By Mike Brownfield
The gas price headlines aren’t looking so good for Americans. Honolulu is a penny away from record gas prices. Chicago gas nears $5 a gallon. Nationally, $4 a gallon average gas may be only be a month away. There’s something that President Obama could do to help solve the problem but, instead, he’s spending his time laying blame.
In a speech today in suburban Virginia, he said there’s plenty of supply to meet the world’s demand for oil, placing the blame for the high prices on speculators:
The problem is … speculators and people make various bets, and they say, you know what, we think that maybe there’s a 20 percent chance that something might happen in the Middle East that might disrupt oil supply, so we’re going to bet that oil is going to go up real high. And that spikes up prices significantly.
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Blaming speculators, though, is a costly diversion to real solutions. Speculators, at best, marginally increase the price of gasoline if it leads to oil inventories increasing—but only in the short run, because businesses have to unload these inventories. Allowing access to onshore and offshore drilling production can help lower prices because futures markets and speculators will lower the future cost of oil, which will translate into lower fuel prices at the pump.
And what the president didn’t say is that he’s deliberately choosing not to allow access to that domestic oil supply by continuing his moratorium on drilling in the Gulf of Mexico, following the oil spill disaster that occurred one year ago today. The Wall Street Journal reports:
One year after the BP PLC oil spill, Gulf of Mexico energy output is beginning to show the impact of the Obama administration’s 10-month freeze on deep-water drilling.
Offshore oil production, most of which comes from the Gulf, is expected to average 1.55 million barrels a day this year, down 13% from 2010, according to the U.S. Energy Information Administration . . .
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The drilling suspension, along with a new, slower permitting process, will result in the loss this year of about 375,000 barrels of oil a day, according to energy consultancy Wood Mackenzie. That is roughly equivalent to one-third of the production in Libya that remains shut down because of political turmoil there.
So what’s the solution? The president needs to change course, lift the moratorium on drilling in the Gulf, and open up our domestic resources for exploration. Heritage’s John Ligon and Nicolos Loris write:
Increasing access to oil reserves in the U.S., both onshore and offshore, would help offset rising demand, increase jobs, and stimulate the economy. Moreover, this will help improve our strategic position, as much of the world’s supply of oil is delivered in a restrictive market dominated by unstable or hostile nations.
Loris and Ligon also note that there are oil sources onshore, too, that are currently off-limits, as well as the potential for 800 billion barrels of recoverable oil from shale throughout Colorado, Utah and Wyoming. It’s time for Congress and the Obama Administration to open the door to increasing the domestic energy supply, not leaving us dependent on foreign sources of oil.