American Elephants

Obama’s Got the Economy Running on Empty by The Elephant's Child

Indiana Governor Mitch Daniels was on Fox News Sunday, and remarked” Let’s give the president credit for one domestic policy that works. He wanted higher gas prices and he got them.”

Gas prices are on the rise and nobody is happy about it.  President Obama hastened to explain that it wasn’t his fault, there were no quick fixes, we can’t just drill our way to lower gas prices, there is no silver bullet that will bring down gas prices or reduce our dependence on foreign oil overnight — what we can do is get our priorities straight, and make a sustained, serious effort to tackle this problem — and then he suggested — algae.

Leftist loon, Edward Markey (D-MA) promptly suggested opening the spigots of the Strategic Petroleum Reserve. I think it was just last week that he sponsored a bill to cut funding for our nuclear arsenal by $100 billion, which would result in unilateral disarmament. He’s also a true believer in global warming, and supports every effort to defend ourselves from the horrors of CO2. But I wander astray. Why don’t these people understand “strategic?” Is it too big a word? The reserve is not there to be used every time people get upset about gas prices.

President Obama’s story on gas prices is priceless: 1) Gasoline prices are beyond his control, 2) but  oil and gas production is rising in America due to his energy policies, 3) higher prices are another reason to raise taxes on oil and gas drillers, and 4) investing in algae will be just the brilliant new idea we need. Oh, and since people are so angry about the Keystone XL pipeline, he’ll let them build the Southern part, from Cushing, Oklahoma to next-door Texas. An attempt to pacify the perturbed, that accomplishes nothing much.

Oil prices are futures prices and depend on the outlook for the future price of oil. When the Middle East is afire, Iran is threatening to close the Straits of Hormuz, Syria is in chaos, and the world is trying to cut off Iran’s sales of oil to deter them from making a bomb, it gets a little dicey. On the other hand, when Reagan cancelled a moratorium and Bush cancelled a moratorium the price of oil immediately dropped. Actually, if President Obama simply guaranteed …nevermind. He doesn’t understand the laws of supply and demand, and what he offers with one hand, he taxes with the other.

Today’s price is $3.89.  I don’t know if that is with or without state taxes. The average state tax is 48.8¢ per gallon. New York is the highest at 67.4¢ followed closely by Connecticut, California, Hawaii and Michigan. The lowest are Alaska 26.4¢ and Wyoming at 32.4¢. But for Obama to claim he has nothing to do with gas prices ignores history:

  • In 2008, Senator Ken Salazar (D-CO) refused to vote for any new offshore drilling.  In a conversation with minority leader Mitch McConnell (R-KY), Salazar objected to allowing any drilling on America’s outer continental shelf—even if gas prices reached $10 a gallon.  Obama named him Secretary of the Interior.
  • In 2008, Steven Chu, head of the Lawrence Livermore Laboratories at U. of California Berkeley, told the Wall Street Journal that “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” he also said “We have lots of fossil fuel; that’s really both good and bad news.  We won’t run out of energy, but there’s enough carbon in the ground to really cook us.” Obama named him Secretary of Energy.
  • During the 2008 campaign, candidate Obama said “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.” And “So if somebody wants to build a coal-powered plant, they can.  It’s just that it will bankrupt them.” He was elected president.

Energy production is up, but because of drilling on state and private lands, and offshore on permits granted by previous administrations. On the other hand, when oil prices ramp up, it brings into production more costly resources around the world, increasing the world supply which drives down the price. It also lets the world become less dependent on cheap Mideast oil.

At today’s price, gasoline has reached  a price that in real inflation-adjusted terms it has reached only a few times in history. It fluctuates with global events. We cannot put Obama’s solar and clean wind energy in our gas tanks, biofuel is a flop, switchgrass never got off the ground, ethanol is an expensive flop but still required, and algae is years away from becoming a fuel and unlikely to boot. Here in the Seattle area, gas is up by 44¢ this month.

(The picture is from I Own the World. They suggest carrying a pack of post-it’s and a marker with you to leave your small protest at the pump)

7 Comments so far
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The US is becoming a net exporter of oil. Drilling for more domestically will only serve to increase those exports since supply here isn’t the issue. Plus, Cushing is so full of oil it’s gotten to the point that significant expansion of its facility is needed. It needs a pipeline out of the area. This is the only part of the Keystone that makes real sense. So I’d have to disagree that building the southern portion is placating. It’s more practical of a decision.

