REFILE-WRAPUP 3-Obama urges oil producers to increase output

Tue Apr 26, 2011 10:42pm EDT

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(Refiling to correct link to graphic)

* Obama says pressuring oil producers to lift supply

* Urges Congress to close oil and gas tax loopholes

* Holder sees "disturbing" things in energy markets

* U.S. gasoline futures hit 33-month high (Recasts with Obama comments)

By Alister Bull and David Alexander

WASHINGTON, April 26 (Reuters) - President Barack Obama on Tuesday urged world oil producers to lift crude output, as he sought to deflect public anger over high gasoline prices that has hurt his popularity among voters.

U.S. motor fuel prices have become a heated political issue after pushing toward $4 a gallon. Gasoline futures hit 33-month highs on Tuesday.

The rising prices at the pump are fueling voter discontent with Obama's leadership, opinion polls show, and could harm his re-election chances in 2012.

"They need to increase supplies," Obama told CBS affiliate WTKR in Hampton Roads, Virginia. "We are in a lot of conversations with major oil producers like Saudi Arabia," he separately told WXYZ television in Detroit.

Calling on producers to pump more oil during times of high crude prices was a strategy also used by the administrations of former presidents George W. Bush and Bill Clinton.

Obama, until now, had focused on trying to reduce oil demand, but he made clear in his comments on Tuesday that increasing output was also part of the solution.

"It's the first time the Obama administration has done this, but it's not because they have figured out any new strategy on trying to fight high oil prices," said Tim Evans, energy analyst at Citi Futures Perspective in New York.

"It's because it's the first time they've seen a 30 percent jump in oil prices over a few months."

Repeating concern that energy traders might be stoking higher prices, the Obama administration's top law enforcement official, Attorney General Eric Holder, told reporters he saw some "disturbing" things in the energy markets.

He said this justified the formation of a task force unveiled last week to probe possible fraud and manipulation of gasoline prices. [ID:nN26290736]

Earlier on Tuesday, the president sent a letter to Congress urging it to end tax breaks for oil and gas companies.

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Obama's letter to Congress on gas prices ID:nN26284246]

Graphic on U.S. retail gasoline prices:

r.reuters.com/but29r

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In the letter, Obama hailed what he called bipartisan support for ending the tax breaks.

But Republicans, who feel rising gas prices could help them defeat Obama in the 2012 election, said the approach would "raise taxes and increase the price at the pump."

This opposition contradicted signs of openness on Monday from the top Republican in the House of Representatives, Speaker John Boehner [ID:nN25223852], who voiced willingness to look at the subsidies received by oil and gas companies.

This put him somewhat at odds with his party's longstanding support for the energy industry, but by Tuesday his remarks on Obama's energy policies had turned much more critical.

GRASPING AT STRAWS

Indicating scepticism that the president's plan was anything other than a political tactic, energy analysts said there was no quick fix to the problem of high gasoline prices.

"Obama has said no, there's no silver bullet to help push down gasoline prices in the short term, but now it seems he's grasping at straws in the last couple of days to find policies to do the trick," said Matt Smith at Summit Energy in Kentucky.

A Washington Post-ABC News poll on Tuesday found that 71 percent of those surveyed said gasoline prices were causing them serious financial hardship, while 55 percent disapproved of the way Obama was handling his job as president.

The White House rejected suggestions Obama's letter was designed to deflect anger over gas price away from the president and toward oil companies, which it has repeatedly pointed out have made huge profits and yet continue to enjoy tax subsidies.

"We don't look at this as an issue of electoral politics in 18 months," White House press secretary Jay Carney said.

Obama, repeating a line he has repeatedly deployed in his two annual budget proposals, said more than $4 billion saved by closing the oil industry tax breaks could be invested in clean energy that would help to ease U.S. dependence on foreign oil. (Additional reporting by Jeff Mason, Steve Holland, Timothy Gardner, and Jeremy Pelofsky; Editing by Laura MacInnis, Philip Barbara and Eric Walsh)

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