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Monday, February 20, 2012

Is Obama to Blame for $4 Gasoline?



Democrats, Republicans spin oil data in dispute over high gas prices. 

Summary 
From the non-patrician Annnenberg Public Policy Center


Conflicting, false and misleading statements on oil production and gasoline prices have become the currency of politicians lately, as oil tops $100 per barrel and gasoline hovers near $4 per gallon. Among some of the claims that got our attention:
  • Top Republicans blame President Obama’s moratorium on deepwater drilling for rising gasoline prices. The moratorium delayed drilling of some new wells, but did not affect the output of wells already in production. A projected drop in total domestic oil production this year should amount to six-tenths of 1 percent of all U.S. consumption of liquid fuels. A Wall Street oil analyst told us the moratorium has had “zero” effect on prices.
  • Obama said domestic oil production last year was its highest since 2003. That’s true — but U.S. oil production is projected to drop this year.
  • Rep. Kevin McCarthy said “under this administration our output has gone down 13 percent.” McCarthy is wrong — U.S. oil production was up in 2009 and 2010, and is projected to decline only 2 percent this year.
  • Sarah Palin said Obama is “allowing America to remain increasingly dependent on imports” from unstable countries. But there has been a decline — not an increase — in total oil imports from Middle Eastern and African countries, as well as countries identified by the State Department as “dangerous or unstable,” since Obama took office.

Analysis

It has become a familiar Republican refrain to blame rising gas prices on President Barack Obama and his policies — particularly his decision after the Gulf oil spill on April 20, 2010, to impose a moratorium on deepwater drilling. The administration immediately halted approval of new drilling permits and ordered a safety review that resulted in a May 27 announcement of a six-month drilling moratorium. The moratorium was lifted earlier than expected in October, but the administration has been slow to issue new deepwater permits — leading Mississippi Gov. Haley Barbour and other GOP critics to call it a “perma-torium.” The first permit was only issued Feb. 28.

The $4-Per-Gallon President?
On her Facebook page, Sarah Palin wrote a post March 15 headlined the “$4-Per-Gallon President.” In it, she blamed the president’s “anti-drilling” policies — his moratorium, proposed 2012 budget and regulatory policies — for driving down domestic oil production and causing “pain at the pump.” She said gas prices have gone up “67 percent since he took office,” claiming it is “no accident.”
Palin, March 15: The evidence of the President’s anti-drilling mentality and his culpability in the high gas prices hurting Americans is there for all to see.
On “Fox News Sunday” March 13, Sen. Mitch McConnell was asked if Obama is to blame for rising gas prices, and the Senate GOP leader responded that “he certainly participated” in raising gas prices. “This administration in the last two years has been shutting down wells,” he said.

A blog item posted March 16 on the website of House Speaker John Boehner blamed the president for higher gas prices. The post, which carried the headline “Higher Gas Prices & Thousands of Jobs Lost: The Impact of Obama’s De Facto Gulf Moratorium,” cited the congressional testimony of a Republican official, Louisiana’s secretary of natural resources Scott Angelle, who claimed that the administration’s moratorium and delays in issuing new permits raised gas prices 37 cents per gallon from May 26, 2010, (the day before the moratorium) until the end of 2010. (It is worth noting, however, that the price of gasoline had gone up $1 per gallon before the Gulf oil spill. A gallon of gasoline in the U.S. rose from $1.83 on Jan. 19, 2009, a day before Obama took office, to $2.83 on April 19, 2010, the day before the oil spill, EIA historical data shows.)

So, why have gasoline prices gone up and what impact have Obama’s policies had on oil production and gasoline prices?

We talked to Fadel Gheit, a former Mobil Oil executive who is now a senior energy analyst at Oppenheimer & Co. Asked about the impact of the deepwater moratorium, Gheit said the moratorium had a “negative impact on production, but not as much as the politicians would like us to believe.” The impact of the moratorium on gas prices? “Nothing. Zero,” he said.

