OPINION:
ANALYSIS/OPINION:
Gas at $2.50 a gallon. $2.25? $2.00? Maybe even $1.59? (FYI, that’s what gas was per gallon just before Barack Obama became president.)
Wonderful. CNBC on Tuesday wrote that the new lower gas prices across America will save the typical family $1,100 a year if (if) they stay low. That would amount to a $75 billion (with a “B”) tax cut, says Goldman Sachs (and they know billions).
Oil prices have plunged 34 percent since June to a five-year low; Texas crude traded at just $67 a barrel Tuesday, down from a $103 in late June. Nationwide, the average gallon of regular costs $2.82 (out here in the Virginia hills it’s just $2.39).
Filling up the old Jeep has gone from $60-$70 to only $30-$40. And just in time for Christmas!
But the Saudis don’t care about your Christmas. And the new lower prices aren’t a gift. OPEC (the Organization of the Petroleum Exporting Countries, which, sadly, does not include the United States) met after Thanksgiving and decided to keep up the big flow. The cartel of oil producers that includes Saudi Arabia, Iran, Iraq and Venezuela couldn’t agree on how to respond to lower prices and a sudden glut in the market, so it decided to nothing.
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Or so the reports said. OPEC is God; It sets the prices and everyone falls in line. But now there’s just too much oil. Why? Shale oil. U.S. oil producers are crushing it, pulling up more oil than they have in the last 30 years; U.S. crude oil production surpassed 9 million barrels per day in recent weeks (nearly half of the 18.8 million barrels Americans use daily). Next year, the Energy Information Administration forecasts output will average nearly 9.5 million bpd.
So then, if there’s more oil, why would OPEC continue to produce so much — too much? The answer is simple: If the OPEC countries can drive down the price per barrel, U.S. producers using fracking to draw oil out of shale rock will be hard-pressed to stay competitive.
“This is largely an effort to push U.S. independents out,” said one knowledgeable oil lobbyist. “They are less likely to sustain $60 barrel crude, whereas the Saudis can with their cash reserves. Its all about staying power over next two years. This is good for us as a purchaser of crude (and consumers writ large); it is not necessarily good for upstream producers as the cost of production in these shale plays is quiet significant. If prices continue to drop you could see rig counts come down and thus production of U.S. crude decrease.”
And therein is the real story behind the falling prices. Yes, lower prices per gallon feed the desperate U.S. economy ($1,100 a year is huge for most people), but what plays out long term? If OPEC can drive the price down so low it hurts (or eliminates) small U.S. shale producers, they’ll then come back — two years from now, three, four — and ramp the prices up big time, to $110 a barrel (or $130).
And this is — and has been — President Obama’s goal from the moment he took office.
Energy Secretary Steven Chu said as Mr. Obama took office, “Somehow, we have to figure out how to boost the price of gasoline to the levels in Europe.” That’s $9, $10 a gallon. The theory behind the goal is that rising gas prices will make green energy viable, even cost efficient.
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And no one in the Obama administration gives a damn what Americans pay for gas. They want prices high. That’s why they’ve proposed a new federal rule dubbed “the most expensive regulation ever.” The new rules on ozone, meant to drastically cut the amount of smog produced by power plants and factories, would wipe out $3.4 trillion in economic output and 2.9 million jobs by 2040, according to Politico.
Now, with lower gas and oil prices, talk is emerging that some in the administration want to raise the federal gas tax or impose a new tax on carbon dioxide (seriously) to bring in more cash (Democrats don’t want Americans to ever keep an extra penny). Gas prices will rise again, as they always do, but Americans will remain on the hook for the new taxes.
U.S. oil companies are producing more oil than ever — no thanks to Mr. Obama and Senate Democrats, who voted “no” on opening Arctic National Wildlife Reserve in Alaska and on permitting the Keystone XL pipeline, both of which would drive prices even lower. But more, increased U.S. production means Americans would no longer have to rely on OPEC and the nations that truly hate America.
But apparently, Mr. Obama doesn’t want that, either. Luckily, Republicans are taking over in January, and they rather enjoy letting Americans keep more of their own money.
• Joseph Curl covered the White House and politics for The Washington Times. He can be reached at josephcurl@gmail.com and on Twitter @josephcurl.
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