Why Do You Suppose Gas Prices Are So High?

I would love to see someone refute this! More than that, I would love to hear from anyone not absolutely disgusted by this!


10 Things You Need to Know About High Gas Prices and Obama’s Oil Policy
Posted February 23rd, 2011 at 6:00pm in Energy and Environment

This week the media’s attention is finally focused on oil prices. After two years of continually rising consumer gas prices in America, the oil futures market has captivated the Mideast storyline. And attention is much needed. December 2010 saw the highest gas prices for the month of December in our nation’s history. This month, we’re setting similar records with the national average of $3.14/gallon–fifty cents higher than it was a year ago. If this trend continues, the summer of 2011 will hit consumers much harder than in the summer of 2008 when prices soared above $4/gallon. [My Note: consider that this was written less than 2 months ago – the end of February – and on the same date in April, gas is already well OVER $4/gallon for regular in most cities, and in some cases is even over $5/gallon. And it is even higher for medium and premium grades!]

But if you only read, hear or see this week’s news reports, you would think that oil and gas prices were doing just fine until the historic events in Egypt, Libya and across the Middle East unfolded this past month and caused spikes in the futures market. Unfortunately, that is not the case. President Obama has been unilaterally taking steps to increase the cost of gasoline for two years. Here are ten things you need to know about gas prices that you may not hear reported elsewhere:

1. Gas Prices Are Skyrocketing Under President Obama: The oil futures market is just that, a futures market. The price-per-barrel spikes in oil this week have not affected the domestic market yet. In fact, former Shell Oil President John Hofmeister made the prediction in December 2010 that America would face $5/gallon gasoline by 2012, a full month before the revolution in Egypt began. At the end of President George W. Bush’s two terms in office, prices were 9% lower than when he took office (adjusted for inflation). The day before President Obama was inaugurated; the average price of a gallon of gas was $1.83. Today, that average is $3.14.

2. President Obama Has Crippled Domestic Oil Exploration: Putting aside calls from some who want to increase domestic exploration to areas in Alaska and elsewhere, President Obama has completely shut down the existing oil drilling infrastructure in the U.S. At least 103 permits are awaiting review by the Bureau of Ocean Energy Management, Regulation and Enforcement. The federal government has not approved a single new exploratory drilling plan in the Gulf of Mexico since Obama “lifted” his deepwater drilling moratorium in October 2010. Obama also reversed an earlier decision by his administration to open access to coastal waters for exploration, instead placing a seven-year ban on drilling in the Atlantic and Pacific Coasts and Eastern Gulf of Mexico as part of the government’s 2012-2017 Outer Continental Shelf Program.

3. The Obama Permitorium is Costing the Government Much-Needed Revenue: The Gulf accounts for more than 25 percent of domestic oil production. With production in the Gulf expected to drop in 2011 by 220,000 barrels per day, the Energy Information Administration (EIA) estimates the U.S. will suffer $3.7 million in lost revenue per day as a result of lost royalties. If that holds, the federal government would lose more than $1.35 billion from royalty payments, just this year.

4. The Obama Administration Has Been Held in Contempt of Court: Federal District Court Judge Martin Feldman held the Obama Interior Department in contempt of court on February 2, 2011, for dismissively ignoring his ruling to cease the drilling moratorium which the judge had previously struck down as “arbitrary and capricious.” Judge Feldman has since given the Administration 30 days to act on permits it has needlessly and purposefully delayed saying inaction was “not a lawful option.”

5. Jobs Are Being Killed by Obama’s Oil Policies: As a direct result of Obama’s oil policies, companies that help supply our domestic energy needs are going out of business. Most recently, Houston-based Seahawk Drilling filed for bankruptcy. The Chief Operating Officer of the offshore drilling company, Randy Stilley, stated: “The decision by regulators to arbitrarily construct unnecessary barriers to obtaining permits they had traditionally authorized has had an adverse impact not only on Seahawk, but on the sector as a whole.”

6. And More Jobs Are Being Killed: Vendors, suppliers, even restaurants and retailers are losing ground or going out of business as a result of the economically crippling policies Obama has unilaterally imposed. According to Reuters, many of the thirty-plus deepwater rigs in the Gulf have moved to other markets. Each rig directly employs approximately 200 people, but that doesn’t even count the ripple effect across the nation. One industry official told CNBC that the industry was on “life support.” But President Obama is spending billions to finance offshore jobs…in Brazil. The Obama Administration committed at least $2 billion in 2009 towards Petrobras, one of the largest offshore oil drilling companies in the world.