Click on "read more" below to continue reading.



Moratorium Impact on the Gulf
The moratorium had no effect on wells already in production, according to Nicholas Pardi, a spokesman for the Bureau of Ocean Energy Management, Regulation and Enforcement. But it did affect drilling of new wells, and it’s important for new wells to start producing oil as the old wells experience a natural decline in production.

Department of Interior spokeswoman Eileen Angelico told us that 21 rigs were forced to suspend activity on exploratory or developmental wells. Gary Long, an engineer for the Energy Information Administration, estimated that each rig could produce three wells a year. Each deepwater well can produce an average of about 5,000 barrels a day, but ultra-deep wells can produce sometimes more than double that. How long does it take for a new well to produce oil? Long said it could take just three months — or as long as four years.

So, the moratorium had an impact on production. But how much?

First of all, U.S. oil production in the Gulf of Mexico last year was 1.64 million barrels per day — a record, despite the spill and moratorium. We confirmed that it was indeed a record year for Gulf oil production based on EIA data (since 1981) and Department of Interior data (dating to 1947), as provided by  EIA spokesman Jonathan Cogan. (Gheit credited improved technology and increased experience in deepwater drilling for the steady climb in Gulf production.)

This year, however, oil production is expected to decline in the Gulf.

In its latest monthly short-term energy report, the Energy Information Administration on March 8 projected that oil production in the Gulf will decline this year by 240,000 barrels per day. Doug Morris, who is part of the EIA team that estimates oil production for the monthly reports, said some of the expected decline in Gulf oil production is “definitely related to the moratorium” and regulatory changes. And, he added, “some of it’s due to natural decline.”

It’s important to note that even before the oil spill and the moratorium, the EIA projected in April 2010 that oil production in the Gulf would decline this year. Before the spill, the EIA expected the Gulf to produce 110,000 less barrels per day in 2011. As we said, it is now expected to decline by 240,000 barrels a day this year. The difference is 130,000 barrels per day.

But domestic production elsewhere will partially offset the decline in the Gulf. EIA estimates that the net result will be a decrease of about 110,000 barrels per day — which amounts to six-tenths of 1 percent of the total 19.30 million barrels per day that the U.S. is expected to consume this year. Gheit said such a relatively small decline “doesn’t even move the needle” on gas prices. He blamed global events — not the president’s policies — for rising gas prices.
Gheit, March 17: Only the naive will think that will have a direct impact. It doesn’t even move the needle. Is 100,000 barrels (a day) going to make a difference? It’s not. A cent or two per gallon? It might. But there are much bigger factors. It is like a perfect storm.
The “perfect storm,” he said, includes a series of refinery accidents, including an April 2, 2010, blast in Washington state that killed seven people; a labor strike in October 2010 that caused disruptions and closings of oil refineries in France; “operating problems” at refineries in Venezuela, Mexico and South America; and an increase in demand for oil because of the improving economy. Of course, there is the unrest in the Mideast — which has pushed oil prices above $100 per barrel.

“All in all, oil prices have been on the rise in the last six months — before the Middle East. It has been moving for more than a year now. Oil prices are inflated and will remain inflated for factors other than supply and demand,” Gheit said.

U.S. Oil Production: Up or Down?
While Republicans have criticized Obama’s energy policies, the president has touted — as he did in a March 11 press conference — that oil production rose last year.
Obama, March 11: Last year, American oil production reached its highest level since 2003. Let me repeat that. Our oil production reached its highest level in seven years. Oil production from federal waters in the Gulf of Mexico reached an all-time high.
Obama is right on both counts. EIA data (table 4a) shows that total domestic production of crude oil was 5.51 million barrels per day, including 1.64 million barrels per day from the Gulf of Mexico. Historical EIA data shows that the last time the U.S. produced that much total oil was in 2003, when it generated 5.68 million barrels per day. (We already addressed that 2010 was indeed a record year for the Gulf.)

