Obama and gas prices

As gas prices continue to rise, President Obama is under increasing pressure from both Republicans and the public to take action. Gasbuddy.com, which tracks gas prices, shows an increase of almost 70 cents per gallon in Georgia since Christmas. During the same period, the national average gas price has increased by almost 60 cents. The current national gas price is $3.794 per gallon, while Georgia is a few cents cheaper at $3.703. There may not be any relief in the near future. The Energy Information Administration forecasts that gas prices will stay near $4 per gallon through the summer.

To date, President Obama’s main response has been to blame speculators. In 2011, the president asked the Department of Justice to investigate oil speculators for possible fraud or manipulation of prices. McClatchy Newspapers found the Oil and Gas Price Fraud Working Group, a subgroup of the Financial Fraud Enforcement Task Force, has met “only four or five times since its creation.” President Obama ordered the group back to work last week while at the same time saying that it never stopped working.

Speculators are not the problem. OPEC is the cartel of oil-producing countries that sets the price for much of the world’s oil. The OPEC basket price for March 14, yesterday’s close of business, was $124.29 per barrel. Currently, oil is trading on the New York Mercantile Exchange between $103 and $106 per barrel. Oil is actually selling on the commodities market for less than OPEC is charging. This means that the “speculators” are actually bidding the price of oil down.

President Obama and the Democrats maintain that the president does not control the price of oil and therefore should not be blamed for rising gas prices. The Democrats did not feel that the president was so helpless when George Bush resided in the White House, however. Many blamed President Bush’s ties to the oil industry for 2008’s record spike in gas prices.

While it is true that President Obama cannot take action that will swiftly bring gas prices down, it is also true that many of his policies have contributed to the increase in gas prices. The president’s affinity for green energy and dislike for oil has led to policies that are hostile to oil producers. For example, although President Obama has taken credit for the fact that U.S. oil production is at an eight year high, he failed to mention that the increase was due to drilling permits issued under President Bush.

According to the Institute for Energy Research, the number of offshore drilling permits has fallen by more than 50 percent under President Obama. The percentage of applications approved has fallen from a historical average of 73 percent to the current approval rate of 23 percent. Approval time has increased from an average of 60 days to more than 90. The Obama Administration was held in contempt for continuing its moratorium on off-shore drilling after its executive-ordered ban was struck down by a federal judge. Even before the oil spill, one of President Obama’s first executive actions was to cancel 77 Bush-era oil leases in Utah. Further, the Obama Administration has also unveiled new regulation of fracking, the drilling technique that has made the oil and natural gas booms in Pennsylvania, Ohio, and North Dakota possible. Increased regulation may well lead to fewer permits in these areas as well.

Another high profile decision was President Obama’s rejection of the Keystone XL pipeline. Obama killed the pipeline in January after three years of study. In February 2012, the president lobbied Democratic senators to vote down a Republican bill that would have approved the pipeline according to Investor’s Business Daily, killing the bill a second time. The Canadian oil that would have been piped to U.S. refineries will now likely go to emerging markets in China.

The Energy Information Administration cites the closure of three refineries since September 2011 that supplied gasoline to the East Coast as a factor in rising gas prices. An additional refinery may be shut down in July if no buyer is found. The reduced supply has been partially offset by a new refinery in Delaware City, but has undoubtedly contributed to higher prices. President Obama engineered the purchase of Chrysler by Fiat, but has shown no interest in finding new operators for these refineries.

The Federal Reserve has also increased the money supply through quantitative easing, where the Fed buys securities from banks and expands the money supply. According to the N.Y. Times, the Fed has added more than $2 trillion to the money supply since the economic crisis began in 2008. When more money is in the system, each individual dollar is worth less. As supply increases, demand decreases.

As Republicans on Congress’ Joint Economic Committee noted in report detailed in CNS News last year, “Oil is an international commodity that trades in dollars. The value of the unit of exchange, in this case the dollar, plays an important role in determining the ‘headline’ price for the underlying commodity.” The report further notes that the first round of quantitative easing resulted in an increase of more than $17 per barrel of oil. This is approximately an increase of more than 50 cents per gallon of gasoline.

Another major factor in the high price of gasoline is instability in the Middle East caused by the Iranian nuclear program. The Iranian quest for nuclear weapons predates the Obama Administration, but the president has frittered away time with fruitless negotiations while the Iranians worked and used diplomacy as a delaying tactic.

In the meantime, Obama has done everything possible to prevent Israel from launching a strike on Iranian nuclear facilities, even after Iran attempted a terror bombing inside the District of Columbia in October 2011. He is right that an Israeli strike would probably result in an Iranian blockade of the Persian Gulf causing oil prices to skyrocket, but he seriously underestimates Iranian Twelver religious fervor and their resolve to destroy Israel. The Iranian leadership believes that a Muslim messiah is coming soon and that their mission is launch a nuclear war to prepare the way for him.

A conventional war in the Middle East would be disastrous for oil prices. A nuclear war in the Middle East (or worse: one that reaches American shores) would be even worse. As the Iranians draw close to becoming a nuclear power, there is less time for sanctions to work and less chance for a peaceful solution. The price of oil includes a risk premium for the possibility of war in the Middle East that Obama’s inaction has made more likely.

Finally, President Obama is a bit disingenuous about wanting cheaper prices for gas and energy. In September 2008, Dr. Steven Chu, the man who later became President Obama’s energy secretary, told the Wall Street Journal, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” Chu wanted gas prices to increase in order to coax Americans into buying more energy-efficient cars and encouraging shorter commutes.