And one other thing to consider is if gas prices went down to the point consumers were happy to pay, the oil companies would reduce their production and exploration efforts because low prices per barrel (& at the pump) mean less profit. This is precisely what is happening in the natural gas arena and what happened in the 80’s when prices plummeted.


Comment by mpbulletin

The U.S. is a net exporter of refined petroleum products, not oil, and just barely. Supply here is an issue. Imports from Latin America are dropping off, and we’d really like to get oil from our friends up north instead of unstable Middle East countries. Killing the Keystone XL pipeline was one of the stupidest decisions ever made by any president, ever. But this president is in campaign mode and Big Environment threatened to withdraw their support and their money — and they have a lot of money. They have an obsession about Alberta’s oil sands and are spending millions to try to squash development, pipelines and use. Their obsessions are based on emotion, not fact, but they are really making the Canadians angry. Justifiably so.

There is no objection to the southern Keystone XL, and I understand that Cushing needs more pipeline. However, Obama has really offended the Canadians. China is already in Alberta inking deals. Bad tradecraft to offend one of our best friends, and bad tradecraft to tell Canada that we are an undependable neighbor. Steven Harper is now looking to diversify customers for their natural resources. Canada is a spacious but lightly populated country dependent on export of natural resources.

Basic supply and demand. When the price of oil goes up (and oil is a commodity) at a certain point it will make drilling for oil in more costly locations feasible. Eventually, as more oil comes on line, prices will drop, less new oil will be produced and prices will start up again.


Comment by The Elephant's Child

Elephant> Refined products or oil it doesn’t make a difference. The products are still produced here and they are being sent OUT because our supply is fine. Wouldn’t you think that if we’re bringing in oil to be refined that those products would make their way into our supply lines instead of being exported? So no, DELAYING the keystone xl was not “one of the stupidest decisions ever made”. I think it’d be well worth mentioning that there are plenty of Canadians who are against the oil sands development as well so offending the Canadians is hardly an argument for utilizing this source. Did you complain when Bush banned Canadian prescription drugs from being used here in an attempt to lower Rx prices? I’d say that did more to offend Canadians than delaying ONE pipeline, wouldn’t you?

“Basic supply and demand.”

But that’s just it…demand is low here in the US and as I stated before supply is fine so the price increases are going against that mantra. It illustrates however that one of the primary drivers here are the highly volatile futures markets that are betting on “what-ifs” that are pushing the prices up.

And I’ll make another point as to why the keystone delay is far from the disaster for supply many of its proponents want it to be.

The Obama administration has approved 144 off-shore drilling permits since the BP spill, has opened up previously closed areas to leases and is considering Arctic drilling. I’d say domestic production and supply is doing just fine as is its future as all those permits continue one by one to go on line as many are already I’m sure.

The prices are not due to anything the President has done or hasn’t done and delaying ONE pipeline is not going to raise or lower prices either.

It’s time to put some of the rhetoric into perspective and stop trying to hang the solution on one hook declaring mass failure if that one thing doesn’t go through. Obama is pursuing a diverse energy policy to cushion the country from the repeated shocks from oil prices and he’s being criticized for it by those who don’t seem to grasp how pragmatic that approach is.


Comment by mpbulletin

Your arguments are specious. Oil is not being exported


our supply is fine. Killing the Keystone XL deprived the country immediately of 20,000 jobs, numbers confirmed by the CEO of TransCanada who spelled out just what those specific jobs were. The estimated spin-off jobs were 250,000 – that’s truckers, suppliers, restaurants all along the length of the pipeline. I’m sure you can find Canadians who object to oil sands development, but the government is ticked.

Of course I supported Bush’s ban of Canadian prescription drugs. Canada demanded and got a big discount on American drugs, then wanted to entice Americans across the border to buy the discounted drugs. Nice racket!

You are misinformed. The Obama administration’s permitorium in the Gulf has resulted in 57% fewer deepwater permits, a 68% reduction in shallow-water permits, and a 50% reduction in plans that gain approval in the year to date. In fiscal year 2011, oil production on federal lands decreased by 11% while oil production of private and state lands increased by 14%. Obama is trying to take credit for the increase, which has nothing to do with him.

