Oil Guru

Oil Guru

All Things Oil & Energy


RSS to JavaScript

Ga. Closes Schools for 2 Days to Save Fuel

9.26.2005

"Snow days" to save on fuel?

Ga. Closes Schools for 2 Days to Save Fuel

By MIKE STOBBE, Associated Press WriterMon Sep 26, 9:53 AM ET

The governor's request that Georgia public schools take two "snow days" and close to conserve fuel did not sit well with parents who had to scramble to find baby sitters and day care for their children.

Rasheed Ahmad said he probably would have to take the day off from work Monday to look after his three daughters, ages 10, 8 and 4.

"Everybody's rushing to day care, asking do you have any vacancy for two days," said Ahmad. "And they say they don't. It's really bad."

Gov. Sonny Perdue's request Friday that schools close Monday and Tuesday was prompted by Hurricane Rita, which was bearing down on the oil refineries of the Gulf Coast.

He estimated that closing all the state's schools would save about 250,000 gallons of diesel fuel by idling buses, plus an undetermined amount of gasoline by allowing teachers, staff members and some parents to stay home. All but three of the state's 181 districts agreed.

Perdue made his decision after learning that a Houston-to-New York pipeline that supplies most of Georgia's gasoline had been shut down, said Dan McLagan, Perdue's spokesman. On Sunday, the pipeline was operating only sporadically.

If school buses had not been idled on purpose at the beginning of the week, they likely would have been shut down by empty tanks by the end of the week, McLagan said.

"The politically safe thing to would be to do nothing, and then blame the hurricane for any subsequent problems. But that's not leadership," McLagan said.

The Republican governor's action was attacked by Secretary of State Cathy Cox, a Democratic gubernatorial candidate, who called it a "stunt."

Some people worried that his move would only create a panicked rush to gas stations, although by Sunday that did not seem to have happened, said Jim Tudor, president of the Georgia Association of Convenience Stores.

For parents like Ahmad, Perdue's announcement left little time to make arrangements for children who suddenly had two free days on their hands.

Some parents said it was a lot of trouble for a hurricane that did less damage than predicted.

"People still have to go to work, and the freeways are still going to be packed. I mean I could see if the governor said 'All right, everybody stay home Monday and Tuesday!'" said Kyle Glenn, 44, stepmother of a 10-year-old pupil at Fulton County's Mimosa Elementary School.

Perdue also banned all nonessential travel by state employees and urged businesses to conserve fuel.

Some parents supported the governor's decision.

Rozina Charania, 37, of suburban Gwinnett County, praised the governor's attempt to try to control the situation and conserve fuel. "It made a lot of sense," she said as she walked with her husband and their 9-year-old daughter.

Bush says oil reserve can be tapped again

Bush says oil reserve can be tapped again
President details energy-sector steps taken after Hurricane Rita

The Associated Press
Updated: 4:16 p.m. ET Sept. 26, 2005

WASHINGTON - President Bush said Monday that the government is prepared to again tap the Strategic Petroleum Reserve to alleviate any new pain at the pump caused by Hurricane Rita’s assault on the center of the nation’s energy industry, and he asked Americans not to drive if they don’t have to.

He also implied he will likely name a federal czar-like official to oversee the reconstruction of the Gulf Coast from the devastation caused by Hurricane Katrina. But he said that local officials must first produce a vision for how they want their rebuilt communities to look.

“I’m considering how best to balance the need for local vision and federal involvement,” he said. “The vision and the element of reconstruction is just beginning and there may be a need for an interface with a particular person to help to make sure that the vision becomes reality.”

Sen. David Vitter, R-La., said Monday he had urged the president to place “a strong federal leader on the Katrina reconstruction effort” beyond the short-term relief effort. Such a “reconstruction czar” would also need to make sure there were no improprieties in awarding the lucrative reconstruction contracts, Vitter said.

“If the American people lose confidence in this effort, Louisiana and the victims of the storm are going to suffer, so we have to have those protections in place,” Vitter said in an interview on NBC’s “Today” show.

