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By Robert Rapier on Feb 28, 2012 with 66 responses

President Obama’s Role in Current Gas Prices

Newt Gingrich — Gas Price Fairy

If you have been following the news at all, you know that President Obama is catching a lot of heat over rising gas prices. He used his weekly radio address this week to talk about the issue:

Obama calls GOP gas price plan “a bumper sticker”

Most of his critics are way off the mark, for reasons I will get into below, but Newt Gingrich is perhaps the most out-of-touch with reality:

Gingrich: I’m the $2.50 gas president — Obama is the $10 gas guy

“If you would like to have a national American energy policy, never again bow to a Saudi king and pay $2.50 a gallon, Newt Gingrich will be your candidate,” he said to cheers. “If you want $10 a gallon gasoline, an anti-energy secretary, and in weakness requiring us to depend on foreigners for our energy, Barack Obama should be your candidate.”

Pandering to the Naive

I believe the reason people are so misinformed about the energy markets is because they are listening to people like Newt spew this sort of uninformed tripe. He is helping to dumb down the electorate by offering simplistic and unrealistic solutions to complex problems. Newt’s comments are either based on a fundamental misunderstanding of why gas prices are where they are, or he is just blatantly pandering to people he believes are too naive to understand the issues. Then again, when it comes to gas prices, logic goes out the window and far too many people are perfectly willing to believe all sorts of crazy things.

Let’s try to shed a bit more light on the subject. (Of course, “shedding light” often brings out comments from the sort of people who are ready to take Newt at face value, or who believe it’s all just about oil company greed).

As I noted in my previous column — Why Bill O’Reilly’s Gasoline Price Solution Doesn’t Work — I did two interviews on the subject of Obama and gas prices last week. One was with Brian Beutler at Talking Points Memo (TPM): The Truth About Political Attacks Over High Gas Prices. The second was with Alan Colmes from Fox News Radio.

In both interviews, I made the point that President Obama is absolutely not responsible for current gas prices. If McCain had been elected, gas prices would still be where they are, and Democrats would be using the issue against him. The reason for this is that projects that bring gasoline to consumers take years to execute. If President Obama declared tomorrow that oil companies could drill anywhere they wanted, it would have no impact on supplies (and by extension, fuel prices) for years. Further, there are no assurances that even this would moderate gasoline prices, because these prices are increasingly being driven by factors outside of the United States.

Oil is a Globally Traded Commodity

This last point is important, and it is critical to understand if you want to understand why gasoline prices are rising. If you look at consumption habits around the world, it is true that in the U.S. gasoline demand has plummeted. We might expect that we should therefore see falling gasoline prices. But the oil markets are not limited to the borders of the United States, and the U.S. is still heavily dependent upon oil imports (and hence, we pay the world price) for the fuel that we produce. As long as growth in developing countries remains strong, people there are happy to buy the oil products that the U.S. or EU is not using, keeping the price pressure very high. In a nutshell, the price of gasoline is not determined by U.S. presidential policy, but rather by how much people in India, Vietnam, or China are willing to pay for oil. Demand growth in those countries has been extremely strong even in the face of $100 oil, and that is a fundamental reason why there has been no gas price relief despite that fact that 1). Gasoline demand in the U.S. is down; and 2). Oil production in the U.S. has been rising.

If you really believe that Obama has a lot of control over gasoline prices, then ask yourself why prices are up all around the world. Why are people in the UK protesting gasoline prices? Do Obama’s policies drive up prices throughout the world? Of course not. Gasoline prices are responding to the same market forces in Europe, Asia, and even in oil-exporting countries like Canada. The fact that gas prices are up everywhere should tip people off that this issue extends far beyond the powers of the American president.

But there is a flip-side to this for Obama supporters, which I have written about recently: Are President Obama’s Policies Causing U.S. Oil Production to Rise? If President Obama is not responsible for current gas prices because of the lag time it takes for policies to have an impact and for projects to get implemented, then he is also not responsible for the current uptick in domestic oil and natural gas production. So you can’t have it both ways: If you want to give him credit for higher oil production, you can’t then dodge blame for higher gas prices. Either he owns both or he owns neither. And in fact, he owns neither.

