Everyone’s complaining about the high price of gasoline, but in the end there really isn’t much that any President can do about it:
[W]hat can the White House, Congress or competing presidential candidates do to reduce gas prices in the near term? The short answer, alas, is not much.
No industrialized economy is as reliant on oil, or as obsessed with gasoline prices, as the United States, the world’s biggest consumer of oil. But the oil market is largely immune to Washington’s machinations, and prices have more than quadrupled over the last six years for reasons that are increasingly disconnected from what happens in the United States.
The reality is that oil is a globally traded commodity, and Americans must pay international prices to get their share. And those prices reflect the fact that global supplies are stretched and struggling to meet a booming demand that is being driven by growth in developing countries, notably China and India. This has left the world with a very slim cushion of extra production.
“Gasoline prices have reached the boiling point in political terms,” said Daniel Yergin, chairman of Cambridge Energy Research Associates, a consulting firm. “But you have to look at the root causes of this. Spare capacity is very tight. And a very tight market is very vulnerable to crises.”
And there are plenty of crises in the areas we get oil from, of course:
Geopolitics have played a big part in the steep price increases. Nigeria remains in the grips of a militant insurgency bent on crippling its oil industry. The Middle East is mired in familiar crises and conflicts. Oil traders say they fear a possible interruption of Iran’s oil exports or terrorist attacks against Saudi Arabia’s vast oil industry.
Then there is Iraq. On the eve of the war, five years ago, oil was trading at about $30 a barrel. On Friday, it closed at $125.96 a barrel. Over that period, Iraq’s oil production has been stuck at about 2.2 million barrels a day, far below its potential.
These factors have build “an almost-permanent security premium” into the price of oil, Mr. Yergin said.
Add in to this the fact that there is a near stranglehold on the possibility of renewed energy exploration here in the United States or the construction of new oil refineries, and the reasons that prices are so high become here. The political will to do what needs to be done, however, doesn’t exist. And politicians continue to develop unworkable pie-in-the-sky “plans” that accomplish nothing.
May 11th, 2008 at 8:59 am
the president could propose a windfall profits tax that would be spent on building additional refineries. this one step would increase the supply and insure lower prices.