President Obama is wasting taxpayer money, and driving up the debt to pursue alternate “clean” energy that is pure waste. Neither wind nor solar energy are “new” nor “21st century, but old abandoned technology. They require 100%, 24/7 back-up from conventional power plants, so there is no savings, and no net energy. It is not a matter of technology, but a matter of the nature of wind which is too intermittent and solar energy which is too diffuse. His massive subsidies for solar panel makers have been ill-advised and fraudulent, and the string of bankruptcies is a scandal. These efforts will not work, will not save the planet from its natural warming and cooling, and will not cut back on CO2, which is a harmless, colorless gas that is not a cause of warming and cooling.

The price of gas — nat. av. $3.94 today is caused by four main drivers: 68% for the price of crude; 15% federal, state and local taxes; and distribution, marketing, pipelines 10%; and refining 7%
New Pew survey: two-thirds of Americans think the President should approve the Keystone XL pipeline.


Comment by The Elephant's Child

Elephant> Really? You believe those job numbers? You do realize that those numbers are so far from reality it’s ridiculous? The company, Transcanada is counting each contract that is renewed with each worker as a separate job. That is one person who has their job renewed each year over, say a 3 year period, will be counted as 3 jobs. And those spin-off jobs…while that number is quite high, those are also the very same types of jobs that the GOP dismissed when Obama put out his infrastructure development/maintenance projects along with broadband expansion, public transportation and commuter rail projects. I find it funny how they (and you now) tout those jobs because they are all of a sudden supported by the Right. The numbers you gave are debunked as highly skewed.

Yep, I figured you did buy into the GW Rx ban. But this time around ya can’t offend those Canadians can ya? Sorry, you bought into the “racket” claim put forth by the GOP who were wholeheartedly in the Pharma pockets. The thing is Canada allowed negotiated Rx drugs and the US didn’t because GOP legislation would not allow Medicare/Medicaid to do just that. Bush claimed those Canadian drugs weren’t up to the standards of the US which was ridiculous because they came from the same companies.

I am most certainly NOT misinformed about my figures of oil development and I provided a very reliable source to back up my numbers. There MAY have been a reduction from PLANNED drilling projects but his policies did NOT reduce the number of them underway and you cannot argue with the number high number of permits approved.
Have a look at the link above, the 2nd factcheck portion is applicable to this debate.

Funny, how the rest of the western world and Asia do not see progressing towards renewables as a waste of money, isn’t it? You talk about massive subsidies for those sources for development but neglect to acknowledge the massive subsidies the oil and gas industry received for decades to develop that infrastructure we use on a daily basis. And they are still receiving said subsidies even though their profits are through the roof. I say, if it was fair for oil/gas to get subsidies for YEARS then it is more than fair that renewables do as well.

As far as the scandals go, once again you’re neglecting to recognize the successes. A large number of companies got subsidies for solar and other renewables and they are doing just fine. You’re buying into the GOP rhetoric which jumps on the one or two that went bankrupt and make it sound like they represent the entire effort. How many oil and gas companies or project development companies have there been that received federal dollars went bankrupt over the years?

Yes, the price of oil does come from, in a large part, from the price of crude. But you forget to ask yourself WHY the price of crude is at the level it is at…. because of the futures markets betting on “what-if’s”.


Comment by mpbulletin

I understand that you are a loyal progressive. We will disagree. The rest of the world is giving up on renewables. Germany has dumped solar, as has Spain. The Netherlands has dumped offshore wind, and the public is revolting in Britain as is the public in Australia. But then if you rely on the PI for news, you wouldn’t know. No point in discussion.


Comment by The Elephant's Child

Elephant> Sorry my friend but those countries are not giving up on their renewables projects. That is just not happening. Perhaps you may have heard of one or two projects that went belly up but overall they are pursuing alternatives wholeheartedly. Where do you get your information??

What is “PI”? The Seattle source I listed? Nope, that was just a news story I happened upon that illustrated my points. I actually have never really heard of that newspaper before BUT the article I referenced was from the Associated Press. That’s the type of credible sourcing I look for. It’s also worth noting that I referred to articles from the Washington Post and CNN as well.

But hey, if you’re done with this discussion, that’s fine. We aren’t going to find agreement but please don’t dismiss the facts just because they are coming from a “loyal progressive”… was that what you called me?


Comment by mpbulletin

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