The Corner

So Are High Gas Prices Good or Bad?

As the global economy gets better, as we freeze federal leases, and as the Middle East heats up, will $5-a-gallon summer gas be good or bad? Suddenly the administration seems to think that high energy prices are bad and, in fact, that it has done a lot to lower them.

The Obama team’s various explanations for addressing skyrocketing gas prices so far seem threefold: It claims that by getting out of Iraq it is settling down the Mideast; it is reducing demand; and it is increasing production. All of these are either half-truths, or developments that are irrelevant to the presidency. And the fact that gas prices have doubled since January 2009 suggests that whatever the current Obama policy is, it has not worked — at least if lower gas prices were the aim.

Our departure from Iraq has had nothing to do with calming oil prices. When Obama entered office, Iraq was already quiet; the month we left, no U.S. soldiers were lost. As for Middle East oil, in 2002, the last year before the Iraq invasion, Iraq produced slightly over 2 million barrels per day; oil production exceeded that prewar figure already by 2007 after the success of the Petraeus surge. In 2011 (with thousands of troops still in Iraq), it hit a 3 million barrels average, with projections for even more this year. The Iranian mess, no doubt, has fostered speculation, but I will leave it to others to judge whether Obama’s policies toward Iran have created calm and reassurance in the Gulf region.

Here at home we have increased oil production despite, not because, of Obama’s policies — largely because of Dakota oil production, whose leases mostly predated the Obama administration and were largely on private land. To the extent the administration has had any influence on American production though the granting of new public leases, it has discouraged new efforts in the Gulf, off-shore, in Alaska, and in the west — and was quite proud that it had. Had the administration allowed drilling there — or at least begun three years ago giving incentives for drivers, especially of heavy trucks and equipment, to change over to natural gas — then we would now be far better off, given the huge new American supplies of natural gas. But again, under the tenets of man-made global warming, natural gas is considered a polluting fuel, since it produces heat.

Finally, gas demand is low by recent standards, not due to Obama’s policies, at least in the direct sense, but only because we remain in the worst economic doldrums since the Depression — curbing demand — while auto companies continue to improve engine efficiency.

Obviously putting American oil off-limits and blocking the Keystone pipeline hardly encourage Middle East producers to make up the slack by doing things that we will not. Nor can we blame the “oil men” in the White House. Under the old calumny, the Bush-Cheney oil connections led to supposed profiteering that got gas up to an average of $1.85 when Bush left office in January 2009; apparently that slur is now inoperative given that gas has roughly doubled under the wind-and-solar team.

Still, why is there an administration worry about soon-to-be $5 gas, given that such European levels are necessary to make Solyndra- and Volt-like projects economically viable?

When soon-to-be energy secretary Steven Chu declared to the Wall Street Journal that “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” and when a soon-to-be President Obama warned that under his agenda cutbacks on domestic coal production would mean “electricity rates would necessarily skyrocket,” the message was clear. The skyrocketing prices that we are now witnessing were once considered as a win-win situation: higher energy prices, less consumption, less global warming, more subsidized wind and solar, high-speed rail, and “millions of green jobs.”

So what’s the problem?


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