President Obama acknowledged Friday that the fast-rising cost of gasoline could diminish the effect of policies designed to stimulate economic growth, but warned that he is not yet prepared to unleash the nation’s energy reserves to bring down the price of oil.
In a news conference, Obama said that a payroll tax cut signed into law in December as part of the tax package would now go to cushion the impact of a recent spike in oil prices and allow for continued economic growth.
An Energy Department analysis released this week says that the average U.S. household will pay $700 more in fuel costs this year, cutting into the $1,000 per year savings per family that Obama cited as a result of the payroll tax cut.
“[G]as prices are hurting individuals right now and obviously taking some of that tax cut that we gave them and forcing them to use it on gas as opposed to buying other items,” the president said.
Oil prices have been rising fast in recent weeks as disruptions in Libya have shut down about 1 million barrels a day of production and spooked energy markets about the possibility of wider upheaval in Middle Eastern petroleum exporting nations.
But the actual impact on oil supplies has so far been modest as Saudi Arabia has offered to fill in the shortfall by increasing its own oil output.
On Friday, oil fell slightly to $101.16 after hitting a 2 1 /2-year high of $105.44 earlier this week. The nationwide average cost of a gallon of gasoline has jumped to $3.54, up 42 cents in just a month.
As pump prices have risen, so has pressure on Obama from both sides of the political aisle to take more steps to drive down energy costs.
Some Democrats have called on the president to open the Strategic Petroleum Reserve, a stockpile of 727 million barrels of crude oil available for emergencies. Some Republicans have said that Obama, kowtowing to environmental interests, has frustrated the development of domestic oil sources.
Obama pushed back against both arguments Friday, saying the pickup in oil prices is largely being driven by the global economic recovery, particularly the speed of growth in emerging economies, and doesn’t yet necessitate tapping the emergency reserve.
Still, he sought to calm oil markets by holding open the possibility of tapping the reserve if conditions worsen.
“If we see significant disruptions or shifts in the market that are so disconcerting to people that we think a Strategic Petroleum Reserve release might be appropriate, then we’ll take that step,” Obama said.
Meanwhile, Republicans and the oil industry argued that the president hasn’t done what’s necessary to make sure there’s a steady domestic supply of fuel. They complain that the administration hasn’t moved quickly enough to issue new drilling permits in the Gulf of Mexico.
“Domestic oil production is projected to decrease in future years in large measure because of the actions this administration has taken to lock away our vast energy resources,” said Rep. Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee.
Obama rejected that view, saying, “We are encouraging offshore exploration and production. We’re just doing it responsibly.”
He also said that he had given aides two weeks to determine how many leases on federal lands are not being developed, reviving an issue that flared up two years ago. Given the cost and complexity of exploring offshore, most big oil companies have a pipeline of leases that take a few years to explore and develop.