SAN FRANCISCO (Reuters) - With U.S. retail gasoline prices at a record high, Democratic presidential candidate John Kerry on Tuesday will propose a new policy to reduce fuel costs, igniting a political fight over how much Americans pay at the pump.

Blaming the spike on the "failed policies" of Republican President Bush -- a former Texas oilman -- Kerry would pressure oil-producing nations to increase production and temporarily suspend filling the U.S. Strategic Petroleum Reserve, campaign aides said.

Kerry has chosen San Diego, which has the highest gas prices in the country -- $2.12 for a gallon of regular unleaded -- to lay out his proposals.

"I happened to notice that gas is now close to $3 a gallon here in California," he told a fund-raiser in San Francisco. "If it keeps going up like that, (Vice President) Dick Cheney and President Bush are going to have to carpool to work together."

With the peak summer driving season approaching and the Nov. 2 presidential election less than eight months away, energy costs are hitting consumers and business owners hard.

The U.S. Energy Information Administration on Monday announced the average nationwide price of regular unleaded gasoline set a new high of $1.758 per gallon. The agency predicted prices will move even higher in April and May.

Kerry, a Massachusetts Democrat who has been under fire from Republicans for advocating higher gasoline taxes in the Senate, would "arm twist" members of the Organization of Petroleum Exporting Countries to increase production.

"A Kerry administration would act immediately to exert pressure on OPEC to abandon its cut in output quotas and instead increase oil supplies," the aides said.

OPEC ministers meet on Wednesday in Vienna to decide whether to go ahead with a planned output reduction of 1 million barrels a day in April. U.S. crude oil prices soared above $38 a barrel earlier this month -- a 13-year high -- on worries about global supplies although prices have since fallen.

Bush campaign spokesman Steve Schmidt blasted Kerry's record of backing hikes in the gas tax and urged consumers to "check the prices at your neighborhood gas stations and add 50 cents -- that's what John Kerry said he supported."

Republicans as well as Democrats have urged the Bush administration to stop filling the Strategic Petroleum Reserve -- America's emergency crude oil stockpile -- to keep more oil in the market.

The White House has refused, saying that the scheduled crude oil deliveries to the stockpile have a "negligible" impact on market prices. Energy Secretary Spencer Abraham said last week the United States was not going "to beg for oil."

"The Bush administration has put the SPR fill program on automatic pilot without regard to the short-term effect on the US market," the Kerry campaign said. "The program needs better management."

Kerry would temporarily suspend filling SPR until oil prices return to normal levels.

Other elements of his proposal include working with states to develop "rational" fuel policies that ensure local air quality is protected while reducing market problems resulting from the number of boutique fuels used around the country.

Kerry would also offer tax incentives to encourage Americans to use energy more cleanly and efficiently, fund the development of alternative energy sources like wind and solar and develop domestic oil and gas supplies.