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Politics
Editor's Note: Is the Bush administration manipulating gas prices? Only an insider would know for sure, but certainly there are means, motive and opportunity. Motive, in that squeezing consumers puts pressure on Congress to pass the fossil-fuel friendly energy bill while also pinning rival John Kerry to the wall. Means, in that Bush and Cheney are not only oil moguls in their own right but also have deep connections to the Saudis who control OPEC. And opportunity, in that the administration can appear to be telling the Saudis to open up production when in reality doing nothing of the kind. Read below that energy secretary Spencer Abraham told the Senate Armed Services Committee last week that while the administration was concerned about prices, "we've also made it clear that we're not going to beg for oil." Meanwhile a senior official from an OPEC country has let it be known that the U.S. has put "very little" pressure on OPEC to increase production. --kw
Saudis Push Plan for Cut in Production by OPEC By Simon Romero The New York Times
Wednesday 31 March 2004
VIENNA, March 30 - Saudi Arabia, the pivotal member of OPEC, signaled on Tuesday that it was pushing forward with a plan to lower the cartel's target for crude oil production by a million barrels a day, a move that would keep oil prices high.
In practical terms, the development meant that despite the misgivings of some member nations, OPEC officials gathering for a meeting here on Wednesday are not likely to increase oil production to relieve prices, as desired by the United States, where energy costs have become a political issue.
"Throwing more oil on the market would be destructive for everybody," said Ali al-Naimi, the Saudi oil minister.
Mr. Naimi brushed aside criticism that his nation was seeking higher financial returns from its oil exports. He said the recent run-up in prices had been caused by a spate of speculative activity in the commodity markets, not by inadequate supply.
As if cued by Mr. Naimi's remarks, the price of light crude for delivery in a month's time climbed 80 cents, to $36.25 a barrel, in New York trading on Tuesday, approaching the 13-year high it reached earlier this month.
Growing concern in Washington over rising prices seems to be having little effect on OPEC's decisions. The average retail price for gasoline rose on Tuesday to $1.753 a gallon, a record high, according to AAA, formerly the American Automobile Association; the average was $1.69 a gallon a month ago. Still, the United States is placing "very little" pressure on Saudi Arabia and other OPEC countries to keep production up, a senior official from an OPEC country said Tuesday.
"The U.S. doesn't really get involved," the official asserted, noting that everyone remembered how little success the former energy secretary, Bill Richardson, had several years ago when he tried to use overt diplomatic pressure on the group.
This official even asserted that OPEC had recently been leaning toward increasing production, but then put off the idea to avoid any appearance of doing Washington's bidding. "The administration knows this history," this official said. "We are telling them, keep your mouth shut."
The Bush administration is under increasing pressure to explain its approach to higher oil and gasoline costs. Twenty-five Democratic senators urged President Bush in a letter Tuesday to press OPEC to increase production. And at a campaign rally in San Diego, Senator John Kerry said the Bush administration had not done enough to hold down energy costs. "We should be putting pressure on OPEC to increase the supplies and not allow those countries to undermine the economies of the world," Senator Kerry said.
Scott McClellan, the White House spokesman, dismissed the criticism. "We continue to engage in ongoing discussions with major producers around the world about the importance of letting the market determine the prices," Mr. McClellan told reporters while traveling with President Bush in Wisconsin.
But he said the administration had ruled out a step urged by Senator Kerry and many members of both parties in Congress: temporarily suspending government purchases of oil for the Strategic Petroleum Reserve. Such a step "would have a negligible impact" on prices, he said.
Other members of the administration have also been trying to explain their policy toward OPEC. Spencer Abraham, the energy secretary, told the Senate Armed Services Committee last week that while the administration was concerned about prices, "we've also made it clear that we're not going to beg for oil."
But Andrew H. Card Jr., the president's chief of staff, appearing on MSNBC two days later, said that the United States was consulting with its "allies" in OPEC and asking for more production.
A senior administration official said that "there has been a commonality of views across administrations on the issue of energy security" that includes informal, nonpublic discussions with OPEC oil ministers.
"We have active informal contacts with oil ministers from most OPEC countries," the official said, and the message is "we want to see oil production levels that are consistent with the needs of a growing world economy" - a code phrase for more production.
The Saudi oil minister, Mr. Naimi, said that the political pressures developing in the United States were understandable but misdirected. "People in power know that crude supplies have nothing to do with the current gasoline prices in the U.S.," Mr. Naimi said in Vienna. "A lot of things will be said in an election year."
