Posted: Thursday, March 15, 2012 11:00 AM
We weren't surprised when Energy Secretary Steven Chu told Congress last month that it wasn't the Obama administration's goal to reduce the cost of gasoline.
Even before he was appointed to his post, Chu said U.S. gas prices should be on par with the $8 to $10 per gallon paid by Europeans to spur greater fuel efficiency and conservation, while making alternatives more economical. Presidential candidate Barack Obama said much the same thing, and as president has not done anything to indicate he's changed his opinion.
While it's hard to argue with Chu's stated goal of wanting to end America's dependence on foreign oil, his statement was a bit politically tone deaf with the national average price of gasoline flirting with $4, and the price of diesel even higher. The president's recent assertion that oil is the "fuel of yesterday" also seems a bit out of touch with reality.
Petroleum drives the economy of the United States. It moves the majority of Americans from point A to B. It plows the fields, harvests the crops and moves the finished product to market. It powers the ships that carry international trade, and the trucks and trains that move goods domestically. And if there were shovel-ready jobs to be done, diesel would move the dirt, mix the concrete and set the steel into place.
Despite the recent run up, petroleum is still less expensive than any alternative fuel. It is abundant, and easily refined for a variety of uses. As enticing as alternative fuels may be, it will be years, if not decades, until any of these technologies can be perfected and an efficient distribution infrastructure can be put in place.
There isn't much a sitting president can do today to lower gas prices tomorrow. That isn't to say there aren't things that could be done over the course of a presidency that would make a difference over time.
* Oil production in the U.S. is at an eight-year high. But that increase has come from private lands as production on federal lands has fallen and the issuance of new permits and leases has all but ceased. Production would increase even more if the administration offered more federal leases and adopted rational permitting and environmental review policies.
* Oil is traded in dollars. When the dollar is weak, the price of oil increases. Budget deficits funded with borrowed money push down the dollar's value. The Federal Reserve's efforts to pump money into the economy devalues the currency. Conservative spending and monetary policies would make a difference in the price of oil.
* The president has proposed not allowing oil companies to take tax credits all manufacturers are allowed to take. Targeting oil companies for a tax increase won't reduce the cost of fuel.
Energy is not a zero-sum game. The government can and should encourage oil production and research and development of alternatives. But giving up on the former in favor of the latter is akin to economic suicide.