Gasoline prices have hit $4 a gallon in California, twice what they were when Barack Obama took office. But sometimes overlooked is that prices previously declined partly because of worldwide recession depressing demand. As economies recover, demand increases, and so do prices.
Moreover, Middle East instability now threatens supplies, adding more upward price pressure as oil futures purchasers build in a hedge in case supplies are cut off.
President Obama says he shares motorists’ pain. But consumers should pay attention to what he does. He said last week he wants to increase domestic oil production, but his policies have the opposite effect — denying land and offshore oil drilling permits and imposing unnecessarily rigorous regulations and bureaucratic barriers, which discourage energy investment and production.
Obama’s energy policy is muddled. He applauds Brazil for innovatively capturing deep-water oil off its coast, while he makes it more difficult for U.S. drillers to do the same. He deplores high energy costs, but advances greenhouse gas restrictions that increase costs and discourage new production of affordable energy.
This fickle president is torn between forcing the nation off fossil fuels and the American public’s preference for affordable energy. This tension will increase as his re-election campaign gears up.
Higher prices for conventional fuels make Obama’s preferred higher-cost “renewable” energy schemes more appealing to consumers. In 2008, before his appointment as energy secretary, Steven Chu told the Wall Street Journal energy prices were the lynchpin to energy overhaul. “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” Chu said. Today, European gasoline prices top $8 a gallon.
President Obama “has a huge problem,” we were told by Myron Ebell, the Competitive Enterprise Institute’s director of energy and global warming policy. “There’s no doubt people in the administration want gasoline to get above $5,” but “gas prices are one of the few things everybody notices.”
One study estimated the president’s cap-and-trade proposal killed in Congress would have increased gasoline prices up to 50 percent by 2014, residential electricity prices up to 14 percent and natural gas prices as much as 21 percent – facts unlikely to win many votes.
The president can’t have it both ways. He must either side with consumers and allow unfettered domestic development of affordable energy, or be honest about forcing conversion to uneconomically “renewable” sources by increasing energy costs.