The 11 members of the Organization of Petroleum Exporting Countries now produce about one-third of the world's oil supply, or about 26 million barrels a day, almost 11 percent more than the group's official target of 23.5 million barrels a day for April.
Pushed up in part by strong demand from China and the United States, prices for West Texas intermediate crude oil, the benchmark American grade, averaged $35.25 a barrel in the first quarter, the highest in 20 years, according to Cambridge Energy Research Associates. Though American gasoline prices are rising for a number of reasons, including the switch to cleaner-burning blends and increases in demand, the price of crude is still considered the most important factor.
There appears to be strong sentiment within OPEC to keep prices high. Several delegates here spoke in support of Saudi Arabia's stance, including those from Algeria, Libya and Venezuela. "I feel we should go with the cut," Fathi bin Shatwan, the Libyan oil minister, told reporters after arriving in Vienna. "Maybe there's a bit of oversupply, even."
Some producers in the Persian Gulf, notably the United Arab Emirates and Kuwait, appeared hesitant about going ahead with the plan to lower production targets, which was adopted at a meeting in Algiers last month. But Saudi Arabia alone has the ability to increase or decrease output rapidly, so its views are expected to prevail. Helped by robust oil sales, the Saudi economy is growing at its fastest pace since the early 1980's.
The alluring economic benefits of high prices are hard for producers to resist, and few analysts believe that any OPEC member other than, perhaps, Saudi Arabia will actually start producing much less oil, even if the organization decides to go ahead with the lowered targets. It would be almost impossible, for instance, for the group to reduce its production for April at this point, because member nations have already committed themselves to shipping oil to customers around the world next month.
Data collected by analysts that track tanker movement also hold few signs that crude shipments will slow. Vela, the tanker arm of Saudi Arabia's national oil company, is believed to be sending more shipments to American ports in the Gulf of Mexico in April than in any month since last October, said Katherine Spector, an energy strategist at Deutsche Bank.
"We might get cuts from a smaller OPEC member like the U.A.E, but more for reasons of maintenance than anything else," Ms. Spector said. "It's hard to see any significant cuts taking place."
Two leading oil producers that are not part of OPEC - Russia and Mexico - have signaled their view that prices have risen too high and may start damping global economic activity. Russia, which is attending Wednesday's meeting as an observer, said it was issuing a formal warning on prices.
"We cannot seek financial benefits at the expense of consumers, as it would spark inflation and destabilize the world's economy," Alexander Voronin, Russia's deputy energy minister, said in a statement.
One of OPEC's normally quiet members, Iraq, is said to have suggested convening an emergency meeting of the organization next month to reassess prices and demand - another indication, analysts said, that OPEC is trying more actively than in the past to influence world oil prices.
Still, Iraq is not expected to play a major role in OPEC decisions for some time, analysts said. The country now produces roughly 2.5 million to 2.6 million barrels of crude a day, compared with 3.5 million barrels a day in the 1980's, the last time it was affected by OPEC quota obligations.
Jim Burkhard, director of oil market analysis at Cambridge Energy Research Associates, said it was unlikely that Iraq would become an important member of OPEC until it was able to increase production steadily without a threat of sabotage to its oil operations.
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Steven R. Weisman, in Washington, and Richard W. Stevenson, in Wisconsin, contributed reporting for this article.
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Bush, Kerry Trade Charges on Gas Prices By Reuters
Tuesday 30 March 2004
WASHINGTON (Reuters) - Democrat John Kerry and President Bush traded shots over skyrocketing gasoline prices on Tuesday, putting the pocketbook issue on the campaign's front-burner months before Americans hit the road for vacation season.
On a fund-raising trip to California, Kerry accused the White House of doing nothing to reduce gas prices and offered a plan to drive down costs by pressuring oil-producing countries to boost supplies and suspending replenishment of the Strategic Petroleum Reserve.
Bush fired back that his Democratic challenger wanted to raise the federal gasoline tax, and launched a new television ad in 18 battleground states accusing Kerry of the "wacky idea" of taxing gas to force people to drive less.
The exchange came as the national average price of regular unleaded gasoline hit a new high of $1.758 per gallon, with predictions that prices will soar even higher in April and May because of tight supplies.
"This administration ... has done nothing to reduce the gas prices," Kerry told an outdoor rally at the University of California, San Diego.
Californians pay more for gas than any other Americans, a point Kerry drove home by stopping his motorcade at a gas station where the posted price was $2.15 for a gallon of regular unleaded.
