Monday, March 12, 2012

Why Whines About High Gas Prices Are Full of Hot Air

We've been hearing plenty lately about the rising cost of gasoline. The media continue to report breathlessly about "the pain at the pump", and those darned media pundits are now chattering about how much blame President Obama will be getting for it. But when we look beyond the media speculation and Republican spin, the real picture looks quite different from what one catches on the cable "news" channels.

While many G-O-TEA politicians are quick to blame Obama for all that "pain at the pump", they're also quick to ignore the facts.

According to the study [by six federal agencies], the United States reduced net imports of crude oil last year by 10%, or 1 million barrels a day. The U.S. now imports 45% of its petroleum, down from 57% in 2008, and is on track to meet Obama’s long-term goal, the administration maintains.

Imports have fallen, in part, because the United States has increased domestic oil and gas production in recent years.

U.S. crude oil production increased by an estimated 120,000 barrels a day last year over 2010, the report says. Current production, about 5.6 million barrels a day, is the highest since 2003.

The U.S. has been the world’s largest producer of natural gas since 2009, the report says. Use of renewable sources of energy, such as wind and solar, is still relatively small but has doubled since 2008.

They're also quick to ignore history.

The usual suspects [for high gas prices] can be rounded up: refinery maintenance closures; the annual shift from cheaper-to-make winter blends of gasoline to the summer blends that use more expensive components; speculators, hedge funds and others driving up the cost of gasoline and oil futures; refiners helping make their petroleum products one of the nation’s most successful exports; and recent fears of a conflict with Iran.

Meanwhile, President Obama catches much of the current heat for price. But he might find some solace in the fact that he would be the first president since Kennedy if he isn’t hit with the visual pain of a larger number on the nation’s gas pumps.

That’s how far back one has to go (in a non-inflation adjusted sense) to find a president whose term ended without an increase in prices at the gas pumps, and that was probably because his term in office was cut short.

And in fact, gas prices now are still below the all time (national average) high of $4.11 experienced during George W. Bush's Presidency. I know that's still cold comfort for everyone having to spend more at the gas station now, but these are the facts. Speculation on Iran is having its effect on the market. Global oil demand is rising. (Remember that law of supply and demand?) Domestic oil production is at an 8 year high, and we're now using more domestically produced oil than imported oil. Oh, and even conservatives like George Will and the Cato Institute have admitted that the G-O-TEA attacks on President Obama are full of hot air.

And if G-O-TEA politicians think that whining about high has prices is their ticket to victory, then they may be in trouble if they're caught without refund insurance.

It’s hard to rule anything out, but evidence is thin that gasoline will matter much come November. While Americans love to grumble about expensive gasoline — and with good reason — political science research suggests that they don’t usually vote over it. Nate Silver, for one, has found that “there’s not a lot of evidence that oil prices are all that important” a factor in presidential elections. Nor do gasoline prices necessarily dictate the public’s view of the White House: Back during George W. Bush’s presidency, there was a much-linked graph showing his approval ratings climbing and dipping in lockstep with gas prices. But subsequent analysis by political scientist Brendan Nyhan showed that the correlation was just a “statistical artifact.”

The more severe worry for Obama, at this point, is whether soaring gas prices will stomp on the nascent economic recovery. The way this typically happens is that pricey gasoline starts crimping the checkbooks of U.S. consumers, who then have less money to spend on other things. (In the Post-ABC poll, most respondents said they were already feeling the pinch.) That leads to slower growth. And slower growth, political scientists agree, really can sink a presidency.

Still, it’s not yet clear whether oil prices will actually crush the current recovery. James Hamilton, an economist at UC San Diego, has found that most U.S. recessions since World War II have been preceded by a sharp run-up in oil prices. So you’d expect him to be gloomy about our current predicament. But, surprisingly, he’s not. “I find myself in the unusual position,” he recently wrote, “of being less concerned about the impact of oil prices on the U.S. economy than many other analysts.” In Hamilton’s view, high oil prices tend to inflict disproportionate economic harm by leading to a cut-back in vehicle sales. (When gas prices are volatile, consumers are hesitant to purchase new cars and trucks.) But that doesn’t seem to be happening right now — vehicle sales are booming. Moreover, low natural gas prices, a warm winter, and improved fuel efficiency have helped insulate U.S. consumers from pricey oil. Americans have been grappling with expensive oil for several years now, and they seem to be adapting.

And there are certainly ways for us to adapt. We can use mass transit more often. We can carpool. And of course, we can invest in renewable alternatives to oil that can be produced right here in America and create more American jobs. And of course, all of these are more effective in providing relief to American consumers than empty chants to "Drill Baby Drill" and ridiculous schemes to pump up profits for Canadian oil corporations.

So there we have it. All the ridiculous attacks on President Obama regarding high gas prices really come up empty. Remember that next time you see more media speculation and Republican spin on an issue they really don't seem interested in fully understanding.

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