President has to keep a close eye on oil and gasoline prices
Ohio motorists are reaching deeper and deeper into their pockets to find the money necessary to fill their tanks as gasoline is selling for 50 cents per gallon more than a year ago. Almost half of that increase has come in the last few weeks.
And prices could increase by that much again — or more — in the months ahead.
This is not simply a case of supply and demand. This is a reaction to a level of political unrest in the Middle East that threatens the flow of oil unlike anything seen since the Iranian revolution more than 30 years ago.
And gasoline prices could be headed the way of the summer of 2008. That’s when oil prices hit a record of $145 a barrel and gasoline climbed to a national average of $4.11 a gallon in July.
In the last week, oil has been fluctuating right above and below $100 per barrel. But the uncertainty of the market due to civil unrest in the Middle East and North Africa has fueled rampant speculation. And that speculation magically transfers to prices at the pump, even though it takes weeks for oil to be transported from the fields and refined into gasoline before being delivered to the service station.
That shouldn’t come as surprise, because history has shown that an oil crisis is good business for oil companies. In 2008, while millions of people were struggling to fill their tanks to get where they had to go and canceling trips they didn’t have to take, the oil companies were doing fine. That $4 a gallon gas in 2008 helped Exxon Mobil, for example, to a record profit of $45.2 billion that year. The travel industry, including the airlines, didn’t share the joy.
U.S. Treasury Secretary Timothy Geithner has been issuing reassuring statements and President Barack Obama told a group of business leaders the other day that they should not worry about inflation due to the spike in oil prices. The president seems to be treating this as a short-term situation.
President vs. candidate
Let’s hope he’s right. And if he’s not, let’s hope President Obama doesn’t take too long to show the concern exhibited by candidate Obama during that election-year summer of 2008.
In August, just as gasoline prices were starting to work their way down and the presidential campaign was starting to heat up, Obama advocated tapping into the nation’s strategic oil reserves to provide some price relief at the pump. He suggested selling about 70 million barrels of oil from more than 700 million barrels kept in storage.
Now, some House Democrats are already calling on Obama to do what he suggested President George W. Bush should have done three years ago.
With Libya’s oil industry in chaos, violent protests rocking Oman, Egypt in flux, pro-reform groups clashing with Iranian government forces and unrest in Algeria, substantial segments of the world’s oil production are at risk.
Even so, Saudi Arabia is increasing production, and Iraq just reported its highest output since before Saddam Hussein was toppled eight years ago. Maybe Obama’s air of optimism will turn out to be warranted.
If, however, he waits too long and fails to take his own advice of just three years ago, the fragile economic recovery — already facing threats from spending cutbacks in Congress — could fall prey to rapacious energy costs.
Here in northeastern Ohio, we’re at $3.38 a gallon for self-serve regular and holding our breath. Some West Coast states are already pushing an average of $3.75. And for many families, every dollar spent at a service station is a dollar diverted from somewhere else in the budget.