WASHINGTON, March 19, 2012 — Everyone at the gas pump is yelling, “Ouch!” Republicans, Democrats, and Independents. In some parts of the country, gas is headed north of $5 for regular. That is a chunk of change out of stagnanting middle class incomes. For the poor it is devastating. So who’s to blame?
This being an election year, Republicans eagerly point the finger of blame and shame at President Obama. Not fair, counter Democrats, saying the President has no control over fluctuating gas prices.
So who’s right? Let’s look at the facts and let them tell the story.
Why are gas prices rising?
For a whole host reasons, the American consumer is not in the driver’s seat:
* China and other emerging economies are driving the prices up as their demand for oil and gas increases. U.S. Energy Information Administration
* Warmer weather almost always means higher prices, just as it does each year. Then each year prices rise, level off in the peak summer driving season, and then drop in the fall. This is in part because of “refinery maintenance schedules, the annual shift of production to warm-weather fuel blends and other technical factors,” according to US Economics Weekly.
*Speculators are contributing mightily to the rising price at the pumps. Investors in the commodities market speculate that the price will be more than they originally paid and they will profit handsomely. In fact, speculators are leaving the stock market for commodities and oil futures, betting the price of oil will continue to skyrocket. Who are these speculators? According to the head of Petroleum Marketers Association, Dan Gilligan, it includes respected institutions such as Harvard Endowment and the California pension fund.
* War mongering makes speculators think oil will become even more valuable as an investment. Every time Israel rattles its sabers or every time Tehran inches closer to a nuclear bomb or every time a candidate suggests bombing Syria, oil prices get a boost. If we were to enter into still another war in the Mideast, oil would become scarcer, making the sky the limit for speculators.
Actual war with Iran could lead to a sudden loss of 2.2 million barrels of oil a day, the amount that Iran currently exports. That would send prices through the roof. Or if Iran were to successfully “block the Strait of Hormuz, through which 17 million barrels of world oil flows each day, that could be even more catastrophic.”
So why don’t we so do as Sarah Palin once said, “Drill, baby, drill” right here at home?
If we started drilling right this minute, it wouldn’t solve the problem of higher gas prices. In fact, we are drilling more than ever before. Refineries are working at capacity. However, since oil companies are in the business of making money, they ship petroleum and petroleum products overseas. In September 2011 alone, “the United States exported 3.2 million barrels of refined petroleum products a day and imported just 2.2 million barrels a day. That’s a surplus of exports over imports of roughly a million barrels a day.”
“For the first nine months of 2011,” according to the U.S. Energy Information Agency, “the U.S. exported 752 million barrels of refined petroleum products: gasoline, jet fuel, kerosene and such chemical-industry feed stocks as ethylene, butane and propylene.” The reason? Our slowing economy hit the oil industry in the pocketbook and there is more money to be made abroad in new, robust economies like China. But don’t cry for the oil companies: their profits are up, as they raked in $1 trillion from 2001 through 2011.
Besides, if we drill, how much would stay here anyway? To hear the whine of the oil companies, they are overregulated and haven’t enough places to drill. Actually, oil companies have a plethora of places to set up their rigs, they just aren’t. Of course, the oil companies want federal lands opened up as well.
“Despite a temporary slowdown in exploration in the Gulf of Mexico after the BP oil disaster, the number of rigs in American oil fields has quadrupled over three years. There have been new discoveries and the administration has promised to open up more offshore reserves. To say that Mr. Obama has denied industry access is nonsense.”
And then there is the Keystone Pipeline. If you listen to the GOP candidates, you would think the pipeline would solve all our gas woes by bringing us jobs, tax revenues, and lower gas prices. However, an internal study done by TransCanada, the company that would build the pipeline from Canada’s tar sands across the heartland to refineries along the Gulf Coast, found that most of that oil will be exported and it will jack up “Midwest oil prices by reducing ‘oversupply’ in that region.”
Then why not open the Strategic Petroleum Reserve to lower soaring gas prices?
Most Americans favor such a move. After all the SPR was established in 1975 as a buffer against severe oil supply disruptions like the 1974–75 Arab oil embargo. So if there were a sudden drop in oil production, the U.S. could release oil from its stockpiles, thus reducing the risks of major price spikes.
So far it’s been done five times, most recently last year when President Obama released 30 million barrels of oil to compensate for the disruption in the supply caused by the Libyan conflict. (Bet you never even knew it.) However, to do so only has a short-term advantage and any international crisis could trigger a hike in prices. Tapping the SPR is more of a political gimmick than a real solution.
What can be done? Certainly not anything that fits on a bumper sticker. Watch for an upcoming column with suggestions from some of the best minds around who are grounded in reality and not political fantasies hatched along the campaign trail by either political party.
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