It must have looked so simple from Barack Obama’s rarely visited Senate office, or Steven Chu’s comfortable digs at Berkeley: if only we stopped taking advantage of all those nasty fossil fuels, everything would be better. Three years ago, when then-Senator Obama was dismissing high energy prices as just another good reason for more government handouts, and Chu was insisting that Americans ought to pay European prices for gasoline, all they heard in return was applause from their core constituencies — academics and the media.
Unfortunately for now-President Obama, the reality of $4-$5-a-gallon gasoline is a much tougher sell to the general public. He’s put himself to work spinning the line that “speculators” are at fault for high prices, but the actual explanation is far more prosaic. Limited supply plus growing demand equals higher prices. That’s a formula so simple, even a community organizer should be able to understand it.
Asian demand for energy continues to rise as nations in the far east region — oddly lacking in “stimulus” spending — continue to boom. Supply, meanwhile, has fallen off, not only as a consequence of the turmoil in Libya and other oil-producing countries, but also thanks to the Obama-ordered moratorium on drilling in the Gulf of Mexico — and the recently ordered moratorium on future drilling anywhere else off the American coastline.
Obama and his minions have been chasing the green jobs chimera for so long that it’s an instinct. They pompously suggest that Americans ought to trade in their current vehicles for pricey, government-approved matchbox cars, asserting still that there’s “no quick fix” for high energy prices. History, and very recent history at that, indicates that they are mistaken.
Take a look at this chart compiled by metalprices.com. It’s the price of a barrel of crude oil over the past 5 years.
See that big peak in the middle? That was the last oil spike, in the summer of 2008. Notice how the price hit a high point, then fell off a cliff afterward?
The day corresponding to that peak, an all-time high of $145.16/barrel, was July 14, 2008. By some strange coincidence, that was the very same day then-President George W. Bush lifted, by executive order, a federal ban on offshore oil drilling.
Bush’s order was, of course, immediately dismissed by the “experts.” Reuters waved away the action as “a largely symbolic move unlikely to have any short-term impact on high gasoline costs.” Barack Obama’s campaign lectured that if “offshore drilling would provide short-term relief at the pump or a long-term strategy for energy independence, it would be worthy of our consideration, regardless of the risks. But most experts, even within the Bush administration, concede it would do neither.”
The movement left was even more dismissive. ClimateProgress.org blasted The Washington Post for failing to headline their story about the order “Offshore Drilling Raises Oil Prices.” In response to Bush’s assertion that additional offshore extraction could equal current U.S. production in 10 years, they editorialized: “Yes, and monkeys could fly out of my butt” (emphasis in original).
There was just one problem: reality. Even though, as critics were eager to point out, any additional American drilling was years in the future, oil prices immediately went into free-fall. By Friday, July 18, the price of a barrel of crude had dropped to $128.94, a 12% decrease. A month later, on August 14, the price had fallen to $115.05. In spectacular fashion, Bush’s academic and media critics were proven seriously wrong.
For commodities traders who’d been pricing oil based on a supposition of scarcity, the potential for millions of additional barrels on the market hit like a thunderbolt. The simple act of putting America’s resources on the table popped the oil bubble, and a stunning price drop followed in short order. By election day, November 4, the price of a barrel of crude had plummeted to $70.84 — a 51% decrease in less than five months.
But wait. I can already hear the cries of, “Uh uh! The price dropped because demand fell off! Haven’tcha ever heard of the Great Recession?”
Problem is, all of that happened months prior to the collapse of Lehman Brothers and the beginning of the financial crisis on September 15, 2008 (price of crude: $95.52). Oil prices actually spiked at the outset of the economic mess, peaking at just over $100/barrel on September 30 before falling again. They reached a bottom price of $30.28 on December 23, a jaw-dropping 80% off the July peak, less than a month before Barack Obama took office.
Speaking of which: Obama had been president-elect for all of five days when he announced his intention to rescind Bush’s order. Oil prices started going up again in January of 2009 and steadily increasing ever since. Obama Energy Secretary Ken Salazar announced a highly restrictive offshore leasing policy last December, and the Bush executive order was officially reversed on February 8, 2011.
The price of crude that day was $85.85. By April 19, it had risen to $107.18, with no end in sight.
Update: On his PJ Xpress blog, Ed Driscoll adds “CNN Neuters Obama” and a president’s impact on oil prices.