High gasoline prices feed economic uncertainty: Bush

By Chris Baltimore

WASHINGTON (Reuters) - President George W. Bush on Thursday said high gasoline prices were stoking uncertainty over the direction of the U.S. economy as crude oil prices surpassed records set during the oil shocks of 1979-1980.

"That creates a lot of uncertainty," Bush said at a news conference, referring to gasoline prices. "If you're out there wondering what your life is going to be like and you're looking at $4 a gallon, that's uncertain."

Some analysts have said U.S. gasoline could hit $4 a gallon this summer, but Bush did not say whether he agreed.

Hours later, U.S. crude oil prices hit a new all-time peak of $102.74 a barrel, beating the previous inflation-adjusted high of $102.53 struck in 1980 as tracked by the International Energy Agency.

In real terms, crude oil prices are now higher than they have ever been.

Driven by record weakness in the U.S. dollar, as well as a rally in commodities across the board, U.S. crude oil futures prices on Thursday surpassed levels set during the price shocks of 1978-1980, when oil prices doubled due to a revolution in Iran and an ensuing drop in the OPEC member's oil output.

U.S. gasoline prices have shot up 17 cents in the past two weeks to a national average of $3.10 a gallon, as record crude oil prices above $100 a barrel trickled through the refining system to the pump.

High energy prices are another factor weighing on the U.S. economy, which is teetering on the edge of recession.

New economic data on Thursday showed the slender pace of U.S. growth was unrevised in the fourth quarter and new jobless claims jumped sharply last week, reinforcing a fragile outlook.

The federal Energy Information Administration has projected that average U.S. pump prices will peak around $3.40 a gallon this spring, but it has said it would likely revise that figure upward in the near future to reflect soaring oil prices.

Speaking with reporters on Thursday, U.S. Energy Secretary Sam Bodman declined to concede that $4 gasoline prices were inevitable. Bodman reiterated calls for the Organization of the Petroleum Exporting Countries to boost its output when it meets next week to review production policy.

Bush said the U.S. Congress should pass legislation to encourage the building of refineries on abandoned military bases and open the Arctic National Wildlife Refuge in Alaska to oil drilling.

Bush also said rising demand for ethanol gasoline blended from corn is putting pressure on food prices, and called for more research into non-food cellulosic fuel sources like switch grass and wood chips.

"If you look what is happening in corn, you're beginning to see the food issue and the energy issue collide," Bush said.

(Editing by Marguerita Choy)