Obama steps up campaign against high fuel costs

WASHINGTON (AFP) - US President Barack Obama on Tuesday stepped up his campaign over politically damaging high gasoline prices, calling on Congress to eliminate $4 billion dollars in subsidies to oil industry giants.

"There are steps we can take to ensure the American people don't fall victim to skyrocketing gas prices over the long term," said Obama in a letter to top Republican and Democratic leaders on Capitol Hill.

"One of these steps is to eliminate unwarranted tax breaks to the oil and gas industry and invest that revenue into clean energy to reduce our dependence on foreign oil."

Obama's offensive comes in a week when several giant oil firms are poised to release quarterly results expected to show big profit increases at a time when American motorists are being squeezed by rising prices at the pumps.

The White House appears acutely aware of the damage gasoline price hikes could do to Obama's political prospects, and the danger that increasing fuel costs could dampen recent growth in jobs and economic growth.

Analysts say that while presidents often have few options to lower gasoline prices, which are at the mercy of global price fluctuations, they often pay a political price when voters get hit in their wallets.

In his 2008 White House campaign, Obama turned the price of motor fuel into a weapon against Republicans, claiming his foe Senator John McCain was a puppet of "Big Oil" who would leave consumers hostage to the cost of filling their cars.

In his letter to congressional leaders, Obama said that subsidies paid to oil firms to develop new sources of energy were "wasteful" and not needed by an industry riding high on large profits.

Obama wrote that many Americans were still struggling to pay their bills or to find jobs.

"The recent steep increase in gas prices, driven by increased global demand and compounded by unrest and supply disruptions in the Middle East has only added to these struggles," he wrote.

Obama wants to redivert subsidies offered to oil firms towards developing alternative sources of 21st century clean energy.

"That's the key to helping families avoid pain at the pump and reducing our dependence on foreign oil," Obama said in the letter to leaders including Republican House Speaker John Boehner and Democratic Senate leader Harry Reid.

The vast oil and gas industry benefits for a range of tax breaks and incentives focusing on the prospecting and exploration of new energy fields.

The industry has warned that any drop in government subsidies will cost jobs at a time when the administration is battling to bring down high unemployment after the worst economic crisis in decades.

Brendan Buck, a spokesman for Boehner, said that his boss wanted to reduce dependence on foreign oil by tapping increased American energy resources.

"Unfortunately, what the president has suggested so far would simply raise taxes and increase the price at the pump," Buck said.

Markets are awaiting quarterly results from firms including ExxonMobil, ConocoPhillips and Chevron this week.

First-quarter earnings at four of the largest oil companies are expected to improve by 22 percent to 56 percent, according to the latest poll of analysts by Thomson Financial.

According to the US Energy Information Administration, the average cost of a gallon of gasoline in the United States is close to four dollars, a rise of nearly a dollar over a year ago.