President Obama does not have a plan to balance the budget or a coherent Middle East, but he sure does understand a threat to his reelection prospects. That explains why he devoted his Saturday radio address to the issue of rising gas taxes. He intoned:
On Thursday, my attorney general also launched a task force with just one job: rooting out cases of fraud or manipulation in the oil markets that might affect gas prices, including any illegal activity by traders and speculators. We’re going to make sure that no one is taking advantage of the American people for their own short-term gain. And another step we need to take is to finally end the $4 billion in taxpayer subsidies we give to the oil and gas companies each year. That’s $4 billion of your money going to these companies when they’re making record profits and you’re paying near record prices at the pump. It has to stop.
And he made a pitch for his “clean-energy’ government subsidies, a dubious expenditure of taxpayers’ money that would have zero impact on the current spike in gas prices. He even claimed that his administration was promoting oil development. (This is the administration that insisted on a deep-water drilling moratorium and has been less than eager to grant new leases for domestic oil development.)
As former White House press secretary Dana Perino put it, “The facts are standing in the way of their rhetoric.”
The president’s search for the bad guys reminds me of O.J. Simpson’s search for his ex-wife’s “real killer.” In fact, there is no bogeyman in the oil industry; to the extent there is market distortion it is of the administration’s own making.
This isn’t the first time, and it won’t be the last, that politicians have stoked suspicions that big, bad oil companies were ripping off consumers. Richard Epstein, writing for “Advancing a Free Society” under the Hoover Institute’s banner, explains:
As gas prices in the United States continue their relentless march upward, the political question of the hour is what, if anything, the United States government should do about the situation. The issue is of course not a new one. Whenever international instability threatens the supply of oil, we follow the lead of Captain Louis Renault in Casablanca, and round up the usual suspects. Our lot is a painful Congressional hearing in which indignant Congressional figures berate oil company executives for responding to supply conditions, only to ask the
Federal Trade Commission once again to launch a fruitless investigation.
Those folks should save their energy for a more useful activity. The simple explanation for the increase in prices is the constriction in supply. As the supply curve moves upward, the quantity of oil sold goes down and its price goes up. If demand increases with the prospect of hoarding, the price could go higher still.
It is the Obama administration that’s helped restrict domestic supply. Meanwhile, as countries climb out of the recession, demand increases. Economist Douglas Holtz-Eakin (former economic adviser to the John McCain presidential campaign and now president of the American Action Forum) told me yesterday that there is no mystery as to why gas prices have risen. “The bulk of the issue,” he said, “is supply and demand. We hit $140 in 2008, and then the whole world went into a recession and prices fell. No real new supply was added, so it’s nearly inevitable we get high prices again.”
Other factors maybe at work here as well. It’s the Fed’s “quantitative easing” that has driven the dollar down and the prices of commodities, including oil, up. (And, of course, unrest in the Middle East is yet another factor driving oil prices upward.)
Obama’s snide remarks about SUVs and blather about highly subsidized green jobs suggest he’s on the defense about gas prices. And he should be. Conservatives should be clear: The administration’s own policies are contributing to yet another drain on the wallets of average Americans. If Obama wants to do something productive, he’d open up new domestic sources of oil and natural gas instead of new inquisitions of energy executives.