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Viewpoint: Gas Prices and the Great GOP Lie

9 minute read
Bryan Walsh

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.”

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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.

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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.

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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.

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