Obama cites bottlenecks, speculation as possible gasoline price factors

US President Barack Obama said his administration is looking at whether it would be possible to ease both international and US supply bottlenecks as an immediate response to rising gasoline prices. The president also is asking US Atty. Gen. Eric H. Holder Jr. to determine if oil market speculation is playing a role, he told reporters during his first 2012 press conference on Mar. 6.

He reiterated that the US is making progress in reducing its dependence on oil imports, and pledged to keep looking at every possible strategy to reduce oil consumption while maintaining living standards, productivity, and economic growth without hurting consumers.

“There are some short-term steps that we’re looking at,” Obama continued. “For example, there are certain potential bottlenecks in refineries around the country that we've been concerned about. We're concerned about what's happening in terms of production around the world. It's not just what's happening in the [Persian] Gulf. You've had, for example, in Sudan, some oil that’s been taken offline that’s helping to restrict supply.”

In its Mar. 6 Short-Term Energy Outlook (STEO), the US Energy Information Administration said several notable production disruptions outside the Organization of Petroleum Exporting Countries began or intensified during the last 2 months, leaving an average 1 million b/d offline in February.

“In the former Sudan, an unresolved dispute between Sudan and the newly independent South Sudan over transit fees and other issues caused the latter to shut-in all of its production at the end of January,” it said. “EIA now projects that total production from Sudan and South Sudan, which averaged about 430,000 b/d in 2011, will average 200,000 b/d in 2012 and recover to 370,000 b/d in 2013.”

Other disruptions

Civil conflict has reduced production in Yemen, from 260,000 b/d to a probable average of 180,000 b/d this year, and in Syria, from 400,000 b/d to a likely average of 260,000 b/d in 2012, according to EIA. “Disruptions stemming from technical issues have temporarily curbed production in the UK and Canada, but production is expected to recover in the near future,” it added.

EIA said it expects OPEC members’ production to continue rising in the next 2 years to accommodate growing demand, growing an estimate 480,000 b/d in 2012 and 560,000 b/d in 2013. The projection does not consider possible impacts from the European Union’s impending embargo and other sanctions on Iran’s crude production because it is too soon to assess the country’s ability to sell its crude elsewhere, it indicated. “However, EIA estimates that Iran’s crude oil production has fallen since mid-2011 and is projected to continue to decline through the forecast period,” it said.

Obama also said he would ask Holder to “pay attention to potential speculation in the oil markets” and possibly reconstitute a taskforce to look into the matter. His remark along this line followed suggestions by some leading congressional Democrats that market speculation may be contributing to gasoline price increases. Others have recommended tapping the US Strategic Petroleum Reserve, although the president did not mention this.

Congressional Republican leaders have charged that Obama’s actions don’t live up to his statements. “If we want to see reduced [gasoline] prices, economic growth, job growth, and stronger national security, [he] must support a true ‘all-of-the-above’ energy strategy, which means permitting the Keystone XL pipeline and advancing domestic oil production in Alaska and off our coasts,” suggested US Rep. Ed Whitfield (Ky.), who chairs the Energy and Commerce Committee’s Energy and Power Subcommittee, which has scheduled a Mar. 7 hearing on gasoline prices.

EIA said in its Mar. 5 weekly report that retail gasoline prices nationwide averaged $3.79/gal, 7¢ higher than the previous week and 27¢ more than this time last year. Diesel fuel retail prices averaged $4.09/gal, 4.3¢ more week-to-week and 22¢ more year-to-year, it added.

EIA said in its most recent STEO it expects US retail regular gasoline prices, which averaged $3.53/gal in 2011, to reach nearly $4/gal nationwide in May and average $3.79/gal in 2012 and $3.72/gal in 2013. It predicted that on-highway diesel fuel prices will climb from an average $3.84/gal in 2011 to $4.15/gal in 2012 and $4.11/gal in 2013.

Contact Nick Snow at [email protected].