September 01, 2005
Thursday

WASHINGTON - President Bush asked Americans on Thursday to limit gasoline purchases to essential needs, while congressional leaders threatened gas-price gougers and energy-commodity speculators with federal prosecution.

With reports of looming gas shortages because of Hurricane Katrina's damage to refineries and pipelines, drivers formed long lines at stations and prices spiked well over $3 a gallon in some areas.

In a first for a former Texas oilman who has long stressed production over conservation, Bush urged motorists to "be prudent" in purchasing gas.

"Don't buy gas if you don't need it," Bush said, his father and former President Clinton behind him in the Oval Office.

Bush, who asked the two former presidents to reprise their tsunami-relief effort and raise money for Katrina victims, also authorized foreign ships to transport gasoline that is normally distributed through underground pipelines now damaged by the storm. "The good folks must understand that major refineries have been shut down, which means it's going to be hard to get gasoline to some markets," Bush said.

Rep. Joe Barton, a Texas Republican and chairman of the House Energy Committee, called an emergency congressional hearing for Wednesday. Citing his own experience of seeing an overnight price hike of 21 cents at a Washington gas station, Barton warned gougers of severe consequences.

"There's no need to panic about this," he said. "On the other side, there's no reason for retailers to just jack the price up because everybody's concerned. We've going to move very quickly to stop that if we have the legal ability to do so without passing emergency legislation."

Raising the specter of "price controls and price freezes," Barton expressed the hope that the government will not have to take drastic steps "to prevent pure price gouging."

Gas prices rose by more than 50 cents a gallon Wednesday in Ohio, 40 cents in Georgia and 30 cents in Maine, according to several Web sites that monitor prices. The average price for regular gasoline early Thursday ranged from $2.53 in Mississippi to $2.88 in California and $2.93 in Hawaii, according to AAA, but prices rose steeply during the day at many stations across the country.

Mary Rose Brown, a spokeswoman for Valero Energy Corp. in San Antonio, the country's second-largest refinery, said her company was exercising restraint in pricing its product.

"We have chosen to lag the market and are keeping our retail and wholesale-branded price increases far below the market increases," she said. "In fact, (they) are 40 to 50 cents per gallon below spot market prices."

Republican Sen. Pete Domenici of New Mexico, chairman of the Senate Energy Committee, moved up a hearing on gas prices and oil supply to Tuesday from its previously scheduled Thursday date.

"Today's gasoline prices are taking a severe toll on Americans' pocketbooks," Domenici said. "Consumers are anxious. They pull up to a gas pump, and they are stunned by the prices. Economists are concerned. Steep energy prices like we are seeing crimp consumer spending and blunt their confidence in the economy."

In an earlier TV interview, Bush warned people not to take advantage of the chaos and fear caused by Katrina.

"I think there ought to be zero tolerance of people breaking the law during an emergency such as this, whether it be looting, price gouging at the gasoline pump or taking advantage of charitable giving, or insurance fraud," he told ABC's "Good Morning America" program. "And I've made that clear to our attorney general."

Bush on Wednesday authorized use of the Strategic Petroleum Reserve and temporarily waived environmental regulations on gasoline production and transport.

Charlie Drevna, policy director for the National Petrochemical and Refiners Association, said Katrina's fury had shut down nine refineries that normally produce 10 percent of the 380 million gallons of gas American drivers use each day.

Katrina's impact on the country's gasoline supply is worse than previous hurricanes or other disasters, Drevna said, because the storm struck the Gulf Coast refining hub along Louisiana, Mississippi and Alabama.

"This is the biggest hit the nation has ever taken," he said. "Katrina landed in the middle of refinery country."

Even as Bush predicted that Katrina's destruction would cause a "temporary disruption" in the country's energy supply, some analysts feared a broader economic impact.

Ken Simonson, chief economist for the Associated General Contractors of America, said the storm's damage would drive up construction costs.

"Unfortunately, Katrina will push many of these costs much higher," he said. "Contractors use a lot of diesel fuel for off-road equipment, their own trucks, and the multitude of deliveries of materials and equipment. Petroleum or natural gas is a key ingredient in asphalt, roofing materials, plastic pipe and insulation. And energy costs are built into the price of mining, milling, making, molding and transporting metals, concrete and most other construction materials."

Doug McIntyre, a senior oil-market analyst with the U.S. Energy Information Administration, noted that gas supplies were already tight and prices already at near-record levels before Katrina struck.

Before Katrina wrought its worst damage, McIntyre's agency, in its weekly survey, Monday put the average gas price at $2.61 per gallon, 40 percent higher than the start of the year. McIntyre said he wouldn't be surprised to see the average price next Monday reach $3 or higher.

"The severity and location of the storm make this pretty much unprecedented," McIntyre said. "It really hit a crucial area and delivered a major supply shock when prices were very high already."

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