So what then is the president’s role as far as gas prices or oil production? At best we can say that the policies a president puts in place today can make some impact on the markets in a few years. So five years from now we may be lamenting or praising President Obama’s energy policy decisions. We can of course speculate on how they may turn out. His policies may ultimately hurt supplies and raise prices, but they have no bearing on today’s gas prices. In reality, due to the increasing importance of consumers in developing countries, even long-term there isn’t a lot that a U.S. president is going to be able to do to impact prices. Obama could put policies in place that increase supplies, but that won’t necessarily result in cheap gasoline.

Conclusion: Don’t Rely on Politicians to Lower Gas Prices

Is there anything then that a president could do to affect domestic gas prices in the short term? Yes, there are a few options, but there are consequences to all. A president might convince Congress to lower or eliminate federal gasoline taxes, but that would result in a revenue shortfall that would need to be made up. It would also likely result in some increased demand, eliminating part of the benefit of the tax cut. The federal gasoline tax is only 18.4 cents per gallon, and one might imagine that if it was totally eliminated that prices might ease somewhat initially, but that might in turn increase demand so that consumers would not see the entire 18.4 cent per gallon benefit.

The government could also subsidize the price of gasoline as is done in Venezuela, where the cost is only a dime or so a gallon. This is also the case in some other oil-producing countries like Saudi Arabia. (Wikipedia has an entry on typical gasoline prices around the world). But these are countries that make a lot of money from oil exports. These countries also consume far less gasoline than does the United States. So if the U.S. embarked upon a program of subsidizing gasoline consumption, the costs would be mind-boggling. Further, I would argue that it makes very little sense to subsidize consumption of a depleting resource.

The most sensible thing that governments can do is to encourage a move away from gasoline dependence. In that case, even if prices continue to rise, the economy won’t be as susceptible to the price shock. In fact, when people ask me what they should do to protect themselves against high gas prices, the first thing I ask is “What do you drive?” Do your part to limit gasoline’s hold on your life, and you won’t have to hold your breath that a politician is going to solve this problem for you. They have been making empty promises for decades, and there are very good reasons why they (both Democrats and Republicans) have failed. So you should stop looking to them for the answer.

 

  1. By David on February 28, 2012 at 9:07 am

    Obama hired an energy secretary who has the stated goal is of raising our gasoline prices to those of Europe, $8-$10 per gallon.   Obama himself stated his goal is to make our electricity prices skyrocket.   Say what you will about thier ability to do those things, we know what their intentions are.

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    • By Roman on February 28, 2012 at 7:15 pm

      David…copy and paste your proof of this statement so that we can believe you.

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      • By David on February 29, 2012 at 9:14 pm

        From the Dec. 12, 2008 Wall Street Journal: 

        “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” Mr. Chu, who directs the Lawrence Berkeley National Laboratory in California, said in an interview with The Wall Street Journal in September.”

        Barack Obama, in a Jan 2008 talk with the San Francisco Examiner:
        “Under my plan of a cap and trade system, electricity rates would necessarily skyrocket”

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        • By Fatima on March 1, 2012 at 2:28 am

          David: First, please properly cite your sources.  Secondly, why would anyone who actually had to work hard in this country to reach a level of stability in their life consider raising the gas rate to such an astronomical amount? What would be his incentive? Why would the same person who is trying to tax the rich so that ALL Americans have access to education and some of the “luxuries of life” impose such gas rates on the impoverished communities.  Your argument doesn’t make any sense.   He doesn’t have any interest in gas profits but I bet Bush and his friends do.

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          • By Lou Gage on March 1, 2012 at 9:29 am

            Fatima, I would like to know how you dragged Bush into a discussion of what the President has said on the record about forcing energy prices up?

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          • By David on March 1, 2012 at 10:13 am

            Fatima, you should be asking Chu and Obama why they said those things, not me.  What you may not realize is that the parasites in governments, and the parasites in society that feed off of the governments, make more from oil and gas taxes of various kinds than the profits made by the oil companies.  So my answer as to why is that  if someone is a lazy undisciplined parasite, or  is a member of the political party that represents such people, and you want someone to steal more from the responsible, productive people, rasing taxes is the preferred method these days. 

