The Fox News headline read last Wednesday: “Thanks to Mr. Obama, America is running on empty.” The story, written by Republican National Committee Chairman Reince Priebus, blames President Obama for the high price of gasoline and outlined the usual right-wing talking points: he stalled the Keystone Pipeline, he cut back on oil drilling and he wasted tax money on foolish dreams of renewable energy. With gas prices around $4 a gallon, everybody in Fairfield, and I’m sure across this nation, is justifiably irritated and keen to pin blame.
But before pointing the fickle finger of fault, let’s take a fair and balanced look at why gas prices are so high.
Typically, gasoline prices are a function of crude oil costs, distribution costs and layers of taxes. Taxes and distribution costs are fairly constant, but crude prices vary wildly. American crude prices hit $110 a barrel last Thursday, rapidly approaching their 2008, Bush-era historical highs. With Middle East wars, internal revolutions and economic sanctions against Syria and Iran, commodity hedgers and speculators are understandably nervous about energy supplies and bid crude prices higher. Add to that the threatened closure of the Straits of Hormuz by an irate Iran and the predictable follow-up war, and you’ve got one painful gas bubble.
Oil prices jumped Thursday after Iranian TV reported a Saudi Arabian pipeline explosion. The report proved false, but Iran had a hearty laugh, while making some extra oil money.
U.S. domestic oil production peaked at 9 million barrels per day in 1971 and dropped to a low of 4.9 million barrels under President Bush in 2008. Today, we are at about 5.7 million barrels per day and rising rapidly, while U.S. demand for oil is simultaneously falling. Falling oil demand is a “good news/bad news” result of more fuel-efficient cars, renewable energy and this dragging recession. Gasoline consumption maxed out in the SUV heyday of 2007 at 9.3 million barrels per day and is currently down to 8.7 million.
So, what about the infamous Keystone Pipeline extension?
Let’s pretend that the extension had already been built, and more Canadian crude could be transported to the U.S. Would that extra crude lower gas prices? You tell me: U.S. oil storage facilities are already loaded. The U.S. currently has almost 2 billion barrels of crude waiting to be refined. Would another half-million barrels, or one-four-thousandth more, make an appreciable difference? America’s gas tank has been topped-off and is spilling over. America is not “running on empty.”
If you’ve been taking notes, which I strongly suggest, you’ll recall that in my Jan. 30 Daily Republic column, “Keystone XL reality check,” I wrote: “. . . America currently has an excess of refined oil products. To prevent a domestic glut, refiners are now shipping record amounts of gasoline and diesel fuel overseas, keeping fuel pump prices elevated and oil company profits high.” Last year, for the first time since 1949, the U.S. exported more refined oil products than we imported. In fact, we exported a net average of 439,000 barrels per day. Every day. Dang, that’s a lot of gasoline. American oil refinery production problems, distribution and the ongoing industry monopolization are also extremely pertinent topics to address here, but they deserve more space.
One more thing, America is already awash in crude, but if President Obama announced he was authorizing tapping our nation’s strategic oil reserve, those words would rattle the commodity speculators and temporarily reduce prices at our gas pumps. Unfortunately, bluffing is a strategy with rapidly diminishing returns. If you were president, would you play that card now, or wait until summer, when seasonal prices trend higher?
Mike Kirchubel grew up in Fairfield and is the author of “Vile Acts of Evil – Banking in America.” He can be reached at [email protected]