Bush Outlines Four Part Plan to Deal With Energy Crisis

By Freddie Mooche

Washington - President Bush today outlined his administration's four-part plan to deal with high energy prices, especially that of gasoline, which consumers have seen spot shortages of in several regions of the nation this month alone and soaring costs at the pump.

"What people are seeing at their gasoline pumps reflects the global economy in which we live," said President Bush. Consumers have seen the cost of gasoline rise over 25 cents a gallon at the pump in less than two weeks. According to AAA, the national average price of gasoline is now $2.91 a gallon, 41 cents more per gallon than a month ago and 67 cents per gallon higher than last year at this time.

Three refineries on the Gulf Coast shut down by last fall's hurricanes are only now reportedly beginning to return to operation, or soon will be. Additionally, some refineries that were not damaged by the hurricanes deferred planned fall maintenance until this spring, so as to maximize production immediately following the hurricanes. However, this means that we now have refineries undergoing previously scheduled spring maintenance, plus those that had deferred maintenance from last fall. Compared to weekly data last year for the similar period (the four weeks ending April 15, 2005), gasoline production for the most recent four-week period is down 457,000 barrels per day, while gasoline demand is up slightly compared to last year. As a result, finished gasoline inventories have been pulled down sharply, dropping more than 20 million barrels over the past four weeks, despite large volumes of imports. However, as these refineries return to full operation, gasoline production should increase, thus adding much-needed supply into the system.

And so the fundamental question is, what are we going to do? What can the government do? President Bush emphasized that the Federal Trade Commission was investigating whether the price of gasoline has been unfairly manipulated in any way. Bush also ordered the Department of Justice to work with the FTC and the Energy Department to conduct inquiries into illegal manipulation or cheating related to the current gasoline prices. The FTC and the Attorney General are contacting 50 state attorney generals to offer technical assistance to urge them to investigate possible illegal price manipulation within their jurisdictions.

"This administration is not going to tolerate manipulation," said Bush. "We expect our consumers to be treated fairly." The President called on oil companies to accelerate plans to expand refineries, as did OPEC's President Sunday when he arrived in Doha for the 10th annual International Energy Convention.

"These energy companies have got large cash flows, and they need to reinvest those cash flows into expanding refining capacity, or researching alternative energy sources, or developing new technologies, or expanding production in environmentally friendly ways. That's what the American people expect. We expect there to be strong reinvestment to help us with our economic security needs and our national security needs," said Bush.

Dr Edmund Maduabebe Daukoru, President of the Organization of Petroleum Exporting Countries (Opec), told reporters Sunday, "If we do the right things by lowering international tensions, oil prices will definitely stabilize." President Bush explained that, "What people are seeing at their gasoline pumps reflects the global economy in which we live. See, when demand for oil goes up in China or India, two fast-growing economies, it affects the price of oil worldwide."

Also affecting the price of oil is Iran, which produces 2 million barrels for export daily and is threatening to cut off that production if the UN Security Council - or the United States - attempts to stop the Islamic nation from enriching uranium for its own use, which Iran insists is for peaceful purposes, yet the US, UK and EU say is for weapons. It's Iran which Daukoru was referring to when mentioning "international tensions". Bush also emphasized that as part of his energy plan, he was asking Congress to remove $2 billion in tax breaks for oil companies that search for deep-water oil and gas deposits. "Congress has got to understand that these energy companies don't need unnecessary tax breaks like the write-offs of certain geological and geophysical expenditures, or the use of taxpayers' money to subsidize energy companies' research into deep water drilling," said Bush.

The President also said that America was moving toward hybrid vehicles and the use of clean-diesel automobiles and trucks that burn about 30 percent less energy than gasoline-driven cars. "The easiest way to promote fuel efficiency is to encourage drivers to purchase highly efficient hybrid or clean diesel vehicles, which, by the way, can run on alternative energy sources," said Bush. More than 200,000 hybrid and clean diesel vehicles were sold in the United States last year. It's the highest sales in history. Congress expanded a tax credit for purchase of hybrids and clean diesel vehicles up to as much as up to $3,400 per purchase. The problem is that these tax credits apply to only a limited number of hybrid and clean diesel vehicles for each manufacturer. If the automakers sell more than their limit, new purchasers are not eligible for the full tax credit.

