Expensive oil due to tight supply - U.S. energy secy

By Tom Doggett

WASHINGTON (Reuters) - U.S. Energy Secretary Sam Bodman told Congress on Thursday that crude oil prices have reached record-high levels of $135 a barrel because global oil production has failed to keep up with demand.

"The high-priced energy environment is being driven by the fact that demand has outstripped supply," Bodman testified at a congressional hearing looking into the Bush administration's energy policy and the cause of high oil prices.

Bodman reiterated to members of the House Select Committee on Energy Independence and Global Warming that part of the long-term solution to America's energy problems is increasing domestic oil production, and that Congress should allow drilling in Alaska's Arctic National Wildlife Refuge.

"There is no silver bullet that will immediately solve our energy challenges, or drastically reduce costs at the gas pump," Bodman said.

However, Democratic Rep. Edward Markey, who is the committee's chairman, said the administration could help bring down prices in the short term by selling oil to energy companies from the Strategic Petroleum Reserve.

"This administration has no problem deploying our National Guard reserves to Iraq but it continues to refuse to deploy our oil reserves to help consumers this summer," Markey said.

Markey asked why the Bush administration would ask Saudi Arabia to pump more oil when the United States had a huge stockpile of crude that could be tapped. He said the reserve "is the one weapon we have ... and we must use it now."

Bodman said the oil reserve "is meant to be there as a protection for the American people" and should only be used in a severe supply emergency. The stockpile holds about 703 million barrels of crude at four underground storage sites in Texas and Louisiana.