Viewpoint: Gas Prices and the Great GOP Lie
To hear the Republican presidential candidates tell it,
President Obama is doing all he can — shy of changing the
price signs at your local Mobil station — to raise the cost
of gasoline. Last week Mitt Romney told Fox News that Obama
"has done everything in his power to make it harder for us
to get oil and natural gas in this country, driving up the
price of those commodities in the case of gasoline." Rick
Santorum last month warned that gas — now at $3.84 a gallon
on average — would hit $5 a gallon under Obama, and that the
President "has done everything possible to shut down energy
production." Newt Gingrich — he of the promised
$2.50-a-gallon gas — has called on Obama to fire Energy
Secretary Steven Chu over comments he made years ago about
the need for American gas prices to be higher. "If he
doesn't," Gingrich said, "then the American people will know
the President is still committed to his radical ideology,
which wants to artificially raise the cost of energy."
I'm not positive, but I suspect that for Obama — like most
Presidents — any ideology, radical or otherwise, takes a
backseat come campaign season to the primary objective:
getting re-elected. And no President who wants to remain
President is going to be happy with gas prices that are
scraping $4 a gallon, which is why over the past couple of
weeks just about the only thing Obama seems to want to talk
about is energy prices — and everything his government is
doing to reduce them. Hence the unusual spectacle of seeing
a Democratic President — and one who came into office on
fire for clean energy — boasting that domestic oil
production had risen for three straight years under his
Administration. "When gas prices go up, it hurts everybody,"
Obama said in a speech last month. "High gas prices are like
a tax straight out of your paycheck."
(MORE: Consumers Are Upset About High
Gas Prices — but Not Enough to Stop Shopping)
It's that same de facto tax that explains why politicians
rush to blame each other when gas starts getting expensive.
But is Obama really "fully responsible for what the American
public is paying for gasoline," as the Republican Senator
John Barrasso said last week?
The short answer is no — and pretty much so is the long
answer. First things first: the price of gasoline is
overwhelmingly dictated by the global price of crude oil.
It's true that local conditions in individual countries can
make a difference. Some East Coast refineries have shut down
operations, for example, because they are locked into
long-term sales contracts with distributors, making it
impossible for them to pass on the higher price they're
paying for oil, and thus cutting into their profit margins.
This has further raised the price of gasoline, especially in
big cities like Boston and Washington. (If you think you've
got it bad, it costs $4.14 a gallon to fill up where I work
in midtown Manhattan.) That's a problem that comes from the
oil industry and needs to be resolved by the oil industry,
not the President, and it's likely a temporary one anyway as
refiners adjust to higher prices and reroute gasoline from
the Gulf Coast.
No, gas is expensive because oil is expensive — and oil is
expensive for reasons that the U.S. did not cause and can't
unilaterally fix. American oil consumption is actually down
from its peak of 20.8 million barrels a day in 2005 to a
little under 19 million barrels a day last year. A lot of
that is the lingering economic malaise, which depresses
business and consumption and therefore driving; unemployed
people, in other words, don't commute. Americans drove just
under 8.1 billion miles in 2010, less than the 8.26 billion
we drove in 2006.
(MORE: 5 Ways to Score Cheaper Gas)
Obama certainly doesn't want to take responsibility for
the recession, but he may well want to claim some credit for
another factor behind declining oil demand: more efficient
vehicles. Ten years ago, cars and trucks averaged 24.7
m.p.g. By 2011, that figure rose to 29.6 m.p.g. — and new
deals brokered by the Obama Administration with the
automakers to raise fuel-efficiency standards to as high as
55 m.p.g. by 2025 could take an even bigger bite out of
demand while also giving American drivers more resilience
against high gas prices. After all, doubling the fuel
efficiency of your vehicle is equivalent to cutting the
price of gas in half.
That would be smart to do because it's quite possible that
— barring another major global economic slowdown — oil will
remain relatively expensive for the foreseeable future.