So, why did Republican Rep. Kevin McCarthy of California say on CNN’s “State of the Union” that oil production has gone down?
McCarthy, March 13: You know, under this administration, our output has gone down 13 percent.
McCarthy is wrong. He undoubtedly meant to say that oil production in the Gulf is projected to go down 13 percent this year — which is how Sen. Jon Kyl correctly stated it later on the same program. But that figure represents a projection, not an actual decline, and overall decline in domestic production is expected to be 2 percent once you factor in a rise in domestic production elsewhere. It’s another example of selective use of figures to make a partisan point.

Gheit said the longer range “picture is not as grim” as some make it out to be. He pointed to the Bakken Shale deposit in North Dakota, which the EIA says produced 49.4 million barrels in 2009. Gheit said North Dakota could be producing 1 million barrels a day by 2014. “That would more than exceed any shortfall in the Gulf,” he said. (The Bakken isn’t the world’s largest oil reserve as claimed in a chain e-mail that has circulated for years, but it is helping U.S. production significantly.)

U.S. Oil Imports: Up or Down?
How much oil the U.S. imports also has been a source of confusion.

Earlier this month we wrote about seemingly conflicting comments made by Obama and McConnell.

The president said that imports declined last year to less than 50 percent of U.S. consumption, while the Kentucky senator warned that the U.S. imports 60 percent of our oil. McConnell was talking about total imports, while Obama was talking about net imports (total imports minus exports). Both can claim to be correct, but the EIA sides with Obama’s math when gauging U.S. dependency on foreign oil.

As you can see, it is easy to cite official numbers to support a partisan narrative.

Also on imports, Palin claimed in that same March 15 Facebook post that the administration’s inaction on drilling permits is “allowing America to remain increasingly dependent on imports from foreign regimes in dangerously unstable parts of the world.”

There is no question that the U.S. for a long time has relied on importing oil from dangerously unstable parts of the world. But has Obama allowed us to become “increasingly dependent”? No.
First of all, net imports are trending downward. Our reliance on imported liquid fuels — as the EIA calls oil and other petroleum products — declined to less than 50 percent of U.S. consumption in 2010. And, despite an expected uptick this and next year, it will decline through 2035. The EIA’s 2011 Annual Energy Outlook, released December 2010, projects our reliance on imported liquid fuels will drop to 42 percent by 2035.
EIA, December 2010: U.S. dependence on imported liquid fuels measured as a share of total U.S. liquid fuel use, which reached 60 percent in 2005 and 2006 before falling to 52 percent in 2009, is expected to continue declining over the projection period, to 42 percent in 2035.
Our reliance on imports from foreign countries — whether stable or unstable — is projected to trend down in the long-term, even though there may be ups and downs along the way.

Now, Palin did not specify which countries she meant when she wrote about “foreign regimes in dangerously unstable parts of the world.” The Middle East and Africa are unquestionably two “dangerously unstable parts of the world,” so let’s look at U.S. imports from those regions last year compared with 2008, President George W. Bush’s last year in office. (To do so, we looked at EIA data for U.S. imports — using the 2008 “annual-thousand barrels per day” figures and calculating a comparable figure using the 2010 monthly import data.)

EIA data shows the U.S. imported 2.3 million barrels a day from 13 countries in the Middle East in 2010 — down from 3 million barrels per day in 2008. They were: Algeria, Kuwait, Qatar, United Emirates, Libya, Egypt, Saudi Arabia, Iraq, Israel, Morocco, Oman, Syria and Tunisia. Likewise, the U.S. imported 1.6 million barrels per day from 11 countries in Africa — down from 1.7 million barrels in 2008. They were: Angola, Cameroon, Chad, Democratic Republic of the Congo, Equatorial Guinea, Gabon, Ghana, Liberia, Mauritania and Nigeria.

The percentage decline was steeper in the Middle East (24 percent) than it was in Africa, where it was just 8 percent.

