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Obama and gas prices
May 24, 2011 - Jim Anderson
The Daily News reprinted an interesting editorial Saturday from the Marquette Mining Journal.
Titled, “Obama energy strategy has been a failure,” the piece casts direct blame on the president for higher gasoline prices.
Obama's recent orders to extend existing oil leases in the Gulf of Mexico and off the coast of Alaska and to hold more frequent lease sales in Alaska are “too little, too late,” the editorial states.
“His grand strategy on energy has been to limit domestic oil production and Americans now are paying the price for it,” the editorial concludes.
Gasoline prices are a great political game. But the notion that a U.S. president can dramatically affect them by increasing domestic oil production is questionable, at best.
Although every bit of production helps, prices are tied to global market forces.
Producing more domestic oil may keep more money here, but the impact on gasoline prices most likely amounts to pennies or nickels, not dollars. An expanding global economy plays a much bigger role in gasoline prices than the ability of the U.S. to move the market needle.
Let’s establish this. Oil companies are not going to sell U.S. oil to U.S. consumers for anything less than the world price.
The world consumes and produces about 85 million barrels of oil per day, according to Michael Canes, former chief economist of the American Petroleum Institute. Domestic crude oil production in the U.S. is about 5.5 million barrels per day.
U.S. consumption, meanwhile, is nearly 19 million barrels per day.
So that’s what we’re up against.
Even if we were to double domestic production (to a level above the U.S. peak in 1970) we would be producing just 13 percent of the world’s oil — while consuming 22 percent of it.
Earlier this year, Ken Green, resident scholar with the conservative American Enterprise Institute, told the New York Times that many people overestimate the ability of the U.S. to influence global oil prices.
"The world price is the world price," he said. "Even if we were producing 100 percent of our oil," he said, if prices increase because of a shortage in China or India, "our price would go up to the same thing.”
In recent weeks, gasoline prices have been driven up by a variety of factors, including turmoil in Libya, market speculation and Mississippi flood fears.
Proclaiming that Obama’s energy strategy is the reason for the recent price surge seems to amount to finger-pointing with little substance.
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