By Larry Bell Barack Obama A June 2008 Politico article titled “High Oil Prices? Blame Weak Dollar?“ attributed nearly 40% of the increased price Americans were paying for oil to the Federal Reserve’s low interest policy causing a weak dollar. It concluded that “the public should demand that the next president follow economic policies that shore up the value of the dollar rather than run up big trade and budget deficits.” And that was when the U.S. debt was $8.2 trillion, compared with more than $14 trillion today. Holding George W. Bush accountable for oil price escalation was a popular Democrat theme at that time. House Speaker Nancy Pelosi certainly knew who to blame for “skyrocketing” prices less than three years ago: “The price of oil is at the doorstep; $4-plus per gallon for oil is attributed to two oilmen in the White House and their protectors in the U.S. Senate.” The mainstream media clearly agreed that it was mostly the president’s fault, and as the dollar fell throughout the Bush administration, they, or at least the writers at Politico, were to a high degree correct. But as reflected by recent reporting patterns, times have indeed changed since then. According to studies conducted by the Business and Management Institute, major networks presented 15 times more stories associating President Bush with rising 2008 oil prices than reports connecting President Obama to comparable recent circumstances. There were also 2.5 more stories about the topic during a 20-day rising price news span in the Bush years vs. a comparable period under Obama. And few, if any, 2011 media reports have connected high pump and commodity prices to the Obama Administration’s anti-drilling policies. So who should we blame? According to our Scapegoater-in-Chief, the following are the real culprits. Traders And Speculators President Obama has repeatedly claimed that the global supply is adequate, blaming speculators for driving gasoline prices higher. Speaking at a suburban Virginia community college on April 19 he said: “The problem is…speculators and people make various bets, and they say, you know what, we think that maybe there’s a 20% chance that something might happen in the Middle East that might disrupt oil supply, so we’re going to bet that oil is going up real high. And that spikes up oil prices significantly.” In response, he instructed U.S. Attorney General Eric Holder to establish a Financial Fraud Enforcement Working Group, including several Cabinet department officials, federal regulators and the National Association of Attorneys General to investigate “…the role of traders and speculators” in the oil surge. Obama further pledged that “We’re going to be monitoring gas stations to make sure there isn’t any price gouging that’s taking advantage of consumers.” Two U.S. agencies, the Commodity Futures Trading Commission (CFTC) and Federal Trade Commission (FTC) recently agreed to share information to support the probes. CFTC is also considering new rules that would slap “position limits” on big commodity traders to cap the number of futures and related swaps contracts any one company can control. Subsidy supporters, on the other hand, argue that commodities futures investors perform a vital function by allowing those who depend upon supplies (such as refiners and airlines) to “lock-in” a price months or years in advance. This enables them to confidently plan future operations and actually reduces disruptive market volatility overall. Big Oil Profiteering On April 30 President Obama declared that oil companies are unfairly profiting from rising pump prices and again urged Congress to terminate $4 billion annual oil and gas company tax breaks. In his weekly radio and Internet address he stated: “These tax giveaways aren’t right. They aren’t smart. And we need to end them.” Instead, he said that money recouped from these subsidies should be redirected to new energy resources and research, but refuses to cut spending on “clean energy” initiatives (presumably including ethanol). That same week Exxon Mobile Corp. had reported nearly $11 billion in first quarter profits, but said it had no control over oil prices and that “…for every gallon of gasoline, diesel or finished products we manufactured and sold in the United States in the last three months of 2010, we earned a little more than 2 cents per gallon.” In contrast, the average state gas tax per gallon was more than 48 cents. Overall, Exxon announced that in 2010 it “made less than 8 cents for every dollar of revenue from all of our businesses around the world.” Our Oil Addiction The president has advised us to recognize that periodic spikes in gasoline prices should be recognized as a “a hard truth” Americans are going to have to live with so long as we depend upon foreign oil. Speaking at a May 11, 2011 White House press conference he acknowledged that while increased domestic production is necessary, it’s not a “long-term solution” since the U.S. controls only 2% of the world’s oil supply while consuming 25 percent of it. “We’ve got to gradually reduce our demand for oil, through more fuel-efficient vehicles and diversifying our energy resources.” This appears to be consistent with a viewpoint presented by then-Senator and candidate Obama during a June 11, 2008 interview. Regarding $4 per gallon gas prices at that time he stated that America has been consuming energy as if it is infinite with demand badly outstripping supply. When asked by CNBC’s John Harwood “So could the (high) oil prices help us?” he responded: “I think I would have preferred a gradual adjustment. The fact that this is such a rapid shock to American pocketbooks is not a good thing. But if we take some steps right now to help people make the adjustment, first by putting more money in their pockets, but also by encouraging the market to adapt to these circumstances more rapidly, particularly U.S. automakers.” Middle East Unrest And World Competition President Obama currently states that supply is not a problem, and American refineries are operating “at fairly full capacity”. Speaking at the May 11 White House press conference, he said “Oil, however, is sold on a global market, and the uncertainty created by political turmoil in the Middle East and North Africa has combined with increased demand from China and other developing countries to send prices soaring.” Yet only three weeks earlier during television interviews on WXYZ in Detroit and WTHT in Hampton Roads, Virginia, the president indicated that there actually was an oil supply shortage, one resulting from disruptions caused by the war in Libya. He told the Detroit station “We are in a lot of conversations with the major oil producers like Saudi Arabia to let them know that it’s not going to be good for them if our economy is hobbled because of high oil prices.” On WTKR he repeated his message stressing to oil producing nations that “…if we’re not growing, they’re not going to be making money either. And so they need to increase supplies.” Judging from his May 14 radio and internet comments, 2012 incumbent presidential candidate Obama appears to have had a recent epiphany, announcing that he now believes that we should expand oil production in America too. Under obvious public pressure he announced that he was directing the Department of Interior to conduct annual lease sales in Alaska’s National Petroleum Reserve, and plans to speed up evaluation of oil and gas resources in the mid and south Atlantic. Gaming And Buck Passing While it is reasonable to acknowledge that resuming and expanding domestic drilling won’t solve immediate problems, it’s also realistic to recognize current administration policies do have clear present-day consequences. Regulatory uncertainty causes those speculators to hedge bets with worst case supply scenarios. Bureaucratic energy industry interference causes jobs to be sacrificed and economic growth to be stifled. Most problematic of all, a weak dollar clearly correlates with a rising price of oil priced in dollars, not to mention that the dollar’s changing value on a daily basis forces the kind of speculation on oil’s nominal price that Obama loathes. Appropriate or not, attribution of credit for national economic fortunes, both good and bad, comes with the turf occupied by the White House’s principal resident. Some of you may remember that Harry Truman had a sign on his Oval Office desk that acknowledged that responsibility, stating “The Buck Stops Here”. Rumor has it that President Obama is having a similar sign made, but with one change. It will say “The Buck Stop There”. There’s absolutely no doubt about it – Barry surely ain’t no Harry. Read Larry Bell's weekly blog on Forbes at http://blogs.forbes.com/larrybell/
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