Gas prices and presidential politics

In the first presidential debate, Mitt Romney blamed Barack Obama for gas prices doubling. Examining that subject actually provides a powerful reason to re-elect President Obama.

Indeed, when Obama took office in January 2009, the U.S. average for regular gas was $1.77/gal. It is more than double that today. Of course this hurts working families, who are reminded of the impact every time they fill up the tank.

But wait! The $3.75 average price of gas is only ten cents higher than it had been at this point in the 2008 presidential campaign. And today’s price is 25 cents lower than it was at the high point of the Bush administration.

The real issue is: who is to blame for the high prices, and what can be done to stabilize energy costs?

The graph of gas prices shows an overall upward trend since the end of 2001, with a lot of zigs and zags. At the end of 2008, there was a sharp drop — then the upward trend began again. The price jumps around enough that you can “prove” anything you want.

But the price of gas is not set by the President of the United States. It is mainly set by global supply and demand for oil. Increased demand from fast-growing economies in Asia and Latin America over the last decade contributed to the upward trend in prices. But limiting supply — especially through war and the threat of war — is the main factor in the wild price swings of the past decade.

When President George W. Bush launched the war in Iraq, he knocked out an important piece of global oil production. The result was an escalation in oil prices and oil company profits. War and the threat of war in Libya, Syria, and Iran contributed to the three recent spikes in gas prices.

The oil industry reaps huge profits from high oil prices. And Wall Street profits from the uncertainties of war and instability. Fortunes are made and lost by betting on future oil prices. Speculation contributed to the big spike in prices through most of 2008, and the temporary crash at the end of that year.

California is currently experiencing a gas price spike of 50-cents above the national average, attributed to refinery and pipeline closings. It is also possible for major producers can use their monopoly power to create shortages in order to raise prices. A dramatic example was California’s artificial electricity shortage in 2001, deliberately created by energy monopolies to extort $40 billion in excess charges.

Some questions: Would it be conceivable for top oil industry executives, eager for a Romney victory, to engineer temporary shortages and price hikes to discredit the Obama administration? If Obama is responsible for high gas prices, how come the big oil companies aren’t supporting him? Do we have to choose between affordable energy and the environment? For consumers hit by high gas prices, who to vote for?

On the whole, gas prices and consumers’ energy costs are likely to be higher under Romney than under Obama.

In the policy area with the biggest short-term impact, Romney is more likely to provoke war with Iran, knocking out a major world oil supplier and threatening supplies from the whole region.

Over the long haul, even if Romney padlocked the EPA and lifted all restrictions on drilling, it would be many years before new supplies come on line. The new production would be a drop in the global supply bucket and have negligible effect on the price.

Romney would halt the Obama administration’s progress toward more efficient cars. Americans will need to fill up more often and, because total demand will be higher, the cost of each tank will be higher. Romney would continue subsidizing big oil, while reversing Obama’s policies of investing in green energy, mass transit, and energy conservation that reduce demand (and price) for oil.

Romney would leave us more dependent than ever on fossil fuels and the handful of energy conglomerates that dominate the oil industry. It will be easier for them to manipulate supplies and prices, holding our economy and our very survival hostage to their power and profits.

A comprehensive energy policy for the U.S. would go alot further than anything now in place. But compared with the Obama administration, Romney’s policy is likely to cost consumers more, not less. And there is no question that the environment, climate, and public health would suffer from a Romney administration. On these issues, there is a clear choice. And it is not the choice Romney had in mind when he opened his mouth about gas prices.

Photo: A gas price chart. Art Perlo/PW