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High Prices a 'Major Problem' for White House

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Indicating that high gasoline prices are among the "major problems" the White House is trying to tackle, President Bush on Tuesday said his administration would closely monitor prices and investigate possible price gouging. Bush reacted as crude oil futures in New York briefly touched a record $71.60 per barrel on Tuesday, while retail gasoline prices jumped 28.5¢ in the last three weeks to reach a national average of $2.79 per gallon. Using a press event with Rob Portman, his new pick to head the budget office, to speak on gasoline prices, Bush expressed concern over the impact high gasoline prices are having on families and small businesses. He also made clear it was the responsibility of the government to ensure there is no manipulation of the market. "I'm mindful that the government has the responsibility to make sure that we watch very carefully, and to investigate possible price gouging. And we'll do just that," he said. Bush said three reasons for high gasoline prices were high crude oil prices, tight supply because of increasing demand, especially from China and India, and the switch over to summer fuel blends. The issue of high gasoline prices is expected to take on political overtones once Congress gets back from its two-week recess next week. In a sign of things to come, Sen. Charles Schumer (D-N.Y.) on Tuesday urged the Federal Trade Commission (FTC) to closely monitor refining capacity and prices. "I urge the FTC to rigorously monitor refining capacity to ensure the industry is producing at the highest level possible and not manipulating the amount of product flowing to the market," Schumer wrote in a letter to FTC Chairman Deborah Majoras. Schumer said generally after oil companies switch to summer fuel production refineries operate at or above 90%, a practice observed in the past five years. However, refining utilization is still hovering at 85% this year, which leads some experts to believe that the oil companies may be dragging this along to drive up prices, he noted. "Given the past behavior of the oil companies who take advantage of natural or cyclical occurrences and raise prices even more than has been necessary, this requires scrutiny," Schumer said. The National Petrochemical and Refiners Association (NPRA) responded by saying that Gulf Coast refineries still have not fully recovered from last year's damage-inflicting hurricanes. "The fact of the matter is that over 3% of the nation's refining capacity is still inoperative due to the impacts of Hurricanes Katrina and Rita, and the aftermath of a serious accident. If these refineries were operating, utilization rates would be higher than they currently are," said NPRA President Bob Slaughter. High gasoline prices have industry players pointing fingers. American Petroleum Institute President Red Cavaney wrote in a recent letter to Congress that an added factor this year was the phase out of the additive methyl tertiary butyl ether (MTBE) from gasoline and the switch to ethanol. He said ethanol was currently more expensive than gasoline and also cited logistical problems in shipping ethanol. Slaughter noted that the price of ethanol in New York Harbor has increased from the $1.45 range this time last year to $2.00 in December and $2.77 currently. The Renewable Fuels Association, representing ethanol producers, for its part, maintains the use of ethanol as a fuel additive is having the least effect on gasoline prices (OD Apr.12,p5). "In reality, the phase-out of MTBE, high crude oil prices and the petroleum industry's pricing tactics are the true culprits hiking gas prices," said a press advisory from the RFA. Still, the RFA, API and the auto industry are expected to share a platform at a renewable fuels summit here next week, where Bush is expected to speak. Several House and Senate members have also been invited to discuss what can Congress do, according to a House aide. The summit could be a springboard for efforts in the House of Representatives to take up legislation to address US energy dependence. "The pressure to do something is going to rise in direct proportion to the rise in price of gasoline," said the aide. Manimoli Dinesh, Washington

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