Bodman sees up to three years of fuel pain
Energy secretary says oil companies have lost control of the
market
By Alex Johnson
Reporter
MSNBC
Updated: 5:03 p.m. ET April 30, 2006
Gasoline prices have soared an average of 60 cents a gallon in less
than a month because suppliers are unable to keep up with demand, a
situation that could persist up to three more years, Energy
Secretary Samuel Bodman said Sunday.
Bodman said on NBCs Meet the Press that the shortfall was a sign
of a stronger economy under President Bush, but he acknowledged
that, at least for now, the suppliers have lost control of the
market.
The oil has gone up because the suppliers are unable to make the
flows equal to the demand, he said. ... Clearly, its going to be
a number of years, maybe two to three years, before suppliers are
going to be able to keep up with those demands.
Bodman blamed demand from China and India, reduced refining
capacity after Hurricane Katrina, and inadequate planning for
shifts to cleaner fuels like ethanol and low-sulfur diesel for
causing market dislocations that led to rising prices, but Red
Cavaney, president of the American Petroleum Institute, the
industry trade group, said the war in Iraq played a major role,
too.
U.S. companies have been unable to provide the Iraqis with
technical assistance to revive their oil industry because we make
sure that we dont put our employees in harms way, he said. As
soon as you can stabilize the situation in Iraq, they can ramp up
production, but its going to take years.
Industry profits defended
Senate Minority Whip Dick Durbin of Illinois said the price of
gasoline had almost doubled since Bush took office. All of these
things were predictable, he said, pointing to provisions of the
energy bill Bush signed last year, which did not shield producers
of cleaner-fuel additives like MTBE from legal liability, thereby
slowing the transition and squeezing gas supplies.
Weve had a failure in our nations energy policy, Durbin
said.
At the same time, U.S. oil companies are reporting record profits
even as motorists struggle to deal with the rising prices. Chevron
Corp., ConocoPhillips Ltd. and ExxonMobil Corp. combined to earn
more than $15.5 billion in the first three months of the year. But
Bodman and Cavaney said they saw no problem with the profit
reports.
Bodman said the U.S. companies faced competition primarily from
from government-owned and -controlled firms, which can manipulate
market forces to their advantage. A lot of it is controlled by
what [Venezuelan President] Hugo Chavez does, for instance, he
said.
U.S. refiners need large cash reserves to compete in research and
development, he said, and to drive more exploration and
drilling.
Bush said last week that there was no evidence of price gouging,
but he called on the Justice Department to open an investigation.
Bodman said he, too, saw we see no evidence of it, but this is one
of those situations where I guess I would call it trust but
verify.
Bush last week announced several measures to lower prices,
including a suspension of filling the nations emergency oil
stockpile and relaxing environmental regulations.
This administration is doing everything it can do, Bodman
said.
Taxes on oil companies?
The secretary was clear in his opposition to imposition of a
windfall profits tax on the oil industry, which many Democrats
and some prominent Republicans have supported.
Sen. Arlen Specter, R-Pa., chairman of the Judiciary Committee,
said last week that a windfall profits tax could offer eventual
relief to consumers, while Senate Republican leader Bill Frist of
Tennessee said on MSNBCs Hardball that the Republicans would try
at least to repeal some tax credits to oil companies.
Durbin, the No. 2 Democrat in the Senate, echoed those calls on
Meet the Press, warning that if you do not tax these
corporations ... they will continue to run up the profits to high
heavens.
But Bodman said such presumably punitive tax measures would be
counterproductive. That was tried 30 years ago. It did not work,"
he said. That proposal does not hold water.
An NBC News-Wall Street Journal poll found this week that rising
gasoline prices were Americans biggest concern this week, more
than the nuclear threat from Iran and illegal immigration.
Economists, however, say the impact on the economy will be muted
because energy costs were a relatively small part of the $11
trillion U.S. economy.
Ben Bernanke, chairman of the Federal Reserve, predicted last week
that the rising cost of energy would probably likely slow economic
growth by only a couple of tenths of a percent over the next two
years by cutting into consumer spending.