The great debate over oil prices and who is to blame
The debate between economists and politicians over whether a president can control gasoline prices will continue until automobiles no longer run on gasoline. And the debate will shift to the price of whatever it is that cars are running on then.
But there can be no debate over this: neither party can have it both ways.
When Barack Obama was seeking the presidency in 2008, gasoline prices were high, and candidate Obama was not averse to putting the blame on President George W. Bush.
By the time President Obama took office, prices had fallen dramatically, but not as a reflection of Bush energy policy in the latter months of his presidency. Gasoline prices fell because it was the economy that was in the tank.
Generally speaking, gasoline prices are a reflection of what’s happening on the world stage, whether it is Iran threatening to block the Strait of Hormuz or speculators and oil companies reacting to that or some other news.
Republican presidential candidates are of nearly one voice in blaming Obama, and one of them, Newt Gingrich, even says that he could have prices down to $2.50 per gallon in two years. President Bush saw the price of gasoline fall from more than $4 a gallon in July 2008 to less than $2 in January 2009. But the Dow Jones Industrial Average was on a downward spiral at that point, bottoming out at 6,547, almost exactly half of what it is today, three years later.
Pain at the pump
Today’s rising Dow, however encouraging it might be for the economy in general, is not much consolation to the man or woman who is paying $5 more to top off the tank of a mid-sized car today than it cost at Christmas time.
To someone on a budget, that’s $5 that won’t be spent somewhere else, and a loss in discretionary spending produces a drag across the economy. Not to mention the psychological effect it has on every consumer who feels a pinch at the pump.
The administration says U.S. oil production is at an eight year high. But what’s also going up are oil exports. That’s not surprising, since, as we said, oil from which gasoline is refined, is not a national product, but an international product. “Drill, baby, drill” is a catchy phrase, but it isn’t a solution to U.S. energy demands and costs when the product of drilling is shipped to China.
There is no quick or solitary solution to the problem of increasing energy costs. A combination of increased production and decreased demand, through conservation and shifting to alternative sources of energy, holds the best long-term prospect for success.
In the short term, Obama should give serious consideration into tapping some of the 700 million barrels of oil stored in the nation’s Strategic Petroleum Reserve. Tapping as little as 5 percent of those reserves can have a dramatic effect on what speculators are willing to risk. And lower prices for oil translate into lower prices for gasoline.