The President’s Pain at the Pump

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In this March 2, 2012 photo, a New York City taxi driver pumps gas at a BP mini-mart, in New York. Experts say pump prices are rising on the expectation that supplies will dip next month while refineries switch from winter to summer gasoline blends. Forecasts see gas rising as high as $4.25 per gallon in late April. (AP Photo/Gene J. Puskar)

A New York City taxi driver pumps gas at a BP mini-mart, in New York, on March 2, 2012. (AP Photo/Gene J. Puskar)

The number of people who approved of President Obama’s economic policies seemed to be on the rise, but his numbers took a serious hit in the latest Washington Post-ABC News survey, which indicated that:

“Gas prices are a main culprit: Nearly two-thirds of Americans say they disapprove of the way the president is handling the situation at the pump, where rising prices have already hit hard. Just 26 percent approve of his work on the issue, his lowest rating in the poll. Most Americans say higher prices are already taking a toll on family finances, and nearly half say they think that prices will continue to rise, and stay high.”

Half of those polled think the White House can do something about it, but the reality is that there’s not a lot of action a president can take. Global market forces are what drives the price, a truth that Joe Romm of the progressive ThinkProgress website noted was acknowledged even by The Wall Street Journal and the libertarian Cato Institute (although, Romm observed, the oil-rich Koch brothers, who are in the process of officially taking back ownership of the think tank, “may take issue with Cato’s rare broken-clock sensibility on issues like this one”).

In an op-ed for U.S. News & World Report, Cato senior fellows Peter Van Doren and Jerry Taylor asked, “Is President Obama responsible for the spiraling price of gasoline? Republicans say yes, but the facts say no.”

“Why have gasoline prices increased since the start of the year? The simplest explanation is that the price of crude oil has increased. Specifically, the spot price for Brent (North Sea) crude has increased $16 a barrel since January. Given that there are 42 gallons to a barrel, that works out to a 38 cent increase in the price of a gallon of oil. Spot prices for gasoline trade in New York have increased about 41 cents per gallon over the same time frame. So there you go.”

Even though U.S. crude oil production has been climbing fast (despite GOP complaints about not enough domestic drilling), production of North Sea crude is down and its price “sets the market price for all gasoline regardless of whether other cheaper crude sources are used to refine most of our gasoline.” To which U.S. News & World Report’s Susan Milligan added:

“Unfortunately, the president can’t make gas prices drop on his or her own, or it would have been done already. Despite GOP speculation that President Obama actually wants gas prices to be prohibitively high to encourage people to conserve energy, the president — as he pointed out in his recent news conference — would have to be bent on career suicide to wish for higher gas prices in an election year.”

As for The Wall Street Journal, Rex Nutting, international commentary editor for its MarketWatch.com, noted that, “When Mr. Obama was inaugurated, demand was weak due to the recession. But now it’s stronger, and thus the price is higher.”

“What’s more, producing a lot of oil doesn’t lower the price of gasoline in your country. According to the U.S. Energy Information Administration, Germans over the past three years have paid an average of $2.64 a gallon (excluding taxes), while Americans paid $2.69, even though the U.S. produced 5.4 million barrels of oil per day while Germany produced just 28,000.”

Other factors are at play, including last year’s Japanese earthquake (because nuclear plants are shut down, more oil’s being burned for electricity), the recent bankruptcy of the European refinery Petroplus and a BP refinery fire in Washington State that has caused gas prices to climb all along the West Coast. The Economist points to other global disruptions in supply — a pipeline dispute with South Sudan, mechanical problems in the North Sea and especially tensions in the Middle East. The current crisis around Iran’s nuclear program, including economic sanctions and a payment dispute between Iran and China has taken half a million barrels of oil a day off the market:

“And there is the threat of far bigger supply disruptions if Iran were ever to carry out its threat to close the Strait of Hormuz, through which 17m barrels of oil pass every day, some 20% of global supply. Even a temporary closure would imply a disruption to dwarf any previous oil shock. The 1973 Arab oil embargo, for instance, involved less than 5m b/d.”

If war were to break out, economists at Standard & Poor’s estimate that the price at the pump could go as high as five dollars a gallon.

