Apparently, the word has gone out. With the economy having taken a turn for the better, Republicans need something else to blame on Barack Obama, and they’ve settled on the price of gasoline.
Fox News has taken up the story; Speaker John Boehner and others have echoed it as well. The theory seems to be that the rising price of oil internationally is President Obama’s fault, allegedly because he has blocked expanded oil production here at home.
In that place known as reality, the GOP theory has some fundamental problems. We can begin with the fact that oil produced in the United States must still be sold in the United States at world oil prices. There is no “hometown discount.”
If the world oil price doesn’t change, the domestic oil price doesn’t change. That’s just a fact, and short of nationalizing the American oil industry, you can’t change that fact.
Here’s another fact: no matter what the United States does — including drilling holes every hundred feet across the whole continent — we lack the ability to change the price of oil on the world market. And that becomes pretty clear with a brief tour of petroleum-related data over the past five years. First, let’s look a the the average price of gasoline: (All data from the U.S. Energy Information Administration):
Note that gasoline prices peaked in the summer of 2008 at well over $4 a gallon, then plummeted once the Great Recession hit and consumption fell worldwide. That has led to speculation by some that high gasoline prices caused the economic woes that followed, but most economists dismiss that theory. Of course, most would probably also admit that high prices didn’t help.
Here’s a chart illustrating what U.S. oil consumption has done in the past five years. You’ll see the impact of the recession here as well:
Note that U.S. petroleum consumption has been dropping for quite a while now and remains well below peak levels. But our reduced demand for oil has had no impact on world oil prices because it has been more than offset by increased consumption by countries such as China and India.
Here’s our third and final graph: U.S. domestic oil production.
Note that production in November of 2011 is up more than 20 percent over November 2006. We are producing significantly more oil and also consuming significantly less — if we had the ability to move world markets on our own, that combination of increased supply and reduced demand should force world oil prices down. Yet the price remains stubbornly over $100 a barrel.
(If there’s a military confrontation with Iran, as many seem to want, that price will jump significantly, probably forcing the administration to tap our strategic petroleum reserves. But that’s a topic for another day.)
In the world of politics, of course, candidates attempt to create their own reality independent of the real world. The now-departed Michele Bachmann, for example, used to promise that “Under President Bachmann, you will see gasoline come down below $2 a gallon again,” which was an exceedingly silly thing to say.
And it is no less silly coming from the mouth of Newt Gingrich, who is now claiming that “the Obama administration’s ideological refusal to expand American energy production continues to block the development of resources which could lower gasoline prices dramatically.”
“$2.50 a gallon gas is not a dream. It’s achievable with the right policies, and that starts with a president who will stop bowing and start drilling,” Gingrich said. “If we take the right steps, we can quickly and dramatically reduce the price of gas by tapping America’s incredible oil and gas resources to increase supply.”
That is absolutely false — nobody with any knowledge of the oil markets believes it’s possible for the United States to drive the world oil price down to $70 a barrel, which is what it would take to make Gingrich’s claim come true.
Such rhetoric takes the American voter for a fool.
– Jay Bookman