Because of worries that the storm could cause disruptions in getting gasoline to market, Bush urged motorists to cut out any unnecessary travel. He also said that federal employees should carpool or take mass transit to work and promised government officials would not take any trips they don’t have to.

“We can all pitch in by being better conservers of energy. People just need to recognize that these storms have caused disruption and that if they’re able to maybe not drive on a trip that’s not essential, that would be helpful,” he said. “If it makes sense for the citizen out there to curtail nonessential travel, it darned sure makes sense for federal employees.”

Bush announced he was flying back to the hurricane-affected region on Tuesday, traveling to Beaumont and Port Arthur, Texas — two of the harder-hit areas. He just concluded on Sunday a three-day hurricane trip — his sixth since Katrina hit a month ago — that took him to Colorado, two cities in Texas and Louisiana. During that trip, the president had no direct contact with areas or people affected by the storm, instead spending the entire weekend getting briefings on the storm from military and other federal officials.

With early indicators offering reason for optimism and a speedy recovery, Bush nonetheless warned Americans to expect some effect on energy supplies.

“A lot of our production comes from the Gulf and when you have a Hurricane Katrina followed by a Hurricane Rita, it’s natural, unfortunately, that it’s going to affect supplies,” Bush said after a briefing at the Energy Department.

“It’s important for our people to know that we understand the situation and we’re willing to use the Strategic Petroleum Reserve to mitigate any shortfall in crude oil that could affect our consumers.”

If oil is made available from the SPR reserves, it likely will be in the form of a loan to specific refineries, Energy Department officials said. That’s is a much quicker process than a formal release and sale of oil that requires a go-ahead by other oil-consuming nations.

After Katrina, DOE approved loans of 13 million barrels of oil to refineries in Louisiana that could not get crude because of supply disruptions. DOE spokesman Craig Stevens said there has not been a request for more SPR oil at this time.

Oil prices slid Monday, as markets reacted to reports of relatively light damage to crucial U.S. petroleum processing zones in Texas.

But 16 Texas oil refineries remained shut down after the storm, and crews found significant damage to at least one in the Port Arthur area, said Energy Department spokesman Craig Stevens.

The Endogenous Oil Shock

9.06.2005
The Endogenous Oil Shock
Stephen Roach
Morgan Stanley
Global Economic Forum
Sept 2, 2005

In the macro world, strikes, wars, and natural disasters have long been thought of as classic exogenous shocks -- those out-of-the-blue disruptions that jolt economies and markets. For stable economies, the impact of the exogenous shock is fairly predictable -- a temporary reduction in growth followed by the rebound of recovery. Such are the impacts that are likely to follow from the devastation of America’s Hurricane Katrina. But the energy shock of 2005 may be of a very different breed. It could well be an endogenous shock -- an unfortunate outgrowth of excesses that have been building in the macro system for a long time.

The Federal Reserve has set the stage for this endogenous shock. As it has supported the US economy from bubble to bubble, it has fostered a climate of excess demand and excess liquidity. First equities in the late 1990s and now property -- the Fed has nurtured the steady transformation of an income-based US economy into an asset-dependent spending machine. Belatedly, Alan Greenspan has finally paid lip service to the mounting perils of the Asset Economy. In his recent swan song at Jackson Hole, the Fed chairman cautioned that “history has not dealt kindly” with investors (i.e., American consumers) who may have gone too far in “accepting lower compensation for risk” on their asset holdings (see “Reflections on Central Banking,” August 26, 2005). Even couched in all the oblique caveats so typical of Fedspeak, this is quite a confession. The Father of the Asset Economy now fears he has created a monster.

