Saturday, July 23, 2011

Energy Lies—III

"Obama is Responsible for $4 Gas Prices"

~ The idea that any one person, even the President, is solely responsible for the price of gasoline is absurd on its face. The energy market is intensely complicated and its actors can't even predict prices, much less control them.

But that doesn't stop the Wingnut chorus (Donald Trump, Heritage Foundation, Sarah Palin, American Petroleum Institute and others to whom I refuse to link) from assigning blame to Obama for everything from the drilling moratorium in the Gulf of Mexico to that hardy perennial, onerous regulations. Others suggest a conspiracy to promote renewable energy (would that it were so!) or hatred of Big Oil (we'll punish them with higher profits!) or a vague, generalized contempt for America (not that those impugning the President would be guilty of such, mind you.)

It's useful to review the price of gasoline over time. While the Energy Information Administration is notoriously poor at prediction, they are very good at compiling records:

Chart of US regular gasoline prices 1990-present
Average US price of regular unleaded gasoline, in dollars per gallon (Source: EIA)

Gas prices peaked in summer 2008 at just over $4. George Bush was President. No one had ever heard of a blowout preventer, industry was drilling in the Gulf of Mexico as fast as it could, and deregulation was at its zenith. Gas was very expensive anyway, largely because the price of oil was rocketing to more than $140 per barrel. Most now believe that this was the result of commodities speculators and heightened demand driven by an unsustainable debt-fueled bubble. With the Great Recession, oil plunged in price, demand slackened and gasoline prices fell back.

Looking at the graph, and accounting for the economic near-panic in the fall of 2008, recent prices appear to be following a steady trend that started back in 1999, about the time people started really talking about the rise of the BRIC and other emerging economies.

Gas flirted with the $4 level again in the last few months (and exceeded it here in Washington State.) Why? World demand for oil, especially from developing countries continues to be strong. The "Arab Spring" created a lot of supply uncertainty. There is also a broad bull market in commodities that is boosting the prices of everything from metals to rare earth elements to new highs.

So why are gas prices around $4 per gallon? It's not about what Obama is doing or not doing. It's not even about the United States. It's not about us. It's the global economy, stupid.

Other energy lies:
"Gulf of Mexico Oil Drilling Stymied by Regulation"
"Obama is Blocking Oil Drilling"

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