Bush, on his ninth visit to the battleground state of Wisconsin, responded that "there are some in the other party in Washington who would like to raise gas taxes. I think it would be wrong."
His new black-and-white campaign ad, which also will air on national cable networks, took aim more directly at the Massachusetts senator.
"Some people have wacky ideas, like taxing gasoline more so people drive less. That's John Kerry," said the advertisement.
The Bush campaign added a Kerry gas tax calculator to its Web site, giving driving directions to any destination and adding up the increased costs after an increase in the gas tax.
A new CNN/USA Today/Gallup poll showed more than two-thirds of Americans believe rising gas costs represent a crisis or a major problem for the United States. Only 31 percent thought it was a minor problem or no problem at all.
BUSH: KERRY VOTED FOR TAX INCREASE
The Bush campaign claimed Kerry voted 11 times for gasoline tax increases and was quoted in a 1994 interview as supporting a 50-cent a gallon increase.
Kerry says he never favored such a move and would not support one now. His campaign said he suggested in 1994 that a gasoline tax could be explored as a way to reduce the budget deficit.
"We need an energy policy that's real and honest for this country," Kerry said in California. "We should be putting pressure on OPEC to raise the supply and not allow those countries to undermine the economies of the world."
Ministers from the Organization of Petroleum Exporting Countries meet on Wednesday in Vienna to decide whether to proceed with a planned output reduction of 1 million barrels a day in April. OPEC's biggest producer Saudi Arabia said on Tuesday it would support more reduction in output.
Shortly before Kerry spoke, the White House said it was having talks with OPEC members about boosting supplies.
Republicans as well as Democrats have urged the Bush administration to stop filling the SPR -- America's emergency crude oil stockpile -- to keep more oil in the market. The White House has refused, saying the scheduled crude oil deliveries to the stockpile have a "negligible" impact on market prices.
Kerry told thousands of supporters at the rally he would "momentarily" stop filling the SPR until gas prices returned to normal levels. But the Bush campaign said Kerry claimed in 2000 that the SPR would not have any impact on prices.
A Bush campaign spokesman said Kerry was using the reserve "as a political football."
"John Kerry's speech today is an effort to cloud his record of supporting higher gas taxes and opposing a comprehensive energy plan," said spokesman Steve Schmidt.
The Bush attacks on Kerry came one day after Vice President Dick Cheney accused the presumptive Democratic nominee of planning huge income tax hikes. The efforts, part of a broader Republican strategy to paint Kerry as a tax-and-spend liberal, appear to have met some success.
Kerry's poll numbers dropped steadily during the past few weeks, most dramatically in the battleground states where Bush's ads have aired.
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Voters Aren't Energy Dummies The Christian Science Monitor | Editorial
Wednesday 31 March 2004
As gasoline prices rise toward $2.50 a gallon, the Bush and Kerry campaigns are battling over the causes and solutions to this consumer "problem."
The problem is, though, they've both got the wrong problem, and are pandering to short-term consumer instincts.
Even though motorists wince at the cost of filling up, a quick reminder about past inflation usually enlightens them that gas prices haven't been this low in two decades - in real dollars. And the percentage of average income spent on gasoline also remains low.
The real problem is that gas is just too cheap as the Age of Oil nears empty.
If anything, gas prices should be higher (and less erratic) to help force the shift to other types of energy and transport, or to better conservation - well before world production of oil starts to decline within two decades, as most experts forecast.
Instead, John Kerry and President Bush are trading charges that each has directly or indirectly toyed in the past with an additional 50 cent tax on gas, believing voters will recoil at this "pocketbook" issue.
But motorists have long accepted federal and state gas taxes that pay for highways. With leadership, the candidates should be endorsing a gas tax hike as a self-evident incentive to prepare for a postoil economy and as a source of revenue for research and development of renewable energy.
They're also arguing over whether the government should stop putting oil into the Strategic Petroleum Reserve to help bring down prices. In 1996 and 2000, President Clinton sold some SPR oil, but the sales had a negligible effect. The SPR should be kept for its sole purpose: an emergency supply for unexpected shortages, such as after a possible terrorist attack on oil facilities.
The more Americans can reduce oil imports by using less gasoline, the less money will flow to a few Middle East autocrats whose policies have encouraged anti-US terrorists. And a higher gas tax is the best way to curb OPEC's strategy of keeping oil prices going up and down in order to slow long-term investment in alternative energies.
Through wise energy policies and the general rise in oil prices over the past three decades, the US has cut its energy use, as a share of GDP, in half.
Why stop now?
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