President’s action over fuel seen as inadequate
President’s action over fuel seen as inadequate
By Carola Hoyos and Kevin Morrison in London. Copyright by The Financial Times
Published: April 25 2006 19:22 | Last updated: April 25 2006 23:34
Oil prices fell slightly on Tuesday after President George W. Bush attempted to cool consumer concerns about petrol prices hovering near record highs. But the proposals he unveiled are being seen by many industry-watchers -- and by the president’s political rivals -- as too little, too late and, finally, too temporary.
“It is like giving aspirin for prostate cancer,” said Philip Verleger, an independent energy consultant and visiting fellow at the Institute for International Economics. Mr Verleger said the president did not address the fundamental fact that the US is the world’s largest oil consumer, while its own oil production is in long-term decline.
Traders focused on the president’s comments, in a speech to the Renewable Fuels Association in Washington, about relaxing some rules on tighter environmental standards for petrol and diesel, sending prices lower. The US benchmark oil price for June delivery dropped 93 cents to $72.40 a barrel, and US gasoline futures fell more than 2 per cent to 4.4 cents.
But one trader said the drop in gasoline futures prices could last as little as 24 hours if Wednesday’s data on US gasoline stockpiles showed another drop.
Mr Bush’s four-point plan marks the most comprehensive effort by the White House to address an issue that has risen rapidly up the political agenda, and which has further damaged his reputation for handling of the economy. Mr Bush this week saw his approval ratings drop to the lowest level of his presidency, with his already weak ratings worsened due to public concerns over petrol prices.
Al Hubbard, director of the White House National Economic Council on Tuesday said: “This president is committed to addressing it, both in the short-term and in the long-term. He has a number of proposals to Congress that we hope they will act on very quickly. “
Mr Bush has requested that the Environmental Protection Agency consider granting waivers that would temporarily allow suppliers to sell cheaper, lower-grade fuels to ease prices.
This could affect new rules, starting in May, that bar refiners from making petrol using the additive MTBE, a water pollutant, and require they instead mix in ethanol. The US oil industry has spent an estimated $16bn (€12.9bn, £9bn) in recent years to upgrade refineries for the new rules.
But the waiver power Mr Bush has requested would allow suspension of rules for only 20 days at a time. Joseph Stanislaw, head of the JAS Stanislaw Group, an energy consulting company, points out that during the energy crisis of 1973, then-president Richard Nixon extended daylight saving time, won approval for the trans-Alaskan oil pipeline and even banned petrol sales on Sundays.
Mr Bush, in contrast, is concentrating on the short term. “Not filling the SPR [Strategic Petroleum Reserve] and removing environmental restrictions are steps to try and reduce the current high gasoline prices,” says Mr Stanislaw. “The long-term key – not given in the speech – is to find a new supply source: And that source is not more oil supply, it is improved efficiencies in our car fleets and a more general look at the demand side of the equation.”
John Boehner, the House Republican leader, said on Tuesday Congress would consider broader measures this year, despite passing what was billed as comprehensive energy legislation last year. “We all know we have an energy crisis in our country,” he said.
“I think that we continue to need to look at a comprehensive approach. We need to conserve more. We need to look at alternative sources of energy, and we need more production.”
Democrats are aggressively exploiting concerns about rising oil prices, hoping to use the issue to recapture Congress in the November mid-term elections. Party strategists have sought to forge a direct link between high gas prices and Republican policies to aid oil companies. Harry Reid, Senate minority leader, on Tuesday attacked “Big Oil” and accused Republicans of being “more interested in protecting oil companies’ profits than the American people’s pockets.”
MoveOn.Org, a political action committee backing Democrats, claimed that political ads highlighting rising petrol prices were hurting Republicans in a number of districts that will be closely fought in November.
Mr Bush, who warned in his State of the Union address in January that America was “addicted to oil”, has tried to put some distance between his administration and the oil industry. But the White House has resisted any punitive measures. He said on Tuesday energy companies had “a role to play,” and should reinvest their record cash flows profits in alternative energy and refining capacity.
Nauman Barakat, trader and senior vice-president of Australian bank Macquarie, said he did not expect a fundamental reduction of prices anytime soon.
“The question is: what is going to break demand?” he said. “I see it as three things: a recession, a major terrorist attack or a mutation of bird flu into humans, which would dramatically reduce travel.”
Bo Collins, managing partner at MotherRock, a US energy hedge fund, said: “President Bush’s speech highlights the struggle over shaping energy policies in a era of high prices.”
