," which the administration could have foretold.

Spitzer's New York office has made 18 legal cases of gas gouging, particularly in the immediate wake of Hurricanes Katrina and Rita. While Spitzer called the gouging "wrong," he said that even consumers who comparison-shop can have little effect on the market.

"Realistically, as consumers, we cannot effect the global market or even the national market," Spitzer said. "We are the pawns. We are stuck."

Trace the pump prices' roots in a Reality Check.

Senator Bob Menendez, D-N.J., says oil companies blamed an "act of God" for fuel shortages and price increases last year. Now he says it is "crystal clear that the current spike in gas prices is at least partly due to an act of greed." Spitzer called out oil companies for having "internalized all of the profit."

Menendez is proposing a 60-day suspension of the gasoline tax. He says repealing tax breaks for energy companies could cover the cost.

Meanwhile, the country's three largest oil and gas companies are expected to report combined first-quarter profits this week in excess of $16 billion, a 19 percent surge from last year that is sure to complicate life for the industry in Washington, where elected officials are scrambling for ways to assuage angry consumers and businesses.

And experts said Bush's actions wouldn't have much impact on prices at the pump. The president warned that motorists would have to dig deep into their pockets all summer long, tipping his hat to the reality of high prices, CBS News correspondent Jim Axelrod reports.

"Energy experts predict gas prices are going to remain high throughout the summer and that's going to be a continued strain," Mr. Bush said.

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, 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.