So we’re going to have another fatuous debate about gas prices in this country, as if the President has a ticker on his desk that he can set to the 9/10 of a cent. President Obama made the effort to mock this. As a national politician he obviously feels he cannot say “there’s not much I can do,” but he came extremely close in this speech. I give him credit for anticipating the Republican line of attack:
You can bet that since it’s an election year, they’re already dusting off their 3-point plan for $2 gas. And I’ll save you the suspense. Step one is to drill and step two is to drill. And then step three is to keep drilling. (Laughter.) We heard the same line in 2007 when I was running for President. We hear the same thing every year. We’ve heard the same thing for 30 years [...]
So we’re focused on production. That’s not the issue. And we’ll keep on producing more homegrown energy. But here’s the thing — it’s not enough. The amount of oil that we drill at home doesn’t set the price of gas by itself. The oil market is global; oil is bought and sold in a world market. And just like last year, the single biggest thing that’s causing the price of oil to spike right now is instability in the Middle East -– this time around Iran. When uncertainty increases, speculative trading on Wall Street increases, and that drives prices up even more [...]
Over the long term, the biggest reason oil prices will probably keep going up is growing demand in countries like China and India and Brazil. I want you to all think about this. In five years, the number of cars on the road in China more than tripled — just in the last five years. Nearly 10 million cars were added in China in 2010 alone — 10 million cars in one year in one country. Think about how much oil that requires. And as folks in China and India and Brazil, they aspire to buy a car just like Americans do, those numbers are only going to get bigger.
So what does this mean for us? It means that anybody who tells you that we can drill our way out of this problem doesn’t know what they’re talking about, or just isn’t telling you the truth. (Applause.)
Lots of truth in there. World demand does drive oil prices, though US demand is at least a part of that, and we’re at a 16-year low. Geopolitics probably has driven some of the run-up, but of course that goes hand in hand with a strategy toward Iran that threatens global oil supplies, which didn’t come out of nowhere and certainly has something to do with Washington. And making the US more elastic in terms of energy use is key, and massive development isn’t necessarily the answer there.
I would point you to Matthew Yglesias and Brian Beutler for more in this general vein. But if we’re going to have a grown-up discussion about gas prices, we should add a couple more pieces to the puzzle:
1) Mass transit. Part of the reason that America suffers more than some other countries with respect to gas prices is the lack of available transit options. The House’s transportation bill fixed to make that worse, by eliminating a percentage of that bill which goes toward transit funding. They’re reworking that now. And a conversation about how to deal with gas prices should talk about building and subsidizing transit options.
2) Speculation. This was not a part of Obama’s speech, but Nancy Pelosi is all over it. And with 64% of the oil market dominated by speculators, it’s a serious concern. And there’s room for the President to do some work here. The CFTC needs a stronger crackdown on over-speculation in the commodities markets, period, full stop. You’d see prices go down.
3) Turn down the volume. To the extent that instability in the Middle East is a factor in the prices, the threat of an Iran attack is the driving force. Obviously the President isn’t the only one, or even the main one, driving rhetoric on Iran. In fact, many Administration players have tried their best to turn down the volume. Perhaps linking the belligerence to gas prices directly would do the trick.
These are just a few thoughts, and I agree there’s no silver bullet here. But there are a few concrete steps, and they have nothing to do with drill baby drill, or anything Republicans have been saying, for that matter.