As President Obama and his team of regulators bring domestic oil production to a crawl via their moratorium on offshore drilling, standstill on drilling permits, and myriad regulations on accessing oil on public lands, is it any wonder that oil and gas prices are climbing toward the record highs we saw in 2008, prior to the economic collapse?
Last week, Greenwire reported that there were fewer new wells drilled for oil on public lands in 2010 than in any other year in the past decade, and that as many as two-thirds of the permits issued to the oil and gas industry for drilling on federal lands were unused.
Meanwhile, U.S. crude supplies have fallen for the sixth straight week, oil is inching toward $100 a barrel, the highest since October 2008, and retail gas prices are close to $3.00 a gallon.
This has scary implications for an economic recovery — as Ben Bernanke alluded to last week when he testified that he was “closely watching” increasing gas prices which could hurt economic growth.
Back in 2008, [U.S.] crude oil . . . traded above $100 a barrel for about six months before the world economy collapsed into the worst crisis since the 1930s.
Other studies, too, show a strong correlation between rising oil prices and economic recessions. This week’s Fiscal Times:
A 2006 paper from the U.S. Energy Information Agency said, “most of the major economic downturns in the United States, Europe, and the Asia Pacific region since the 1970s have been preceded by sudden increases in crude oil prices.”
James Hamilton of UC San Diego produced a report in 2009 saying that higher oil prices in 2007-2008 impacted domestic spending and auto purchases to such an extent that “in the absence of those declines, it is unlikely that we would have characterized the period 2007 to 2008 as one of economic recession for the U.S.”
— Dana Joel Gattuso is director of the Center for Environmental and Regulatory Affairs at the National Center for Public Policy Research.