Bush Pressured to Tap Strategic Oil Reserves and Dampen Prices : Economics: But an official says that the pool, by law, is only for severe shortages.

The Bush Administration came under heavy pressure from both parties Tuesday to tap the nation’s 590-million-barrel strategic petroleum reserve as a means of dampening the sudden surge in oil and gasoline prices that has occurred since Iraq invaded Kuwait.

In a bevy of hearings in Congress, both Republicans and Democrats blasted the Administration for not moving rapidly enough to use the national oil-reserve pool, which was established in the 1970s to offset any sudden crimp in oil supplies.

Lawmakers also stepped up their criticism of the nation’s major oil companies, charging that the industry has engaged in price gouging and that it has been exploiting the crisis in the Middle East to “soak” consumers.

“This is a case of the industry trying to get ahead of the curve,” Rep. H. James Saxton (R-N.J.) complained. “Do you really think that Americans don’t know what’s going on?” he asked industry spokesmen at one of the hearings.

“The Administration, by not acting, has allowed this price gouging to occur,” Rep. Thomas McMillen (D-Md.) charged at a hearing of the House Energy and Commerce subcommittee on energy and power.

The escalating criticism from Congress marked the first serious sign that President Bush may face political problems at home as a result of his tough stance against Iraq’s invasion of Kuwait.

At the Administration’s instigation, the West has imposed an embargo on Iraqi oil that has helped push global petroleum prices up sharply. On Monday, the United Nations expanded the Western sanctions into a world-wide initiative.

Global petroleum prices continued to rise Tuesday as the embargo against Iraq took hold and the crisis in the Middle East intensified. In New York, the price of spot crude oil jumped 26 cents Tuesday to $28.31 a barrel.

For its part, the Administration remained relatively quiet on the oil-price issue Tuesday. White House spokesman Marlin Fitzwater said that Bush told the Cabinet he is “greatly concerned about gouging and price increases.” But he declined to go any further.

Officials also were cautious in responding to demands that they begin tapping the strategic petroleum reserve. Assistant Secretary of Energy John Easton said the Administration is prepared to draw on the huge pool only to prevent shortages, not to stabilize prices.

Easton said that, according to federal law, the government can call on the reserve only when there is a severe energy supply interruption. “It does not indicate that the reserve could be used simply to moderate prices,” he declared.

Meanwhile, Atty. Gen. Dick Thornburgh said Tuesday that the Justice Department is investigating the possibility that some oil companies may have violated antitrust laws in connection with the recent surge in gasoline prices.

It was not immediately clear what impact, if any, the Justice Department’s investigation might have. Thornburgh cautioned Tuesday that cases such as these are difficult to investigate and prosecute.

“Remember, the offense is price-fixing, not price-raising,” Thornburgh said. “We have to have evidence of collusion, evidence of some agreement. If it’s there, we’ll have no hesitation. We have a much more aggressive antitrust policy . . . than during the 1980s.”

Oil analysts say that tapping the strategic petroleum reserve and distributing more oil to consumers and to other oil-short nations is one of the few steps the Administration can take to help dampen the price-surge without risking adverse side-effects.

The reserve, located along the coast of the Gulf of Mexico, essentially is a series of salt domes that have been set aside for the storage of oil. The government has been filling them gradually over the last decade.

Economists have widely blamed the oil-price controls that were in effect during the 1970s for having exacerbated the oil supply shortages that occurred during those years. The shortages forced motorists to wait in long gasoline lines, sparking a political backlash.

Roger W. Robinson, a former National Security Council staff member now with the Center for Security Policy, a conservative think tank, said that by tapping the strategic reserve, the United States could dump up to 3 million barrels a day onto the world market to prevent price increases.

He said that if other countries, such as West Germany and Japan, also released oil from their reserves, it would be “more than sufficient” to cover the estimated 4.7-million-barrel-a-day shortfall that is expected to occur as a result of the loss of oil from Iraq and Kuwait.

Despite the growing protests over rising oil prices, private analysts at Tuesday’s hearings were virtually unanimous in predicting that oil prices would rise even further.

Philip K. Verleger, a fellow at the Institute of International Economics, a Washington think-tank, warned that “the situation may well degenerate into total chaos” if oil-consuming nations in the West do not act to release their own oil reserves.

Verleger also urged the Bush Administration to ask federal regulators to suspend the trading of petroleum on the New York Mercantile Exchange until the increased supply hits the market.

But oil industry representatives insisted at Tuesday’s congressional hearings that the price rises are simply a normal reaction by the markets to the turmoil in the Middle East and if anything may help by warning consumers that they must conserve more fuel than they have.

Phillip R. Chisholm, president of the Petroleum Marketers’ Assn. of America, told the panel that “markets are generally ruled by a perception of what is happening or may soon happen to a given commodity--in this case, petroleum products.”

“It appears that fear and panic have taken over the market,” he said. “What we have witnessed is a psychological reaction to the recent developments in the Middle East.”

The Energy Department’s Easton agreed. “The market is acting speculatively with respect to the future,” he said. “Presently there is not a significant shortfall in the availability of crude oil on the market.”