Back to Basics

When President Obama took office, regular gasoline cost $1.85 a gallon. Now it’s hit $4.00 per gallon in many cities, and some analysts predict it could reach $5.00 or more this summer. Filling your tank could soon slam you for $75-$90.

Winter was warm. Our economy remains weak. People are driving less, in cars that get better mileage, even with mandatory 10% low-mileage ethanol. Gasoline is plentiful.

Misinformed politicians and pundits say prices should be falling. Our pain at the pump is due to greedy speculators, they claim, and greedier oil companies that are exporting oil and refined products.

Their explanation is superficially plausible – but wrong.

Energy Information Administration (EIA) data show that 76% of what we pay for gasoline is determined by world crude oil prices; 12% is federal and state taxes; 6% is refining; and 6% is marketing and distribution. The price that refiners pay for crude is set by global markets.

World prices are driven by supply and demand, and unstable global politics. That means today’s prices are significantly affected by expectations and fears about tomorrow.

A major factor is Asia’s growing appetite for oil – coupled with America’s refusal to produce more of its own petroleum. Prices are also whipsawed by uncertainty over potential supply disruptions, due to drilling accidents and warfare in Nigeria; disputes over Syria, Yemen and Israeli-Palestinian territories; erroneous reports of a pipeline explosion in Saudi Arabia; concern about attacks on Middle East oil pipelines and processing centers; and new Western sanctions on Iran over its nuclear program and the mullahs’ threats to close the Straits of Hormuz.

Moreover, oil is priced in US dollars, and the Federal Reserve’s easy money, low interest policies – combined with massive US indebtedness – have weakened the dollar’s value. It now costs refineries more dollars to buy a barrel of crude than it did three years ago.

Amid this uncertainty and unrest, speculators try to forecast future prices and price shocks, pay less today for crude oil that could cost more four weeks hence, and get the best possible price for clients who need reliable supplies. When they’re wrong, speculators end up buying high, selling low and losing money.

Oil speculators play a vital role, just as they do in corn and other commodities futures markets.

Basic chemistry dictates that a barrel of crude (42 gallons) cannot be converted entirely into gasoline. Depending on the type of crude, some 140 refineries across the USA transform each barrel into gasoline, diesel, jet fuel, heating oil, asphalt, waxes, petrochemicals and other essential products.

This manufacturing process leaves them with excess diesel fuel, because American vehicles consume less diesel than refineries produce – due to air pollution laws that limit diesel use. US refineries export that excess diesel to Europe, which uses more diesel than gasoline, and Europeans ship their surplus gasoline to mostly East Coast consumers. US refineries also sell excess inventories of other manufactured products to overseas markets, but diesel is by far their principal export.

America exports $180 billion in finished products every month – $2.2 trillion annually in corn, wheat, cars, tractors, appliances, airplanes, pharmaceuticals and much more.

Last year, for the first time since 1949, America was a net exporter of fuel and other petroleum products.

The Republicans have yet to choose a nominee, but we already know that Obama’s other opponent will be oil companies.

As we’re often told, President Obama doesn’t have a “silver bullet” to control gas prices. There hasn’t been a presidential gas-price reducing silver bullet since George W. Bush left office. He must have taken it with him back to Crawford. But Obama does have some ideas on how to bring the price of gas down, and of them is to end government subsidies to Big Oil:

In his weekly address to the nation Saturday, Obama sought to redirect consumers’ anger with his administration to anger with Congress for allowing companies like Exxon Mobil and Chevron to receive $4 billion from the federal government every year.

“Your member of Congress should be fighting for you. Not for big financial firms. Not for big oil companies,” Obama claimed.

“In the next few weeks, I expect Congress to vote on ending these subsidies,” he continued. “And when they do, we’re going to put every single Member of Congress on record: They can either stand up for oil companies, or they can stand up for the American people.”

I’m not advised by brilliant economists like the president is, so maybe I’m unwisely straying above my pay grade here, but if we eliminated these tax breaks to oil companies right now, might that make the price at the pump go up? “No” say Democrats, arguing that Big Oil already reaps huge profits. In that case the government should also end subsidies to Goldman Sachs and Google. If eliminating government subsidies for oil companies might make gas less expensive, why wouldn’t eliminating government subsidies for General Electric make, say, refrigerators cheaper? Wait, the latter subsidies are for “green” projects so they’re okay.

