Oil Company Executives Agree: Obama Not to Blame for High Gas Prices
(Washington, DC) – Today the House Committee on Science, Space, and Technology held a hearing entitled, “Tapping America’s Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: Technology and Policy Pathways.” The stated purpose of the hearing was to examine policy and technology pathways to developing unconventional oil resources such as oil shale and oil sands. However, witnesses were asked to comment on areas ranging from the economic impacts of high energy prices, to the factors that shape oil and gasoline markets, to the regulatory hurdles that affect production, and much of the hearing was spent discussing President Obama and the high price of gasoline.
Ranking Member Eddie Bernice Johnson (D-TX) said in her opening statement, “The real reason we are here is that it is an election year, and this hearing is another installment in the losing campaign to pin the nation’s escalating gasoline prices on President Obama. To that, I add my voice to the bipartisan chorus of industry and policy experts that consider that as ridiculous as the notion that we can somehow drill our way into low gas prices and energy independence.” She continued, “The Republicans multi-million dollar effort to create an alternate reality in which a President controls gas prices is backfiring. The American people are smarter than that, and are coming to appreciate the real cost of our addiction to oil.”
Ranking Member Johnson asked witnesses if President Obama is the cause of high gas prices. Three of the witnesses – including the two witnesses who work at oil companies - answered with an unqualified “no”, while the other two witnesses hedged by saying “yes and no”. When asked after the hearing whether she was satisfied with the answers, Ms. Johnson responded, “Now that the two witnesses who actually work at oil companies answer without hesitation that the President is not the cause of high gas prices, I hope that those on the other side of the aisle who haves persisted in making such a false claim will finally cease and desist.”
The price of gasoline is determined by the price of oil, which is a globally traded commodity dominated by Organization of the Petroleum Exporting Countries (OPEC) nations that collude to manipulate supply. Prices are then further skewed by speculation as well as other complex market mechanisms which are very reactive to geopolitical instability. So, the impact of additional U.S. unconventional oil on the global market would be marginal at most and likely have very little if any impact on gasoline prices, especially in the near-term since the lead-times for producing unconventional oil resources is on the order of decades. Likewise, temporary suspension of domestic oil production - as in the case of the post-BP Deepwater Horizon tragedy - had limited impact on global prices.
In discussing the linkage between domestic drilling and gasoline prices, Mr. Daniel Weiss from the Center for American Progress Action Fund, cited a recent study. He stated, “To test whether more U.S. drilling would lower gasoline prices, the Associated Press completed an exhaustive analysis of 36 years of monthly U.S. oil production and gasoline price data. AP found that there is:
“No statistical correlation between how much oil comes out of U.S. wells and the price at the pump. If more domestic oil drilling worked as politicians say, you'd now be paying about $2 a gallon for gasoline. Instead, you're paying the highest prices ever for March.”
Mr. Weiss continued, “Canada – which produces most of its own oil – also has high gasoline prices. The Edmonton Journal on March 30 reported that “Canadians are paying some of the highest prices they ever have for gasoline.”
Democrats and witnesses also stressed the importance of moving away from an overreliance on oil by transitioning to new technologies. Ms. Johnson stated, “Even if the oil comes from your own backyard, you pay the global price. The only guaranteed relief from the pain at the pump is to visit the pump less often. We need more transportation options, with cars and trucks that are dramatically more efficient, more alternative fuels, and more vehicle electrification. The cheapest gas is the gas you don’t have to buy.”
In light of the attacks made on President Obama’s Administration regarding gas prices, Mr. Weiss said, “The House passed FY 2013 budget resolution, authored by Rep. Paul Ryan (R-WI), would worsen pain at the pump by slashing billions of dollars of investments in transit, alternative fuels and clean energy technologies that would reduce oil consumption. Such investments help protect middle-class families from volatile energy prices as well as create jobs. Instead, the budget would retain $40 billion in tax breaks for big oil.”
Mr. Weiss also pointed out that, contrary to Republican assertions that President Obama is obstructing domestic drilling, the average annual oil production from federal lands and waters is five percent higher under President Obama than it was under President Bush.
While acknowledging the historic role the Department of Energy has played in opening the shale gas boom seen today, Ms. Johnson questioned whether taxpayers should be forced again to pay for the oil industry’s research. “At a time of severe fiscal restraint and record gas prices, is it appropriate to talk about expanding the federal role in technology development for the oil and gas industry? What about the fear of government “picking winners and losers”, “crowding out private investment”, or otherwise engaging in market-supported activities that my Republican colleagues are usually so quick to malign cleantech research programs for supposedly perpetrating? How many decades and how many billions of tax payer dollars can we spend picking the same winners? If sustained high oil prices are not enough to drive further innovation in unconventional oil, is it really the job of the taxpayer to buy-down the oil industry’s risk? Are billions of taxpayer dollars in subsidies not enough of a handout for the most profitable industry in the world?”
Ranking Member Johnson concluded her opening statement by saying, “I would like to dispel the myth that President Obama and the Democrats are mounting a war on fossil fuels. We simply want future generations to have a choice. Where Democrats differ from our Republican counterparts is that we recognize that our nation will be strengthened by diversifying our energy supply and protecting public health, and that is more important than short-term profits of industry. The oil will be there. It is up to the markets to make the price right, and the industry to make sure it can be produced sustainably.”
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