Treasury Secretary W. Michael Blumenthal, upset at the impact of Energy Secretary James R. Schlesinger's recent statements on the severity of Iranian oil shutdown, has sought to reassure investors that the U.S. economy is not in trouble.
Blumenthal commented Thursday before the Senate Budget Committee, one day after Schelsinger had testified before the Senate Energy Committee about how the cutoff of Iranian oil is "prospectively more serious" that the 1973-74 Arab oil embargo.
Schlesinger noted, however, that the United States' ability to deal with a sharp reduction in oil supplies is much improved over five years ago.
Blumenthal, declaring that the administration's program to shore up the dollar abroad is working, was asked by Sen. Pete Domenici (R-N.M.) to explain why foreign investors seem to be interpreting the economic signals differently.
There has been some weakening of the dollar this week, Blumenthal conceded. He blamed it mainly on the unsettled political situation in Iran, which has resulted in the cutoff of Iranian oil and created uncertainty among investors.
In New York, it was reported that because of the Iranian cutoff, major oil companies have begun limiting the amount of petroleum they sell to affiliate and third-party refiners, and some companies have raised their prices on crude oil. The actions were expected to have little or no effect on the availability or retail price of gasoline or heating oil.
"In Secretary Schlesinger's statement yesterday, he indicated that the situation is serious in Iran and has a serious impact on the world and the U.S. oil demand and supply situation, which clearly is the kind of thing that causes people to run to gold," Blumenthal said, according to the official transcript of the session.
Blumenthal did not challenge Schlesinger's interpretation of the Iranian situation.
Several reporters who heard Blumenthal's remarks or read them in the transcript concluded he was reminding Schlesinger that such an assessment from the energy secretary had caused some investors to panic.
But Treasury Department spokesman Joseph Laitin said today that Blumenthal meant no criticism of Schlesinger in any way. "He was saying that the situation in Iran -- not Schlesinger's characterization of it -- was causing the problem," Laitin said.