April 25 (Bloomberg) -- President George W. Bush, facing voter concern over soaring fuel prices, said he will free up oil that is being added to the nation's emergency reserves and waive rules that are creating bottlenecks in U.S. gasoline markets.

Bush, in a speech today in Washington to the trade group for ethanol producers, said the country should improve fuel efficiency and develop alternatives to oil. He also ordered the Justice Department to look for possible price manipulation. Democratic lawmakers said Bush's proposals would do little to lower prices.

``We'll leave a little more oil on the market'' by halting deliveries to the reserves, Bush said. ``Every little bit helps.'' He said the fuel-rule waivers would address concerns about local shortages as refiners switch to blending ethanol in gasoline.

Bush and Republicans in Congress face growing pressure from voters as crude oil soars to a record and gasoline pump prices near the all-time high set after Hurricane Katrina last year. A CNN poll released yesterday showed 69 percent of U.S. adults say higher fuel costs are causing financial hardship.

The Energy Department will suspend deposits to the Strategic Petroleum Reserve through the end of summer, which is the period of peak demand in the U.S., Bush said.

Because the stockpile is nearly full, the effect of the halt may be minimal. The government has been adding an average of about 25,000 barrels of oil per day to the reserve so far this year. The U.S. imports about 10 million barrels a day.

Oil Reserves

The U.S. reserve, in underground salt caverns along the U.S. Gulf Coast, is meant to be used in case of a sudden supply disruption. Bush has said he would not release reserves just because prices are high, and he didn't change that stance today.

Crude oil surged to a record $75.35 a barrel on the New York Mercantile Exchange last week amid concern that Iranian oil supplies might be jeopardized by the dispute over Iran's nuclear program. Oil fell 45 cents to $72.88 a barrel today in reaction to Bush's speech.

Fear of future disruptions is doing more to boost oil prices than a lack of supply, Saudi Arabia's oil minister, Ali al-Naimi, said this week. Saudi Arabia is the biggest oil producer in OPEC, followed by Iran.

Fuel Rules

The plan to waive rules governing fuel blends could do more harm than good, according to Bob Slaughter, head of the National Petrochemical and Refiners Association, the refining industry's trade group, based in Washington.

``If you even consider making any change, you want a lot of evidence that a change is necessary and will do more good than harm,'' Slaughter said in an interview yesterday. ``That is not the case right now.''

Refiners are replacing MTBE, a gasoline additive that fouled drinking water supplies, with ethanol because of changes in fuel rules in the energy legislation Bush signed in August.

Over the past week, shortages have occurred in Delaware, Pennsylvania, Virginia and Maryland, according to the AAA, the nation's largest motoring club. About 60 filling stations in the Dallas area experienced brief shortages earlier this month.

The transition has been made more difficult because it coincides with an annual switch to so-called summer-grade fuel, required in some places under the Clean Air Act. Pennsylvania is the only state so far to request a waiver of the summer rules, according to Jennifer Wood, spokeswoman for the Environmental Protection Agency in Washington.

Price Manipulation

The investigation by the Federal Trade Commission and the Justice Department was sought by the Republican leaders of the House and Senate. It renews Bush's directive to the FTC after Katrina hit to be on the watch for price gouging.

``The first thing to do is to make sure Americans are treated fairly at the gas pump,'' Bush said. ``This administration is not going to tolerate manipulation.''

Boone Pickens, a Dallas hedge fund manager and Bush supporter, said he was disappointed the president is raising this issue because it probably won't lead to anything.

``There's not anything there. There's not anybody gouging,'' Pickens said in an interview today at the Milken Institute conference in Los Angeles. ``You have the Federal Trade Commission looking at gasoline prices every day.''

U.S. Attorney General Alberto Gonzales and FTC chief Deborah Platt Majoras today sent letters to state attorneys general pledging cooperation on investigations and saying the agencies ``have substantially increased our efforts at the federal level to monitor, detect, pursue and prevent any violations of the law in this industry.''

The FTC will send a final report to Congress by May 19 on whether businesses have manipulated gasoline markets and prices.

Past Investigations

Past investigations of price gouging have concluded that ``the industry is reasonably competitive and the explanation for price increases lies in other causes,'' said Bert Foer, president of the American Antitrust Institute. The chance investigators will find anything new ``strikes me as fairly low,'' he said.

The average retail price of gasoline nationwide is $2.914 a gallon, according to the Department of Energy, and prices exceed $3 in Los Angeles, New York and Washington. Bush's 14-vehicle motorcade to today's event passed an Exxon station next to the Watergate complex that was selling gasoline for $3.29 a gallon.

In his speech, Bush repeated past statements that high prices are a result of worldwide demand outstripping supply.

The president said the actions the U.S. must take are encouraging greater fuel efficiency for cars and trucks, including more use of hybrid vehicles, and expanding domestic production and refining capacity.

Tax Incentives

Democrats in Congress said today that they would push legislation to give motorists a 60-day moratorium on paying the federal gasoline tax of 18 cents a gallon.

The move would give motorists some relief from higher prices during the vacation driving season, said Senator Bob Menendez. The New Jersey Democrat said he would propose repealing tax breaks for oil companies to make up the shortfall to the federal highway trust fund, which is financed by the gasoline excise tax.

Bush today said that he would urge Congress to eliminate tax incentives that benefit oil companies, including breaks for research on deepwater drilling. The tax subsidies he would target are worth $2 billion over the next 10 years, he said.

Democratic Senators Dianne Feinstein of California and Maria Cantwell of Washington proposed legislation to ban ``excessively unconscionable prices'' after disasters such as Hurricane Katrina. They also proposed a requirement that oil and gasoline futures traders who use on-line trading systems keep records to enable federal regulators to detect market manipulation.

Oil Traders

The New York Mercantile Exchange, where oil futures are traded in the U.S., keeps an ``audit trail'' that enables market regulators to detect manipulation, Feinstein said. ``But if you trade on an electronic trading platform, no records are kept and there is no audit trail.''

New York Democrat Charles E. Schumer said Democrats will also propose a ``complete examination as to whether or not we should break up the big oil companies.''

``We have to reexamine whether having only a handful of giant oil companies can coexist with the needs of the American consumer and a rational energy policy in this country,'' he said.

Valero Energy Corp. today reported that first-quarter profit surged 59 percent and said the second quarter will probably be its best ever. The company, which processes one of every seven barrels of oil refined in the U.S., pushed past ConocoPhillips and Exxon Mobil Corp. to become the country's biggest refiner when it acquired Premcor Inc. for $10.8 billion last year.

Oil Mergers

A Federal Trade Commission study issued in 2004 found that the consolidation of U.S. oil companies had not contributed to increases in oil or gasoline prices.

The FTC study contradicted findings by the Government Accountability Office, the investigative arm of Congress, that five oil-company mergers since 1990 had pushed up gasoline prices an average of one or 2 cents a gallon.

The oil industry is one of the biggest donors to Republican election campaigns. In 2004, the industry gave 80 percent of its $26 million in campaign donations to Republican candidates, including $2.6 million to Bush. That was the Republicans' biggest share in at least a decade, according to the Center for Responsive Politics, a Washington-based research group.

In 2005, the industry gave 84 percent of $7 million to the Republicans, and the top 20 congressional recipients of the industry's giving were all Republicans.

To contact the reporter on this story: Catherine Dodge in Washington at cdodge@bloomberg.net; Jim Efstathiou Jr. in Washington at jefstathiou@bloomberg.net

Last Updated: April 25, 2006 17:47 EDT