Those fears are well founded, in my view. The tragedy is that the powers that be are only now just coming to this realization. Alas, there has long been ample evidence that America’s asset-dependent spending mindset has gone too far. That’s the message from unconscionably low saving rates -- now below “zero” for individuals (a record low of -0.6% in July) and at low single digits for the nation as a whole (on a net, after-depreciation, basis). That’s also the message from a gaping US current-account deficit -- a record 6.4% of GDP in early 2005. Such excesses are further corroborated by an unprecedented debt binge by asset-dependent American consumers; not only has the household sector’s outstanding debt risen by 20 percentage points of GDP over the past five years -- more than the cumulative increase over the preceding 20 years -- but debt-servicing expenses are near all-time highs in what is still a rock-bottom interest rate climate. And if there was any doubt over the bubble-like underpinnings of the Asset Economy, the latest report on nationwide home prices says it all -- a 13.4% y-o-y increase in 2Q05, the sharpest increase since mid-1979. Saving-short American consumers have gone deeper and deeper into debt in order to spend freely out of artificial purchasing power extracted from overvalued homes. All that paints a very compelling picture of an excess-demand-driven US economy.

The same is true of the case for excess liquidity. In America’s deregulated financial market environment, liquidity-related impacts show up less in the various gauges of the money supply and credit flows and more in the form of movements in real interest rates. With the Fed maintaining a long period of unusually accommodative policy -- a negative real federal funds rate from late 2001 to late 2004 that has gone only barely positive since -- financial assets have been supported by a steady stream of “carry trades.” This, in turn, has created excess demand for a wide range of fixed-income assets in recent years -- further depressing intermediate- and longer-term interest rates and thereby boosting property prices and wealth-dependent consumption.

It is the resulting excesses on the demand side of the US macro equation that have set the stage for an endogenous shock. That’s very much the case with respect to the oil shock of 2005. Hurricane Katrina may well go down in history as the tipping point to another energy crisis. But it is important to keep in mind that oil prices had already pierced the $65 threshold before this devastating natural disaster occurred. The reason: an unusually tight balance between long constrained energy supply and surging energy demand, with the latter well supported by the spending excesses of the Asset Economy. In other words, had it not been for America’s asset-induced spending binge, there probably would have been a greater margin between aggregate supply and demand that would have left prices of oil and other energy products on a very different trajectory. With the United States still accounting for fully 25% of worldwide oil demand -- more than three times the share of China -- the impacts of excess US consumption on global oil prices can hardly be minimized. The endogenous energy shock is very much an outgrowth of this phenomenon, in my view.

Nor should the oil shock be treated as an isolated occurrence. America’s Asset Economy is perfectly capable of generating other endogenous shocks, as well. The two most worrisome possibilities -- a bursting of the property bubble and a current-account crisis. These are typically low-probability events. But for an Asset Economy that has gone to excess, those probabilities are higher today than would otherwise be the case. Of these two possibilities, a post-bubble shakeout in the US housing market is more worrisome. The government’s just-released report on 2Q05 home prices underscores why. Not only is the nationwide rate of housing appreciation at a 26-year high, but fully 25 states plus the District of Columbia -- a grouping that probably accounts for at least 65% of the total market value of US residential property -- have experienced double-digit house price increases over the past year. At the same time, for 55 metropolitan areas, house price appreciation has been 20% or higher over the past year. As the housing bubble grows larger and covers more and more of the US, the perils of a post-bubble endgame for overly indebted American consumers grow larger by the day. Such are the perils of an Asset Economy that has long gone to excess.

The same would be the case with a US current account crisis. All it would take would be a desire on the part of America’s foreign creditors to seek compensation for taking currency risk -- or an inclination on the part of foreign central banks to diversify their official foreign exchange reserve portfolios that are so heavily over-weighted dollar-denominated assets. Both of these possibilities are entirely feasible and not without important implications for the global economy. In either case, the back-up in US interest rates that would arise from such a response would reverberate into other asset markets, especially over-valued residential property. Here, as well, the shocks associated with such a scenario are very much an endogenous outgrowth of an Asset Economy that has gone to excess.

The oil shock of 2005 now poses an immediate threat to the US and global economy. The significance of that threat will only become apparent with the passage of time. In the end, it is always the duration of any shock that matters the most in shaping macro outcomes. But this oil shock did not exactly come out of thin air. It was, in effect, set up by chronic excesses on the demand side of the US macro equation. Such an outcome could have important implications for financial markets. Fed tightening could be brought to a premature conclusion, as US monetary authorities pause to assess the damage from Hurricane Katrina. In response, bonds could rally further and equities could sag under the weight of prospective shortfalls to corporate earnings.