But Kevin G. Hall at McClatchy News Service maintains that oil is not in such short supply and pointed a finger at Wall Street. “While tension over Iran has ratcheted up over the last few months, the price of oil and gasoline has leaped far beyond conventional supply and demand variables,” he wrote. “Financial speculators are piling into the market, torquing the Iranian fear factor into ever-higher prices…”

“What should the price of oil be if left to conventional supply and demand market fundamentals? Canada’s the largest supplier of imported oil to the United States, which now actually produces more than half of the oil it consumes. Production and delivery costs for a barrel of oil from Canada are about $75 a barrel. The market-fundamentals cost for a barrel of oil is in that ballpark; above that, speculation sets the prices.”

Meanwhile, the White House is dancing as fast as it can. President Obama spent a portion of Monday defending his energy policy in a series of local TV interviews strategically aimed at election swing states. He’s not totally without options, although they’re limited. The Washington Post reports, “U.S. policy makes a difference, energy experts say, but with a long delay, whether it is a matter of drilling for more oil or increasing the fuel efficiency of the automobile fleet, which takes a decade or more to turn over.”

As presidents, including Obama, have done in the past, he could release oil from the Strategic Petroleum Reserve, but this is a temporary solution, “an emergency stockpile for supply disruptions,” the Post notes, “not a device for blunting price increases.”

“Other issues have been raised that have little or nothing to do with current gas prices. Approving the Keystone XL pipeline, rejected by Obama with its current route and highlighted by Gingrich on Monday as a useful move, would not add to current oil supplies; it would only add to the excess pipeline capacity from Canada that is expected to last until 2016. Renewable energy such as wind and solar makes the electricity grid cleaner but has nothing to do with oil prices. Electric cars could help, but it is likely that their sales figures will fall short of administration goals. And higher U.S. production will cut U.S. oil imports and ease the pressure on global demand, but the United States will remain a major oil importer for many years.”

Frank Verrastro, director of the Center for Strategic and International Studies’ energy program, told the Post, “We need a reasoned debate based on facts, but that’s not the climate we’re in, unfortunately.”

(Note: For a handy map of gas prices across the nation, go to GasBuddy.com.)

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  • leftofcenter

    Does Obama realize that his adding to the endless hype about war with Iran is helping to raise gas prices?

  • Anonymous

    The president we have turns out to be the lesser of evils,  We can further develope the north slope where the pipeline has a limited lifetime, so now is the time. (high paying jobs too).    We need to stop letting china polute the world and mine rare earth materials here,  We need better car mileage,  I don’t think electric is yet an answer for where do the batteries come from(i don’t know actually).  Our military and govt agencies  probably waste oil and energy like never before, (its not they who pay for it directly but us suckers).  Get us out of afganistan now that will save oil.   I could go on and on.  But i disagree the president can effect gas prices in the future.  I recommend people check out Dan Carlin’s podcasts.

  • GradyLeeHoward

    tom- Yes, our military is the biggest fuel waster on Earth, and likely a worse polluter than all of China. As MLK observed our war machine is the biggest purveyor of violence (and terror) in history, which takes plenty of oil.

  • GradyLeeHoward

    But if he doesn’t Romney will label him a wuss.

  • GradyLeeHoward

    Gas has to go up because all the easy oil has been drilled. It’s fracking and sludge from here on out. They pay twice and more what we do in Europe. What makes US so special?

  • GradyLeeHoward

    Muslim Pakistan has nuclear missiles but very little oil.
    We call them our ally.
    Think it over.

  • GradyLeeHoward

    Michael Winship reporting on gas prices….
    That depresses me.

  • Larafc

    here we go again no free speech in bloomington indiana why

  • Jsummer2231

    worker are being fired at indiana university for dumb way of life they have to used their cars too get too 15 places on campus no gasline  to pay for this why worker have too pay for more higher  gasline food health care copst of liveing here is too much no free speech at all thank you people of u s a by the way worker have to live 25 miles away to worker
    here why by the way rent is too high here too dead to worker on the job here too why
    people dead on work here why hired more people why can we no workstudy at
    all or just for the snob who pay for it why

  • Stpiccol

    bloomington indiana no jobs here at all waiter cook lawncare janitor distwasher
    teacher no jobs here at all by the way no windond washer people at all in high building like 8 too 10 floors out doors no one does it here at all people who can fix a bus on the weekend
    no one does that too no one too fix a truck on ther weekend too no gold at all