Concerned that the trade deficit with China could hurt Republicans in the November elections, the Bush administration has been holding a harder line. Last month the administration filed an unfair-trade case against the Asian giant involving U.S. auto parts. But the insatiable appetites of motor vehicles themselves are creating headaches domestically. And this week, the government told motorists to prepare for higher fuel prices in the months ahead.
The Energy Department predicts the cost of regular fuel to average $2.62 per gallon during the April to September driving period, 25 cents more than last summer. Some places already are reporting prices have surpassed the $3 mark.
Analysts blame the spike on increased fuel prices at the wholesale level. This week, crude oil climbed above $69 a barrel; its highest level this year. Wholesale gasoline for delivery in May is just over $2 a gallon, nearly 30 percent higher than a year ago.
The upcoming hurricane season also is causing concern. Just how high fuel prices might go if the Gulf Coast is hit by another major storm is anybody's guess. Gasoline soared to a national average of $3.07 per gallon after Hurricane Katrina shut down major refineries last year.
President Bush: "America is addicted to oil."
The Bush administration's push for alternative fuels and the elimination of the rival oxygenate MTBE is increasing demand for ethanol. And, government officials warn supplies will be tight this summer. Ethanol prices on the spot market now top $2.60 a gallon, more than twice as much as last spring. But, the Energy Department does not predict a decline in demand.
SLUG E-85 PUMP
Newer vehicles capable of burning as much as 85 percent ethanol also are increasing demand. But the so-called E-85 fuel isn't readily available. U.S. Senators Richard Durbin and Barack Obama have criticized oil companies and the Bush Administration for the lack of E-85 pumps nationwide.
Obama is calling on the Internal Revenue Service to immediately allow stations to take advantage of a law that would greatly increase access. Legislation signed last year provides up to $30,000 in tax credits for stations that install alternative fuel equipment. The IRS has yet to make the credit available. Currently, an estimated 4 million flex-fuel vehicles are on the road, but only several hundred stations offer E-85.