7. Decreasing Our Domestic Supply Increases Foreign Dependence: Even Energy Secretary Steven Chu admits that “any disruption in the Middle East means a partial disruption in the oil we import. It’s a world market and [a disruption] could actually have real harm of the price.” If this is the case, then cutting our domestic supply hardly seems like an appropriate response. Rather than face this reality, Secretary Chu ridiculously called for an increase in renewable energy investments, which is a complete non-sequitur.

8. Renewable Energy Is Not the Answer to Mideast Turmoil: According to the EIA, petroleum accounts for less than one percent of electricity production. So wind and solar, which do not produce transportation fuel even if Obama’s $40,000 Chevy Volt quadruples production, can only replace coal and natural gas, of which America has an abundant supply. As for biomass, over 40 percent of domestic corn consumption goes to ethanol, which provides less than 10 percent of our transportation fuel and causes food prices to increase. Three large production platforms in the Gulf could provide an amount equivalent to all of the biofuels produced in the U.S.

9. Regulations and Delays: The Obama EPA has added costly new regulations to refineries in the name of global warming, while the Obama Interior Department issues new rules that make it much harder to develop natural resources on government land. The [color:82a2=color=blue]EPA is also denying approval of the Keystone pipeline which would increase the amount of oil the U.S. receives from our friendly neighbor Canada by over a million barrels per day.

10. The Middle East Is Not the Sole Cause of Rising Oil Prices: Global oil prices have been rising steadily for months based on variety of factors including those listed above and as the world economy pulls out of a recession. In fact, Egypt is not a major producer of petroleum, and only 2-3 percent of the world’s supply moves through the Suez Canal. Certain spikes are not abnormal and can be more easily weathered with a smarter domestic energy strategy.

This week, Deputy Energy Secretary Daniel Poneman told Bloomberg Television: “We’re hoping capacity will be brought to bear so it will continue to support our economic recovery.” Mr. Poneman needs to head down his hallway to meet with his boss Secretary Chu and explain how energy prices affect an economic recovery. Because it was Chu who, in the name of environmental radicalism, stated in 2008: “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” It would seem President Obama and Secretary Chu are getting their wish and you are paying for it every day.

You can follow Rory Cooper on Twitter @rorycooper

The Gulf accounts for more than 25 percent of domestic oil production. With production in the Gulf expected to drop in 2011 by 220,000 barrels per day, the Energy Information Administration (EIA) estimates the U.S. will suffer $3.7 million in lost revenue per day as a result of lost royalties. If that holds, the federal government would lose more than $1.35 billion from royalty payments, just this year.

220,000 bpd? Is that a typo? Because that is an extraordinarily small reduction in our domestic oil production. Something on the order of 2-3%.

I'm sure that it is having some impact on domestic gas prices, but it cannot possibly account for all or even most of it--especially since, as the author points out, the price of oil (on the international market) has been rising steadily throughout the duration of Obama's term--as it has been almost monotonically since 1999. Despite the occasional dips (and the big dip in 2008), the trend over the last decade is obvious: oil prices are skyrocketing. And gas prices are tied to oil prices. Oil prices are skyrocketing "under Obama," as they did "under Bush" as well and will continue to long after Obama's gone, and the prime cause of this is skyrocketing demand. As surely as a dog wags its tail, when oil process skyrocket, gas prices follow suit.

For our European friends, the thing that makes this bad is the rapid ascension of gas prices. You guys are used to high gas prices. We're not.... especially when they rise as fast as they have.

Ours have shot up too. I think it is ridiculous to blame any one PM/President or government.

Perhaps we should turn our attention to the oil speculators? You know, those people who are ordering tankers to sit in international waters to restrict supply just to force prices up just that little bit more. Nope, we daren't accuse businesses of anything. After all, what's good for them is always, without doubt, good for us. Why spiralling petrol prices are for our benefit though is beyond me.

The_Amber_Spyglass wrote:Ours have shot up too. I think it is ridiculous to blame any one PM/President or government.