However, the U.S. overall imported less oil in 2010 compared with 2008, because of increased domestic production and a weakened economy. The U.S. imported 11.75 million barrels per day in 2010, down from 12.91 million barrels per day in 2008, or roughly a 9 percent drop.

So, in order to properly judge whether we are “increasingly dependent” on imports from countries in these two regions, we have to look at the imports from the Middle East and Africa as a share of total U.S. imports. In that case, oil from African countries represented 14 percent of total U.S. imports in 2010 — about the same as it did in 2008. The share of oil from the Middle East, however, declined from 24 percent of U.S. imports in 2008 to 20 percent in 2010.

Overall, the two regions accounted for 37 percent of our imported oil in 2008 and 33 percent of our imported oil in 2010. So by this measure, Palin was wrong to say Obama was making the country “increasingly dependent on imports from foreign regimes in dangerously unstable parts of the world.”

Perhaps another way to judge our reliance on troubled countries is to look at the State Department’s list of “dangerous or unstable nations,” which recommends that Americans “avoid or consider the risk of travel to that country.” This isn’t the best method, because some countries do not have unstable governments but can be dangerous to tourists in some areas. Japan, for example, is on the list of “dangerous or unstable countries,” because of the recent earthquake and tsunami and subsequent damage to nuclear reactors.

Nevertheless, there were 34 countries listed when we checked on March 18, and the U.S. imported oil products from half of them in the last three years — including Mexico and Saudi Arabia, two of our major suppliers, according to EIA figures.

The U.S. imported about 5.4 million barrels of petroleum and other liquids per day from those 17 nations in 2008. That was about 42 percent of the 12.91 million barrels per day that the U.S. imported that year. And the U.S. imported about 4.8 million barrels of petroleum per day from those same countries in 2010, or 41 percent of the 11.75 million barrels of petroleum it imported each day last year.

So, going by the countries that the State Department considers to be “dangerous or unstable,” Palin would be wrong when looking at total imports since Obama became president. Individually, however, imports were up from some nations and down from others.

Six of the State Department’s “dangerous or unstable” countries are among our top 15 oil suppliers: Saudi Arabia, Mexico, Nigeria, Iraq, Algeria and Colombia. Four were down from 2008 (Algeria, Saudi Arabia, Iraq and Mexico) and two were up (Colombia and Nigeria).

The U.S. actually imports more petroleum from our northern neighbor, Canada, than it does from any other country. And Canada does not appear on the State Department’s list of “dangerous or unstable nations.” Nor do Venezuela, Russia, Angola, Brazil, the United Kingdom, Ecuador, the Virgin Islands or Kuwait, which are all in the top 15 countries from which the U.S. imports oil and other petroleum products.

– by Eugene Kiely and D’Angelo Gore, with Michael Morse and Lara Seligman
From the non-patrician Annnenberg Public Policy Center

Sources

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3 comments:

Anonymous said...

So, according to Gheit, since the moratorium has only affected the oil production and not the gas prices that leaves me with only 1 conclusion...... It is just to screw the public to that the gas stations can make money. I do not even remember life before gas was over $3.00 per gallon. And every time I go to get gas my father reminds me that when he was 17, he remembers when gas was %0.50 per gallon (whether or not that is true or not I have no idea).
Anyways.... Screwing the public... thats all it is...



Nicole Baxter COM 101-4080

Anonymous said...

Actually it has to do with trading futures, contracting base on futures, and the greed of the investors in oil. Whenever a small group controls how much money they can charge and make this is bound to happen. Gas prices are base on price per barrel of crude oil, with other factors. In other words how much will it cost to replace what comes out of the pump. Gas stations make very little money (gasolene companies make bank).

Clint Albright COM 101 4080 spring 2012 said...

This article was really interesting, its nice to read actual facts instead of all the verbal vomit that politicians say. In the article especially some of the statements from Sarah Palin had no actual facts. It just bewilders me that most of the Republican party just attacks Obama with little to no accurate information and just play the blame game. This article goes into good detail on how much oil is imported and exported with great information on whats really going on with the oil industry.