Endogenous shocks are of a different breed than the more typical exogenous disturbance. They reflect systemic risks in economies that could well take a good deal of time to purge. That was always the biggest risk for America’s Asset Economy.

Oil Prices Fall on Stockpile Release

9.05.2005

While things are starting to improve, it will most likely be weeks, if not months, before the US energy infrastructure can be fully inspected, let alone repaired.

Oil Prices Fall on Stockpile Release

VIENNA, Austria - Oil prices fell Monday after industrialized nations agreed to release 60 million barrels of crude from their strategic stockpiles to help avert a severe fuel shortage in the United States.

The U.S. refinery system was struggling to recover from Hurricane Katrina. Two storm-shuttered facilities restarted and flows of crude oil improved enough to allow refineries in the Gulf Coast and Midwest to ramp up production. But four damaged Gulf Coast refiners look likely to remain shut for weeks or even months, taking with them more than 5 percent of U.S. capacity.

Industrialized nations arranged by Monday to ship about 30 cargoes of gasoline to the U.S., Vienna's PV oil associates said.

On London's International Petroleum Exchange, October Brent was down $1.41 to $64.65 a barrel by midday in Europe - close to what it had been before Katrina hit.

The New York Mercantile Exchange was closed for the Labor Day holiday. Benchmark light, sweet crude had closed Friday at $67.57 a barrel, down $1.90 after the International Energy Agency on Friday announced its 26 members would release 2 million barrels daily for 30 days to meet shortfalls in world energy markets.

The International Energy Agency groups industrialized nations under the Organization of Economic Cooperation and Development umbrella. Its members began stockpiling crude following the oil shocks of the 1970s.

The total release from the IEA includes 30 million from the United States' own Strategic Petroleum Reserve, which is near its capacity of around 700 million barrels stored in salt caverns in Texas and Louisiana - the state hardest hit by Katrina.

But analysts urged caution, despite the respite.

"Be wary of good news. The situation remains horrific and light will be at the end of a very long tunnel," brokerage Fimat Inc. said in a research note.

Petroleum prices soared last week after the hurricane's direct hit on U.S. petroleum infrastructure responsible for 30 percent of its crude production, a quarter of its gas and its import terminals.

Hurricane Katrina pinched U.S. fuel supply, causing spot shortages and price spikes throughout the country. The storm shut eight major refineries and caused 12 others to run at reduced rates when their crude-oil supplies were cut.

Refineries in Louisiana expect to be back running within the week. Motiva Enterprises, a joint venture of Royal Dutch Shell PLC and state-owned Saudi Arabian Oil Co., has begun to restart its 235,000 barrel a day refinery.

That's the second refinery to restart after Hurricane Katrina. Marathon Oil Corp. restarted its 245,000 barrel a day refinery last week and expects the facility to be operating at full capacity Monday.

The prospects for four other refineries that shut down ahead of the storm are more dire. The plants, in hard-hit areas southeast of New Orleans and in Mississippi, can process some 880,000 barrels a day of crude, more than 5 percent of total U.S. capacity.

Chevron Corp.'s 325,000 barrel a day Pascagoula, Mississippi, facility and ConocoPhillips' 255,000 barrel a day Alliance refinery in Belle Chasse, Louisiana, have suffered "major damage," the Energy Department said.

Also improving crude-oil supply, the Louisiana Offshore Oil Port, the key facility for offloading and distributing imported crude oil on the U.S. Gulf Coast, said Saturday it is able to operate at about 75 percent capacity after power was restored at its Clovelly, Louisiana, storage facility. Deliveries of crude oil to the Capline Pipeline supplying refineries in the Midwest should begin Sunday.

Nymex crude soared to an all-time high of $70.85 a barrel Aug. 30, followed closely by highs in gasoline and natural gas.

"It should be a wake-up call for U.S. energy planners," said Energyintel analyst Peter Kemp in London.

