Perhaps no politician has done more to put the onus on the president than Gingrich, who says he has a plan to reduce gas prices to $2.50 a gallon and offset the loss of output that might result from an attack on Iran, which exports about 2.5 million barrels of crude oil per day.
“There’s no way we could increase production that much,” said Verrastro of the CSIS. “But the facts be damned. It’s election season.”
As for lowering U.S. pump prices, that would require lowering world crude oil prices. Crude oil accounts for about three-quarters of the cost of a gallon of gas at these price levels, according to the Energy Information Administration. By comparison, taxes account for just 12 percent, refining about 6 percent, and distribution and marketing about 6 percent.
The international oil market has tightened, not because of a single factor such as U.S. drilling but because a series of crises has shaved oil production or boosted demand worldwide. Together they add up to a difference of about 1 million barrels a day in the global oil balance.
In the wake of a tsunami and earthquake last year, Japan has closed down virtually all of its 54 nuclear power plants and has been burning more oil to generate electricity; its power sector is using 320,000 barrels a day more than before the disasters, according to the International Energy Agency.
In Sudan, bickering between the north and the south and a dispute over pipeline revenue have choked off about 240,000 barrels a day, the IEA said. Unrest in Yemen and Syria knocked out about 100,000 barrels a day each. Libya’s output is recovering from last year’s civil war, but at 1.3 million barrels a day, output is still about 300,000 barrels a day short of capacity, traders say. And as a result of maintenance problems in the North Sea, Norwegian and British output is running about 160,000 barrels a day lower than normal, the IEA added.
In China, economic growth has slowed, but the IEA still expects demand to climb by 400,000 barrels a day.
This year, global oil demand will hit 89.9 million barrels a day, the IEA says, shrinking the spare production capacity to a level lower than Iran’s exports. That has spooked oil traders and refiners. Because oil products are so essential to companies and motorists, incremental changes in the supply-and-demand balance have a relatively large effect on prices.