According to the CBO (PDF), there were $2.5 billion in government subsidies — that is to say “tax breaks” — for all fossil fuels in 2011. That’s roughly the same amount of money that could go down the drain on “clean energy loans.” Maybe that’s what is meant by a “balanced approach.”

httpv://www.youtube.com/watch?v=E5Qqvmqgz2A

My piece at Fox News discusses the high energy prices starts this way:

On Friday, President Obama announced that he was “making sure that my Attorney General is paying attention to potential speculation in the oil markets.” 23 Senators and 45 congressmen, all Democrats except for one independent, are calling for urgent action against the “speculators” they hold responsible.
These members of congress want the Commodity Futures Trading Commission to use its new regulatory powers under a law Obama signed two years ago to limit the amount of oil that speculators can buy.
This isn’t a new concern.
During the 2008 presidential campaign, Obama campaigned against “the special interest politics that put the interests of Big Oil and speculators ahead of the interests of working people,” and surely implied that an Obama administration would end these high prices by clamping down on speculation.
Possibly that is why a new Washington Post/ABC News survey released on Monday shows that soaring gas prices have taken a toll on Obama, with 50 percent of American’s strongly disapproving of Obama’s economic performance — the highest in the poll’s history. . . .

Interestingly, Energy Secretary Steven Chu walks away from his past support for higher energy prices, though is it a political conversion? Or is he just qualifying it so much that he is only walking away from it temporarily. It seems pretty clear that it is the later.

“Let me first respond to your first statement, Senator,” Chu said. “Since I walked in the door as Secretary of Energy, I have been doing everything in my powers to do what we can to reduce — as we see these gas prices spike — to reduce these prices. And the administration, the president, and I personally, yes we do acknowledge and feel the pain of not only American consumers, but American businesses when they see these prices increase.”

“Are you saying that you no longer share the view that we need to figure out how to boost gasoline prices in America?” Lee asked

“I no longer share that view,” Chu said.

“You did then, but don’t now?” asked Lee.

“When I became Secretary of Energy, I represented the U.S. government and I think that right now, in this economic very slow but — you know, return that we need to have these prices … will effect the comeback of our economy and we’re very worried about that. So of course we don’t want the price of gasoline to go up, we want it to go down.” . . .

My new piece with Grover Norquist in the Philadelphia Inquirer starts this way:

With regular gas prices topping $3.70 last weekend, angry politicians are blaming the higher prices on speculators and greedy oil companies. On Monday, The Hill newspaper reported that 23 senators and 45 congressmen, all Democrats except for one independent, called for urgent action against the “speculators” they hold responsible. Sen. Bob Casey of Pennsylvania demanded, “Consumers shouldn’t be forced to pay higher prices at the pump because of speculative bets on Wall Street.”

These politicians want the Commodity Futures Trading Commission to use its new regulatory powers under a law signed by President Obama two years ago to limit the amount of oil that speculators can buy.

This isn’t a new concern. Last April, when regular gas prices hit $4 a gallon, the president launched a Department of Justice investigation into what he called “manipulation in the oil markets that might affect gas prices.”

Unfortunately, neither the Democrats in Congress nor Obama appear to have a clue how markets work. The policy reminds one of Richard Nixon’s attacks on speculators during the 1970s. . . .

Just a couple of weeks ago, White House Press Secretary Jay Carney claimed that it wasn’t President Obama who turned down the Keystone pipeline, and that Obama’s denial was only due to Republicans forcing his hand by playing politics.

Today, Republicans are again forcing Obama’s hand… to pick up the phone and call Senate Dems to convince them to vote down a pipeline amendment that would bypass the White House completely:

President Barack Obama is intervening in a Senate fight over the Keystone XL oil pipeline and personally lobbying Democrats to reject an amendment calling for its construction, according to several sources familiar with the talks.

The White House lobbying effort, including phone calls from the president to Democrats, signals that the vote could be close when it heads to the floor Thursday. The president is trying to defeat an amendment that would give election-year fodder to his Republican critics who have accused him of blocking a job-creating energy project at a time of high gas prices.

The amendment, proposed by Sen. John Hoeven (R-N.D.), states that Obama would have no role in such cross-border permitting decisions since, in this case, the pipeline would originate in Canada. The measure would need 60 votes to pass, and Obama has already lost two Democrats who back the proposal

Just tell the Dems the pipeline’s going to be used to pump algae down to the new Planktonmobile factory in Florida and maybe the president would change his mind.

(h/t Weasel Zippers)

“This president, systematically, is doing everything he can to raise the price of energy in this country. He’s shutting down all sorts of opportunities for us to drill for oil.”
–Rick Santorum

If you think gasoline is expensive now, just wait and see the price at the pump if Barack Obama is re-elected. His policies have steadily dragged the country toward $5 per gallon. If he gets another term in office, affordable gas will be a faint memory. And that will have Obama and his Green backers tickled pink.