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          • By Tonya on September 23, 2012 at 5:10 pm

            Fatimah, Bush isn’t running for president and when he was president, gas prices were much lower.  One reason is that we were drilling more oil in the U.S. and Obama is not allowing US companies to drill, but he is paying other countries, like Brazil, for oil exploration.  He should pay US citizens for oil exploration. 

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            • By EMK on September 27, 2012 at 8:55 am

              Actually, gas prices reached their peak in 2008 during the Bush administration: http://gasbuddy.com/gb_retail_price_chart.aspx

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            • By Stephen on November 7, 2012 at 11:21 pm

              I agree Tonya!  there was a point in time back in 06 where the gas prices were 1.80/gallon!  This country needs to be energy independent!  If we become energy Independent, we will head down the right path to produce our own oil and energy which will help lower the gas prices over time.  That’s why it was in the 1.80 and 2.00 range when Bush was in Office because we were trying to drill our own oil.  Obama doesn’t like the idea of drilling our own oil too because of the environment and the risk of oil spills.  Oil spills can be cleaned up and controlled. 

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        • By John on March 1, 2012 at 11:02 am

          Gas in Europe is so high because of massive taxes associated with the product.

          In the WSJ article that David is citing, quoting Mr. Chu, the following paragraph reads as follows:

          But Mr. Obama has dismissed the idea of boosting the federal gasoline tax, a move energy experts say could be the single most effective step to promote alternative energies and temper demand. Mr. Obama said Sunday that a heightened gas tax would be a “mistake” because it would put “additional burdens on American families right now.”

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      • By Robert Rapier on March 1, 2012 at 1:32 pm
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        • By Yikes McGee on March 3, 2012 at 10:26 am

          A posting on the Yahoo “contributor network,” and you characterize that as “this story is making headlines today?”  HAHAHAHAHAHAHAHAHAHAHAHA!

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          • By Robert Rapier on March 3, 2012 at 2:01 pm

            I actually saw several stories like that; I just grabbed one at random. I wasn’t trying to use this as proof of Chu’s intentions, but rather to show that there are certainly news stories attempting to make that case.

            RR 

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    • By Yikes McGee on March 3, 2012 at 10:44 am

      It seems that you are taking the quotes out of all context in order to misrepresent “what their intentions are.”  In 2008, in a different job, Chu made his comment in reference to what it would take to lower our dependency on foreign oil, and the statement is part of a complex scenario.  I know those complexities are inconvenient for the binary, right-wing “thinker,” but necessary to understand the topic you are so outspoken about.  In 2008, Obama’s comment was in reference to cap and trade, pointing out that while it would be somewhat costly, it was a necessary step.  The amount it would cost has bee typically misrepresented by Republicans.  To characterize these statements as “goals’ is dishonest and manipulative.  Typical right-wing lies. 

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  2. By Addoeh on February 28, 2012 at 9:33 am

    I’d like to see Gingrich’s math for getting gas down to a consistent level of $2.50 a gallon.  Of course it probably doesn’t exist, but it would be funny to see it.  I imagine it would be the Underpants Gnomes from South Park.  Step 1: Collect underpants.  Step 2: ???.  Step 3: Profit!

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    • By Levi on February 29, 2012 at 9:29 am

      I’d imagine you’re right – when he says he’ll make gas prices $2.50 a gallon, he’s really saying is “I’ll pass a law that says ‘Gas must be $2.50 a gallon at all gas stations’. I’ll let the people under me figure out how it’s going to be done”. Every time I’ve listened to Newt speak, it’s like he’s transposing the word “president” for “king” in his head

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  3. By Ben on February 28, 2012 at 9:52 am

