President Mostly Speaks Truth About Gas Prices


Posted on 24 February 2012

Printer-friendly versionPrinter-friendly versionSend by emailSend by email

By David Dayen

So we’re going to have another fatuous debate about gas prices in this country, as if the President has a ticker on his desk that he can set to the 9/10 of a cent. President Obama made the effort to mock this. As a national politician he obviously feels he cannot say “there’s not much I can do,” but he came extremely close in this speech. I give him credit for anticipating the Republican line of attack:

You can bet that since it’s an election year, they’re already dusting off their 3-point plan for $2 gas. And I’ll save you the suspense. Step one is to drill and step two is to drill. And then step three is to keep drilling. (Laughter.) We heard the same line in 2007 when I was running for President. We hear the same thing every year. We’ve heard the same thing for 30 years [...]

So we’re focused on production. That’s not the issue. And we’ll keep on producing more homegrown energy. But here’s the thing — it’s not enough. The amount of oil that we drill at home doesn’t set the price of gas by itself. The oil market is global; oil is bought and sold in a world market. And just like last year, the single biggest thing that’s causing the price of oil to spike right now is instability in the Middle East -– this time around Iran. When uncertainty increases, speculative trading on Wall Street increases, and that drives prices up even more [...]

Over the long term, the biggest reason oil prices will probably keep going up is growing demand in countries like China and India and Brazil. I want you to all think about this. In five years, the number of cars on the road in China more than tripled — just in the last five years. Nearly 10 million cars were added in China in 2010 alone — 10 million cars in one year in one country. Think about how much oil that requires. And as folks in China and India and Brazil, they aspire to buy a car just like Americans do, those numbers are only going to get bigger.

So what does this mean for us? It means that anybody who tells you that we can drill our way out of this problem doesn’t know what they’re talking about, or just isn’t telling you the truth. (Applause.)

Lots of truth in there. World demand does drive oil prices, though US demand is at least a part of that, and we’re at a 16-year low. Geopolitics probably has driven some of the run-up, but of course that goes hand in hand with a strategy toward Iran that threatens global oil supplies, which didn’t come out of nowhere and certainly has something to do with Washington. And making the US more elastic in terms of energy use is key, and massive development isn’t necessarily the answer there.

I would point you to Matthew Yglesias and Brian Beutler for more in this general vein. But if we’re going to have a grown-up discussion about gas prices, we should add a couple more pieces to the puzzle:

1) Mass transit. Part of the reason that America suffers more than some other countries with respect to gas prices is the lack of available transit options. The House’s transportation bill fixed to make that worse, by eliminating a percentage of that bill which goes toward transit funding. They’re reworking that now. And a conversation about how to deal with gas prices should talk about building and subsidizing transit options.

2) Speculation. This was not a part of Obama’s speech, but Nancy Pelosi is all over it. And with 64% of the oil market dominated by speculators, it’s a serious concern. And there’s room for the President to do some work here. The CFTC needs a stronger crackdown on over-speculation in the commodities markets, period, full stop. You’d see prices go down.

3) Turn down the volume. To the extent that instability in the Middle East is a factor in the prices, the threat of an Iran attack is the driving force. Obviously the President isn’t the only one, or even the main one, driving rhetoric on Iran. In fact, many Administration players have tried their best to turn down the volume. Perhaps linking the belligerence to gas prices directly would do the trick.

These are just a few thoughts, and I agree there’s no silver bullet here. But there are a few concrete steps, and they have nothing to do with drill baby drill, or anything Republicans have been saying, for that matter.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Dave Dayen is a writer, comedian and TV/film editor based in Santa Monica. This piece originally appeared on Firedoglake.

First, although it is true that Obama was made every effort to stem oil exploration and development in the US, his efforts have little to do with what is going on today. The average development time for an oil field is about six years (longer if they are in deep water or arctic, less if onshore). The current production increase we are seeing is due to efforts in the 2004-2006 time frame. Yes, current production increase is Bush's fault.

Second, the real impact of Obama will be in the 2015-2020 timeframe. Not now.

thirdly, the price increase will increase new production and decrease consumption.

fourthly, now would be a nice time to start pushing for conversion to natural gas.

And, finally, can we pull out all those democrat ads against Bush and gas prices in 2008 and use them now on Obama?

Iran faces a delicate issue. On the one hand it wants to show the world all it’s got and put it at ease, while on the other hand it fears that such show 'n tell will give its enemies a roadmap to bomb it.
Saddam Hussein faced a similar dilemma ten years ago. Though he wanted the world to know he had nothing to hide, he also wanted to bluff his archenemy Iran into believing Iraq still had WMD.
Bluffing did not go well for Saddam, and it might not go well for Ahmadinejad.
But since the price tag for ridding Saddam proved high, maybe we ought to reflect what we are asking of Iran now. On the eve of a threatened attack, we are asking it to take us to the depths of its arsenal and show us all it's got.
Such great expectations are a sign we have been talking to our friends too long and are in need of a broader perspective. Exactly when was the last time we asked Pakistan, India, China or Russia to show us their arsenal?
“But those countries are not advocating the destruction of Israel.”
True, but Israel is not a thorn on their side either.
Surely, however, we can see beyond the hyperboles and figure out their underlying purpose. Or have we forgotten that not all Iranians are thrilled with Ahmadinejad?
He sure hasn’t.
Nor has he forgotten that that his countrymen hate Israel even more. So he tells them that Israel will be wiped from the face of the earth. Expectantly, this nonsense unites them against a common enemy. It is even a diversion from the misery and isolation brought on by his theocratic regime.
Quite clever work by Ahmadinejad -- and not a rial spent or a bullet fired.
So why are we letting the crazy talk about destroying Israel get us all worked-up -- to the point of turning the world topsy-turvy again.
Can we not see the desperate attempts of an unpopular regime simply trying to hold on?

Opening up more and more of our natural resources to drilling for a finite destructive fossil fuel in the face of climate change is like saying the way to get off crack is just to buy a little more on the streets from your dealer.

There are no amount of "reserves" in the US that will make a dent in global prices...in fact, what we do destroy here to get a little oil goes into the global market anyway.

The way out of the gas price mess, and the global warming catastrophe, and the air pollution problem, and on down the line is mass investments in public transit, transition to clean vehicles of all types, increased use of renewable energies for all kinds of purposes, and stop speculation on things like oil prices...and food for that matter.

The idea that the GOP, and the Fox News knuckle draggers that like to comment on this site can lecture anyone about gas prices, as they buy more SUV's and favor war after war in the Middle East while opposing all attempts to build cleaner cars and invest in clean technologies is laughable...and tragic.