The 2012 election outcome will depend upon the shape of the economy and who gets the blame. The emerging GOP field smells blood because high oil prices are hurting job creation and giving consumers gas pains. If they can pin the problem on Obama, they think they have a hot issue ready-made for attack ads.
Darrell Issa, Republican chair of the House Oversight Committee, released a “report” claiming the Obama administration had conspired to raise prices by purposefully instituting administrative and environmental roadblocks to keep domestic oil production down, thereby causing prices to rise.
He tried to make the case that Obama wanted high prices to force Americans to invest in
It makes no political sense either. The last thing a president running soon for re-election wants is high gas prices.
Ed Wallace, writing in Bloomberg Business Week, put the blame for current high prices on oil speculators, who were driving up the prices beyond $60-$70 a barrel to the stratosphere of over $100 with predictions of $140 later this year. He blamed the Obama administration by not pushing for laws that would control such speculation, but he also shot his argument in his foot by mentioning that both John McCain and Obama had advocated the same laws in 2008 and nothing had happened. It was a bipartisan failure, not just an Obama one. Oil speculation is a worldwide problem, too, so US regulation alone would not suffice.
Saudi Prince Ali-Waleed bin Talal, in an interview by Fareed Zakaria on CNN, also blamed speculation, claiming that high prices were not in their interest either since Europe would switch to alternative energy forever, implying that would be bad for his business.
The truth is Obama has little control over oil prices in the short term. The Middle Eastern cartel of oil producing countries, OPEC, controls 40 percent of the world's supply. Domestic prices are determined by their production and cartel price setting, and not very much by U.S. production. The OPEC cartel last week voted not to increase production, though the Saudis said they would increase their output anyway.
Obama also ran into a bit of unanticipated bad luck: the Arab Spring. Libyan production reduced supplies by 1.2 million barrels a day and investors have become jittery about the stability of other producers in the region. These fears only fed speculation.
Obama's tool box to influence prices in the short term is pretty sparse. He can release strategic reserves and his spokesman last week said the administration was considering that. He needs to take care, though. U.S. reserves in total
Most of his weapons are long term: He has already opened up more federal leases. Permitting more drilling in the Gulf to recheck concerns about safety and environmental damage did cause a delay in resumption of drilling, but that too is a limited , longer term solution. Drill, baby, drill lost some credibility in 2008 when Americans realized the U.S. has only 2 percent of the world's oil reserves, yet we consume more than 20 percent of the world's oil.
Our dependence on foreign oil is also not in U.S. interests because it has forced us to lick the boots of some bad actors. It is now coming back to haunt us in revolutions and terrorism. Obama is right: In the long term, we just have to kick the oil habit. In the short term, we should take Republican finger-pointing with a grain of salt.