Energy has become an increasingly important topic during the 2012 election cycle with gasoline prices rising to historically high levels and threatening to send the U.S. economy into a double-dip recession. As you would expect, energy policy is quickly becoming a major campaign flashpoint with Newt Gingrich, Rick Santorum, Mitt Romney and Ron Paul all strongly criticizing President Obama on the issue.
Over the course of the last couple of months we have seen reports that 2011 was the highest annual average price ever, that 2012 prices are projected to be ten percent higher, that prices in January hit record highs, that February prices are at record highs, that we will have $4.00 per gallon gasoline by April, that we might have $5.00 gasoline this summer and that prices are already bumping up against $6.00 per gallon gasoline in Florida. The sum total of all of these reports is that this is going to be an awfully painful year at the pump.
In response to the spiraling costs, President Obama has stated that a “we need it all” approach to energy issues would be good for the nation. Yet, his Administration has not shown any evidence of moving to implement such a plan. In fact, the opposite appears to be true. Over the course of the last three years, the Administration has taken numerous steps to curtail domestic oil production, restrict imports from our North American neighbors and raise taxes on oil and gas production.
A short list of steps taken by the Administration that have led to higher gasoline prices includes the rescission of 77 oil and gas leases in Utah, stalling oil shale research and development in Colorado, Wyoming and Utah, stalling permits for exploration in the Chukchi and Beaufort Seas of Alaska, shutting down the Gulf of Mexico, killing a lease sale in the Mid-Atlantic and rejecting TransCanada’s application for a permit to build the Keystone XL pipeline.
The President has also proposed raising taxes on oil and gas production by $40 billion in the latest budget proposal that he has submitted to Congress (as well as his three previous proposals) and pushed relentlessly for a cap and trade bill, both EPA and the Department of the Interior are aggressively moving to restrict the use of hydraulic fracturing, which would shut down shale oil production, and the Department of Energy is working to develop a low carbon fuel standard (a carbon emissions cap aimed at gasoline and diesel), which would more than double the already sky-high gasoline prices.
Perhaps this is why President Obama spent a lot of time during his State of the Union speech talking about energy, made a major speech on the topic in Miami recently, and used his Saturday Radio Address to discuss the issue.
It also explains why the Republican presidential campaigns are talking about energy and taking aim at President Obama for high gas prices. Both Newt Gingrich and Rick Santorum participated in a 2012 Colorado Energy Summit the day before the Colorado Caucuses and all four candidates have addressed the issue in recent campaign events.
Gingrich has made reducing gas prices a major component of his campaign messaging with a pledge to reduce gasoline prices to $2.50 per gallon. He has called for a comprehensive program to increase domestic energy production and his campaign has run a 28 minute energy speech on television in several Super Tuesday states. Gingrich has also noted that we can completely replace all of the oil the United States currently imports from the Persian Gulf by building the Keystone XL pipeline, returning the Gulf of Mexico to pre-Macondo production levels and filling the Trans-Alaska Pipeline with crude from the Chukchi Sea and National Petroleum Reserve – Alaska.
In his Colorado energy speech, Santorum called for increased domestic oil production, construction of Keystone XL and discussed the immense burdens that EPA is placing on the American economy with out-of-control regulations. Santorum also points out that increased natural gas production has significantly lowered natural gas prices and offers this history as a good example of what will happen if we increase oil production.
Mitt Romney has called for expanded domestic access, supports construction of the Keystone XL Pipeline, and has announced a three part energy plan focused on reforming the federal regulatory state, increasing domestic energy production and reigning in federal investments in politically favored projects. Ron Paul has blamed burdensome regulations for driving up gasoline prices, wants to end restrictions on oil and gas drilling and wants to repeal the 18 cent per gallon federal gas tax to reduce gasoline prices (although this would defund the Highway Trust Fund and open a whole new set of issues).
There is a major price difference between the oil that we can produce in North America and the oil that we can purchase from the Middle East – and gasoline prices are directly pegged to the price of oil. Producing and purchasing more North American oil will displace more expensive Middle Eastern oil and reduce gasoline prices. Yes, reducing gasoline consumption and developing alternative and renewable fuels are important steps. However, pushing these two approaches to the exclusion of increasing production – as the Obama Administration has done for the past three years – is clearly not working.
It is not clear whether the Obama Administration will demonstrate that it understands the importance of energy to our overall economy before the November election. The recent statement by Energy Secretary Steven Chu that the Administration is not interested in lowering gasoline prices seems to indicate that it won’t.
On the other hand, it is clear that the other candidates in the race for the White House get it. They understand that we need to increase domestic production in order to break the high gasoline prices that are dragging down the economy.