WASHINGTON -- As oil and gasoline prices fell over news from the Energy Information Administration (EIA) that the nation's oil, gasoline, diesel and heating oil inventories were larger than expected, Democrats in the U.S. House of Representatives were unsuccessful in a renewed effort to make gasoline and diesel price gouging a federal crime, but were successful in blocking legislation to allow offshore drilling.
Oil prices were lower after the government said on Wednesday that the nation's fuel and oil supplies were larger than expected, reported the Associated Press, evidence that the [image-nocss] soaring price for gasoline has sliced into Americans' demand for fuel. U.S. crude oil inventories rose by 800,000 barrels to 301.8 million barrels in the week to June 20, the EIA said, compared with analyst expectations of a 1.4-million-barrel decline.
At the pump, gasoline prices inched lower, but remain entrenched above $4 a gallon. In its weekly inventory report, the EIA said crude oil supplies rose slightly last week. Analysts surveyed by research firm Platts had expected a 1.7 million-barrel decline. Gasoline supplies fell less than expected. And inventories of distillates—which include diesel fuel and heating oil—rose much more than expected. Demand for gasoline, meanwhile, fell 2.1%. The weekly inventory report tends to trigger volatile trading in oil futures, said the report, especially since prices have risen to record levels near $140. (Click here for the full report.)
"At some point, that's going to bring [gasoline] prices down," Phil Flynn, an analyst at Alaron Trading Corp., Chicago, told AP.
Light, sweet crude for August delivery fell $2.45 to settle at $134.55 on the New York Mercantile Exchange.
In Congress, House Democrats failed Tuesday to resurrect a bill to punish retail gasoline price gouging, while maneuvering to block Republican attempts to expand offshore drilling, an idea gaining in popularity amid $4-a-gallon gasoline prices. Action on legislation that would ensure continuation of the ban on oil and natural gas drilling in most of the country's coastal waters was put off until later this summer after it became increasingly clear that Republican lawmakers may have the votes to lift the drilling moratorium, AP said.
As Democrats prepared a string of energy proposals before lawmakers depart for the July 4 holiday recess, Republicans charged that they were being blocked from getting a vote on whether to end the ban on offshore oil and gas drilling.
Last week, Republican presidential candidate Senator John McCain (R-Ariz.) as well as President Bush called for ending the blanket prohibition on energy development over 80% of the country's offshore waters. Republicans contend that the offshore bans should be ended to allow for more domestic oil and gas production, an argument that has gained support with $130-a-barrel oil raising the cost of everything from food to air travel.
The House Appropriations Committee has postponed consideration of an Interior Department spending bill that included continuation of the offshore drilling ban. Republicans had prepared a proposal that would have ended the ban and allowed oil and gas development 50 miles from shore in all U.S. coastal waters.
"Somebody's afraid that we'll send a message" and lift the drilling ban, Rep. Jerry Lewis of California, the ranking Republican on the Appropriations panel, said Tuesday as the panel focused on other legislation.
The similar Interior spending bill, which also included the offshore drilling ban, was put off in the Senate as well.
House Democratic leaders failed to get the two-thirds vote needed to push through a measure that would have made gasoline and diesel fuel price gouging a federal crime, with penalties of up to $2 million for individuals and possible jail time. The vote was 276 to 146.
The House has passed similar gouging legislation previously, as has the Senate, only to be abandoned. Supporters of the bill argued that gouging is widespread, while opponents said it is not and would be difficult to prove even if it occurred.
Democratic congressional leaders remain strongly opposed to lifting the drilling moratorium, arguing that oil companies already hold leases to 40 million acres of federal waters that they have not moved to develop. "One way you deal with this problem of supply...is to force oil companies and gas companies that own permits to drill them," said Rep. Rahm Emanuel (D-Ill.).
House Majority Leader Steny Hoyer (D-Md.) said that legislation to lift the ban has significant support and might pass the House, but he told reporters, "If we allow drilling everywhere tomorrow, there would be no additional supply available."
Energy experts and oil geologists acknowledge it would take five to 10 years for any oil or natural gas to be produced if the ban were ended today.
"We have the votes," maintained Rep. John Peterson (R-Pa.), sponsor of the pro-drilling measure that would open waters 50 miles offshore to oil companies. But he said House Speaker Nancy Pelosi (D-Calif.) "will do everything she can do to stalemate it."
Emanuel, at a news conference, sidestepped questions on whether Democrats are concerned the Republican drilling measure was gaining support and that Democratic leaders were refusing to allow it to come up for a vote. Instead, Emanuel emphasized that Democrats soon will push legislation that would require oil and gas companies to explore and develop the waters on which they already have obtained federal leases. If they don't, they will lose the leases.
Oil companies and their Republican supporters in Congress "are using this crisis as an excuse" for a grab for additional federal land and waters, said Emanuel.
Other Democratic proposals range from giving the federal government new tools to curtail speculation in oil trading markets by imposing new requirements on the amount of collateral traders must have in oil purchases and requiring a reduction in mass transit fares.
Meanwhile, the U.S. Supreme Court on Wednesday cut the $2.5 billion punitive damages award in the 1989 Exxon Valdez disaster to $500 million, said AP. The court ruled that victims of the worst oil spill in U.S. history may collect punitive damages from Exxon Mobil Corp., but not as much as a federal appeals court determined. Justice David Souter wrote for the court that punitive damages may not exceed what the company already paid to compensate victims for economic losses, about $500 million compensation.
Exxon asked the high court to reject the punitive damages judgment, saying it already has spent $3.4 billion in response to the accident that fouled 1,200 miles of Alaska coastline.
A jury decided Exxon should pay $5 billion in punitive damages. A federal appeals court cut that verdict in half.
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