The Doleful Road to $6 Gas

by John McClaughry 

John McClaughry

Vermonters are alarmed at $4 gas, and terrified at the prospect of $5 or $6 gas to follow. That alarm has contributed mightily to the descent to 41% in President Obama’s job approval rating. The Obama Administration is thus working feverishly to transfer the responsibility to somebody – anybody – else.

The President argues that the prospect for an Iranian conflict causes speculators to drive up the price of crude oil on world commodity markets. That’s certainly true, but that’s far from all of the story.

The price of oil futures, like every other commodity, is based on forecasts of future oil demand and supply. In addition to the looming Iranian interruption, market participants – both oil refiners and speculators – look at many other factors, including government policies relating to supply.

In a January 2008 interview with the San Francisco Chronicle, candidate Obama explained his cap and trade plan to cut greenhouse gas emissions from carbon-based fuels. Under it, he admitted, “electricity costs would necessarily skyrocket.” And so would gasoline, diesel and heating oil prices, subjected to the same cap and trade regulations.

Once in office, Obama ‘s energy policies have clearly been based on the belief that humans, in our insatiable urge for the convenience and comfort made possible by inexpensive carbon-based energy, are propelling the planet toward Al Gore’s heat death.

Ever higher prices discourage energy consumption. Obama named as Secretary of Energy Steven Chu, who had then recently said “somehow we have to figure out how to boost the price of gasoline to the levels in Europe”, currently $8 a gallon. A month ago Chu informed a House committee that he was not working to lower gasoline prices, but to wean the US off of oil. With U.S. gas prices pushing $4 a gallon, Chu is now squirming to reinterpret those statements.

But Steven Chu’s statements don’t drive up gas prices. Policies designed to choke off petroleum production do.

The Obama administration, backed by the entire environmental movement, is dead set against allowing oil production from a 2200 acre tract –the size of tiny St. George, Vermont – of a desolate plain in the Arctic National Wildlife Refuge. Not only will the billions of gallons of oil stay in the ground, but the lack of oil production will eventually require shutting down the Alaska Pipeline.

The administration, again backed by the environmental movement, has been hostile to increased oil production in the Gulf and on the Outer Continental Shelf. Almost all of the welcome surge in natural gas production made possible by fracking technology has occurred on private land where the administration can’t stop it.

The Obama Environmental Protection Agency is also imposing Tier 3 gasoline standards that are predicted to increase gas prices by 25 cents a gallon. The Obama EPA refuses to recognize that at some point the claimed benefits of ever-cleaner gasoline can cause more economic damage then they are worth.

Under strong enviro pressure the President has, astonishingly, blocked the Keystone XL oil pipeline from crossing into the US from Canada. Denied a transit route to Texas refineries, the Canadians are about to build their own pipeline to convey the Alberta oil to their Pacific coast, for export to the Far East.

According to the environmental groups backing the Obama policies, the alternative fuel to gasoline is ethanol. But the Federal mandates and subsidies that caused the conversion of 40% of America’s corn crop into ethanol have also produced engine damage and higher food prices. Cellulosic ethanol has turned out to be an embarrassing bust.

Then there’s the electric car craze. When the Obama administration became the largest shareholder in General Motors, it pushed the company into marketing an electric car. The new Chevy Volt will reduce demand for gasoline by running 100% on electricity (so long as their batteries last.)

Despite a federal subsidy of $7,500 per car, GM announced last month that it was suspending Volt production after selling only 8,000 cars. The President is now proposing that the subsidy be increased to $10,000 to attract more buyers (with average household incomes of $170,000).

The current crown jewel in the President’s energy tiara is a new program to replace petroleum fuel with alcohol from algae. Sure, it could probably be done, with enormous federal subsidies. So could Newt Gingrich’s city on the moon.

Can we get real here? If Americans don’t want to face Steven Chu’s European gas prices any time soon, the President should forget about the dubious Menace of Global Warming, tell his appointees to back off ever more subsidies and mandates, and let American industry produce the energy the American people need, at prices they can afford.

John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).

One thought on “The Doleful Road to $6 Gas

  1. But, but, the Menace of Global Warming must be real. Why, it’s never been this warm in Vermont in March before. This MUST be the result of global warming, oops, climate change.

    So, because it’s so warm and gas prices are so high, isn’t it fair to conclude that climate change is the cause of high gas prices?

    Those who buy this theory will have no problem blaming Republicans and conservatives rather than TeamObama’s policies for $5 gasoline.

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