    “And you will know the truth, and the truth will set you free.”  - John 8:32
    Thanks for telling it like it is even if we too often wish that it were not so.  I’m of the opinion that No Free Lunch should enjoy a spot on the masthead to daily remind CER readers that we are interested in getting to the heart of the matter even where it may bend back against comfort/convention.
    Is there some risk that the blog may invite derision because it refuses to simply pander to mindless grumblers.  Perhaps.  But I tend to more of a confidence that the majority of folks prefer the facts and rational analysis to the ideological bias that dominates the airwaves and print/electronic media in recent years.      
    Thanks for a willingess to speak truth to power, RR.  In the end, much like that memorable line from Mr. Frost’s poem, it does make all the difference.
    Ben
     

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  4. By Ty on February 28, 2012 at 10:07 am

    a short term fix that politicians CAN do would be to freeze all outgoing shipments of crude oil, refined gasoline, jet fuel, and ESPECIALLY diesel fuel. I would extend that ban to tires and any other item that is largely  comprized of oil.  80% of the worlds oil is controlled/owned by governments because it drives their economies.  we can play that game too.

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    • By Addoeh on February 28, 2012 at 10:27 am

      And the countries we export those goods to would just go somewhere else to get it.  And many of the people employed in refinaries and tire factories in the US would lose their jobs because there is less demand for the products they make.  
      http://www.consumerenergyreport.com/2012/02/25/why-bill-oreillys-gasoline-price-solution-doesnt-work/

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    • By FSC on February 28, 2012 at 11:06 am

      Allowing
      the government to mandate where you can and where you can’t sell the products
      you produce is a terrible idea. Even if that mandate would give you some short
      term benefits, which I doubt, it would scare away investors in all industries.
      This would drive the economy into a government centric disaster like Venezuela.
      To support this idea you would have to be able to scream: HUGO CHAVEZ POR
      PRESIDENT!!

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    • By Robert Rapier on February 28, 2012 at 1:11 pm

      a short term fix that politicians CAN do would be to freeze all outgoing shipments of crude oil, refined gasoline, jet fuel, and ESPECIALLY diesel fuel.


      We export literally no crude oil, but the refined products we export go to countries that we import oil from. If we freeze exports to those countries, how do you think that will work out with respect to our oil imports from them? I explained what would happen in my previous post: Our oil imports would fall as our product exports fell, and it wouldn’t impact domestic supplies at all. It would further reduce U.S. refining capacity though.

      RR
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  5. By Rufus on February 28, 2012 at 10:26 am

    What would you do when, for instance, Mexico says, “We’ll send you a Million Barrels of Oil/Day, but you have to sell us back 1/2 Million barrels of diesel, and gasoline?”

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  6. By Rufus on February 28, 2012 at 10:30 am

    1)  Quit paying farmers NOT to Plant 30,000,000 acres of cropland, and2)  Extend the CAFE Mandates to High Ethanol Blends.

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  7. By CarbonBridge on February 28, 2012 at 10:45 am

    RR:  You’ve made some good comments today and I think your words on this issue will go beyond this blog discussion.  High fuel prices effect everyone and wars are fought over crude oil availability as we all realize. 

    Someone whom I’ve known for decades phoned me from the pacific coast of California yesterday after he’d filled up his big pickup (pulling a large trailer) with $5/gal diesel.  He wasn’t impressed at all with his skinner wallet while he had further questions about alternatives.  Same man understands the basic polar magnetic differences between all float-on-water oils and water soluble, biodegradable fuel alcohols.

    -Mark

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  8. By Rufus on February 28, 2012 at 10:55 am

    The price action the last two days leads me to think that  Obama has informed the Sauds, and others, that he’s getting ready to release some oil from the “Stragegic” Reserves.We should know in about two weeks.

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    • By Addoeh on February 28, 2012 at 1:27 pm

      If that happens, get ready for oil prices to fall…for about a week.  Then they will be right back to where they were before, perhaps even higher.

