Tags: Geithner | Oil | Prices | fix

Geithner: ‘There’s No Quick Fix’ for Soaring Oil Prices

Friday, 24 February 2012 09:25 AM

There are no quick fixes to lowering high oil prices, and U.S. policymakers need to focus on changing longer-term exploration and production policies, says Treasury Secretary Timothy Geithner.

Two things are working to push up oil prices higher and taking gasoline up with them, rising global demand stemming from firming economies worldwide, and secondly, ongoing tensions and threats of war between the West and Israel with Iran.

Those factors aren't going to change overnight.

"There's no quick fix to this, no short-term fix for this. The best strategy for the country is to expand production in the United States and to encourage Americans to use more efficient, cleaner sources of energy to make sure Americans are efficient about how they use energy and those are things we're over time doing," Geithner tells CNBC.

Editor's Note: Meltdown on Main Street Coming, Prepare Now

While the U.S. expands production capacity over the longer-term, more recent tax breaks such as the payroll tax cut extension can ease the pain at the pump in the meantime.

"It's very important that Congress continue to look for ways to do things that will help make the economy stronger overall and help lighten the burden on middle-class families like through the payroll tax extension," Geithner says.

The government has dipped into its strategic petroleum reserve in the past and will consider repeating such measure.

"There's a case for the use of the reserve in some circumstances and we'll continue to look at those and evaluate that carefully. But, again, the right thing for the country is to make sure we are focused on long-term investments in energy, changes in energy policy to help solve these long-term problems," he told CNBC.

"You can't view this as a problem that can be solved by short-term fixes."

Some blame the Federal Reserve for high gasoline prices.

The Fed has pumped trillions of dollars into the economy to kick-start recovery, but critics say such a move has pumped up oil prices as a side effect.

Easy money stemming from loose monetary policies has made its way into commodities markets, and since oil is often priced in dollars, buyers in other currencies find the commodity attractively priced thanks to a dollar made weaker by the Federal Reserve.

Meanwhile, excessive regulations are preventing many energy companies increasing supply at home, many have charged.

"No credible argument to support that, again, in my judgment," Geithner says.

"As everybody can acknowledge and the facts show this, there's been a very substantial increase in exploration, production in the United States during these last three years," he said.

"It's getting better, not worse, and that's the good thing for the long run, of course, you see profitability in the energy sector very high, investment in the United States very, very strong and those are fundamentally good things for us over the long run."

Iran continues to develop its nuclear program despite sanctions from the West.

The country has repeatedly threatened to close off the Strait of Hormuz, a narrow waterway connecting oil-rich Persian Gulf nations with the world, and fears are growing than an edgy Israel may attack Iran unilaterally.

That's adding 30 cents to every gasoline Americans are buying these days.

"It's a market that's caught fire," says Ben Brockwell, an analyst at the Oil Price Information Service, according to CNNMoney.

"And it doesn't look like there's any circuit breakers to stop it."

Editor's Note: Meltdown on Main Street Coming, Prepare Now

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