President Repeats First-Term Answers to Rising Gas Prices

By Dan Eggen and Jonathan Weisman
Washington Post Staff Writers
Wednesday, April 30, 2008

Soaring gasoline prices spilled over into Washington and the presidential race yesterday, as Congress moved toward a showdown with President Bush over legislation aimed at forcing oil companies to help ease the burden on consumers.

Bush, reaching back to the earliest days of his administration, resurrected GOP demands for new drilling in the Alaska wilderness, fewer restrictions on oil refineries and other measures aimed at lowering fuel prices through higher production.

Democratic leaders shot back that Bush is out of touch with struggling Americans, as he pours money into the Iraq war at the expense of domestic priorities. Senate leaders promised to unveil gasoline price legislation by week's end.

Two oil giants, BP and Royal Dutch Shell, announced record profits yesterday totaling $17 billion in the first three months of the year. Exxon Mobil is expected to smash its own previous records for quarterly corporate profits tomorrow. Average gasoline prices, meanwhile, have surged to a new high of $3.60 per gallon.

On the presidential campaign trail, GOP candidate John McCain (Ariz.) and Democratic hopeful Sen. Hillary Rodham Clinton (N.Y.) have both backed the idea of a summer tax holiday for gasoline and diesel. Sen. Barack Obama (D-Ill.) denounced the idea as a political gimmick that would cost thousands of jobs and save drivers $28 at most.

Bush declined to take a position on the concept of a gas tax holiday, saying he was "open to any ideas" to deal with rising fuel prices. But in a news conference in the Rose Garden, he focused on controversial, longer-term proposals aimed at loosening environmental or regulatory restrictions on domestic oil exploration and production, and he also advocated building additional nuclear plants.

"If there was a magic wand to wave," Bush said, "I'd be waving it, of course. . . . But there is no magic wand to wave right now. It took us a while to get to this fix."

Although oil-related proposals were at the center of his remarks, Bush also offered a broader critique of congressional inaction, arguing that Democrats have worsened the nation's economic problems by opposing his housing reforms, a Colombia free-trade agreement and other proposals.

Many of Bush's oil-related proposals date back to his first term, however, and failed to gain traction even when Congress was under GOP control. His remarks underscored his difficult political predicament, as he is hobbled by dismal approval ratings and overshadowed by a lively presidential campaign.

Indeed, many lawmakers signaled yesterday that they would pay little heed to the president's criticisms, particularly on oil. Sen. Amy Klobuchar (D-Minn.) said that "people don't have time for finger-pointing from the White House right now.

"They have listened to this president for eight years, for eight years that these gas prices have gone up and up and up, for eight years after these oil prices have gone up and up and up, and they want answers," Klobuchar said.

In some respects, the parties' responses to rising oil prices have become a rite of spring. Prices at the pump surge as energy companies switch from winter gasoline blends to summer blends, creating shortages of refinery capacity. Democrats reproach oil companies for "price gouging" and call for federal investigations and windfall profit taxes. Republicans call for drilling in the Arctic National Wildlife Refuge and outer continental shelf, off the Gulf and Pacific coasts. Both parties blame the other.

"Only President Bush could allow Big Oil to write our nation's energy policy," said Senate Majority Leader Harry M. Reid (D-Nev.).

Senate Minority Leader Mitch McConnell (R-Ky.) responded, "It's clear that, on the production side of the equation, this new majority is not interested in doing anything."

But this year feels different, said Sen. Pete V. Domenici (R-N.M.), who has been involved in energy policy for decades. Prices are much higher than those that usually follow normal spring spikes, and with rising international demand, there is no sign that prices will fall significantly.

Much of the Senate legislation in the works is likely to fall victim to partisan bickering. Democrats are likely to call for price-gouging investigations and will try to roll back tax subsidies approved in 2005 for the oil companies to pay for tax relief to consumers. Barbara Boxer (D-Calif.), chairman of the Senate Environment and Public Works Committee, called yesterday for the sale of oil from the Strategic Petroleum Reserve, a 700 million-barrel emergency stockpile of crude oil that is equivalent to nearly two months' worth of U.S. petroleum imports. None of those ideas is likely to get past a Republican filibuster, let alone a presidential veto.

Other measures, however, are gaining bipartisan support. Sen. Byron L. Dorgan (D-N.D.) announced yesterday that he now has a veto-proof margin -- 49 Democrats, two Independents and at least 16 Republicans -- to pass legislation that would temporarily halt purchases for the petroleum reserve, asserting that such a move could have a dampening impact on oil prices.

"With the high gas prices, if we could even have an effect on the futures and the hedgers market in this area, that it would be a positive step," said Sen. Kay Bailey Hutchison (R-Tex.), usually a stalwart Bush ally. "So I have said that I think, maybe, a pause, now, and then look at it in a month or two."

Bush said he was opposed to the idea, however, arguing that the stockpile might be necessary in case of a terrorist attack on oil facilities and that halting contributions would have little impact on gasoline prices. "On a cost-benefit analysis, I don't think you get any benefits," he said.

Bush also pointed to a lack of U.S. oil refinery capacity, saying that no new refinery has been built for 30 years. Refinery capacity has been a problem in the oil industry and was blamed for driving up prices, especially in 2006-2007. But oil companies have been expanding existing refineries, boosting U.S. capacity by 2 million barrels a day since 1985, to 17.6 million barrels a day. Refined imports from the Middle East and Europe make up the difference.

With the economy teetering, some Republicans are also bucking Bush's demands -- repeated yesterday -- that an upcoming war spending bill stick to his $108 billion request, with no additional funding for domestic priorities, such as an extension of unemployment insurance and additional education benefits for returning war veterans.

On another oil-related complaint from lawmakers, Defense Secretary Robert M. Gates this week agreed to cut $171 million in Iraq funding that had been designated for neighborhood police stations, according to a letter to Sen. Carl M. Levin (D-Mich.), chairman of the Senate Armed Services Committee. Many Democrats have complained that Iraq should pay for more of its own security costs because of significant budget surpluses.

Staff writers Karen DeYoung and Steven Mufson contributed to this report.

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