Additional reporting by Caroline Daniel and Holly Yeager in Washington
By Carola Hoyos and Kevin Morrison in London. Copyright by The Financial Times
Published: April 25 2006 19:22 | Last updated: April 25 2006 23:34
Oil prices fell slightly on Tuesday after President George W. Bush attempted to cool consumer concerns about petrol prices hovering near record highs. But the proposals he unveiled are being seen by many industry-watchers -- and by the president’s political rivals -- as too little, too late and, finally, too temporary.
“It is like giving aspirin for prostate cancer,” said Philip Verleger, an independent energy consultant and visiting fellow at the Institute for International Economics. Mr Verleger said the president did not address the fundamental fact that the US is the world’s largest oil consumer, while its own oil production is in long-term decline.
Traders focused on the president’s comments, in a speech to the Renewable Fuels Association in Washington, about relaxing some rules on tighter environmental standards for petrol and diesel, sending prices lower. The US benchmark oil price for June delivery dropped 93 cents to $72.40 a barrel, and US gasoline futures fell more than 2 per cent to 4.4 cents.
But one trader said the drop in gasoline futures prices could last as little as 24 hours if Wednesday’s data on US gasoline stockpiles showed another drop.
Mr Bush’s four-point plan marks the most comprehensive effort by the White House to address an issue that has risen rapidly up the political agenda, and which has further damaged his reputation for handling of the economy. Mr Bush this week saw his approval ratings drop to the lowest level of his presidency, with his already weak ratings worsened due to public concerns over petrol prices.
Al Hubbard, director of the White House National Economic Council on Tuesday said: “This president is committed to addressing it, both in the short-term and in the long-term. He has a number of proposals to Congress that we hope they will act on very quickly. “
Mr Bush has requested that the Environmental Protection Agency consider granting waivers that would temporarily allow suppliers to sell cheaper, lower-grade fuels to ease prices.
This could affect new rules, starting in May, that bar refiners from making petrol using the additive MTBE, a water pollutant, and require they instead mix in ethanol. The US oil industry has spent an estimated $16bn (€12.9bn, £9bn) in recent years to upgrade refineries for the new rules.
But the waiver power Mr Bush has requested would allow suspension of rules for only 20 days at a time. Joseph Stanislaw, head of the JAS Stanislaw Group, an energy consulting company, points out that during the energy crisis of 1973, then-president Richard Nixon extended daylight saving time, won approval for the trans-Alaskan oil pipeline and even banned petrol sales on Sundays.
Mr Bush, in contrast, is concentrating on the short term. “Not filling the SPR [Strategic Petroleum Reserve] and removing environmental restrictions are steps to try and reduce the current high gasoline prices,” says Mr Stanislaw. “The long-term key – not given in the speech – is to find a new supply source: And that source is not more oil supply, it is improved efficiencies in our car fleets and a more general look at the demand side of the equation.”
John Boehner, the House Republican leader, said on Tuesday Congress would consider broader measures this year, despite passing what was billed as comprehensive energy legislation last year. “We all know we have an energy crisis in our country,” he said.
“I think that we continue to need to look at a comprehensive approach. We need to conserve more. We need to look at alternative sources of energy, and we need more production.”
Democrats are aggressively exploiting concerns about rising oil prices, hoping to use the issue to recapture Congress in the November mid-term elections. Party strategists have sought to forge a direct link between high gas prices and Republican policies to aid oil companies. Harry Reid, Senate minority leader, on Tuesday attacked “Big Oil” and accused Republicans of being “more interested in protecting oil companies’ profits than the American people’s pockets.”
MoveOn.Org, a political action committee backing Democrats, claimed that political ads highlighting rising petrol prices were hurting Republicans in a number of districts that will be closely fought in November.
Mr Bush, who warned in his State of the Union address in January that America was “addicted to oil”, has tried to put some distance between his administration and the oil industry. But the White House has resisted any punitive measures. He said on Tuesday energy companies had “a role to play,” and should reinvest their record cash flows profits in alternative energy and refining capacity.
Nauman Barakat, trader and senior vice-president of Australian bank Macquarie, said he did not expect a fundamental reduction of prices anytime soon.
“The question is: what is going to break demand?” he said. “I see it as three things: a recession, a major terrorist attack or a mutation of bird flu into humans, which would dramatically reduce travel.”
Bo Collins, managing partner at MotherRock, a US energy hedge fund, said: “President Bush’s speech highlights the struggle over shaping energy policies in a era of high prices.”
Additional reporting by Caroline Daniel and Holly Yeager in Washington
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