What Makes Gasoline Prices Go Up?

Source: FELICITY BARRINGER • New York Times  • Posted: Thursday, March 8, 2012

The United States exported more petroleum products than it imported last year.

Energy Information Administration, Petroleum Supply MonthlyThe United States exported more petroleum products than it imported last year.

On the day after Super Tuesday, the federal Energy Information Administration came out with a striking fact: in 2011, the United States, for the first time since 1949, exported more petroleum products than it imported.

On the big primary voting day, the same agency delivered news that might be even more relevant to current campaign oratory: the rise in gasoline prices is expected to continue. Its short-term forecast seemed particularly bleak: “During the April through September summer driving season this year, prices are forecast to average about $3.92 per gallon with a peak monthly average price of $3.96 per gallon in May.”

The current average price for regular-grade gasoline is $3.74; the forecast could make $4 or $4.50 gasoline inevitable in places like California, where taxes are higher than in many other states. Some analysts have speculated that the price could hit $5 a gallon.

So where do Americans place the blame when gasoline prices go up?

In a recent Pew Research Center-Washington Post poll, they spread the blame, with 18 percent finding the Obama administration responsible, 14 percent blaming the oil companies, 11 percent feeling that unrest in the Middle East was the crux of the problem and 38 percent giving a variety of other explanations.

But among those who identified themselves as Republicans, one-third blamed the Obama administration. So have some leading Republican politicians, including the Senate minority leader, Mitch McConnell. “Over the past few weeks, the American people have begun to feel the painful effects of President Obama’s energy policy,” the Kentucky Republican said, adding, “Make no mistake: The rising price of gasoline isn’t simply the result of forces we can’t control.

As Exhibit A, proponents of this viewpoint cite the deferral of the permit needed for the Keystone XL pipeline to bring oil from Canada’s tar sands along its planned pathway through the United States to the Gulf Coast.

Environmentalists, who had pushed hard to block the pipeline, applauded the Obama administration’s recent refusal to approve one for now (although many expect it to do so after November elections). But Republicans like Representative Joe Barton of Texas blasted it. “We fought and won World War II in less time than it’s taken so far to evaluate this project,” he said.

Republicans also contend that regulatory hurdles are impeding increased drilling. Yet this hardly dovetails with Tuesday’s forecast from the Energy Information Administration. “The largest area of forecast non-OPEC growth will be North America, where production increases by 360,000 barrels a day and 190,000 barrels a day in 2012 and 2013, respectively, resulting from continued production growth from U.S. onshore shale formations and Canadian oil sands,” it said.

One Republican presidential candidate, Newt Gingrich, has promised that if elected, he would usher in an era of $2.50 gasoline. Another, Mitt Romney, told CNBC on Wednesday that the president could not be held directly responsible for rising gas prices but criticized Mr. Obama for keeping some areas, like the Arctic National Wildlife Refuge in Alaska, off limits to drilling. (Mr. Gingrich recently challenged Mr. Romney to a debate on gas prices. Mr. Romney’s camp said no way.)

President Obama, for his part, has said, “There are no quick fixes to this problem, and you know that we can’t just drill our way to lower gas prices.” He added, “If we’re going to take control of our energy future and avoid these gas price spikes down the line, then we need a sustained, all-of-the-above strategy that develops every available source of American energy — oil, gas, wind, solar, nuclear, biofuels and more.”

On Wednesday, Jeff Bingaman of New Mexico, the Democrat who heads the Senate Committee on Energy and Natural Resources, went further and set out to detail what influences oil and gasoline prices in a speech. The speech by Mr. Bingaman, who is not seeking re-election, was a reprise of one last year in which he defended President Obama on the gasoline-price front.

This time, he provided large graphics to illustrate points like:

Gasoline prices in Europe fluctuate in tandem with gasoline prices in the United States because both are based on global oil prices. “While domestic oil production plays an important role in the energy security and economy of our own country,” he said, “its contribution to the world oil balance is not sufficient to bring global oil prices down.”

Oil production increases in the United States outstripped those of all other major producers from 2008 to 2011.

The increases in production, both onshore and offshore, come after several years of decline in the mid-2000s.

And Senator Bingaman’s remedy for the rising gasoline prices? Use less oil.