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)
“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.)
