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Daniel J. Graeber

Daniel J. Graeber

Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

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Politics, Pandering and Petroleum Prices

Oil prices were up more than $1 per barrel by Friday after the IAEA proclaimed that Iran was ramping up its enrichment activity, continuing a rally that began more than a month ago. Lingering concerns over oil-rich Iran is in part the reason for the rally, which makes its way to the pocket books of consumers by way of higher gasoline prices. However, with campaign season in full swing in the United States ahead of the November presidential elections, it's likely the politicking and speculation are contributing to the energy woes.

The U.S. Energy Information Agency said the average price for a gallon of gasoline in the United States was around $3.65 as of Monday, an 8.8 percent increase since the start of the year. With the U.S. economy barely emerging from recession, and with the presidential campaign season in full swing, politicians on both sides of the aisle have seized the moment.

President Obama, during a campaign event in Miami, said there's no way to "drill our way to lower gas prices." His treasury secretary even said a case could be made that releasing oil from the Strategic Petroleum Reserve could calm some market jitters, just as it did last year during the height of the conflict in Libya.

On the other side of the aisle, Republican frontrunner Rick Santorum said, during a campaign event in battleground state Ohio, that "radical" environmental policies were to blame for high energy prices while the GOP-backed American Petroleum Institute said it feels the White House actually wants higher gasoline prices in order to back a renewable energy agenda.

Never mind the fact that the United States is actually a net gasoline exporter because of lower domestic demand. A contributing factor in the price of oil, and subsequently gasoline prices, is speculation, so in some ways it's all a self-fulfilling prophecy. It's talk of high oil prices that causes high oil prices. There are some who fear tensions with Iran could translate to $4 or even $5 for a gallon of gasoline in the U.S. market by the summer. So guess what happens? Gasoline prices go up. Even if Republicans got there way, it's unlikely any domestic drilling would cause a sudden precipitous drop in energy prices overnight. And the reason for that is because this largely isn't an issue about oil markets, domestic energy policies or concerns about the health of the European economy. No, this is about fear and anger, two very basic human emotions.

Bipartisan rancor does little to sway energy markets one way or the other. Those in power will say things that make their constituents fearful of change while those seeking power try to make people angry enough to challenge the status quo. That's true no matter what the topic. So when API's President Jack Gerard says "words are not leadership if not followed by the right actions," he may be reflecting a statement of truth more than he knows.

By. Daniel J. Graeber of Oilprice.com

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Leave a comment
  • anonymous on February 27 2012 said:
    Yes, we are an exporter of gasoline, but we import the crude to provide jobs to our citizens. Between that and the Fed & Administrations 3 decades old induced policy's producing hyper-inflation. Now more people have money around the world to buy oil and refine it into gasoline. It's simply supply and demand economics taking hold, with Ben adding to the economy to prevent deflation, and Nancy crowing about speculators, the scale never stays still. Which ever side is lower gets picked up, much like the squeaky wheel needing grease.
  • Earl Richards on February 27 2012 said:
    Iran will not close the Straits of Hormuz, because the closing would block the Iranian export trade, including oil shipments to China and Japan. Iran is not going to stangle itself. The closing of the Straits is a phony excuse being used by Big Oil, Wall Street and their media pundits to increase the price of oil.
  • Fred Banks on February 27 2012 said:
    Please Earl, no more of Big Oil and Wall Street. We've heard all of that before, and a good deal more than we need. Big oil is going to post the biggest profits they have ever seen later this year, and they will be so busy spending money and passing out bonuses that they will not have time to formulate excuses - phoney or otherwise.
  • John on February 27 2012 said:
    As anonymous said, the fact that we export gasoline means nothing as the oil we refine it from is imported. We're still buying the oil we need to refine to get the gasoline, and as oil prices soar so will the price of gasoline.

    The reason we're able to export gas currently is because we import oil for more things than just gasoline, and our need for other products leaves us excess gasoline after the refining process is complete. Plus gasoline usage is down in the U.S. because people can no longer afford it so they're looking for alternative methods of transportation or just cutting down on their driving. R.V.s will soon be a thing of the past the way things are going.

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