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.
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:
- 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.
- 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.
- 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.
- 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.”
- 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.”
- 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.
- 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.
- 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.
- 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 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.
- 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