WASHINGTON – Crude oil and gasoline futures fell Tuesday after President Bush gave the Environmental Protection Agency the authority to relax regional clean-fuel standards to attract more imports of gasoline to the United States and to make it easier for supplies to be moved from one state to another.
President Bush also said he would halt deposits of oil to the nation's strategic petroleum reserve until the fall, but analysts said that measure would have next to no impact on crude prices and certainly would not help make gasoline any cheaper. Even the fuel-specification waivers will have a marginal impact, analysts said, given that the main force behind today's soaring pump prices is the near-record price of crude oil.
"If you have $75 a barrel crude oil, you're sort of at a starting point of $2.90 a gallon for gasoline," said Mary Novak, managing director at the economic consulting firm Global Insight.
Light sweet crude for June delivery fell by 68 cents to $72.65 a barrel on the New York Mercantile Exchange, dropping on the heels of a 5.89-cents-per-gallon decline in May gasoline futures, which traded at $2.115 a gallon.
Analysts said a floor remains underneath oil prices, which are 33 percent higher than a year ago, for a variety of reasons:
• With daily global demand roughly 85 million barrels per day, the world's oil producers have less than 2 million barrels per day of spare production capacity, and most of that is for Saudi blends of oil that are less ideal for manufacturing transportation fuels.
• Oil traders are nervous about geopolitical tensions ranging from violence in Nigeria to the West's nuclear standoff with Iran to the move toward greater nationalization of natural resources in energy-rich Venezuela.
• The global economy is expanding, and that means the thirst for oil is only going to grow.
• Speculative investors are piling into energy markets as a way to profit from soaring prices and geopolitical turmoil that could potentially be bad for equities prices.
In a further escalation of the war of words between Iran and the West, Iran threatened Tuesday to begin hiding its nuclear program if the West takes any "harsh measures" against it — Tehran's sharpest rebuttal yet to a U.N. Security Council Friday deadline to suspend uranium enrichment or face possible sanctions.
The United States, Britain and France claim Iran wants to use enriched uranium for nuclear weapons, not just electricity generation. Iran denies the charge, but Washington has been pressing fellow members of the Security Council to impose tough economic sanctions against Iran, which could affect its oil exports.
Nigerian exports are down because of violence there that prompted Royal Dutch Shell PLC to shut in 455,000 barrels per day of production, and more than 300,000 barrels per day of Gulf of Mexico output remains shut in as a result of damage from last summer's hurricanes. Also, Iraq's output has been hampered by continued sabotage of energy industry infrastructure.
Venezuela, another major oil producer, unsettled the market over the weekend by reasserting its intention to give the state greater control of oil fields being operated by foreign-owned oil companies.
Concerns about tight refining capacity and gasoline supplies in the U.S. ahead of the summer driving season are also propping up prices.
In the seven weeks ended April 14, gasoline stocks declined by more than 23 million barrels, according to last week's U.S. Energy Information Administration report.