Feds predict $4.15 gas while Senate GOP kills energy plan As Senate fight rages, feds predict $4.15-a-gallon gas

GOP blocks energy package containing new taxes on big oil

WASHINGTON — Government forecasters Tuesday predicted American motorists would see $4.15-a-gallon gas by summer's end, but lawmakers trying to respond to consumer anger over fuel prices were stuck in idle.

In a fuel-fight steeped as much in election-year politics as energy policy, senators jousted Tuesday over a doomed Democratic energy package intended to slap new taxes on the major oil companies.

In the end, Senate Republicans successfully blocked any action on the bill, although lawmakers took the opportunity to engage in the kind of rhetoric that has characterized the two parties' continuing debate over what to blame for soaring energy prices — restrictions on exploration or oil company greed.

But behind the scenes, lawmakers were working to craft a compromise plan that would try to rein in some of the speculators that many experts believe have helped send oil prices skyward.

"I think we could come to a consensus on the speculators issue," said Sen. Kay Bailey Hutchison, R-Texas.

The confrontation on the Senate floor came on a day when the U.S. Energy Information Administration had more bad news for consumers: gasoline prices, the agency said, will peak at $4.15 in August and average $3.92 in 2009.

Previously, agency analysts had predicted gasoline prices would have topped out by now.

On Tuesday, regular gas was selling for a record $4.04 a gallon nationwide, according to AAA's Daily Fuel Gauge Report, and an all-time high of nearly $3.91 a gallon in Houston.

Oil prices, meanwhile, are expected to average $122 a barrel this year — $50 higher than the 2007 average — and climb to $126 a barrel in 2009, the Energy Information Administration said.

Just a month ago, agency analysts thought oil prices might soften next year.

Light, sweet crude for July delivery fell $3.04 Tuesday to close at $131.31 on the New York Mercantile Exchange.

What the bill proposed

Lawmakers are getting an earful from constituents about gas prices.

"You go to weddings and christenings and people are saying, 'What about gas prices,' " said Sen. Charles Schumer, D-N.Y. "It's on everyone's lips."

Sen. John Cornyn, R-Texas, said the worries about high prices were evident in conversations he had with constituents this week at the Houston Food Bank.

"This is not an esoteric debate here in Congress," Cornyn said.

Democrats launched the skirmish by bringing up an energy package they were all but certain would be unacceptable to Republicans.

Calling for "oil company accountability," the Democrats proposed hitting the five largest oil companies with a 25 percent windfall profits tax unless the companies increased investments in renewable energy and refining capacity.

The measure also would have gutted $17 billion in oil company tax breaks.

And the legislation would have made price gouging a federal crime and branded as illegal efforts by the Organization of the Petroleum Exporting Countries to control the price of oil worldwide.

The proposal attracted an immediate veto threat from the White House.

"Rather than addressing the principal cause of fuel price increases — rising world petroleum demand without a similar increase in supply — (the bill would) undercut U.S. energy security and decrease U.S. energy production, thus exacerbating market tightness and increasing energy prices," the Office of Management and Budget said in a statement.

A 51-43 procedural vote in the Senate was insufficient to avoid a GOP filibuster.

Senate Republicans also blocked any action on a second bill that would have extended tax credits for renewable and alternative energy sources.

Republicans, who have dismissed the Democratic-led House and Senate as a "drill-nothing Congress," are calling for oil and gas exploration in offshore areas where drilling isn't permitted now and in Alaska's Arctic National Wildlife Refuge.

Democrats have made clear they hope to hammer Republicans with these energy provisions throughout the summer and into the fall.

"We believe if we bring this up again and again and again, they'll break," Schumer said.

This energy package, he said, "is politically the most damaging to them."

Speculators targeted

The two senators expected to claim their parties' presidential nominations — Democratic Sen. Barack Obama and Republican Sen. John McCain — did not participate in the voting Tuesday.

The Democratic package also would have tried to cool speculative trading in the oil markets by preventing traders from routing transactions through offshore markets and requiring them to put down more money to trade in energy futures.

This was the only part of the bill that did not prompt a veto threat, although the White House was not fond of the language.

david.ivanovich@chron.com