Political Discord Over Oil Supply Increases Along With Gas Prices

By James Gerstenzang

May 19, 2004 12 AM PT

Times Staff Writer

WASHINGTON — The record-setting price of gasoline sparked a volatile political debate Tuesday, bringing calls for President Bush to tap the nation’s strategic oil reserve and a promise from the administration to discuss with Saudi Arabia a production increase by the world’s leading oil providers.

President Bush’s spokesman and Sen. John F. Kerry of Massachusetts, the Democrats’ likely presidential nominee, scrambled to get ahead of what politicians and others believed could be a welling of voter discontent over gasoline prices. For the first time, the national average price of gas has topped $2 a gallon, the Energy Department reported Monday.

“The president is, like Americans, concerned about rising gas prices,” White House Press Secretary Scott McClellan said. He dismissed as “cheap political rhetoric” Democrats’ suggestions that high gas prices could damage the economy.

Kerry accused Bush of failing to take steps to reverse the sharp price increase. He said the president should pressure Saudi Arabia and other Arab countries for greater oil production.

But Kerry declined to endorse the suggestion of some Democratic senators that the administration tap the Strategic Petroleum Reserve to increase supply, which in theory would lower prices.

With Saudi Arabia already calling for the Organization of Petroleum Exporting Countries, the major oil-producing cartel, to increase output by 1.5 million barrels a day, Energy Secretary Spencer Abraham said Tuesday that he would meet with Saudi officials during a conference of major oil-consuming and -producing nations later this week in Amsterdam.

“We’ll be discussing exactly what that means,” Abraham said of the recommended increase in production.

The Energy Information Administration, part of the U.S. Energy Department, said Monday that the average price of a gallon of unleaded regular gasoline across the country had hit $2 -- a price threshold crossed long ago by Californians. The national price was $2.017, up 7.6 cents from a week ago and up 51.9 cents from a year ago. In California, the average price for unleaded regular was $2.269.

The prices reported in the government’s weekly survey, however, are below the levels of 1981 when adjusted for inflation. Then, California pump prices averaged what would now be $2.426 a gallon, according to the California Energy Commission.

Still, this week’s $2 marker galvanized political attention.

“There is some concern,” acknowledged Charles Black, a Republican political consultant close to the White House. But he added: “It seems like gas prices go up every summer and people think it’ll be a big issue in November, and then they go down in the fall.”

Indeed, prices spiked over $2 a gallon in the Midwest in the summer of 2000. Presidential candidates barely took notice.

But this year, several factors are driving gas prices as a political issue. The price increases are nationwide. The country is led by two men with long-standing ties to the oil industry: Bush and Vice President Dick Cheney. The health of the economy, which is tied in part to energy costs, remains a concern of voters. And the American-led war in Iraq is contributing to uncertainty and to higher oil prices.

“I would say it’s a problem for Bush. It’s a bad thing to happen in an election year for an incumbent,” said Andrew Kohut, director of the Pew Research Center for the People and the Press.

Surveys that Kohut has conducted this year on which news stories are attracting the most attention from Americans have regularly found that the price of gasoline is “a very high-profile problem,” drawing as much attention as, and sometimes more than, the war in Iraq.

“Bush’s particular problem, besides being at the place where the buck stops, is his administration is associated with the oil industry,” Kohut said.

Speaking Tuesday in Portland, Ore., where gasoline was as much as $2.31 a gallon, Kerry said, “George Bush has no plan, doesn’t address it, doesn’t seem to care that every American family is paying more to go to work, for the products that they get, to be able to get to school, to be able to do all of the things that Americans do in the course of a summer.”

He said Bush had failed to follow through on his 2000 campaign statement that “the president ought ... to get on the phone with the OPEC cartel and say, ‘We expect you to open your spigots!’ ”

Kerry said Bush “not only hasn’t done that, but we pick up the newspapers and read about sweetheart deals that are at the expense of the American people.”

Kerry did not specify any alleged deal. But he has previously drawn attention to a report, in a recent book by journalist Bob Woodward, that the Saudi ambassador, who is close to the Bush family, had said the Saudis would try to bring down oil prices before the election. The Bush campaign has denied that such a promise was made.

Recognizing the potential political toll of the price hikes, Bush has tried in campaign appearances since last week to blame the nation’s dependence on imported oil for causing the price increases.

The president argues that Democrats have blocked his energy bill, which would increase domestic oil production.

Democrats have complained that the energy bill is tilted toward production, rather than emphasizing conservation. Kerry and the White House agreed on one point Tuesday: that oil should not be withdrawn from the Strategic Petroleum Reserve, as some Democratic senators have proposed.

“We may get there, but I am not for doing that at this point in time,” Kerry said.

However, he said, oil being sent to the reserve should be diverted to the open market.

The reserve is an emergency supply of crude oil kept in underground salt caverns near the Gulf of Mexico.

The oil industry has argued that even if the reserves are drawn, the nation lacks the refining capacity to handle the demand for gasoline.

McClellan turned aside calls to tap the reserve to manage gasoline prices. He said the supply “was created and formed for national emergencies, and that’s what we believe it should be used for.”

On Capitol Hill, Democrats called on Bush to release 1 million barrels of oil a day from the emergency stockpile for at least 30 days, and to suspend deliveries to the reserve.

Democrats said that when President Clinton released 30 million barrels of oil from the reserve in the summer and fall of 2000, the move helped stabilize prices.

But Sen. Pete V. Domenici (R-N.M.), chairman of the Senate Energy and Natural Resources Committee, said that after Clinton acted, the price of gasoline dropped “only one penny.”

Ten Democratic governors asked Bush in a letter Tuesday to order the Energy Department to investigate the gasoline pricing structure, oil industry profits “and the cost being passed on to consumers.” On Monday, the California Senate’s new Select Committee on Gasoline and Diesel Pricing launched such an investigation of oil companies’ marketing practices.

Times staff writers Michael Finnegan in Portland, Ore., and Richard Simon in Washington contributed to this report.