Obama embraces the seamy supply side
It is said there are no atheists in foxholes. In that context, the recent rise in oil prices seems to have turned the Obama administration into true believers (at least rhetorically) when it comes to the best method to keep gas prices down and the American economy growing.
With oil costing more than $100 a barrel, the White House announced last month that it was going to increase oil supply by withdrawing 30 million barrels from our Strategic Petroleum Reserve and putting that oil into the world market.
As Treasury Secretary Timothy F. Geithner usefully explained, “[C]ostlier energy and less vigorous worldwide growth would keep U.S. economic growth to around a 2 percent annual rate in the first half this year. These reserves exist to help mitigate those kinds of disruption.” Putting additional oil supplies on the market, he said, was a “sensible policy” that should give a lift to a slowly expanding economy.
This has not been the analysis the Obama administration, until now, has brought to the issue. Over the past few years, the administration has argued that gas is too cheap. The president’s energy secretary, Steven Chu, has said, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” When gas went up to $4 a gallon, the president was asked on CNBC whether $4-a-gallon gas prices were good for the American economy. He replied: “I think that I would have preferred a gradual adjustment.” In other words, he wants the price of gasoline in America to go higher, but he would prefer that it go up gradually (presumably so that the new grim reality could sneak up on the public slowly and with little attention paid to the steady increase.) One has to commend the president for that remarkably frank statement.
Certainly the administration’s ban and delays on offshore and new Alaska drilling, its opposition to letting American oil companies develop and rapidly bring on line the vast supply of newly found shale oil and shale natural gas, the EPA’s effort to force many of America’s coal-firing utilities out of business and the proposed special tax increases on American oil companies are consistent with the administration’s aforequoted policy of restricting energy production in order to raise the cost of energy to Americans. (Full disclosure: As I have stated in previous columns, believing as I do in free markets and high levels of energy production for America, I give professional, compensated advice to American energy-producing corporations.)
Of course, the rhetorical surrender to rationality that Mr. Geithner offered up last week — that a larger available supply of oil will lower gas prices and invigorate the economy — was only gained under the duress of a tanking economy and an upcoming presidential election.
Importantly, the policy surrender was limited. The only method of increasing oil supply the administration is willing to endorse is the tapping of the Strategic Petroleum Reserve. Of course, that is oil that already has been discovered, extracted and stored in our Gulf States. This policy does not add even a single gallon of new oil to our reserves — in fact, it reduces our reserves by consuming them now rather than saving them for a supply emergency (such as an Organization of Petroleum Exporting Countries boycott, a war in the Middle East that cuts off supply or a natural disaster like Katrina that cuts off supply).
That is the reason we have strategic reserves of both oil and certain critical minerals — to protect ourselves from sud- den cutoffs, not to manipulate prices.)
Tapping the strategic reserve is the equivalent of trying to increase the supply of American meat by going into the Safeway and shooting a package of steaks. If one really wants to increase the supply of meat, go into the woods and shoot some meat that is still on the hoof. Or raise a new herd. If the administration really wanted to increase the supply of oil over the long term to bring down the price of gas and expand our economy, it would permit our “energy hunters” in the private sector to develop and bring on line the vast oil and natural gas reserves with which America has been blessed.
Still, this is at least theoretical progress. Just as the president admitted in December when he capitulated to the Republicans and agreed to extend the George W. Bush tax cuts, “Tax cutting is good for an expanding economy” (a point he seemingly has forgotten, as he is calling for higher taxes) now he has admitted that increasing oil supply brings down gas prices and raises the economy.
Just as we are all believers when in foxholes during war, apparently we are all supplysiders when in $4-a-gallon recessions before elections.
Tony Blankley is the author of “American Grit: What It Will Take to Survive and Win in the 21st Century” (Regnery, 2009) and vice president of the Edelman public relations firm in Washington.