Barack Obama himself, in a January 2008 interview with the San Francisco Chronicle that can be heard on HotAir.com, said as a candidate that “under my plan of a cap and trade system, electricity rates would necessarily skyrocket.”  This would have been bad news for everyone, including people driven to purchase electric cars by Dr. Chu if cap-and-trade had passed. Although Congress never passed cap-and-trade, President Obama’s EPA is implementing carbon regulation unilaterally.

President Obama cannot personally control the price of oil, but his policies do have an effect on it. On balance, the president’s policies are contributing to the rising gas prices. The statements of candidate Obama and Dr. Chu are evidence that they knew exactly what they were doing all along.

Originally published on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/obama-and-the-price-of-gas

Obama’s green war on jobs and energy

In spite of acknowledging the need to wean the United States off of Middle Eastern oil, the Obama Administration, prompted by core supporters in the environmental lobby, is waging a job-killing war against two projects that would help the economy, produce jobs for Americans, and, perhaps most importantly, reduce our dependence on oil imported from unfriendly foreign countries.

The first issue is the EPA’s proposed regulation of fracking. “Fracking” is a slang term for hydraulic fracturing, the process of injecting fluids, primarily water, into rocks to create larger fissures. The larger fissures allow more oil or natural gas to flow into the well. The process makes it possible to tap into previously unreachable oil and natural gas reserves. The debate on fracking centers on the Marcellus Shale formation in Pennsylvania and Ohio and the Dakota oil and gas fields. Fracking has also been used safely in Texas since the 1950s.

Opponents of fracking are concerned about the impact on air and water quality. Opponents will likely be heartened by the recent release of an EPA report that suggests that fracking may contaminate groundwater. The Wall Street Journal notes that the report, which has not been peer reviewed, admits that chemicals detected in the water in Pavilion, Wy., where the tests were done, are within acceptable limits. Further, the problematic chemical detected is not used in fracking at all, but is a common fire retardant used in plastic components for drinking water wells. This leads many to believe that the contamination is not from fracking at all.

The decision on whether to allow fracking in the Marcellus Shale is important because of the size of the field. It contains an estimated 500 trillion cubic feet of natural gas. The amount recoverable, estimated at about ten percent of the total, is almost equal to two years of natural gas production for the entire rest of the country. As technology advances, more oil and gas that was previously unreachable can be recovered.

Allowing fracking would not only create jobs in the natural gas and oil industries, it would be a boon to the rest of the economy in the form of cheaper energy costs as well. When energy costs go down, manufacturing costs decrease as well. This makes American products more competitive and helps American businesses grow.

The second project that President Obama’s administration is intentionally delaying is the Keystone oil pipeline. The Keystone pipeline would run from Canada’s Athabasca oil sands in Alberta to American refineries in Texas.

The benefits of the pipeline are easy to see. Most obviously, it would relieve U.S. dependency on Middle Eastern and Venezuelan oil and contribute to national energy security. The additional supplies of oil should also help drive down energy costs. Further, TransCanada, the pipeline’s owner, estimates that construction of the pipeline would create 20,000 construction and manufacturing jobs in the U.S. Other jobs would be created in other industries, such as restaurants and hotels, as well. The effect of lower energy prices would create positive effects across the economy. Total value to the U.S. economy is expected to exceed $20 billion.

The pipeline was proposed in 2008 and approved by Canada’s National Energy Board on March 11, 2010. Since then, the proposal has been winding its way through a labyrinth of state and federal bureaucracies. Almost two years later, no final decision has been made at the federal level.

President Obama had previously announced his intention to delay making a decision on the pipeline until 2013, but a provision in the payroll tax extension bill forces him to make a decision in 60 days, moving up the deadline to late February. Given the enormous economic benefit in a time of economic crisis, why is President Obama delaying the approval of the pipeline?

The answer lies in the makeup of President Obama’s base. Environmental groups that are key supporters of President Obama oppose the pipeline over concerns about global warming, possible groundwater contamination in the event of an oil spill, and basic opposition to any development of the oil sands.

There are problems with this position. One is that if the Keystone pipeline is canceled, the oil sands are still likely to be developed. If the United States does not gain access to this Canadian oil, it will, in all likelihood, go to the Chinese. If the Chinese buy Canadian oil, it will be transported via tankers to China, which is a far less safe mode of transportation than a pipeline.

Even though the United States still imports almost half of the oil that it consumes according to the Energy Information Administration, in 2011 the U.S. became a net exporter of fuel. With additional Canadian oil flowing to U.S. refineries combined with a weakening dollar, U.S. export numbers should continue to improve.

Ironically, Obama’s base is becoming split over the pipeline issue. While environmentalists oppose the project, unions have voiced their support for the pipeline on the grounds that it will create jobs and help the economy. If he decides against the pipeline, President Obama risks losing support to a pro-growth candidate. On the other hand, if he approves the pipeline, environmental activists may support a third party candidate, such as a Green, or stay home.

The interference of President Obama’s EPA with fracking and the president’s long delay in approving the Keystone pipeline are two examples of how President Obama’s commitment to a future green energy system and his environmentalist supporters are hurting the United States today. High energy costs could be somewhat reduced by more oil supplies and more jobs could be created if the president approves these projects.

Read this article on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/obama-s-energy-policies-cost-jobs