Right now much of the recent price spike is due to tensions
with Iran, a major oil producer. War with Iran is a real
possibility, albeit an uncertain one, and if the missiles
were to fly, we could easily see a price spike of $50 a
barrel or more. So traders and major oil consumers are
stockpiling crude now as a hedge against that very
situation, which in turn drives the price up now by
artificially inflating demand. I can't see how that's an
incumbent President's fault. What's more, it's the
Republicans themselves who are leaning on Obama to take a
harder line against Iran, a move that would likely only
raise the possibility of war and the attendant crude
catastrophe.
Over the long term, however, the real driver of high oil
prices is rapidly increasing demand from the developing
world, especially India and China. Global oil consumption is
expected to increase by 800,000 barrels a day to 89.9
million barrels a day by 2012 — and Asia is consuming
700,000 barrels worth of that increase. As Chinese and
Indian consumers start buying and driving cars in large
numbers, their share of global crude demand will only
increase, and the oil industry will be hard-pressed to keep
up. That means high prices could become the norm as long as
we remain dependent on oil for the vast share of
transportation fuels. "The era of cheap oil is over," says
Fatih Birol, the chief economist at the International Energy
Agency.
(MORE: Stumped at the Pump)
The final — and perhaps phoniest — knock on the President
from the conservative wing is that he has thrown up huge
roadblocks to domestic oil development. "It's very clear
that this President does not want carbon-based energy
flowing through the country," Romney told Fox recently, in a
fairly typical example of the common refrain.
But if that really is the case, Obama is doing a poor job
of executing that secret policy. Domestic oil production has
steadily increased from about 5.18 million barrels a day in
2005 to more than 5.5 million barrels a day last year.
That's largely thanks to a major increase in unconventional
shale oil produced in Texas and North Dakota, which now
produces more oil than the entire OPEC nation of Ecuador.
There are more oil rigs now working in the U.S. than the
rest of the world combined. Oil companies seem to be doing
just fine — ExxonMobil made $9.4 billion in the past
quarter. Critics note that much of the unconventional oil
boom is happening on state or private land, and therefore is
mostly outside the purview of the federal government, but
it's hard to see how that is Obama's fault either. The U.S.
is in the middle of an oil-and-natural-gas energy boom, even
with a clean energy-loving Democrat in the White House.
Could Obama be doing more to improve domestic oil
production? Sure. Stopping the Keystone XL pipeline, however
temporarily, reduces the amount of oil that can be brought
in from a friendly neighbor, though the pipeline would have
little impact on gas prices in the short term. Oil
production from federal offshore waters has fallen under
Obama, but you do remember a little thing called the
Deepwater Horizon oil spill? (The oil industry would prefer
you didn't.) The temporary moratorium on deepwater drilling
and new safety rules slowed the pace of oil production in
the Gulf, but it's hard to argue in the wake of the biggest
oil spill in American history that they were unnecessary.
Obama could speed the leasing of federal land to oil and gas
companies, though the industry is already sitting on 7,000
approved onshore drilling permits that have been unused,
along with millions of acres under lease in the Gulf that
haven't been explored yet. If they want to drill, they
should drill.
Here's the reality: even if the President opened up every
coastline and every available square mile of the country to
drilling — which the American public would almost certainly
never allow — U.S. oil production would still just be a
small part in the overall bucket of global oil demand. And
we would still pay that expensive global price. No President
has much control over gas prices, Democrat or Republican.
That was true under Richard Nixon in 1974, and true under
Jimmy Carter in 1979; it was true under George W. Bush in
2005, and it's true under Obama now. The best we can do is
to work to become more energy efficient, while supporting
responsible domestic oil development along with
alternatives. The President has a three-legged energy stool:
increasing production, expanding renewables and raising
efficiency. His Republican opponents are just falling down.
MORE: Oil: Should President Obama Tap
the Strategic Petroleum Reserve?
MORE: Even with $4 Gas, Few Drivers
Choose Electric Cars — or Even Hybrids