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  9. By Tom G. on February 28, 2012 at 2:00 pm

    RR 
    This posting is of course right up there with some of your best.  It would be hard to argue with the facts and your knowledge based upon years of first hand experience.
    Myself on the other hand can spout off and talk about the future because I don’t know of anyone who has a better crystal ball than mine.  I cleaned it with Windex today and here is what I saw.     
    1. Gasoline prices will continue to vary by the month.  However, the general trend will be UP and I believe it will continue that trend with only minor periods of retraction. 
    2. The standard old Internal Combustion Engine [ICE] vehicle will continue to get smaller, lighter and more fuel efficient but not cheaper
    3. Hybrid vehicles are gaining momentum and will continue to push mpg levels higher but will continue to be more expensive than ICE vehicles 
    4. Electric Vehicles [EVs] will continue to a minor player until the perceived range anxiety issue is educated away
    5. Imports of oil will continue to fall
    6. Exports of refined fuels will continue to increase
    7. Energy efficiency improvements will become more important to our society and these efforts will begin to significantly reduce energy consumption
    8. People will begin to think beyond the light switch to how energy is actually produced and used 
    9. Clean energy sources like wind, solar, wave, hydro and geothermal will continue to take small bites out of old traditional methods like coal and nuclear, and finally;
    10. I recommend we all think about how much we drive, what we drive, where we drive or even if we need to drive at all.  
    I do however have one small concern.  My crystal ball did say to keep my fingers crossed that when I posting this it doesn’t end up as one big long sentence.  My fingers are of course crossed.  

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    • By Paul D. on June 25, 2012 at 1:47 pm

      With regards to #9… if you want “clean” energy replace some coal plants with state-of-the-art nuclear plants. Wind and solar are great, but far less efficient per square mile, and for them to be “green” there are only certain places they can be used. Clearing a forest to lay down a bunch of wind turbines or solar panels is not good for the environment. Hydro can only be used in very limited situations. Nuclear is the way to go; it produces far more power than coal from a single plant, and the waste is both less radioactive and more controlled; coal plants just pump it into the atmosphere, nuclear waste is carefully contained and stored.

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  10. By Tom G. on February 28, 2012 at 2:02 pm

    Yup all of the numbered points ended up as one sentence.  It appears the text editor is ignoring the return key or double returns to represent a new paragraph.  

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    • By Robert Rapier on February 28, 2012 at 2:09 pm

      Tom, I cleaned it up a bit and at least put the numbered points on different lines. I think Sam is working on a fix for this.

      RR
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      • By Tom G. on February 28, 2012 at 2:14 pm

        Thank you very much.  

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  11. By Tom G. on February 28, 2012 at 2:16 pm

    Samuel is this using the numbering feature of the editor or just plain text entered with additional returns?  
    I did not use the editors numbering feature.

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    • By Samuel R. Avro on February 28, 2012 at 7:57 pm

      Tom,

      I used the numbered feature on the comment editor. It worked for me, but many others were experiencing issues with the comment editor too. We’re working on fixing up the formatting issues as we speak. Hang tight, and thanks for reading!

      In the future, send any bug reports and technical questions to my e-mail: editor@consumerenergyreport.com

      -Sam

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      • By Tom G. on February 29, 2012 at 12:31 am

        Thank you Sam.  I will use the link in the future. 

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  12. By Cheryl on February 28, 2012 at 2:18 pm

    Robert,

    I was wondering if you would share your views on natural gas……do you think prices are likely to fall to $2?

    Thank,you

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    • By Robert Rapier on February 28, 2012 at 2:25 pm

      No, because natural gas producers can’t make any money at $2. They could drop to that level briefly, but even where they are at now natural gas producers will start scaling back production because it isn’t that profitable for them at current prices.

      RR
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      • By armchair261 on February 28, 2012 at 5:53 pm

        Normally, if gas was at $2 it would mean a depressed market and therefore collapsing rig utility rates, which would in turn push the break-even gas price down with it as day rates plummeted. But now with all activity in the shale liquids plays, demand for rigs and services is high regardless of which way gas prices are going. It’s a double whammy for gas. Too much of it, and in an environment of high rig demand. The self correcting mechanism in the gas market is temporarily broken… or at least reset to a significantly higher price floor.

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  13. By Dale Lieneke on February 28, 2012 at 3:46 pm

    At least Gingrich has a plan and not sitting around for 10 to 20 years for a green solution. Come November, there will be a new president.

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    • By Robert Rapier on February 28, 2012 at 4:52 pm

      His plan isn’t so much the issue; it is the suggestion that this plan will make gasoline $2.50 per gallon. That’s either naivety or pandering.

