THE COMPASS

[EarlyOne]

Congress to see more theatrics over high oil

On Monday May 9, 2011, 1:40 pm

By Timothy Gardner

WASHINGTON (Reuters) - U.S. lawmakers will clash this week over strategies for combating high gasoline prices and repealing tax incentives enjoyed by Big Oil companies, but there is little chance of a breakthrough for drivers.

U.S. gasoline prices are set to hover near $4 a gallon this week, about 11 cents off the record hit in 2008, as last week's 15 percent drop in oil prices to below $100 a barrel takes time to work its way to service stations.

Failing more big drops in the oil market, consumers will continue to struggle with high fuel prices.

"There's not much Congress can do" to bring down oil prices in the short term, said Pietro Nivola, a senior fellow in governance at the Brookings Institution, a nonpartisan public policy organization. "The price of oil is set in a global market and we don't control that."

But Democrats and Republicans in Congress, seeking to please their constituents, will try to take action ahead of the presidential and congressional elections next year.

The focus in the Republican-controlled House of Representatives is on forcing President Barack Obama to open up offshore oil drilling, a resource conservatives say has been held in a stranglehold by regulations after the BP oil spill in the Gulf of Mexico last year.

Republicans see high oil prices as a key problem they can blame on Obama after the killing of Osama bin Laden has quieted charges he is not strong enough to lead a nation at war and facing terrorist threats.

The House is slated to vote this week on legislation to set a 60-day deadline for the Interior Department to decide on new offshore drilling permits, one of three bills on opening up drilling.

Last week, the chamber passed a bill that would force the government to conduct lease sales for oil exploration off Virginia and in the Gulf of Mexico.

But the bills will not likely pass in the Senate amid stiff Democratic opposition. The White House said it opposed the lease sale bill because the legislation would undermine safety measures taken after last year's spill.

"The battle lines have been drawn," said David Pumphrey, a fellow at the Center for International and Strategic Studies and former official at the Department of Energy.

"There's a lot of theater right now. It's hard to see how we get closure on meaningful, long-term policies that would have an effect on oil prices."

For their part, Democrats are focusing on getting tough on Big Oil by repealing billions of dollars in tax breaks for the five major oil companies including Exxon Mobil and Chevron.

Senate Majority Leader Harry Reid had said he wanted a bill to be voted on soon to repeal billions of dollars in tax incentives for oil and natural gas companies. But the legislation has not yet emerged.

Sparks may fly on Thursday at a hearing on cutting the incentives called by Senator Max Baucus, who has invited executives from the oil companies to testify. Baucus released a plan last month to end breaks for the industry.

The Obama administration is also trying to tackle speculation in petroleum markets in hopes of pushing down prices. Attorney General Eric Holder directed a taskforce to look into whether gasoline prices were falling in the wake of the drop in the cost of oil.

Senator Carl Levin, who heads a panel on investigations, said last week he also plans to examine speculation in the oil market. He said the crash in oil prices was proof that speculators are behind volatility in commodity markets.

But analysts said investigations by themselves are unlikely to drive down energy costs.

"Politicians do this every single time there is a run up in energy prices," Brookings' Nivola said. "They might find an occasional example of price gouging, but it's ordinarily not easy to widely prove, no matter what kind of investigation they do."