Even before Katrina, markets were on edge because high demand in the United States and China had whittled back global excess capacity to just 1.5 million barrels of the global daily diet of crude, which means there was little left to offset any unplanned production snag.

U.S. oil surges $4 to record above $70 on hurricane

8.28.2005
U.S. oil surges $4 to record above $70 on hurricane
Mon Aug 29, 2005 12:18 AM BST

SINGAPORE (Reuters) - U.S. crude oil futures surged more than $4 in opening trade on Monday, hitting a new record high above $70 a barrel after Hurricane Katrina forced Gulf of Mexico producers to shut in more than a third of their output.

Katrina, which strengthened into a rare, maximum power Category 5 hurricane as it spun through key oil and gas fields towards New Orleans, shut in a total 633,000 barrels per day (bpd), according to company figures on Sunday.

It also forced the closure of seven refineries and a major U.S. crude import terminal.

Crude oil futures on the New York Mercantile Exchange (NYMEX) surged as high as $70.80 a barrel, up $4.67 a barrel, as traders feared lasting damage could further strain an industry that has struggled to keep up with demand for two years.

Oil, Gas May Soar as Storm Shuts U.S. Gulf Production

Oil, Gas May Soar as Storm Shuts U.S. Gulf Production

Aug. 28 (Bloomberg) -- Crude-oil and natural-gas prices may soar after Hurricane Katrina moved into production regions of the Gulf of Mexico, forcing companies including Exxon Mobil Corp. and Chevron Corp. to close operations.

Royal Dutch Shell Plc said it shut 420,000 barrels of daily oil production in the Gulf. The Louisiana Offshore Oil Port, which handles about 11 percent of U.S. imports, closed yesterday. Katrina is one of the most powerful storms ever to enter the Gulf, source of about 30 percent of U.S. oil production and 24 percent of the country's natural gas.

``Forecasters are saying Katrina could do more energy damage than any storm in recent years,'' said Jason Schenker an economist with Wachovia Corp. in Charlotte. ``It's not just that there's going to be outages for the next couple of days. With shutdowns and damage at platforms and refineries, the bullish impact could be felt for the rest of the year.''

Crude oil for October delivery on the New York Mercantile Exchange dropped $1.36, or 2 percent, to close at $66.13 a barrel on Aug. 26. Prices fell amid forecasts that Katrina would stay closer to Florida and miss most producing regions of the Gulf. The futures touched a record $68 a barrel Aug. 25 as the storm gained strength.

``I think it is easily conceivable that we could see crude futures hit $70 this week,'' Schenker said.

Natural gas for September delivery in New York rose 2.2 cents to $9.792 per million British thermal units on Aug. 26. Prices have climbed 59 percent this year.

`Chaotic'

``It's going to be pretty chaotic'' when North American gas markets open tomorrow, said Stephen Smith, president of Stephen Smith Energy Associates in Natchez, Mississippi. ``Prices should be more than $10 per million Btu. How high they will go is anybody's guess.''

If platforms are damaged and production remains shut for more than a week, winter supplies might be affected, leading to higher prices for the rest of the year, Smith said.

U.S. supplies of refined products, including gasoline, jet fuel and diesel, may decline as refineries near the path of the storm also shut. ConocoPhillips, the biggest U.S. refining company, closed its Alliance refinery south of New Orleans. Chevron Corp. and Valero Energy Corp. also shut refineries and evacuated staff.

Most Powerful

Katrina was upgraded to a Category 5 storm, the most powerful on the five-step Saffir-Simpson scale of hurricane intensity, according to the National Hurricane Center in Miami. It would be only the third storm of that magnitude to hit the U.S. since the government began keeping storm records.

Oil prices jumped 22 percent in the month after Hurricane Ivan tore through the Gulf last September, toppling platforms and damaging underwater pipelines.

Lost production in the Gulf because of Ivan peaked Sept. 16 at 1.4 million barrels of oil daily and 6.5 billion cubic feet of gas, according to the U.S. Minerals Management Service, which oversees offshore production. Shut production from Katrina could match those numbers, said Paul Sankey, senior oil analyst with Deutsche Bank Securities in New York.