      RR
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  14. By Benny BND Cole on February 28, 2012 at 5:08 pm

    First, we make RR president of the USA.  Then I will entertain energy arguments and scenarios. 

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  15. By armchair261 on February 28, 2012 at 7:00 pm

    Gingrich is not alone. For further nonsense spewed by hopeless politicians, hear what the clueless senator Bernie Sanders of Vermont has to say about the reasons for high gas prices. If you want to get depressed about the energy sophistication of the average American, read some of the posts following the article. 
    http://www.cnn.com/2012/02/28/opinion/sanders-gas-speculation/index.html?iref=allsearch
    This is mainstream thought, a negative feedback loop fueled by politicians and angry voters. Sanders says it, CNN publishes it, people buy it.

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    • By Robert Rapier on February 28, 2012 at 7:50 pm

      Yeah, I saw Sanders’ comments. Pretty ridiculous. As far as I can tell, they all pander to specific groups of people. 

      RR
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      • By MarkE on February 29, 2012 at 11:53 am

        Robert,

        It appears that Sanders’ op-ed centers around the idea that speculator’s are driving the short-term increase in oil prices.  Is this not at least partially true?  Wasn’t the fast run-up to $140 and then back down due to the futures markets?  It seems that supply and demand did not change enough to justify the large swings in price.

        This article appears to be along the same line of thought and seems better researched.  Or am I missing something?

        http://www.star-telegram.com/2012/02/27/3765797/oil-the-never-ending-story.html

         

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        • By armchair261 on February 29, 2012 at 12:11 pm

          Marke,

          Why has the price of natural gas fallen by around 60% off its highs in recent years? The same companies produce it. Natural gas is sold in the futures markets, so the same speculators should be able to send its price up as well, but they haven’t. You should be asking yourself why they haven’t, if you believe that speculators drive markets.

          A glance at indexmundi’s website
          http://www.indexmundi.com/commodities/
          will show that crude oil is up by about 15% over the past 12 months. In that time, several commodities, such as peanut oil, wool, lumber, and rock phosphate are up significantly more. Other commodities have fallen (like natural gas).

          If one attributes high oil prices as being largely due to speculation, then one needs a model to explain the varying behavior of other commodities. Don’t speculators want to make money on some of them?

          Additionally, there is no clear reason why speculators need higher prices to make money. They can go short as well. 

          Futures trading began in the early 1980′s, when oil prices were peaking at close to $40. Oil fell to around $10 by 1986.  

          Gold prices have soared recently. Has the supply and demand changed considerably? No. But the value of the commodity in the eyes of buyers and sellers has increased anyway. 

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          • By MarkE on February 29, 2012 at 3:14 pm

            Armchair216,

            I agree with what you are saying.  I’m just trying to understand what is causing the volatility if it’s not supply/demand or speculation.  To reverse the question, why has natural gas fallen 40% in 12 months if not due to supply/demand or speculation?

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        • By Robert Rapier on February 29, 2012 at 12:14 pm

          Is this not at least partially true?

          Yes, and I always note that — and in fact did in the Colmes interview. But there are fundamental factors that make that speculation possible; factors that are generally overlooked by those who are quick to blame the speculators for the problem.

          RR 

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          • By armchair261 on February 29, 2012 at 4:43 pm

            Marke,

            Speculation may have some impact on price…. but how much? 3%? 14% 37%? No one knows, but many just simply assume a very high percentage, because it sounds good. People want a deus ex machina answer.

            If speculators were known to be causing excessively high fuel prices, I’d think we’d be hearing loud complaints from oil importing nations, like Japan, China, and Germany…. or from high volume oil buyers like refiners or airlines. We hear very few such complaints. Why not? Such misbehavior would be costing these buyers billions.

            Te following is taken from The Economist magazine, which quotes a 2008 Deutsche Bank research report:
            Analysts at Deutsche Bank looked at the price of commodities that do not trade in a futures market. The prices of several commodities that are not traded on any exchange, and are therefore much harder for speculators to invest in, have risen even faster than that of oil. Deutsche Bank calculates that cadmium, a rare metal, has appreciated twice as much as oil since 2001, for example, and the price of rice has risen fractionally more.

