US energy secretary says increased world oil demand means a whole new world of oil price increases.
When it comes to determining the price consumers have to pay for gasoline and heating oil, it's a whole new world.
So says Samuel Bodman, the Massachusetts Institute of Technology-trained chemical engineer now serving as US energy secretary.
At a breakfast with reporters sponsored by the Monitor, Mr. Bodman noted that "for the first time in my lifetime, in my professional existence," major oil suppliers like Saudi Arabia are "right at the ragged edge" in their ability to meet the demand for oil.
The energy secretary says that despite increased world thirst for oil and constraints on US refining capacity, there is little possibility major oil-producing countries could increase production and have "a radical effect on prices."
The result, says Bodman: "We are for the first time in the hands of the traders. The free market, without outside supply interference [is]....setting the prices."
Bodman was president and chief cperating Officer of Fidelity Investments, the big mutual fund company, before moving into government service. "One of the things I learned at Fidelity is never to speculate on what the prices of common stocks or bonds might be in the future and I tend to apply that here," to energy prices, he said.
Without specifically forecasting prices, Bodman cautioned that "we are in a new situation...we are likely at least in the near term to be dealing with a different pricing regime than we have seen before." It appears to be a situation where new demand for oil appears likely to push up prices.
Despite what he calls an "extraordinary" rate of increase in the US demand for oil - up 2.7 million barrels a day in 2004 - Bodman disagrees with critics of the Bush administration's energy policies who call for imposing new, tougher fuel economy standards for automobiles.
"There really are issues related to safety and issues related to the position of US manufacturers and jobs for the people who are making these cars," Bodman said. "Do we put our citizens at risk by having lighter vehicles, less safe vehicles made in order to comply with what could be viewed as an arbitrary set of standards?"
The secretary stayed close to administration policy on the issue of global warming, one of the major topics at the G-8 summit this week in Gleneagles, Scotland. US officials successfully lobbied against any inclusion in the G-8 communiqué of specific targets for the reduction of greenhouse gas emissions. The US is the only G-8 country not to have ratified the Kyoto Protocol which calls for such reductions.
"I am married to an environmental lawyer so the matter gets frequent attention at home," Bodman quipped. He said that link between greenhouse gases and global warming, "is by no means in my mind absolutely certain..."
Bodman's top priority is working with Congressional leaders as they try to hammer out a compromise energy bill from the markedly different legislation passed by the House and Senate. President Bush wants a bill on his desk by August 1. The House bill favors fossil fuel producers and traditional energy sources. The Senate bill is more heavily weighted toward subsidies for conservation and renewal energy sources.
"There is every reason to believe that we will be better off - far better off - two or three years from now than we are today by having this bill and putting it into law and letting some of these things take hold," Bodman said.
The Energy Department is responsible for the safety, security, and effectiveness of the US nuclear weapons stockpile. "I am satified that we are adequately looking after things even in view of" Thursday's terrorist attacks in London, Bodman said.