Obama Hasn’t Put His Foot on the Gas

Member Group : Jerry Shenk

Unsurprisingly, the price of gasoline has doubled since President Barack Obama’s January 2009 inauguration and is forecast to go significantly higher. In three years, the costs of other forms of energy have also increased significantly.

It’s unsurprising because, prior to his election, Obama warned that his energy policies would cut back domestic coal production and reduce coal-fired generation and that "electricity rates would necessarily skyrocket."

His energy secretary, Steven Chu, told the Wall Street Journal: "Somehow we have to figure out how to boost the price of gasoline to the levels in Europe."
Clearly, Obama and Chu have figured it out. Energy costs have soared. The administration’s announced energy policy is working.

But during an election year, the president has done an about-face. The Obama spin machine now says that the president believes high gasoline prices to be a bad thing and that he has acted to lower them. Considering the evidence of current pump prices, only the ideologically myopic among us will swallow that assertion.

In normal times, either lowering demand or increasing production will moderate or reduce prices for any commodity, including petroleum products.

Obama has claimed credit for an increase in oil and natural-gas production using fracking technology. But fracking has been successful only because the deposits exploitable using the technology are east of the American Rockies beneath private land.

In the Far West, where the federal government owns huge percentages of the potentially productive land, the pace of exploration is glacial. The Institute for Energy Research reveals that drilling on land owned by the government is only half what it was during the Clinton presidency.

Petroleum production has increased in the U.S., but in spite of administration policy rather than because of it.

Mostly, domestic production increases come from the Dakotas’ Bakken Layer. Leases there predate the current administration and are primarily on private land. Obama’s policies have been an impediment to new production.

Not only has the administration failed to issue new leases on public land, it has discouraged activities in the Alaskan National Wildlife Refuge, the Gulf of Mexico (never mind that the Chinese plan drilling in Cuban waters less than 100 miles off the U.S. coastline), elsewhere offshore and in the American West. Of 51oil platforms in the Gulf, only 15 are drilling, a utilization of only 37 percent. Fourteen rigs have left the Gulf in the last two years.

Obama’s decision to block the Keystone XL pipeline from Canadian oil sands will also limit supply in the U.S. Furthermore, gasoline demand is down because we are in the middle of a persistent recession, while automobile manufacturers have found ways to improve engine fuel efficiency.

So, with production up and demand down, why are gasoline prices still increasing?

The president promised that additional federal spending, including his massive stimulus plan, would prime the economic pump and bring the nation out of recession. It did not. Instead, it has prolonged the recession while adding trillions of dollars to the national debt. To fund its profligacy, the government borrowed excessively and printed trillions of new dollars, thereby cheapening the ones we earn and already hold.

America’s political class doesn’t understand that the law of supply and demand applies to America’s currency and securities, too. A cheaper dollar means consumers must spend more of them to get products like gasoline. That effect has more than offset the price advantages of production increases and lower demand. Oil prices aren’t increasing so much as the dollar is depreciating.
As the Wall Street Journal has observed, if Obama wishes to take credit for rising housing and stock prices, then he must also accept responsibility for rising commodity prices.

And as energy expert William Tucker reported at American Spectator: "This is treacherous territory. Every major downturn since the Arab Oil Boycott of 1973 has been preceded by a run-up in oil prices. It seems to signal an inflationary bubble in the economy that is about to pop."

Least surprisingly, it’s been years since we have heard the once-common charge that its ties to President George W. Bush and Vice President Dick Cheney permitted oil industry profiteering at $1.89/gallon, the average cost of gasoline when President Obama took office.