Exactly. This is a global phenomenon. Bush had no real control over the heavenward trajectory of oil prices during his entire presidency up until mid 2008, nor over the sudden fall. Obama has no control over the current return to oil high prices. This focus on "gas" is a red herring. Look at causes, not effects. Oil prices cause gas prices. The causes of oil prices are complex and global.

Perhaps we should turn our attention to the oil speculators? You know, those people who are ordering tankers to sit in international waters to restrict supply just to force prices up just that little bit more. Nope, we daren't accuse businesses of anything. After all, what's good for them is always, without doubt, good for us. Why spiralling petrol prices are for our benefit though is beyond me.

I'd say speculators are partially responsible for short-term, small-scale price hikes, but not for the unmistakable macroeconomic trend of consistently rising oil prices over the last decade. This is due mainly to steadily increasing demand worldwide, particularly in the developing world, more particularly in China and India, but everywhere.

Supply will ultimately be a factor as well (as we will inevitably run out of the stuff), and various short-term disruptions in supply probably account for some of the short-term price hikes, but I don't know to what extent diminishing supply has caused the long-term trend we've been seeing.

kronos wrote:I'd say speculators are partially responsible for short-term, small-scale price hikes, but not for the unmistakable macroeconomic trend of consistently rising oil prices over the last decade.

Clearly there are other factors at play, inflation for another thing, lack of fuel efficiency being another thing that stretches demand. I'm not so sure that the speculators role in this is so insignificant though. If these global trends of selling stock amongst themselves several times in a day, and the deliberate restriction of supply is happening all over the world every day by ordering tankers not to dock where they are supposed to go, keeping supply forever on the move and never being sent where it is needed, that has got to have quite an impact.

The_Amber_Spyglass wrote:Ours have shot up too. I think it is ridiculous to blame any one PM/President or government.

I don't blame Obama. There is a few things he could do to stifle it a bit though, but not much.

The_Amber_Spyglass wrote:Perhaps we should turn our attention to the oil speculators?

Yeah. We're paying high prices on speculation of things that might happen. Not to mention, there's millions of gallons of gas sitting in tanks (on land) that has been processed. Why is that so expensive when it was refined before the current crisis?

I refueled a U-Haul (a moving truck) on Saturday that I rented to go get the rest of my mom's stuff. It took 24.847 gallons and cost me $94.39. That's fuqqin' insane!

(that's 20.68 in UK "gallons" at 57.26 GBP)

The key to it all for me is that I stop driving as much as I used to. It ain't much for the oil companies, but many people do the same thing around here. Less in, less out.

The_Amber_Spyglass wrote:Ours have shot up too. I think it is ridiculous to blame any one PM/President or government.

Perhaps we should turn our attention to the oil speculators? You know, those people who are ordering tankers to sit in international waters to restrict supply just to force prices up just that little bit more. Nope, we daren't accuse businesses of anything. After all, what's good for them is always, without doubt, good for us. Why spiralling petrol prices are for our benefit though is beyond me.

This is a strawman argument advanced by many on the left in this country. What people don't realize is that some of the biggest speculators out there are industries and businesses that rely on speculation to hold their fuel costs down - airlines, train companies, large shippers (FedEx, UPS, etc), energy companies (those that run electrical generating plants) and other very large consumers of oil, gas, natural gas, diesel and av-gas. These speculators are NOT looking to bid up the price of the very fuel their companies rely on. And this completely leaves out the source of most of our energy, coal.

As for what our President could do, he could call off the all-out war he has declared on fossil fuel companies and open up federal lands for oil exploration and production and slash bureaucratic and regulatory hurdles that currently make said exploration and production all but impossible in this country.

This would have the very same effect that it had back when Bush made that same declaration. It would immediately drive prices downward. Just the threat that America was going to get serious about domestic production was enough to lower prices rapidly and dramatically... we have a factual record of this effect. And we can see what happens when we don't follow through on that policy. As the story above points out, gas was below $2.00/gallon before Obama took office ($1.83/gallon to be exact - and it was even lower than that as of Dec 2008 - about $1.60/gallon). Gas is now about $4.00/gallon (depending on where you live - in some places it's much, much higher - in some places, it's a tiny bit lower - but not much lower).

