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08/05/2006 | Analysis: Oil prices debated

Heather Farrell

Congress must agree on the causes of high oil prices before it can agree on a solution, but some lawmakers have as many ideas about major causes as they have solutions.

 

At a hearing on Capitol Hill last Thursday, some members said foreign countries and global events contribute most to high gas prices. Others cited lack of domestic energy sources and increased global demand, while others blamed high prices on oil company greed. Many of the members said a mix of these factors put a strain on American motorists' pocketbooks.

Rep. Joe Barton, R-Texas, chairman of the Committee on Energy and Commerce, focused the problem on global factors, including supply disruptions in the Gulf of Mexico from last year's hurricanes, in Iraq because of the war, and in Iran because of tensions on the Islamic republic's nuclear program. Barton called Venezuela's President Hugo Chavez "quite a wildcard," and said people think "Nigeria is becoming even more unstable, and its production is vulnerable."

"We don't control the price of crude oil in this country," Barton said.

Rep. Tom Allen, D-Maine, took foreign factors from a different angle. He said high oil prices come from the United States' "inept foreign policy."

"It wasn't global oil markets that have neglected West Africa, especially Nigeria, when it needed help," he said. He cited three factors that affect prices: greed, rising demand and uncertain supply, and foreign policy. He asked how much of each factor affected prices.

Rep. Gene Green, D-Texas, said oil companies cannot control the price of oil because they cannot control what happens in unstable countries such as Nigeria and Iraq.

"If Venezuela or Iran decide to shut off exports, we're going to wish we had ANWR," Green said, referring to the Arctic National Wildlife Refuge in Alaska.

Green joined other Democrats in calling for action to support ethanol and biofuels as a way to produce more energy at home. But most Democrats did not see drilling in ANWR as a solution to more domestic energy sources.

Rep. Hilda Solis, D-Calif., said drilling in ANWR "does not begin to touch the growing demand of U.S. consumers." To reduce dependency on all oil, not just foreign oil, the United States needs to give more funding to alternative energy supplies and clean energy research, she said.

Rep. Tim Murphy, R-Penn., said the United States is refusing to take care of its supply issues. The government is not building new nuclear power plants or investing in clean coal technology, refineries, or domestic drilling. "We have to find oil sources here," he said.

At the same time, drivers need to conserve fuel and try to reduce their consumption by one gallon per week, he said.

Supply was not the only problem the members discussed. They also talked about growing demand. Barton said China's "demand increase is incredible" and will continue to grow as more people there buy cars. He said if the U.S. government allowed drilling in Alaska's ANWR, oil prices would not be over $70 per barrel.

But Rep. Eliot Engel, D-N.Y., said prices are high because oil companies are making "obscene profits." He said manipulation and greediness on the part of big oil companies are causing high prices, not the lack of new oil refineries in the United States.

Experts who testified at the hearing said the focus had shifted from demand to supply. They cited constrained global supply cuts and the uncertainty of supply as reasons for high prices.

"The American people clearly want to know why they are paying about $3 -- or more -- at the pump. But we will not find the answer if we only look inside the United States," said Daniel Yergin, chairman of the Cambridge Energy Research Associates.

Uncertain political situations abroad mean uncertain supply of oil, so countries and companies want to store oil to cushion prices if supply gets cut. "Market psychology -- anticipation of risk -- becomes more powerful, translating into a scarcity or risk premium," which he estimated at $10 to $15 per barrel.

"Although there is no actual supply shortage, the world oil market is very tight, owing not only to rising demand, but also to a 'slow motion supply shock,'" a disruption of more than 2 million barrels per day, Yergin said.

The United States needs to continue developing new technologies for oil, gas, nuclear power and clean coal, Yergin said. It also needs to support renewable energies as they become more competitive.

Guy Caruso, administrator of the Energy Information Administration, said the EIA's April Short-Term Energy Outlook estimated $65 per barrel in 2006 and $61 in 2007. These estimates will probably be higher in May's outlook, which will be released next week, he said.

Uncertain countries include Russia, Ecuador and Chad, he said. However, the April outlook expects Algeria, Libya, Angola, and Azerbaijan to increase their production in coming years.

UPI (Estados Unidos)

 



 
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