High gasoline prices are not a cause of the current economic recession, they are an avoidable and unnecessary symptom of liberal environmental and economic policies. When President Barack Obama took office the price of gasoline was $1.83 per gallon. Today it’s over $4.00. Understanding why that is so will give you insight into the patient game plan of the fossil-fuel-hating, combustion-engine-despising, environmentally obsessed left.
The high price of gas is not simply a function of the cost of crude oil. There are many causes for the $4.00 we are currently paying for a gallon of gasoline. Of that $4.00, taxes account for 52 cents, distribution and marketing about 32 cents, refining 56 cents, and the cost of crude oil $2.60. By the mid-20th century, oil was surpassed only by income taxes as the largest generator of revenue for the U.S. government.
Clearly, the biggest portion of the $4.00 you pay goes to the crude oil suppliers. This is where supply and demand takes over. The price of crude oil is determined by the world’s oil-exporting nations, particularly the Organization of Petroleum Exporting Countries (OPEC). OPEC is responsible for over 40% of the world’s crude production. In 2001, when OPEC reduced its production by 1 million barrels a day, gas prices in the U.S. skyrocketed to $1.71 per gallon. When it increased its production in 2005, gas prices dropped.
The United States is actually the third-largest producer of crude oil in the world, but we still import nearly 40% of our crude oil demand, mainly from Canada, Mexico, Saudi Arabia, Nigeria, and Venezuela. But here is where life becomes quite simple. The more crude oil we produce domestically, the less taxes we heap on a gallon of gasoline, the fewer hurdles and blends we require of domestic manufacturers, the less we pay for gasoline. U.S. domestic oil production peaked way back in 1970, and by 2005, imports were twice that of domestically produced crude oil.
Increasing domestic exploration, drilling, and production is the simple solution to what we are paying at the pump. Yet our president has repeatedly misled us by alleging that there is no “silver bullet” for lowering gas prices. What the Obama administration and his liberal machine have been doing is just the opposite — and it is beginning to look intentional.
President Obama follows the liberal playbook about energy independence — code for wind and solar energy which won’t fuel our automobiles, jets, ships, or the war machines he has sent into Libya. He misleads the American people about ethanol leading to energy independence. It can’t and won’t. Ethanol is not economically competitive. Corn ethanol costs an average of $2.53 to produce – several times the 56 cents it costs to produce a gallon of gasoline. Instead, ethanol simply raises the price of gasoline we pay at the pump.
Last month, Shell Oil Company announced it was forced to scrap efforts to drill for oil in the Arctic Ocean off the northern coast of Alaska. The decision comes following a ruling by the EPA’s Environmental Appeals Board to withhold critical air permits. If there was ever a clarion call to strip the EPA of its oil drilling oversight, this is it. Shell spent five years and nearly $4 billion on plans to explore for oil in the Beaufort and Chukchi Seas. The leases alone cost $2.2 billion. The closest village to where Shell proposed to drill is Kaktovik, nearly 70 miles away with a population of 245.
President Obama’s solution to the crisis is to launch investigations and task forces, rather than increasing production. Last month Obama announced that the Justice Department will try to “root out” fraud and waste in the oil markets, yet it was Obama himself who was quoted just a few weeks ago saying, “Politicians are often eager to feed the impression that solving the problem is just a matter of eliminating waste and abuse — you’ll hear that phrase a lot.” At a gas price town hall meeting Obama told a father of ten to cram his family into a hybrid and told us all that inflating our tires and getting a “tune-up” would beat high gas prices.
President Obama overreacted to the British Petroleum Deep Horizon oil spill in the Gulf of Mexico last year by issuing a crippling moratorium on offshore deepwater drilling. The spill was a result of a lack of sufficient oversight during the transition of the rig from exploration to commercial production, a particularly low-probability event. The moratorium did nothing to address the root cause of the accident. The 5th Circuit Court of Appeals agreed with this line of reasoning, yet White House officials falsely represented to the public last year and more recently to a court that scientists had approved the blanket drilling moratorium. The administration then defied a federal court by replacing its original moratorium, which had been struck down, with a substantively identical second moratorium — for no good reason.