The President has a couple options when it comes to high gas prices. Eliminating oil industry tax breaks, while a decent policy generally, has nothing to do with it. In fact, it could raise gas prices, if oil companies demand the same profits after they lose their welfare benefits. That’s not a reason not to do it, as the social benefit of that money put toward, say, research on renewables, far outweighs putting it into the pockets of an oil executive.
But the President has a couple options. He can order the CFTC to tighten position limits, to reduce the influence of Wall Street speculators on the price of oil. And he can tamp down the rhetoric on Iran, which is driving a good portion of the speculation. The belief that military action on Iran, either from Israel or the US, will occur within the next several months is a powerful signal to oil futures markets that the price will go up, which is a self-fulfilling prophecy.
Therefore, I find it hard to read this interview the President granted to Jeffrey Goldberg as doing anything but raising oil prices, with the concurrent effect of depressing the economy and making the President’s re-election more dicey:
GOLDBERG: Go back to this language, ‘All options on the table.’ You’ve probably said it 50 or 100 times. And a lot of people believe it, but the two main intended audiences, the supreme leader of Iran and the prime minister of Israel, you could argue, don’t entirely trust this. The impression we get is that the Israeli government thinks this is a vague expression that’s been used for so many years. Is there some ramping-up of the rhetoric you’re going to give them?
PRESIDENT OBAMA: I think the Israeli people understand it, I think the American people understand it, and I think the Iranians understand it. It means a political component that involves isolating Iran; it means an economic component that involves unprecedented and crippling sanctions; it means a diplomatic component in which we have been able to strengthen the coalition that presents Iran with various options through the P-5 plus 1 and ensures that the IAEA [International Atomic Energy Agency] is robust in evaluating Iran’s military program; and it includes a military component. And I think people understand that.
I think that the Israeli government recognizes that, as president of the United States, I don’t bluff. I also don’t, as a matter of sound policy, go around advertising exactly what our intentions are. But I think both the Iranian and the Israeli governments recognize that when the United States says it is unacceptable for Iran to have a nuclear weapon, we mean what we say.
The whole transcript is at Goldberg’s site, and I predict the price of oil will jump $5-$10 a barrel as a result. Obama framed this as a nuclear nonproliferation strategy. But the Administration has not proceeded in North Korea with threats and belligerence and red lines. And not coincidentally, they’ve seen success. The President addressed that in the interview with some hand-waving about Iran being in a volatile region of the world. It’s certainly true that they are beset on all sides by US troops and bases. So in that respect, it’s volatile.
Goldberg got out of Obama what Benjamin Netanyahu wanted to get next week – an enunciation of a red line with respect to Iran. That’s a dramatic step with real consequences. Kevin Drum is being too cute by half. You cannot talk about the effect of gas prices on elections without talking about the effect of gas prices on the overall economy. While Drum has a defeatist take about constrained oil supply, there isn’t any doubt that geopolitics play a big role in the run-up on prices. Heck, the Iranian embargo constrains oil supply. There is a direct line between what Obama said to Jeffrey Goldberg and his own re-election prospects. I’m in no position to be a political counselor to the White House, but you’d think they’d have figured this out on their own. I admit to also having the interest of not seeing a deadly regional war in the Middle East leading to the deaths of tens of thousands, if not more.