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Oil & Gas Journal

Expand refining capacity
Bush said, "We can also send a clear signal that we understand supply and demand, and then when you don't build a refinery for 30 years, it's going to be a part of restricting supply. And therefore, we ought to expand our refining capacity by permitting new refineries and getting after it quickly."

Pelosi urged Bush to suspend oil purchases for the SPR before and after his press conference, but the president rejected the idea. Buying crude for the reserve represents 0.1% of total global demand, he said. "I don't think it's going to affect price when you affect 0.1% and I do believe it's in our national interest to get the SPR filled in case there's a major disruption of crude oil around the world," he said.

A full SPR is particularly necessary because Al Qaeda believes an attack on a major overseas oil production facility would disrupt US and other nations' economies, according to Bush. He said he does not see any cost benefits from suspending crude oil purchases for the reserve but feels "it costs you oil in the case of a national security risk."

Pelosi responded, "Contrary to the president's assertion, the American people would benefit from suspending these government purchases. It could reduce [gasoline] prices by 5-24¢/gal, a critical first step for America's families, businesses and the economy." She said the SPR has been tapped previously by Bush, as well as former Presidents Bill Clinton and George H.W. Bush. "In 2000, this action brought the price of oil down by one-third—from $30 to $20/bbl," she said.

Responding to a question about the proposal by Sen. John McCain (R-Ariz.), the presumed 2008 Republican presidential nominee, to suspend the federal gasoline tax from Memorial Day through Labor Day to ease upward price pressure, Bush said he did not want to wade into presidential campaigns but added that he would consider this and other ideas.

Candidate observations
Sen. Hillary R. Clinton (D-NY), who is pursuing the Democratic presidential nomination, said Apr. 28 that she would fund a suspension of the levy with a windfall profits tax on oil companies. Her opponent, Sen. Barack Obama (D-Ill.), told an audience Apr. 29 in Winston-Salem, N.C., that the "gas tax holiday" idea was "a gimmick that would save you half a tank of gas over the entire summer so that everyone in Washington can pat themselves on the back and say that they did something." He also supports a windfall profits tax, he said.

Responding to a reporter's statement that the World Bank estimates that 85% of the increase in world corn prices since 2002 has been due to the growth of ethanol demand, Bush said he thought that weather, increased demand for corn, and higher costs of raising it were responsible for 85% of the increase and that ethanol represented only 15%.

"By the way, the high cost of gasoline is going to spur more investment in ethanol as an alternative," Bush said, adding, "The truth of the matter is it's in our national interest to have our farmers grow energy as opposed to us purchasing it from parts of the world that are unstable or may not like us."