(/sites/default/files/uploads/2012/03/0311-obama-gas-prices_full_600.gif)As U.S. gas prices steadily rise to alarming levels, Republican presidential hopefuls have pointed to the Obama administration’s dysfunctional energy policies as a significant influence in the distressing trend. It’s an issue that endangers the president’s re-election prospects and Team Obama is now in full defensive mode, simultaneously claiming that it is “all in” with respect to energy sources of all sorts, while it says that it has also made important inroads toward increasing domestic oil production and reducing dependence of foreign oil.
In order to support these claims, the administration turned to the tactic that has become a staple among global warming alarmists: pick a couple of convenient data points that support your position, claim they are representative of an overall trend and let the ever-gullible, technologically ignorant mainstream media regurgitate the message. For example, Obama has tried to mollify critics by saying that domestic production of crude oil is up to the highest levels that we’ve seen over the past eight years. While that is technically true, it’s a meaningless factoid, for the president doesn’t seem to understand – or refuses to acknowledge – that market forces have raised the value of crude oil enough that domestic production has marginally increased over the already pitiful rates of 2004.
The fact is that United States’ domestic crude oil production topped out at about 3.5 billion barrels per year in the 1970s, according to Department of Energy statistics (see graph below). Since then domestic production has steadily declined, as both Congress and presidential administrations of both parties have sacrificed energy independence in favor of appeasing environmental radicals. By 2004 – the year that the administration cites as the benchmark – domestic production had dropped more than forty percent, to about 2 billion barrels per year. Since then, domestic production has basically leveled out in the 1.8 billion to 2 billion barrel per year range, nowhere close to what we could actually produce if somebody in power had the wisdom and courage to tell leftist environmentalists to find something else to complain about. So yes, 2012 domestic production is creeping a bit higher than the already pitiful 2004 figures, simply because oil prices are high enough to bring more marginal wells back into production, but the Obama administration had nothing to do with that dubious achievement.
The president also attempted to dabble in the unfamiliar realm of free market economics, asserting that the only way to reduce gasoline prices was to reduce demand and thus the United States must consume less petroleum products. This we have been doing. Overall consumption of crude oil in the United States has dropped almost ten percent since the peak year of 2005. Interestingly, that reduction – along with reductions in burning coal to produce power – have also resulted in significant drops in greenhouse gas emission in the United States since 2005, something that the president strangely fails to mention. (The Obama administration’s EPA recently released its annual greenhouse gas inventory report, in which it picked 1990 as the benchmark year in order to claim an overall rise in United States’ greenhouse gas emissions, while it pretty much ignored the overall reductions that have been achieved relative to 2005).
The free market model tells us that there is another way to reduce gasoline prices of course: instead of decreasing demand, we can increase supply. America has the ability to do so, and to do so to a larger degree than any other nation in the world, for the constraints to increasing production in this country are not geological or technical, but rather self-imposed and political. Those constraints can be cast off by the stroke of a pen, the market would quickly respond and everyone would be the richer.
Instead, we choose a kind of economic self-flagellation, deluding ourselves to believe that if we use less cheap, abundant fossil fuels then a planet supposedly in desperate danger will be saved. The facts tell us something quite different. For, as the years go by, our continued reductions in fossil fuel use are less and less significant in the global scheme of things.
Let’s go back to that benchmark year of 2005. Since then, United States’ consumption has dropped from about 7.6 billion barrels per year of crude, to less than 6.9 billion barrels per year, a reduction of over 650 million barrels per year. At the same time, crude oil consumption in China and India increased by over 700 million barrels per year. While it would be foolish and selfish to deny the peoples of China and India the opportunity to raise their standards of living by telling them that they can’t use more oil, it’s equally foolish to attempt to maintain the world’s level of petroleum consumption at a constant level on the back of American consumers. Yet, that is exactly what we have been doing, in effect if not in name. Rather than using our talents and resources to increase supply, we have been drawn into a decades-long, increasingly futile effort to micro-manage domestic demand. It’s a program destined to fail – designed to fail – and American consumers are paying the price at the pump for this failed energy policy every day. Unless and until we have an administration that can deal with the reality of energy production in the twenty first century, rather than the delusional fantasies that our current president is so in love with, five dollar per gallon gas will be upon us in astonishingly short order.
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