Home Energy and Environment Who is Really to Blame for “High” Gasoline Prices?

Who is Really to Blame for “High” Gasoline Prices?

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A recent Maris Poll has the American people attempting to answer that question:

As the price of gasoline skyrockets, Americans have no trouble pointing a proverbial finger. According to this McClatchy-Marist Poll, the turmoil in the Middle East and U.S. oil companies are the most to blame. 36% of U.S. residents think the volatility in the Middle East is at fault while 34% say U.S. oil companies are the culprits.  11% hold President Obama and the Democrats responsible, and 7% find fault with Congressional Republicans.  Three percent of Americans blame state and local taxes, and one in ten — 10% — are

unsure.

As usual, in their infinite wisdom, the American people are…actually, they’re only partly right (I’m being generous) about this one. Let me explain.

1. Volatility in the Middle East: This is an easy one to blame. For one thing, it’s not us – it’s “them,” the “other,” some nasty petrodicators in turbans over in the desert somewhere. See, it’s not our fault!  Except for one problem: there’s not much, if any, of a net oil supply disruption due to Middle Eastern unrest, and “speculation” based on market nervousness is difficult at best to quantify.

The fact is, Middle Eastern oil producers currently are pumping all out. The only exception is Libya, which is in the midst of a civil war that has cut its crude oil production from about 1.6 million barrels per day in late 2010 to around 0.4 million barrels per day in March 2011. Much of that 1.2-million-barrels-per-day reduction (a bit more than 1% of world output) has been replaced by another Middle Eastern country, Saudi Arabia, which raised its output from 8.3 million barrels per day in the fourth quarter of 2010 to 9.0 million barrels per day in March 2011. Overall, OPEC crude oil output is up slightly from 29.277 million barrels per day in the fourth quarter of 2010 to 29.310 million barrels per day in March 2011. Applying EIA’s “rule of thumb” of about a $5-$7 per barrel increase for every 1 million barrels per day of oil supply disrupted, that would give us a direct oil supply disruption impact on oil prices of…that’s right, zero. As in zip, nada, nil.  

On the other hand, there’s also (justifiable) nervousness about potential disruptions to Persian Gulf oil supplies if the unrest sweeping the Arab world spreads and intensifies there, and that could certainly account for a significant slice of the $25 per barrel year-over-year (and $17 per barrel quarter-over-quarter) increase in crude oil prices. Still, let’s keep this in perspective; oil prices averaged $93 per barrel in 2008 (peaking over $130 per barrel in July 2008), fell to $59 per barrel in 2009 due to the “Great Recession” (and a consequent slowdown in world oil demand growth), then rose to $78 per barrel in 2010 as the world economy — and world oil demand – started to recover momentum once again. In other words, today’s oil prices aren’t much different than they were in 2008, actually are LOWER than they were in the summer of 2008. And no, there wasn’t any “Volatility in Middle Eastern oil producers” back then. Hmmmm. Bottom line: in recent years, world oil markets have mostly been driven by oil demand growth, not by any particular oil supply disruptions or problems on the production side of the ledger.

2. U.S. oil companies. While I’m no fan of the oil companies, to put it mildly (because of their egregious record on the environment, human rights, funding of climate change denial, arrogance, etc.), it is absurd to blame current “high” (in quotes because they’re not really that high by U.S. historical standards, let alone by world standards, let alone by share of income) gasoline prices on the oil companies. Sure, you can blame oil companies for resisting policy changes that might have gotten us off of our oil addiction long, long ago. And, in fact, they certainly do deserve a healthy share of the blame for that. But how on earth are oil companies causing “gas” prices to be “high” right now? Another grand conspiracy theory, perhaps, to take its place along the “forged birth certificate” or whatever festering boil of bile is bubbling in the cauldron known as “Donald Trump’s brain?” Is there any evidence that oil companies have been working to restrain supply? Last I checked, they were in fact clamoring to “drill baby drill,” and also llast I checked, U.S. oil production “increased in 2009 and again in 2010.” So much for that “theory.” (note: this is NOT an argument against taking away the oil companies absurd, taxpayer-funded corporate welfare; that is utterly indefensible and needs to go now!)