"To get more of these vehicles on the road, I'm asking Congress to make all hybrid and clean diesel vehicles sold this year eligible for federal tax credits," said Bush. The President declared that to increase the supply of oil flowing into US refineries, he is ordering the Department of Energy to stop making purchases this summer for the Strategic Petroleum Reserve. "Our strategic reserve is sufficiently large enough to guard against any major supply disruption over the next few months. So by deferring deposits until the fall, we'll leave a little more oil on the market," said Bush.

The change over for refineries from the fuel additive MTBE to ethanol has contributed greatly to shortages and higher prices at the pump, so the President said he is instructing the EPA to waive local fuel requirements on a temporary basis. "I'm directing EPA Administrator Johnson to use all his available authority to grant waivers that would relieve critical fuel supply shortages. And I do that for the sake of our consumers. If Johnson finds that he needs more authority to relieve the problem, we're going to work with Congress to obtain the authority he needs," said President Bush.

Bush also stated that there were too many localized fuel blends that in turn drove up costs for consumers. The number of boutique fuels has expanded rapidly over the years, and America now has an uncoordinated and overly complex set of fuel rules. And when you have a uncoordinated, overly complex set of fuel rules, it tends to cause the price to go up. "I'm directing Administrator Johnson to bring the governors together to form a task force on boutique fuels. And the mission of this task force will be to find ways to reduce the number of boutique fuels and to increase cooperation between states on gasoline supply decisions," said the Prsident. "I want to simplify the process for the sake of our consumers," Bush added.

One of the problems we face is we've got tight supplies because we haven't expanded refining capacity. There hasn't been a new refinery built in 30 years. One of the biggest drawbacks has been environmental objections. but with newer technologies available, developing new, more efficient refineries can be accomplished. Part of the reasons why we haven't expanded or built new refineries to the extent we need to is because the permitting process in this country is extremely complicated. Companies that want to upgrade their equipment or expand their existing refineries or build new ones often have to wade through long, bureaucratic delays and/or lawsuits, explained the President.

The President proposed that Congress streamline the application process. "To make this gasoline supply more affordable and more secure, Congress needs to allow refiners to make modifications on their refineries without having to wait for years to get something done," said Bush. The President went on to say, "Congress also needs to simplify and speed up the permitting process for refinery construction and expansion. And so I'm going to work with Congress. It's important for Congress to cut through the red tape and guarantee refinery construction permits will be processed within a single year."

The President took the opportunity to promote Congress on the passage of ANWR, which has divided lawmakers for years. Only now that the environmentalists themselves can't fill up at the pump, Bush sees a chance at getting ANWR passed into law. "I fully recognize that the passage of ANWR will not increase the oil supply immediately. But it's also important to understand that if ANWR had been law a decade ago, America would be producing about a million additional barrels of oil a day, and that would increase our current level of domestic supply by 20 percent. We've got to be wise about energy policy here in America. We've got to make sure that we protect the environment, but we've also got to make sure that we find additional supplies of crude oil in order to take the pressure off the price of crude, which takes the pressure off the price of gasoline at the pump," said Bush.

But the President also pointed out that America must get away from its dependence on fossil fuels. "The Advanced Energy Initiative is focused on three promising ways to reduce gasoline consumption. One is increasing the use of ethanol, another is improving hybrid vehicles, and finally, one is developing hydrogen technology. All three go hand-in-hand; all three are an important part of a strategy to help us diversify away from hydrocarbons," said Bush.

Bush concluded by saying, "What I'm describing to you today is a strategy that recognizes the realities of the world in which we live. Our dependency on oil has created economic security issues for us, and national security issues for us. And therefore, this country must use our brain power and entrepreneurial spirit to diversify away from the hydrocarbon economy."