Bush seeks to curb oil tax breaks
President also sets investigation into gouging, halts deposits to stockpile in bid to deal with soaring gasoline prices.
By Chris Isidore, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) - President Bush announced moves Tuesday that he said will address rising gas prices, including a curb of tax breaks for oil companies and an extension of breaks that could help buyers of fuel-efficient cars.

Bush also called for halting deposits to the nation's emergency stockpile of oil and a probe of potential price gouging.

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President Bush announced a plan to battle rising gasoline prices.
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He made the announcements amid predictions that gasoline will be at record highs through the summer driving season, and with rising voter anger heading into this fall's midterm Congressional elections. Gasoline is average about $2.90 a gallon nationwide and is above $3 in some states.

Some Democrats have called for a so-called "windfall profit tax" on large oil company profits in the face of higher oil prices. Without mentioning that proposal directly, the President criticized Democratic calls for higher taxes in response to higher energy prices.

But he did call on Congress to rollback $2 billion in tax breaks for oil companies over the next 10 years for items such as write-offs for some research and development for deep water drilling.

"Record oil prices and large cash flows also mean that Congress has got to understand that these energy companies don't need unnecessary tax breaks," said Bush, a longtime tax-cut advocate. "Taxpayers don't need to be paying for certain of these expenses on behalf of the energy companies."

Democrats on Capitol Hill lashed into the president's proposals.

"This is the height of hypocrisy," said Rep. Rosa DeLauro, D-Conn. "The president has spent the past five years fighting for this corporate welfare. For him now to suggest he opposes these tax breaks is dishonest and cynical."

Bush also was criticized by a leading Democrat for not doing enough to regulate Big Oil. Sen. Charles Schumer, D-N.Y., said he would introduce a bill calling for an investigation into whether oil companies should be broken up by the federal government.

"Enough is enough. We have no competition," Schumer said at a Washington news conference. "I've heard from major conservative Republican business leaders who don't believe we have enough competition."

Bush points to market forces

In his speech, Bush said rising oil prices were due to increased demand in China and India. But he acknowledged the problems posed for many Americans and the U.S. economy.

"Gasoline price increases are like a hidden tax on the working people. They're like a tax on our farmers. They're like a tax on small businesses," he said in an address to an alternative fuel industry group in Washington. "The prices that people are paying at the gas pump reflect our addiction to oil."

The first move, announced just before the speech, was an temporary halt to additions to the nation's Strategic Petroleum Reserve (SPR).

The reserve sold or loaned about 18 million barrels of oil in the wake of Hurricane Katrina, and it has replenished almost 7 million of those barrels over the last four months. But it had nearly 700 million barrels on hand as of Monday, according to Department of Energy figures. Bush said current inventories are large enough to deal with any potential shortages.

"By deferring deposits until the fall, we'll leave a little more oil on the market," he said. "Every little bit helps."

Oil prices, trading near $74 a barrel before Bush's announcement, settled down 45 cents at $72.88.

Oil analyst Peter Beutel, president of Cameron Hanover, said it made sense for the SPR to slow its purchases at current oil prices and that the amount of oil involved in the discussion is minuscule.

"It's less than 30,000 barrels a day in a country that consumers 21 million. That's not even rearranging a single deck chair on the Titantic," said Beutel. "But psychologically, it has some effect."

Price probe

The president also announced that the Justice Department and Federal Trade Commission will conduct probes into energy prices, as well as help state officials investigate possible price gouging at the gas pump.

"Americans understand by and large that the price of crude oil is going up and that the prices are going up, but what they don't want and will not accept is manipulation of the market. And neither will I," Bush said.

He called on Congress to expand the tax credit for hybrid vehicles, making all buyers of the fuel-efficient vehicles this year eligible for federal tax credits, rather than having caps on the number of vehicles eligible for the tax break.

Bush also repeated earlier calls for speeding up the process for building new gasoline refineries as well as opening the Arctic National Wildlife Reserve to oil exploration.

Bush received a warm reception from the renewable fuel group and praised its work to increase the supply of ethanol as a fuel for cars. Beutel said it made sense for Bush to push for more development of ethanol.

"I think the strong talk on ethanol is probably scaring the (oil) market more than the SPR," he said.

Bush also said he was directing the Environmental Protection Agency to grant temporary waivers of some environmental regulations that he said would relieve fuel supply shortages, especially as oil refiners switch to cleaner fuels required for the summer.

This year, that shift is causing more shortages because oil companies are no longer using an additive known as MTBE, replacing it with ethanol.

The president, whose ratings have fallen to the lowest of his presidency, and fellow Republicans are under pressure due to the upcoming midterm elections.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.