The Obama Administration doesn’t seem to care that every 1 cent increase in the price of gasoline costs the economy $1.4 billion. America is becoming more dependent on Muslim oil while turning its back on a half-century energy alliance with Canada. This has been made evident by the President’s rejection of the Keystone Pipeline.

When Obama was sworn into office, the price of gasoline was $1.80 a gallon. Three years into his term, prices for some Americans are approaching $5 per gallon.

That is just the way Obama likes it. Given another four years, gasoline prices could reach $8 a gallon. This is because Obama has a greater allegiance to the Green Machine that drove home his victory in 2008 and that is fueling his chances for another victory lap come November.

The specifics of what the President promised to the environmentalists if he is re-elected remain a secret. But what we know for certain is that Obama clamped down on deep-water drilling inside the Gulf, tightened Federal restrictions for onshore oil exploration and vetoed the Keystone Pipeline, a major oil artery that would secure dependable Canadian crude to a nation thirsting for oil.

Senator Kay Bailey Hutchison (R-Texas) said the evidence is in, that the Obama Administration has willfully brought higher prices to the gas pump because it has put an embargo on fresh and dependable sources of North American petroleum.

“We can’t slow down global demand for oil and gas, but we can do a lot more here at home to assure that we have the energy we need and to halt skyrocketing costs,” Hutchison said. “President Obama’s policy has resulted in an unprecedented slowdown in new exploration and production of oil and gas.”

Speaker of the House John Boehner said the President has been reckless in mismanaging the nation’s energy policies.

When added up, not passing the Keystone Pipeline and “scrapping leases for oil-shale development” makes the President responsible for $5 gasoline, read a press release from Boehner.

“The Obama administration has spent more than three years blocking efforts to expand energy production and bring down gas prices, while pushing job-crushing tax hikes and taxpayer-backed loans to companies like Solyndra.”

Boehner laid out a timeline showing Obama’s purposeful drive to sending gasoline prices higher:

• Jan. 7, 2010 – The Obama administration announces new bureaucratic hurdles to American energy production that Secretary Salazar admitted “could add delays to the leasing and drilling process.” Gas is $2.67 a gallon.
• March 31, 2010 – Instead of opening new areas to energy exploration and development, President Obama blocks deep-ocean energy production on 60 percent of America’s Outer Continental Shelf. Gas is $2.80 a gallon.
• Dec. 1, 2010 – The president re-imposes and expands the moratorium on offshore energy production. Gas is $2.86 a gallon.
• Jan.

In the title I’m referring of course to Bill Clinton’s support for the construction of the Keystone Pipeline. Why, what did you think I was talking about?

“One of the most amazing things to me about this Keystone pipeline deal is that they ever filed that route in the first place since they could’ve gone around the Nebraska Sandhills and avoided most of the dangers, no matter how imagined, to the Ogallala [aquifer] with a different route, which I presume we’ll get now, because the extra cost of running is infinitesimal compared to the revenue that will be generated over a long period of time,” he said.

“So, I think we should embrace it and develop a stakeholder-driven system of high standards for doing the work,” Clinton added.

With gas prices what they are and not expected to get any lower anytime soon, Clinton’s trying to give Obama a nickel’s worth of free advice:

*****

What’s interesting about Clinton’s support for Keystone is that it’s the State Department that has to sign off on the full project, and Bubba is married to the Secretary of State. That means that if Bill wants to help Obama get re-elected, all he’s got to do is wake up in the morning, whisper his opinion into his lady’s ear, and then that lady can call Hillary and finally get the pipeline underway.

Former US President Clinton, pictured above, demonstrates how oil flows through a pipeline while expressing his support for the Keystone XL project

Today in Florida, President Obama addressed gas prices that are getting so high they can almost see the top of Nancy Pelosi’s unfavorable rating. Obama’s speech hit on many of the predictable points, and from what I’ve read so far it boiled down to two things: We can’t drill our way to lower gas prices, and if we try to kick-start enough Solyndras eventually some of them might get off the ground before the country goes bankrupt.

From The Hill:

President Obama railed against Republicans on Thursday for “licking their chops” and using a spike in gas prices as a political opportunity.

Appearing at the University of Miami in a high profile speech on energy, Obama aimed to deflect the criticism his administration has received for failed energy policies and higher gas prices.

Obama sought to telegraph a message that he is doing all he can to improve energy policy while accusing Republicans of politicizing the issue.

“Only in politics do people greet bad news so enthusiastically,” Obama said before a crowd of students, according to his prepared remarks.