If you think Obama's policies have nothing to do with this, then you are not facing the facts. Those who say political leaders have no ability to influence gas prices are guilty of applying the principle of "ceteris paribus" as an economist would. But the real world does not operate the way typical economic models say. All else is never equal in the real world. And Presidents and Prime Ministers can affect things like gas prices through their policies. Now, it is true that they cannot change cold-hard economic realities (such as were we really running out of oil - or any given resource); but policies that deliberately blunt or severely curtail the exploitation of a given resource will have a very real impact on the prices of that resource.

Do you think that speculators would be betting on higher prices in the future (in this country at least), if we truly unleashed our energy industry to exploit our vast domestic energy resources? Of course they wouldn't! And that would also send a clear signal to other countries who currently rely on American purchases of their oil. You would see prices drop immediately as they now felt that they would soon be in competition with domestic American producers. It really is just basic economics. This is econ-101 stuff.

As for what our President could do, he could call off the all-out war he has declared on fossil fuel companies and open up federal lands for oil exploration and production and slash bureaucratic and regulatory hurdles that currently make said exploration and production all but impossible in this country.

The US is the world's third largest oil producer, behind two countries that have vastly greater reserves, so obviously oil production is not impossible in this country--and we're producing more oil under Obama than we did under Bush, at least as of last year.

http://www.eia.doe.gov/todayinenergy/detail.cfm?id=1130#

If you can demonstrate a decline in domestic oil production under Obama, I'd love to see it. Otherwise, I'd say the fact that oil production is higher under Obama than Bush rather undermines the argument that Obama is to blame for high gas prices because he has stifled oil production.

Again, the 220,000 bpd reduction cited in your article, assuming it's accurate, is essentially nothing. We consumed 18.771 million bpd in 2009; the figure is almost certainly higher now. 220,000 is 1.17% of 18.771 million.

This would have the very same effect that it had back when Bush made that same declaration. It would immediately drive prices downward. Just the threat that America was going to get serious about domestic production was enough to lower prices rapidly and dramatically... we have a factual record of this effect.

No. Gas prices followed oil prices. (Gas prices and oil prices are very, very tightly correlated). Oil prices fell on plummeting demand bought on by the recession.

And we can see what happens when we don't follow through on that policy. As the story above points out, gas was below $2.00/gallon before Obama took office ($1.83/gallon to be exact - and it was even lower than that as of Dec 2008 - about $1.60/gallon). Gas is now about $4.00/gallon (depending on where you live - in some places it's much, much higher - in some places, it's a tiny bit lower - but not much lower).

If you think Obama's policies have nothing to do with this, then you are not facing the facts. Those who say political leaders have no ability to influence gas prices are guilty of applying the principle of "ceteris paribus" as an economist would. But the real world does not operate the way typical economic models say. All else is never equal in the real world. And Presidents and Prime Ministers can affect things like gas prices through their policies. Now, it is true that they cannot change cold-hard economic realities (such as were we really running out of oil - or any given resource); but policies that deliberately blunt or severely curtail the exploitation of a given resource will have a very real impact on the prices of that resource.

Yes, gas prices are high now because oil prices are high again--all over the world, not just in the US.

http://www.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm

^How is Obama causing all the various crude oils produced all over the world to cost essentially the same amount?

Do you think that speculators would be betting on higher prices in the future (in this country at least), if we truly unleashed our energy industry to exploit our vast domestic energy resources? Of course they wouldn't! And that would also send a clear signal to other countries who currently rely on American purchases of their oil. You would see prices drop immediately as they now felt that they would soon be in competition with domestic American producers. It really is just basic economics. This is econ-101 stuff.

Also econ-101 stuff is the fact that any little boost in oil supply we provide, the OPEC states can easily offset by cuts in production while still exporting much more oil and meeting more oil demand than we can.

dblboggie wrote:This is a strawman argument advanced by many on the left in this country. What people don't realize is that some of the biggest speculators out there are industries and businesses that rely on speculation to hold their fuel costs down - airlines, train companies, large shippers (FedEx, UPS, etc), energy companies (those that run electrical generating plants) and other very large consumers of oil, gas, natural gas, diesel and av-gas. These speculators are NOT looking to bid up the price of the very fuel their companies rely on. And this completely leaves out the source of most of our energy, coal.

Please note: right wing newspaper http://www.dailymail.co.uk/news/article-1229070/Sharks-British-coast-Oil-tankers-refuse-unload-prices-rise--keeping-fuel-costs-soaring.html