            Forbes Magazine wrote in June 2008:

            Onions have no futures market. Back in 1958, U.S. onion growers were so convinced speculators were hurting prices, they actually convinced Congress to ban futures trading in onions – a ban still in effect. Yet their recent price volatility makes the swings in oil and corn look tame.
             

            Gas has fallen in price because so much of it has been discovered in the last few years. An industry that is accused of conspiring to fix prices and withhold supply has drilled so many wells, and brought so much gas onstream, that the price has collapsed even while oil has climbed.  The answer for the natural gas price drop is simply greatly increased supply. The markets are doing their work in the case of natural gas; why wouldn’t they be for oil? 

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          • By armchair261 on February 29, 2012 at 4:46 pm

            Marke,

            Also, go to indexmundi.com to see price behavior of other commodities. There is a lot of volatility in other commodities as well. It’s not just oil. Oil just seems to be the thing Americans obsess on. 

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    • By glenn on February 29, 2012 at 12:32 am

      Too bad Sen Sanders is clueless too.  I do believe he is among the minority of non-sold-out politicians though.  It is amazing how very few people realize the futures market has no more of a direct effect on oil prices than betting on a football team. 

      I think it is easy for us in the PO community to forget just how little the average person knows.  Yesterday I talked to a 4 yr college graduate who works for a car rental agency.  He complained about gas prices so I mentioned the basics of PO.  He said “Oooohhhh – so gas comes from oil – how does that happen?”

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      • By armchair261 on February 29, 2012 at 12:13 pm

        Perhaps this blog could feature an energy literacy scorecard, to identify the charlatans and support politicians with knowledgeable and practical views.

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  16. By Dave on February 28, 2012 at 9:58 pm

    RR,
    Pres. Obama isn’t directly responsible for oil/gas pricing, yes.  But he certainly is partially responsible.  I will note that you gave him a pass on the very foolish decision he made to shut the Gulf down following the Deepwater Horizon:  why?  Let’s follow the logic:  oil prices are moderate, Deepwater occurs; the 2nd major spill in 40+ years of Gulf exploration (the US’s first), Pres. Obama shuts everything down, some companies with billions invested move their rigs elsewhere (not to return very quickly), and surprise!, about 6 months later oil begins it’s steady rise to current pricing levels (not very moderate).  Obviously there is more to it and Gringrich is foolish also; but Pres. Obama made an incredibily short sighted decision without understanding basic economics.  Finally, you cannot ignore the war on coal his administration is waging:  1) Lisa Jackson:  “No or nearly no [coal mines] will meet this standard” (discussing newly issued water quality standards from the EPA for coal mines) and 2) one year ago, the EPA pulled an already issued coal mine permit (Spruce) for the first time ever after the company had invested tens of millions.  If you are a large company with tens or even hundreds of millions on the line or if your an employee of these companies, would you trust this man to make reasonably informed decisions effecting the survival of your company or ability to feed your family in the future?  eg. Keystone.

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    • By Robert Rapier on February 29, 2012 at 2:47 am

      I will note that you gave him a pass on the very foolish decision he made to shut the Gulf down following the Deepwater Horizon:  why?

      In March 2010 — just before the accident — offshore oil production in the U.S. was 122 thousand barrels a day. A few months later, it had fallen to 104 thousand barrels per day. I simply don’t believe a decline in global production of 0.02% had any sort of major impact on current oil prices. 

      RR 

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      • By armchair261 on February 29, 2012 at 12:20 pm

        I think these figures are off – they sounded too low to me so I checked. Federal offshore GOM production in the month before Macondo was 1.6 mm bopd. In the year that followed, production hovered around the 1.4 to 1.6 mm bopd range, but has recently fallen off to the low end of the range, probably a direct result of the reduced drilling activity post-Macondo.

        Still, not really enough to have much of an impact on price, especially when you consider that the Bakken itself has more than compensated for the loss.  

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        • By Robert Rapier on February 29, 2012 at 12:31 pm

          The numbers sounded low to me too, but I linked to U.S.–State Offshore Field Production of Crude Oil (Thousand Barrels per Day). Shouldn’t that cover what was impacted by Macondo?