``The storm is more severe than we've thought; it's turned into a monster,'' Sankey said. ``Crude is going to open stronger on Monday. The amount of lost production is equal to almost all the spare capacity in the world.''

Gasoline prices may also rise as oil companies shut refineries on the Gulf Coast. ConocoPhillips shut its 247,000 barrel-a-day Alliance refinery and Chalmette Refining, a 190,000 barrel a day facility owned by Exxon Mobil Corp. and Petroleos de Venezuela SA. Both refineries are near New Orleans.

New Orleans the `Hub'

``New Orleans is really the hub of the whole business,'' Deutsche Bank's Sankey said.

Gasoline for September delivery fell 3.68 cents, or 1.9 percent, to $1.9269 a gallon on the Nymex Aug. 26. The futures, which reached a record $2.029 a gallon on Aug. 17, gained 1.2 percent last week.

New Orleans residents were ordered to evacuate as the storm approached. Mayor Ray Nagin, at a press conference, said only essential personnel and people unable to travel may remain in the city. Thousands already have fled southern Louisiana.

``We probably deal with almost a third of the nation's domestic oil that is produced, and that will most likely be shut down,'' Nagin told CNN. ``That could have a significant impact on oil prices going forward.''

Last Updated: August 28, 2005 18:16 EDT

Gene Laverty in Calgary at  glaverty@bloomberg.net.

Oil's Economic Impact May Be Seen This Week

Oil's Economic Impact May Be Seen This Week

By MICHAEL J. MARTINEZ, AP Business Writer Sun Aug 28, 2:28 PM ET

Wall Street has been battered in recent weeks by high oil prices and mounting evidence that rising energy costs — including record gasoline prices — are starting to curtail consumer spending.

Investors will find out just how much impact oil prices have had thanks to a raft of economic data in the week ahead. But even if the news is particularly good, stocks may still have a difficult time recovering their recent losses as long as oil prices stay close to record levels.

Crude oil futures reached $68 per barrel last week before retreating slightly, and there's no indication they will fall substantially in the near term. With Wal-Mart Stores Inc. and other retailers already warning of weakness as consumers see their dollars siphoned off at the gas pump, Wall Street's fears of an economic slowdown may be justified.

The evidence will come later this week as retailers and automakers report their monthly results for August, the Conference Board releases the latest report on consumer confidence, and the Commerce Department reports on personal spending for July. The Federal Reserve will also release the minutes of the previous week's meeting, and investors will look closely for any sign that the Fed may halt its slow, steady parade of interest-rate hikes, which could slow the economy further if they continue.

Last week, two consecutive sessions of record oil prices sapped any buying momentum on Wall Street and pushed stocks to their lowest levels in seven weeks. For the week, the Dow Jones industrials lost 1.53 percent, the Standard & Poor's 500 index fell 0.69 percent and the Nasdaq composite index slid 1.2 percent.

ECONOMIC DATA

The Conference Board's consumer confidence index could see a larger-than-expected swing lower as consumers wrestle with higher gasoline prices. The index, due out Tuesday, is expected to fall to 101.5 for August, down from the 103.2 reading posted in July.

While not normally a market-moving report, investors will keep a close eye on the Commerce Department's personal income and spending report, due Thursday. Incomes are expected to rise 0.5 percent in July, on par with June's increase. And economists expect personal spending to rise 1 percent from 0.8 percent in June — though high oil prices may influence that number considerably.

Also Thursday, the Institute for Supply Management will issue its latest manufacturing index for August. The index is expected to come in at 57, up slightly from July's 56.6 reading. A lower number could create worries that higher energy and fuel costs are starting to crimp expansion in the manufacturing sector.

The Labor Department's job creation report, due Friday, has been difficult to predict lately. Economists expect 190,000 new jobs to have been created in July, down slightly from June's 207,000 jobs. An extremely different number, high or low, could cause a great deal of volatility.

And finally, the Commerce Department will report on the nation's gross domestic product on Wednesday. Second-quarter GDP growth is expected to come in at 3.4 percent, the same as last month's preliminary figure.

