Record Big Oil profits, gut-punching gas prices at the pump, and $4 billion in yearly government oil subsidies. To President Obama, that confluence confirms what he's been saying all along: America needs to start coming clean from its oil addiction.
“Look, we know there’s no silver bullet that will bring down gas prices or reduce our dependence on foreign oil overnight,” Obama said in his weekly Saturday address. “But what we can do is get our priorities straight, and make a sustained, serious effort to tackle this problem.”
The unseasonal gas price spike – averaging $3.57 for February nationally– threatens the nation's fragile economic recovery. But Obama's decision to use the moment to push his “all-of-the-above” approach – subsidizing the developing of alternative energy sources like wind alongside more measured oil exploration – carries real political risk.
It certainly is providing political opportunity for Republican presidential candidates, who are promising that their plans for more domestic drilling, including off the Atlantic and Pacific seaboards, continued subsidies, and regulatory relief could bring prices to below $3 and would mean, as candidate Newt Gingrich said Thursday, that “no future president will ever bow to a Saudi king again.”
“We'd almost feel sorry for Mr. Obama's gas-price predicament if it weren't a case of rough justice,” the Wall Street Journal opined on Friday. “The President has deliberately sought to raise the price of energy throughout the economy via his cap-and-trade agenda. He is now getting his wish, albeit a little too overtly for political comfort.”
To be sure, the reasons for the price spike are complex, tied in large part to rising tensions in the Middle East between Israel and Iran. And predictions that gas could reach $4.00 a gallon nationally by summer comes even as the US has increased its domestic oil output, despite a lengthy drilling ban after the 2010 Gulf oil spill.
But another key cause, experts say, is the Fed's answer to the country's lending woes, leading most recently to promises of near-zero interest rates through 2014, a policy that has weakened the dollar's value even as it attempts to drive up lending in order to revive the economy. Since oil is traded in dollars, that “easy money” monetary policy is helping to drive up the market price of crude, now hovering at around $120 a barrel.
Republicans blame the administration's policies for halving the number of drilling permits, nixing the Keystone XL pipeline that would have brought Canadian shale oil to US refineries in Texas, and promoting government investment in risky and unproven alternatives.
Republican presidential candidates have been quick to bring up the recent bankruptcy of the administration-backed solar energy firm Solyndra and have mocked vows by the President to use algae and chicken manure to help the country become more energy-independent.
“President Obama's own Energy Secretary, Steven Chu, has said, and I quote: ‘Somehow, we have to figure out how to boost the price of gasoline to the levels in Europe,’” Republican Sen. Kay Bailey Hutchinson of Texas said in the Republican Saturday address. “Well, this Administration is certainly trying their best to do just that.”
The President acknowledged Saturday that high gas prices are an unwelcome hurdle for struggling American workers and business owners, noting that “high gas prices are like a tax straight out of their paychecks.” But he also added that “Americans aren't stupid” and will see through quick-fix Republican ideas aimed not at long-term energy policy, but short-term campaign points.
“You know there are no quick fixes to this problem, and you know we can't just drill our way to lower gas prices,” the President said. “If we're going to take control of our energy future and avoid these gas price spikes down the line, then we need a sustained, all-of-the-above strategy that develops every available source of American energy – oil, gas, wind, solar, nuclear, biofuels, and more. We need to keep developing the technology that allows us to use less oil in our cars and trucks; in our buildings and plants. That's the strategy we're pursuing, and that's the only real solution to this challenge.”
Nevertheless, consumer confidence and Obama's reviving approval ratings are at stake should gas prices continue to hover at the $4 mark, Chris Christopher, an analyst at the economic forecast firm IHS Global Insight, told the San Francisco Chronicle.
“The one thing that's a real downer to Americans is gasoline prices,” he said.