High Gas Prices Will Last Years, Bush Aides Say

WASHINGTON (By Paul Richter, LATimes) May 1, 2006 — Gasoline prices will remain high for years to come and will be largely unaffected by a new White House plan to bring them down, Bush administration officials said Sunday.

Energy Secretary Samuel W. Bodman said the United States faced an oil price "crisis" because surging demand from such countries as China and India had outstripped supply, and he predicted that it would be "two to three years before suppliers are in a position to meet the demands."

"The suppliers have lost control of the market," he told NBC's "Meet the Press."

Gas prices approached record highs last week, further angering motorists and putting a scare into lawmakers seeking reelection in six months. The rise in fuel prices is the No. 1 concern of a plurality of Americans, recent polls show.

In response, the administration sent top officials to the Sunday talk shows to promote the White House energy plan, which would, among other steps, reduce the flow of oil into the national strategic reserve, ease regulations on fuel ingredients, and encourage the production and purchase of hybrid vehicles.

But White House Chief of Staff Joshua B. Bolten acknowledged that President Bush's program to deal with the price increases would have only a "relatively modest" effect on prices in the short term.

"This is a very large problem," he said on "Fox News Sunday." "It's built up over many years — decades, in fact. It's not going to be solved in the short run by some silver bullet. There are a lot of policies that need to be put in place over the long run to wean ourselves from our dependence on foreign oil."

The officials said the only lasting solution would be a long-term effort to reduce dependence on foreign oil, which represents about two-thirds of U.S. consumption.

"We need to deal with the long-term problems of technologies that may get us out of this trap," Secretary of State Condoleezza Rice said on ABC's "This Week."

She said that countries' efforts to ensure oil and gas supplies were "distorting international politics." "The quicker we get about the business of reducing our reliance on oil, the better we're going to be."

Administration officials insisted that Bush was not hypocritical in halting deposits to the Strategic Petroleum Reserve, even though he attacked Democratic opponent Al Gore in the 2000 presidential election for urging a similar reduction to help cut prices.

Asked if Bush's move was aimed at the midterm elections, Bodman said: "I wouldn't call it a political move. I would say it's an effort to … make a contribution to the reduction in price."

He added that, in any case, the price of oil "is not something that is, I think, going to be meaningfully affected by whatever happens to the strategic reserve."

Some elected officials have called for a "windfall" tax on oil company profits, pointing out that the major companies posted record profits last year and that former Exxon Mobil chief Lee Raymond was awarded a $400-million pay package when he retired.

But Bodman said the administration was firmly opposed to such a tax.

"There are certain things that we know don't work, and [a tax on] windfall profits is one of them," he said. "That was tried 30 years ago; it did not work. It resulted in reduced production."

He said that though Bush had instructed the Justice Department to look into reports of price gouging, the administration doubted that profiteering had occurred.

"We see no evidence of it," Bodman said. "But this is one of those situations where I guess I would call it 'Trust, but verify.' "

Despite the administration's opposition, an influential Republican senator, Trent Lott of Mississippi, told CNN's "Late Edition" that he was not dismissing the idea of a windfall profits tax.

"This may come as a shock to you, but I'm going keep my options open," he said. "If the oil companies don't stop escalating the gasoline prices, it is going to force the people to demand that the Congress do something more — and the Congress is going to have to do more."

A top lobbyist for the American Petroleum Institute suggested that the oil industry, which has close ties to the administration, was urging the White House not to go to war with Iran over its nuclear ambitions.

J. Bennett Johnston, who opened a lobbying firm in 1997 after retiring as a Democratic senator from Louisiana, said that "saber-rattling" on Iran was among the factors driving up prices.

"We'd see gasoline prices above $5 or $6, crude oil above $100 [per barrel] if we bomb Iran," he said on "This Week."

According to January figures from Oil & Gas Journal, Iran has the third-largest proven oil reserves in the world, after Saudi Arabia and Canada, and the second-largest proven natural gas reserves, after Russia.

U.S. sanctions forbid American companies and their foreign subsidiaries to conduct business with Iran, and the United States does not import any Iranian oil or gas. But any U.S. military action against Iran's nuclear program would be expected to have an immediate effect on world energy prices.