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Obama eyes active role in oil markets
Thu Mar 20, 2008 9:35am EDT
By Jeff Mason
WASHINGTON (Reuters) - Democrat Barack Obama would take an active role in U.S. oil markets as president, tackling concerns about the dominance of large oil companies and eyeing the Strategic Petroleum Reserve as a potential weapon to combat high prices, his top energy adviser said.
The presidential hopeful's adviser, Jason Grumet, told Reuters that an Obama administration would crack down on any competition lapses in the sector that have resulted from big corporate mergers.
Fleshing out the Illinois senator's energy and environmental policy goals, Grumet also said Obama would seek to link a future U.S. carbon emissions trading system with the European Union's scheme as soon as possible while focusing attention on China and India in forging a global warming pact.
Obama is locked in a tight contest with fellow Democrat New York Sen. Hillary Clinton for the chance to take on presumptive Republican presidential nominee John McCain in the November election.
Grumet, head of the Washington-based Bipartisan Policy Center in addition to advising the Obama campaign, said the oil industry had "concentrated incredible market power in a small number of companies" in a way that caused alarm.
"Senator Obama has a deep concern that the consolidation of the industry -- these national mergers, you know, that were allowed under both Clinton and Bush administrations -- are a cause for some concern," he said.
He said an Obama administration would examine "whether these mergers and consolidations have decreased competition in a way, concentrated market power in a way, that is undermining to consumers."
Grumet declined to identify specific companies and would not comment on whether Obama would seek to break up dominant players. Leading U.S. oil firms include ExxonMobil Corp., Chevron Corp., and ConocoPhillips.
"It is premature to try to articulate what the remedy is," Grumet said. "There are indications that there could be some problems there and ... the (Bush) administration has been a bit asleep at the switch, so we would be digging into those questions aggressively."
HIGH PRICES
With oil prices at record highs, Grumet said Obama would seek to tax the "windfall" profits that oil companies are making - a threat that rival Hillary Clinton has also made.
The average U.S. price for gasoline hit a record $3.28 a gallon this week. The Energy Department is predicting that pump prices in some regions of the country could hit $4 a gallon this spring.
Obama would also consider tapping the Strategic Petroleum Reserve to bring down prices while recognizing that such a move is normally meant to aid in the case of an acute supply disruption, Grumet said.
"It would be on the table," he said of a potential reserve release. "He would certainly see it as an option that he would consider but recognize that ... it's no silver bullet in any circumstance."
The reserve, which was created by Congress in 1975 after the Arab oil embargo, holds emergency supplies of crude at four underground storage sites in Texas and Lousiana.
Obama would also stop filling the SPR while prices remained so high. "If oil were at these kind of record prices, (he would) basically stop pumping it underground," Grumet said. "It's at an acceptable level now."
Grumet said Obama was extremely concerned about high oil prices as well as speculation in the markets. But he rejected claims that environmental restrictions were to blame for insufficient oil refining capacity.
"There's a pretty strong paper record indicating that the reason there is such a thin margin in refining is that the companies recognize that that was the only way they could make refining a profitable industry," Grumet said.
CLIMATE CHANGE, ETHANOL
Obama has said a key factor in bringing oil prices down will be tackling the transport sector and increasing the fuel economy of cars.
That ties in with another key goal: reducing carbon dioxide and other greenhouse gas emissions blamed for global warming.
Grumet said Obama supported a global carbon market and would seek to link a U.S. emissions trading system with the established European one "as soon as possible", though he would make establishing a U.S. program to fight warming and agreeing an international climate change treaty his top priorities.
Grumet said Obama would push the biofuel industry to move into second-generation fuels made from waste and advance beyond ethanol produced by corn to avoid the "food or fuel" debate.
"For this to really be a significant contribution to increasing our energy security, we're going to have to move beyond corn," he said.
(To read more about the U.S. political campaign, visit Reuters "Tales from the Trail: 2008" online here)
(Editing by Lori Santos and Vicki Allen)
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