Bush’s Proposals Viewed as a Drop in the Oil Bucket

Times Staff Writers

Under intense political pressure, President Bush on Tuesday pledged new government action to root out any gasoline price gouging and announced a series of measures designed to encourage conservation and foster energy alternatives. But White House officials acknowledged that the steps were not likely to bring immediate relief.

One of the president’s proposals -- using the Strategic Petroleum Reserve as a lever against higher prices -- has been tried repeatedly by Bush and several of his predecessors, with little if any effect.

Tacitly acknowledging the modest scope of the president’s proposals, Allan B. Hubbard, a top Bush economic advisor, said, “It took us a long time to get into this situation, and it’s going to take us a long time to get out.” Still, he insisted in a conference call with reporters, “The bottom line is, every little bit helps.”


With pump prices for self-serve regular gasoline hitting record-high averages in California this week, Democrats and other critics chided Bush for failing to do more. They suggested he had been slow to grasp the seriousness of the price increases for ordinary Americans, and they blamed his longtime closeness to the oil industry and its influence over administration energy policy for the problem.

Some Republicans -- already worried that the war in Iraq, Bush’s low approval ratings and other problems would hurt them at the polls in November -- felt a need to go considerably further than the president.

Several GOP senators called for a crackdown on what they described as windfall profits in the oil industry, and proposed taking a new look at antitrust laws that they said were outdated.

There were also calls for investigations, and talk of writing a new energy bill -- including making another push to open Alaska’s Arctic National Wildlife Refuge to energy exploration.

In California, Gov. Arnold Schwarzenegger signed an executive order Tuesday setting nonbinding goals for the production of cleaner, renewable energy from crops such as corn or sugar.

The Republican governor, who is running for reelection and has come under fire for taking campaign contributions from oil companies, said it was “critical that we do everything we can to reduce our dependence on petroleum-based fuels,” building on his earlier call for state regulators to investigate possible unfair price manipulation by energy companies.


Florida’s Republican attorney general said Tuesday that he had initiated an investigation into potential “monopolistic behavior” by companies such as Exxon Mobil and ConocoPhillips.

Charlie Crist, who is seeking his party’s nomination to succeed the term-limited Gov. Jeb Bush, said, “The reality is we’ve got these record profits that they’re enjoying, and there’s the same amount of oil in the ground.

“I know there’s a little more usage in China and India perhaps, but not a whole lot has changed except prices have gone through the roof,” he said. “There’s less of a free market, and that has made it more and more difficult to have fair prices available for consumers. A level of de facto monopolization has occurred.”

The president stopped well short of such direct accusations against the oil industry Tuesday. But he noted that the Federal Trade Commission already had been investigating possible price manipulation at the gas pump, and directed the Justice and Energy departments to redouble their efforts at looking for abuse.

“This administration is not going to tolerate manipulation,” Bush said. “We expect our consumers to be treated fairly.”

With oil companies expected to announce record first-quarter profits in coming days, Bush said the industry should invest its anticipated “large cash flows” in projects to foster alternative fuels. He also called for the repeal of some tax breaks that have long benefited energy companies.


Bush also expressed concern about the effect of higher prices on consumers.

“Gasoline price increases are like a hidden tax on the working people,” the president said. “They’re like a tax on our farmers. They’re like a tax on small businesses. Energy prices are -- energy experts predict gas prices are going to remain high throughout the summer, and that’s going to be a continued strain on the American people.”

Bush’s comments, delivered to a meeting of the Renewable Fuels Assn., offered a repackaging of themes he invoked during his State of the Union address this year, when he declared the nation was addicted to oil.

In that speech, the president called for a series of measures to curb reliance on foreign energy sources by encouraging alternatives such as ethanol made from corn, sugar and other agricultural materials -- ideas he repeated Tuesday.

This time, Bush went slightly further, couching his presentation as a more formal plan to confront high gas prices. He called for the repeal of tax breaks awarded in last year’s White House-backed legislation related to oil exploration, as well as research into deep-water drilling and tax credits for hybrid cars.

The president also proposed boosting supplies of crude oil by temporarily deferring deposits into the Strategic Petroleum Reserve, granting certain waivers on environmental permitting, speeding the permit process for refineries and opening up the arctic refuge.

Though White House officials hoped Bush’s speech might cushion the political blow of rising prices and shield the president from blame, he quickly took criticism from all sides.


Some Republican lawmakers and industry advocates criticized the president for the proposed rollback of tax breaks, estimated by the White House to be worth $2 billion over 10 years.

“As much as people want to be mad at the energy companies, tax incentives are a way to increase production, especially with smaller producers. Increasing production is an essential component in reducing our reliance on foreign oil,” said Sen. Craig Thomas (R-Wyo.), who serves on both the tax-writing Finance Committee and the energy committee.

Traders sent oil and gasoline futures down Tuesday in response to the president’s proposals, but industry experts said Bush’s strategies would do little to arrest the soaring fuel prices that had consumers seething.

Halting oil purchases for the Strategic Petroleum Reserve, for example, would boost oil supplies by a tiny amount at a time when nationwide crude inventories are at nearly eight-year highs.

“We’re giving the patient the wrong medicine,” said Fadel Gheit, an oil industry analyst with Oppenheimer & Co. “The problem is not the lack of crude oil.”

As for gasoline supplies, they are at disconcerting lows. However, energy analysts said that problem would soon disappear because refineries were coming back on line from maintenance work. Many also expect to see an uptick in gasoline imports. For those reasons, experts say Bush’s push for the Environmental Protection Agency to allow clean-fuel waivers to ease supplies is unnecessary.


Democrats, who believe gas prices could fuel their takeover of Congress after the November elections, rushed to seize the moment of Bush’s speech, accusing the president of arriving late to a long-simmering point of contention with consumers.

Sen. Barbara Boxer (D-Calif.) accused Bush of seeking political cover “for years of doing nothing -- for years of actually working hand and glove with these companies.”

“There are five words missing from the president’s speech today: Get tough on big oil,” said Sen. Charles E. Schumer (D-N.Y.), chairman of the Democrats’ Senate campaign efforts.

Moreover, critics said that targeting potential pricing abuses is unlikely to be effective.

Price gouging at the gas pump is notoriously hard to prove, and the FTC in the past has typically attributed such increases to legitimate movements of the market rather than to cheating and collusion.

“I think the odds of them finding collusion are somewhere between slim and none,” said Roger Berliner, an energy attorney who is a Democrat. “This is all politics.”


The FTC is completing a report to Congress on gasoline price hikes after Hurricane Katrina, which knocked Gulf Coast refineries and production off line.


Times staff writers Ronald Brownstein and Jonathan Peterson in Washington, Robert Salladay and Peter Nicholas in Sacramento and Elizabeth Douglass in Los Angeles and Times researcher Robin Cochran in Washington contributed to this report.