“You pay more and they’re licking their chops? And you can bet since it’s an election year, they’re already dusting off their three-point plans for $2 gas. I’ll save you the suspense: step one is drill, step two is drill, and step three is keep drilling.

Playing politics with high gas prices in an election year? Now who would do a thing like that?

httpv://www.youtube.com/watch?v=dnLP12X3EgM

Returning to our current gas price spike, Obama Spokesman Jay Carney also reminded everybody this week that it was the GOP who denied the Keystone project. Always against the construction of oil pipelines — that’s how Republicans roll.

Earlier today, DNC Chair Debbie Wasserman Schultz offered the same:

“The Republican field, like Mitt Romney, thinks that we just need to remain tethered and dependent on foreign oil because all they would do is more and more drilling, which is a very shortsighted approach and it would do nothing to prevent people who are struggling to put $80 into their gas tanks to be able to make sure that that’s more affordable,” Wasserman Schultz said on MSNBC.

“And that is another example of how they are economically out of touch,” she said.

Keep in mind the statement about who is economically out of touch is coming from someone who thinks that sinking billions of dollars worth of taxpayer subsidies into a “green” car that is only affordable to buyers who earn an average of $170,000 a year (not to mention huge corporations with ties to the administration) is economically in touch.

In the coming weeks and months, as we’re told that the key to energy independence is to “invest” billions more into clean energy projects and assorted “green” sinkholes, remember that our debt per capita has now surpassed that of Greece:

That would have bought a lot of gas.

Don’t worry though… Obama says he’s got five more years to work on a fix. Plenty of time.

Unless President Obama opens Thursday’s gas prices address by announcing he’s going to put a Master Lock on the door of the EPA’s offices (better chance Team Biden will win a geographic spelling bee in Road Island), I’ll be skeptical about any other suggested solutions:

President Barack Obama plans to step into the political debate over rising gasoline prices on Thursday, when he kicks off the first of a series of events focused on his energy plans, senior administration officials said.

During an event at the University of Miami, Mr. Obama will discuss the steps the country can take to tackle what the White House sees as an annual cycle of spikes in gas prices, the officials said. At the same time, these officials, who briefed reporters Tuesday on the president’s plans, acknowledged that there is almost nothing the president can do in the near term to lower gas prices.

But rising gas prices are a threat to the president as he runs for re-election this year. It’s one of the issues of chief concern to Mr. Obama’s political advisers and has become the subject of criticism of Mr. Obama on the campaign trail.

Mr. Obama’s speech Thursday will call for a diverse energy plan and lay out his efforts to boost domestic production of oil and gas.

To save you some time, here’s Obama’s gas price speech in about 50 words: “Payroll tax cut to help families cover the rising fuel cost that’s a sign of economic recovery. Increase domestic energy output tempered by environmental sensitivity. No quick fixes. Buy Chevy Volts. Republicans playing politics. Remember global warming. More clean energy initiatives. Trade in your gas guzzler. Trouble with Iran.”

President Obama said the same thing back when the administration denied the pipeline permit the Republicans’ killed the Keystone project because of their political games.

Transcript from Real Clear Politics:

Carney: “In terms of Keystone, as you all know, the history here is pretty clear. And the fact is because Republicans decided to play political with Keystone, their action essentially forced the administration to deny the permit process because they insisted on a time frame in which it was impossible to completely approve the pipeline,” Carney said when asked about the pipeline by ABC News’ Jake Tapper.

Later in the briefing, Carney says it is the Republicans’ fault.

Jake Tapper: “How can you say that you have an all the above on approach if the President turned down the Keystone pipeline? And you blame the Republicans for making it political.”

Carney: “But the President didn’t turn down the Keystone pipeline. There was a process in place, with long precedent, run out of the State Department because of the issue of the pipeline crossing an international boundary, that required an amount of time for proper for review after an alternate route was deemed necessary through Nebraska at the request of the Republican Governor of Nebraska and other stakeholders in Nebraska and the region that needed to play out, to be done appropriately. You can’t review and approve a pipeline, the route for which doesn’t even exist.

It’s amazing what excuses they can come up with for things they don’t want, and what justifications can be created for expediting things they do want.

President Obama spent several weeks offering desperately pleas of “we can’t wait” on job creation, so the Republicans took him up on it, and the reply from the White House was “you can’t rush it!”

If the White House had been told the pipeline was going to be used to funnel solar panels from Solyndra to Shangri La, the thing would have been constructed post-haste — time-constraints, cost, and the opinion of officials in the Midwest be damned.

Click the pic to roll tape:

Funny how Carney has to pretend the administration didn’t deny the pipeline because of denied for political reasons.