EARNINGS

Companies are firmly in between second- and third-quarter earnings seasons. No major corporations are slated to release earnings in the week ahead, though if companies have experienced a weaker-than-expected quarter to date, investors may see disappointing outlooks and earnings guidance this week.

EVENTS

The Federal Reserve will release its Aug. 8 meeting minutes Tuesday afternoon. Since the Fed started releasing them in between Fed meetings back in January, the minutes have caused a great deal of activity on Wall Street as investors parse the language and attempt, perhaps too ambitiously, to predict the Fed's next move on interest rates. Expect trading on Tuesday to be volatile.

The nation's auto makers will announce their August sales results on Thursday. The latest round of employee discount programs is likely to boost General Motors Corp. and Ford Motor Co. sales, but investors would be right to wonder how long the sales boom can last in the face of $3 per gallon gasoline.

Also starting on Thursday, the nation's retailers will begin releasing their monthly sales data, which will stretch into next week. Individual retail stocks will see increased volatility, and the overall market could drop if more retailers begin warning that their sales have been hurt by an oil-fueled drop-off in consumer spending.

GOP Fears Gas Price Anger May Spill Over

8.26.2005
Money quote: "People are mad as hell."
GOP Fears Gas Price Anger May Spill Over

By Richard Simon and Mary Curtius Times Staff Writers
LA Times
Thu Aug 25, 7:55 AM ET

WASHINGTON — As consumers feel pain at the pump, record high gas prices are registering as a political problem with congressional Republicans. At a town hall meeting this week, Rep. Jack Kingston (news, bio, voting record) (R-Ga.) wanted to talk about Social Security and Medicare, but the session quickly turned to gas prices.

When Rep. Shelley Moore Capito (news, bio, voting record) (R-W.Va.) toured a Veterans Affairs clinic Wednesday, the first question put to her was: "What are you going to do about the high price of gasoline?"

And a growing number of GOP officials worry that, as the party in power, Republicans will pay their own high price — at the ballot box. They are scrambling to find ways to respond.

"People are mad as hell," Sen. Lindsey Graham (news, bio, voting record) (R-S.C.) said.

Oil prices, which hit an all-time high Wednesday, and gasoline prices are expected to be top items on the agenda when Congress returns from its monthlong recess after Labor Day.

As one of its first orders of business, the Senate will hold a hearing to examine the causes of the price increases, and oil executives might be summoned to testify.

"You can safely predict, with more accuracy than any TV weatherman, that the first blizzard of the year will be the blizzard of gas price legislation introduced this September when Congress comes back to town," said Stuart Roy, a former House GOP leadership aide.

But it is unclear what lawmakers can do to reduce gas prices in the short term — and whether voters will accept the argument that they have few tools to provide immediate relief.

"We should be nervous," said Kingston, vice chairman of the House Republican Conference.

Polls show that the public blames politicians — after oil companies and foreign oilproducing countries — for the high prices. A Harris Poll released Wednesday found that Americans ranked gas prices among the top five issues for the government to address. Compounding the problem for the GOP, Democrats are spotlighting fuel costs in their campaign to wrest control of Congress.

Republican candidates facing tough races in 2006 should be worried, said Tony Fabrizio, a Republican political consultant.

"If I were a guy in a marginal race, I would be all over the oil companies," he said. "I'd be getting ahead of the curve right now, hauling them before my committee, holding hearings throughout my state — maybe introducing legislation to cap their CEO salaries."

Rep. Christopher Shays (news, bio, voting record) (R-Conn.) predicted: "When [voters] start to see that this is not the end but the beginning [of high prices], they are going to be kind of harsh."

He said he had been hearing complaints from constituents this summer and expected them to intensify.

Gas this week reached a record nationwide average of $2.61 for a gallon for self-serve regular, according to AAA. Experts project that oil prices will remain above $55 a barrel through next year.

Republicans "still have the majority," Shays said. "We still get to set the agenda. I'm very concerned. Under our watch, we're seeing this happening."

