Oil and Gas

Obama eyes active role in oil markets

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.

Democratic presidential candidate Senator Barack Obama shakes hands with supporters during a campaign stop at the University of Charleston in Charleston, West Virginia, March 20, 2008. REUTER/John Sommers II

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.”

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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.

The reserve, created by Congress in 1975 after the Arab oil embargo, holds emergency supplies of crude at four underground storage sites in Texas and Louisiana.

Grumet said Obama was extremely concerned about high oil prices as well as speculation in the markets. But he rejected claims that environmental restrictions were to blame for insufficient oil refining capacity, saying oil companies had kept it that way in order to make refining profitable.

Obama has said a key factor in bringing oil prices down and fighting climate change will be tackling the transport sector and increasing the fuel economy of cars.

Grumet said Obama supported a global carbon market and would seek to link a U.S. emissions trading system with the established European one “as soon as possible,” though he would make establishing a U.S. program to fight warming and agreeing to an international climate change treaty his top priorities.

Clinton supports an 80 percent reduction in carbon emissions by 2050, a 40 mile-per-gallon fuel efficiency standard by 2017 and a 10 percent cut in energy consumption by 2020. McCain co-authored a bill to cut emissions by 65 percent by 2050 and favors unspecified fuel efficiency increases.

Grumet said Obama would push the biofuel industry to move into second-generation fuels made from waste and advance beyond ethanol produced by corn to avoid the “food or fuel” debate.

(To read more about the U.S. political campaign, visit Reuters "Tales from the Trail: 2008" online at

Editing by Lori Santos and Eric Beech