3. Obama and the Democrats. Given that U.S. oil production has actually increased since Barack Obama took office, and given that no significant energy policy changes have passed Congress since Barack Obama took office, it’s pretty hard to seriously blame Obama, even in small part, for “high” gasoline prices. About the only thing I’d say Obama could remotely be blamed for is that he could have pushed hard for a strong bill that puts a price on carbon and, thereby, starts us (finally!!!) on our long-overdue path towards kicking the “oil addiction.” Other than that? Uh, don’t think so.

As for the Democrats, here’s where I’d blame them: for decades, they (the party as a whole, not individual lawmakers like Rep. Markey or Sen. Kerry or whoever) have done almost nothing to get America off of oil. Of course, even if they had wanted to do so, they were blocked for much of that period by Republican presidents – Reagan (1981-1989), Bush 41 (1989-1993), and Bush 43 (2001-2009) – and Republican Houses (e.g., Newt Gingrich and Dick Armey and Tom Delay for most of Bill Clinton’s term in office). Still, energy policy has been an almost complete FAIL for Democrats, as it has been for Republicans, for decades now. So yes, in that respect, the American people can “blame” Democrats. Except that…

4. Congressional Republicans are even more at fault, especially if you add in Republican Presidents. Not only have these folks done nothing, they’ve done worse than nothing, working hard to actually prevent America from breaking its oil addiction, transitioning towards energy efficiency and clean energy, and generally adopting smart energy policies instead of the utter idiocy (“drill baby drill!”) they’re known for.

5. State and local taxes. This is beyond laughable it’s so factually incorrect. The reality is that the federal tax on gasoline in the United States is miniscule, at just 18.4 cents per gallon (about 5% of the price at the pump), and even this tiny fee has been unchanged in nearly 20 years (since 1993). U.S. gasoline taxes are also among the lowest in the world; in comparison, taxes make up nearly 60% of the price in Germany, the UK and France, where gasoline costs about $8 per gallon. This one’s beyond stupid. In fact, our gasoline taxes are arguably far, far, far, far too low in this country, by almost any standard. Unless, of course, you prefer sending your money to our “pals” the Saudis instead of keeping it here in the United States. Gee, that’s a tough one, huh?

So, if it’s not really Middle Eastern unrest, taxes, the oil companies, or even Democrats or Republicans in the short run (although big-time in the long run!), then who or what is to blame for “high” gasoline prices in the United States? First, I’d blame the complete failure of policymakers, at the federal and also state level, and for decades now, to enact a serious national energy policy. The fact that we’re still addicted to oil, nearly 40 years after the 1973 Arab oil embargo, is a national disgrace, plain and simple.

Second, I’d blame all the status quo forces, such as Big Oil and OPEC, for helping to keep us addicted to their product. In the former case, it’s mostly been by manipulating our political system to stop any serious effort towards slashing our oil consumption. In the case of the OPEC cartel, they’ve had mixed success in manipulating prices, but to some extent they managed to keep oil prices truly low (in the teens and $20s per barrel) for many years, strongly discouraging the development of alternatives, efficiency, etc., and keeping us strongly addicted to the product they’re pushing.

Finally, I’d point the finger at “we, the people,” who have demanded cheap energy almost as a birthright, who have demanded V-8 engines and gigantic gas guzzlers, who have demanded asphalt and more asphalt to move those guzzlers along, who have demanded the wildly energy INefficient sprawl model of development, and who have failed to demand that our elected officials break this pattern ASAP. Of course, looking in the mirror’s always tough, which is why you usually will see “the American people” at about 0% of the responses in polling on who’s to “blame” for “high” gasoline prices. But the fact is, we have met the enemy, and to a large extent, it is us.

  • Yeah, Obama’s really killing the U.S. oil industry – lol!!!

  • Elaine in Roanoke

    I found it almost impossible to believe the way people fell for advertising and scooped up Hummers a couple of years back. Plus, after we started down the road to more fuel efficient cars in the 1970’s, just as soon as the oil embargo was over, we went right back to buying cars that guzzled gas and we continued suburban sprawl.  And on a different but related subject, don’t even get me started on the absurdity of the McMansions that dot the landscape all over America – as if the average family actually needed 4,000+ square feet of living space! Excellent analysis of the situation, Lowell.