          RR 

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          • By armchair261 on February 29, 2012 at 1:43 pm

            Oh, OK… you were quoting state offshore, I was quoting federal. Probably both were impacted, but I’d suspect that federal waters were more so, since that’s where the deeper water is.

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  17. By Russ Finley on February 28, 2012 at 10:25 pm

    Gingrich isn’t stupid. He doesn’t have much choice if he wants to run on the Republican ticket. An interesting article I read in Newsweek back in November: The Stupid Party

    And I’m not trying to insult anyone. Politicians are mostly cut from the same cloth but it looks like the Republican party is trying to capture a certain demographic.

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  18. By David on March 1, 2012 at 10:19 am

    It should also be noted that the same people who claim that oil/gasoline prices can’t be reduced are pretty much the same people who a few short years ago were saying that natural gas prices couldn’t be reduced, a viewpoint that proved to be very wrong. 

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  19. By Frank Weigert on March 1, 2012 at 12:50 pm

    RR
    “The most sensible thing that governments can do is to encourage a move away from gasoline dependence”

    There is nothing wrong with burning gasoline to power our cars. The problem is we derive it from FOSSIL FUELS. Gasoline made from biomass can not only be global warming neutral, it can also put OPEC out of business if we can implement it successfully.

    Hydrocarbons from biomass is the only technology which has the possibility of not requiring $ 100 TRILLION in new investment. The solution to our transportation fuel problem should use existing petroleum refineries to process biomass. We should produce our electricity using biomass to fuel existing coal fired plants.

    For how fast algae can grow, recall China’s problem during the 2008 Olympics.

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  20. By Philthy on October 11, 2012 at 7:30 pm

    How much do things like state and federal taxes and environmental fees affect gas prices and how much sway can a president have over such? Also, why does the Venezuelaen consumer enjoy such low prices per gallon if global market forces are the biggest contributor to prices? 

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    • By Robert Rapier on October 11, 2012 at 7:50 pm

      Phil, those taxes do matter, but about the only thing the president could do would be to convince congress to lower them. But then demand would pick up a bit and wipe out some of that.

      The artificially lower prices enjoyed in many countries — not just Venezuela — are considered the single largest fossil fuel subsidy in the world. But it is a subsidy to consumers; the oil companies in Venezuela aren’t benefitting from that.

      RR

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      • By Philthy on October 11, 2012 at 11:33 pm

        So, the Venezuealean government can afford subsidizing gasoline as a commodity? I read that many people do not own vehicles over there which makes me think Venezuela’s dependency on oil is less than the United States .. so, is it unrealistic for Americans to expect such a subsidy? Is this because of the scale of our consumption, or because of political philosophy?

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        • By Robert Rapier on October 11, 2012 at 11:45 pm

          Two things. Venezuela owns the oil, so the subsidy is really just foregoing what they could get on world markets. In the U.S. we still import a lot of oil — bought at world prices. That, along with the enormous size of our consumption, makes subsidizing prices a very expensive proposition.

          RR

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  21. By Bob Hope on October 26, 2012 at 1:26 pm

    All of you are blind. The government runs this. Open thy eyes and seethe what is going on in your own country. Contrary to popular belief 87% of Americans know that the government runs this land. The other potion believe that it’s not.. Hmmmm how vague. You can post all the ” poop ” you want and try to show or make belief papers or comments of what has been said to try and ” justify ” they don’t……. Open your eyes..

    Most of our nation is so blind it’s not funny.

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  22. By Terry on October 31, 2012 at 8:35 pm

    This was the MOST sensible argument regarding political (The PRESIDENT, etc.) influence on NON-related matters (…ON gas prices…)

     

    Because you have provided the MOST logical AND functional explanation on this matter, I can assure you that your reasoning and accuracy on this matter will go unheeded, ..precisely because it IS so accurate.  Politics and other social media do NOT truly pay attention to accurate information; it is NOT sensational enough  AND in your statement you proivided a direct answer to the issue; THAT is not political; smile-smile-/smirk-smerk.

     

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