Obama eyes active role in oil markets

By Jeff Mason

WASHINGTON (Reuters) - Democrat Barack Obama would take an active role in U.S. oil markets as president, tackling concerns about the dominance of large oil companies and eyeing the Strategic Petroleum Reserve as a potential weapon to combat high prices, his top energy adviser said.

Jason Grumet, the presidential hopeful's key energy and environmental policy aide, told Reuters this week that an Obama administration would crack down on any competition lapses in the sector that have resulted from big corporate mergers.

Grumet also said Obama would seek to link a future U.S. carbon emissions trading system with the European Union's scheme as soon as possible while focusing attention on China and India in forging a global warming pact.

Obama is locked in a tight race with fellow Democrat New York Sen. Hillary Clinton for the chance to take on presumptive Republican nominee John McCain in the November election.

Grumet, head of the Washington-based Bipartisan Policy Center in addition to advising the Obama campaign, said the oil industry had "concentrated incredible market power in a small number of companies" in a way that caused alarm.

"Senator Obama has a deep concern that the consolidation of the industry -- these national mergers, you know, that were allowed under both Clinton and Bush administrations -- are a cause for some concern," he said.

He said an Obama administration would examine "whether these mergers and consolidations have decreased competition in a way, concentrated market power in a way, that is undermining to consumers."

Grumet declined to identify specific companies and would not comment on whether Obama would seek to break up dominant players. Leading U.S. oil firms include ExxonMobil Corp., Chevron Corp., and ConocoPhillips.

"It is premature to try to articulate what the remedy is," Grumet said. "There are indications that there could be some problems there and ... the (Bush) administration has been a bit asleep at the switch, so we would be digging into those questions aggressively."

HIGH PRICES, CLIMATE CHANGE

With oil prices at record highs, Grumet said Obama would seek to tax the "windfall" profits that oil companies are making - a threat that Clinton has also made. McCain, a Republican senator from Arizona, says the United States needs to eliminate its dependence on foreign oil.

The average U.S. price for gasoline hit a record $3.28 a gallon this week. The Energy Department predicts that pump prices in some regions could hit $4 a gallon this spring.

Obama would also consider tapping the Strategic Petroleum Reserve to bring down prices while recognizing that such a move is normally meant to aid in the case of an acute supply disruption, Grumet said.

"It would be on the table," he said.

Clinton called for releases from the reserve this week. President George W. Bush has said he would not use U.S. reserves to bring prices down.