President George W. Bush yesterday stepped up efforts to combat rising petrol prices, calling for an investigation into possible price manipulation and announcing plans temporarily to stop deposits to the strategic petroleum reserve.

“Our strategic reserve is sufficiently large to guard against any major supply disruption,” Mr Bush told the Renewable Fuels Association. “By deferring deposits until the fall, we’ll leave a little more oil in the market.”

The plan marks the most comprehensive effort by the White House to address an issue that has risen rapidly up the political agenda. Democrats have been seeking to forge a direct link between high petrol prices and Republican policies to aid oil companies, and last week called for congressional candidates to hold events at petrol stations.

Mr Bush, who earlier this year warned that America was “addicted to oil,” tried to put some distance between his administration and its close links with the oil industry. He directed the Department of Justice to work with the Federal Trade Commission, the consumer watchdog, to address the illegal manipulation of petrol prices.

Both the FTC and Justice Department have in recent months dismissed suggestions by some politicians, including the Republican senator Arlen Specter, that excessive consolidation in the oil industry has contributed to the run-up in prices, and have tended to focus on the actions of individual retail outlets, not possible collusion by the oil giants.

Yet a letter, which was sent yesterday to all 50 state attorney-generals, suggests a different, more aggressive strategy by federal authorities.

“Consumers around the nation have expressed concerns about what they have perceived as anti-competitive or otherwise unfair conduct by the world’s major oil companies,” the letter says.

The FTC will release the findings of an investigation into possible anti-competitive behaviour by oil companies to Congress by May 19.

Against a backdrop of growing calls from Democrats for a windfall tax on record oil profits, Mr Bush called for Congress to remove about $2bn of tax breaks from energy companies over 10 years from the 2005 energy bill. The subsidies he specified included write-offs for research into deep-water drilling. “Taxpayers don’t need to be paying for certain of these expenses on behalf of the energy companies,” he said.

The energy bill included about $15bn in subsidies and tax breaks for energy companies. Mr Bush’s focus on deep-water drilling appears a direct rebuke to Tom DeLay, the former House majority leader, who last year inserted $500m in subsidies over 10 years for research into ultra deep-water oil and gas drilling, to aid companies in his district.

Rather than backing a windfall tax, Mr Bush said energy companies should reinvest record profits in building refining capacity and in alternative energy.

Mr Bush revived efforts to allow oil drilling in the Arctic National Wildlife Refuge, which were blocked amid concerns about the impact on the environment.

“If ANWR had been law a decade ago, America would be producing about 1m additional barrels of oil a day, and that would increase our current level of domestic supply by 20 per cent.”

In his speech Mr Bush also called for Congress to extend tax breaks for consumers who buy hybrid cars, asking the Environmental Protection Agency to waive local fuel requirements to relieve concerns about switching to ethanol, and expanding refining capacity.

Copyright The Financial Times Limited 2023. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article


Comments have not been enabled for this article.