Expensive oil due to tight supply: energy secretary

WASHINGTON (Reuters) - U.S. Energy Secretary Sam Bodman told Congress on Thursday that crude oil prices have reached record-high levels of $135 a barrel because global oil production has failed to keep up with demand.

"The high-priced energy environment is being driven by the fact that demand has outstripped supply," Bodman testified at a congressional hearing looking into the Bush administration's energy policy and the cause of high oil prices.

Bodman reiterated to members of the House Select Committee on Energy Independence and Global Warming that part of the long-term solution to America's energy problems is increasing domestic oil production, and that Congress should allow drilling in Alaska's Arctic National Wildlife Refuge.

A new report issued on Thursday by the federal Energy Information Administration said if ANWR were opened to drilling this year, oil from the area would not be available to the market until 2018 and output would peak at 780,000 barrels a day in 2027.

The extra ANWR oil would also do little to lower crude oil costs, pushing down the price of oil by just 75 cents a barrel in 2025, the EIA said.

"There is no silver bullet that will immediately solve our energy challenges, or drastically reduce costs at the gas pump," Bodman said.

However, Democratic Rep. Edward Markey, who is the committee's chairman, said the administration could help bring down prices in the short term by selling oil to energy companies from the Strategic Petroleum Reserve.

"This administration has no problem deploying our National Guard reserves to Iraq but it continues to refuse to deploy our oil reserves to help consumers this summer," Markey said.

Markey asked why the Bush administration would ask Saudi Arabia to pump more oil when the United States had a huge stockpile of crude that could be tapped. He said the reserve "is the one weapon we have ... and we must use it now."

Bodman said the oil reserve "is meant to be there as a protection for the American people" and should only be used in a severe supply emergency. The stockpile holds about 703 million barrels of crude at four underground storage sites in Texas and Louisiana.

Rep. Jim Sensenbrenner, the top Republican on the House committee, said the Democratic-controlled Congress was more interested in promoting wind and solar energy than increasing U.S. oil production.

"Those technologies are better suited for reducing greenhouse gas emissions, not energy prices," he said.

Markey pointed out that big oil companies hold drilling rights "that they aren't even using" to search for oil on more than 30 million acres both onshore and offshore.

(Reporting by Tom Doggett, editing by Matthew Lewis)