Republican presidential candidate Newt Gingrich blames President Barack Obama and talks about bringing down the price to $2.50 per gallon. In California where the price hit $4.277, Gingrich promised if he was elected he would sign an executive order approving the Keystone XL pipeline to move Canadian oil to the Gulf Coast refineries. He blasted Obama’s restrictions on offshore drilling and development of oil shale in the West, among other things.
“We need to go on an all out effort to produce our own energy,” he said, so that it won’t matter what happens in Iran which has been saber rattling and purportedly unsettling the oil market.
Granted that Gingrich and other Republicans are on the money with their call for approval of the Keystone XL pipeline, which would generate an estimated 20,000 jobs, and other steps to develop more domestic oil and gas resources.
However, there’s another factor involved, one that is nothing short of mind-boggling. Figure this: Our country is the world’s largest importer of crude oil and the leading gasoline consumer — but now for the first time, the United States is exporting more gasoline, diesel and jet fuel than any other product.
The reasons, according to the Associated Press, are the higher prices of crude oil and — get this — the lower demand for gasoline in this country as the result of the sluggish economy and the effect of more fuel-efficient automobiles. Contrary to what most of us think, this scenario of lower demand has not brought down the price of gasoline.
Instead, while we are using less gasoline because of tighter budgets, unemployment, foreclosures and other havoc wreaked by the Great Recession, the price is going higher by the day. Instead of cutting prices at home, the oil companies last year sold nearly 120 million gallons of gasoline, diesel, jet fuel and other petroleum products per day to other countries. That’s up from 40 million gallons per day about a decade ago.
“It’s a world market,” Tom Kloza, chief oil analyst of Oil Price Information Service, told the AP. So fuel economy and driving less gets the American consumer nothing but higher prices because of unexpected competition with other countries.
Even more incredible, oil economist Phil Verleger was quoted by the Houston Chronicle as saying that the higher fuel efficiency plus growing output of oil and natural gas would lead the U.S. to “want to consider joining with other energy-exporting countries, like those in OPEC, to sustain high oil prices. Such an effort would support domestic oil and gas production and give the U.S. a real competitive advantage.”
So if we drill here, drill now, as Gingrich proposes, the price of gasoline will not come down, barring some form of government intervention.
It’s a catch 22 and we consumers are caught in it.