High gas prices are not a president’s friend, especially in an election year, so it’s not surprising that President Barack Obama is trying his darndest to shift the blame for record-high fuel prices onto something other than his failed energy policies. Yesterday he made a desperate attempt to distract from those failures and redirect America’s gas price rage with a flawed proposal to punish speculators for supposedly driving up the cost of energy.
Speaking from the Rose Garden, the president announced a proposal to spend $52 million to fund increased government oversight of oil futures market trading in addition to harsher civil and criminal penalties for manipulation in energy markets. “We can’t afford a situation where some speculators can reap millions, while millions of American families get the short end of the stick,” Obama said. “That’s not the way the market should work.”
The implication, of course, is that evil Wall Street barons are the reason gas prices are so high, and that they’re walking away with millions at the expense of the rest of the country. (The president even went so far as to invoke Enron.) That simply isn’t the case, and even the president said that “none of these steps by themselves will bring gas prices down overnight” — a point that White House spokesman Jay Carney reiterated in a press conference later in the afternoon when he admitted “it’s hard to know” what the impact of the president’s proposal would be.
Heritage’s David Kreutzer explains that the president’s “the speculators did it” argument is flawed on several levels. If speculators are making unconscionable profits on energy, why are they only doing it occasionally and not all the time? Why are there only speculators in oil, not natural gas (whose current price is about half of what it averaged over the last decade)? And given how the petroleum market works — for every speculator who makes money on a trade, somebody else will lose money — the president’s theory “requires an endless string of chumps to take the other side of the speculators’ deals.” Finally, Kreutzer writes:
For speculation to drive up prices, the speculators must either cause oil production to slow down (which they haven’t) or to pull oil off the market. If the flow of petroleum and its products remains unchanged, the price at the pump will not change. If petroleum is pulled off the market, which can happen even though there are limits to what can be stored, it will eventually come back on the market.
The question becomes, ‘When the oil comes back on the market, is the price higher or lower than when it was pulled off the market?’ The price will only be higher if the amount supplied at that time is lower or the demand is higher. In either of those cases, speculators have helped moderate price fluctuations and will be rewarded with profits. If the price is lower, then the speculators did a bad thing and will be punished by losing money.
In short, the president’s theory that devious energy speculators are at work driving up the price of oil just doesn’t hold water. So what’s the point of all this? Action for the sake of action, in order to provide a distraction from his failed energy policies.
If the president truly wanted to lower gas prices, he would work to increase supply. But when given the opportunity, he just says “no.” He turned turned down the Keystone XL pipeline, which would bring up to 830,000 barrels of oil per day from Canada. His Administration has made it even harder for companies to explore and extract domestic energy resources by canceling, delaying, or withdrawing a number of lease sales for exploration and development. Meanwhile, huge swaths of federal lands have been put off limits for energy exploration.
The other energy policies he has pursued have either made energy prices higher or proven to be nothing more than abysmal wastes of taxpayer dollars. Take for example new EPA regulations that would effectively ban new coal power plants, thereby increasing the cost of your electricity, or new fuel efficiency standards for automobiles that could add $10,000 to the cost of a new car. Then there’s Obama’s green jobs stimulus, whose poster child of failure is none other than the bankrupt Solyndra solar company that took $540 million of taxpayer funds with it.
In yesterday’s press conference, Carney said, “The president had made clear that there is no silver bullet, there is no pixie dust, there are no magic beans that will — or a 3-point plan that will reduce the price of gas at the pump.” The president is hoping, though, that blaming speculators is all the magic he needs to convince the American people that his energy policies are not a total failure.