US: February 28, 2008


WASHINGTON - The White House called for more US and global oil output to fight rising energy costs, but a top intelligence official said Wednesday that prices at $100 per barrel had yet to spur production.


"We would like to not only have exporting countries increase their output but we would also like here in the United States to be able to increase domestic (oil) production in environmentally friendly ways," White House spokeswoman Dana Perino told reporters.

She insisted, however, there was no "silver bullet" or short-term solution to high energy costs.

Perino spoke as government forecasters warned US drivers would pay much more for gasoline this spring and summer than they did last year because of more expensive crude oil.

The price of crude, which accounts for about two-thirds the cost of making gasoline, hit a record $102 a barrel this week, up sharply from $60 a barrel a year ago.

But even at that level, oil prices have not yet spurred higher production, US Director of National Intelligence Michael McConnell told Congress, citing an agency analysis.

"It has not stimulated investments and the surpluses you think it would create," McConnell told the Senate Armed Services Committee at a hearing on global threats.

The OPEC cartel has resisted raising its production despite President Bush's appeals during a January trip to the Middle East.

"The president is not going to be able to just go over there and open up the spigots," Perino said. "We have to work with our partners, we have to explain to them that having fulsome supplies of gasoline and crude oil is good not just for our economy but for the world economy," she said.


PUMP PRICES GOING HIGHER

Bush was told on his trip that Middle East producers did not want to see an economic downturn in the West, Perino said.

Nevertheless, commenting on tight oil supplies linked to higher US prices, she said, "We remain concerned."

The federal Energy Information Administration's next monthly energy forecast on March 11 will revise up its prior estimate that retail gasoline would peak around $3.40 a gallon this spring, said senior agency analyst Doug MacIntyre.

"I can't give you a number," he said. There has been some speculation that US pump prices will soar to $4 a gallon. MacIntyre said the EIA does not see the national average going that high, but it could reach that at some local stations.

OPEC member Venezuela has helped drive up oil prices with recent threats to cut off US sales in a dispute over Venezuelan President Hugo Chavez's nationalization drive.

McConnell said the threats were a potential concern, given that Venezuelan oil accounts for about 12 percent of US consumption. A cutoff, he said, could have "some impact, but oil is fungible."

He said Nigeria was one place where the United States could make up for lost Venezuelan oil, if Nigerian internal unrest eases and production resumes at previous levels.

But a cutoff would probably hurt the Venezuelan economy more than that of the United States, he said. The United States is the best equipped customer to refine the high-sulfur oil Venezuela produces. "At one level doing this is cutting off your nose to spite your face," he said.

(Additional reporting by Matt Spetalnick and Tom Doggett, editing by Todd Eastham)


Story by Randall Mikkelsen


REUTERS NEWS SERVICE