Republicans have been considering not only what to do about gas prices but how to talk about them. GOP pollster Frank Luntz said Republicans should argue more effectively to the public that the recently passed energy bill would eventually bring down prices by increasing supply.

That legislation — the first overhaul of national energy policy in more than a decade — offers tax breaks and other incentives to spur production and to encourage consumers to buy cars that are more fuel-efficient. It also aims to diversify domestic energy supplies.

"If Republicans explain that the legislation takes time to have an impact, they're inoculated" from the political risk of sustained high prices, Luntz said. "The only way Democrats can get an advantage on gas prices is to show that their policies would bring them down. It is not enough to blame Republicans; you need a solution."

Still, an increasing number of Republicans say Congress needs to do more.

Backers of President Bush's longtime goal of opening a portion of Alaska's Arctic National Wildlife Refuge to energy exploration hope that the high prices will prod Congress to give final approval to the drilling measure, perhaps as early as next month.

Opponents of Arctic drilling argue that it would take years to tap the oil, and that the amount of oil beneath the tundra has been exaggerated.

Congress members are also expected to push to let states opt out of a decades-long moratorium on new offshore oil drilling.

Some Republicans have joined Democrats in calling on Bush to tap the Strategic Petroleum Reserve. But Bush adamantly opposes using oil from the nation's emergency stockpile except in a national security crisis. The Republican chairman of the Senate Energy Committee has argued that the gas price drop was negligible when President Clinton tapped the reserve in 2000.

Such measures are aimed at increasing the supply of gas and oil. Republicans are showing less enthusiasm for proposals to reduce demand. Although the Bush administration this week did propose higher fuel mileage standards for most sport utility vehicles, pickups and minivans, some lawmakers and activists say the government could require even more fuel efficiency without sacrificing safety or auto performance.

Rep. Joe L. Barton (R-Texas), chairman of the House Energy and Commerce Committee, said that with gas above $2.50 a gallon in Texas, his constituents were complaining plenty about prices. But when he lists for people the possible short-term fixes — "price controls, mandatory carpooling, lowering speed limits — they say, 'No, we're not for that.'

"People would love to be paying about half what they're paying for gasoline, but they're not willing to subject themselves to the loss of personal freedom and convenience that that would require," Barton said.

The executive director of the American Council for an Energy-Efficient Economy, Steven Nadel, said many lawmakers hesitated to adopt ideas for reducing gasoline demand because they were philosophically opposed to government intervention in the market.

In addition, he said, some fear that attack ads might say, "Senator so-and-so is trying to take away your pickup truck," because the auto industry asserts that significantly tougher fuel-economy standards would lead to lighter, less-safe vehicles.

Lawmakers also are jittery because of the limits on what they can do to bring down prices.

"Unfortunately, this is a difficult problem that doesn't have an easy solution," said Capito, the West Virginia lawmaker. "People don't want to hear that, and I don't want to say it. But that's the truth."

In an earlier generation, energy problems created trouble for President Carter. But today's situation is different, said John J. Pitney Jr., a former Republican National Committee staff member who teaches government at Claremont McKenna College.

"In the 1970s, many people believed in price controls and the breakup of the oil companies," he said. "Those ideas have fallen out of favor. Back then, there were urban legends about oil-filled tankers anchored just over the horizon, waiting until shortages drove prices up. This time, there doesn't seem to be an obvious target. Any politician who tried to scapegoat SUV drivers would soon find a district office full of angry soccer moms and NASCAR dads."

Some GOP strategists say they don't see any greater risk for Republicans than for Democratic incumbents.

"I think anybody in office — Republican or Democrat — is somewhat concerned, because, unlike a lot of other big issues out there, this one impacts people where they care about it most, and that's their pocketbook," said National Republican Congressional Committee spokesman Carl Forti.

Barton, the House Energy Committee chairman, said complaints about high prices were hard to escape.

Because his car has a congressional license plate, people have come up to him and asked, "Are you Congressman Barton?" But with public irritation so high, he said, "My temptation is to say, 'No, I'm just working for him.' "




Google
Search Google Search Oil Guru