For those of you too young to remember, that’s the title of Firesign Theater‘s fourth album released in 1971. One of the founders of Firesign Theater, Peter Bergman, passed on recently.
While the album ponders man’s place in a world dominated by technology, I think it is also an appropriate description of the political theater surrounding gas prices.
First the facts, the price of gas has gone up $.26 over the past year. That’s around 7%. We’ve seen those sorts of price spikes before, but this time the rise was more rapid than it has been in recent past.
The Republicans, who have been frustrated with the improving economic picture, have seized on this issue to support their claim that the current administration’s policies are really hurting the economy rather than helping it.
The general theme that all of the Republican presidential candidates have used is that more domestic drilling will bring down the price of gas. Gingrich has gone so far as to promise to bring the price down to $2.50.
The truth is that this President HAS increased domestic oil production dramatically. The last time we produced this much domestic oil was 2003. As a result we are reducing our dependence on foreign oil, but the cost of crude on the open market has still gone up.
The other reality is that oil is a globally traded commodity. As a result, there is precious little any President can do to affect the price over the short term. In fact the current run up in price has little to do with supply and everything to do with speculation.
“What can you do to change the market in the short term? The answer is not much,” said James Bartis of the RAND Corporation, a nonprofit research group that provides independent policy analysis. “It takes many years to open up a new oil field, to prepare and get production from a new oilfield. Generally, I would say a decade is the minimum.”
So why are gas prices going up so quickly?
- Speculators are concerned about the rising tensions between Iran, Israel, and the United States. In particular, the most recent jump in prices started more or less the same time as Republican candidates began talking about how they wouldn’t hesitate to attack Iran if Iran continued to enrich uranium.
- The growth of the economies in India and China are driving up demand for cars and gas. Oil companies are expanding their production capabilities in these countries because they see the opportunity for growth. They are REDUCING their refining capacities in this country because demand for gas in this country is going down – 7% in the northeast since 2005. When demand goes down, refineries lose money. When refineries lose money, they close, as two did last year in Pennsylvania, another did last month in the USVI, and a huge Philadelphia refinery will in July if a buyer doesn’t step up. If this last refinery does close, gas will go up in the Northeast because it will have be transported from the Gulf or overseas. Huge new refineries in India are already delivering 40,000 gallons of gas a day to customers in the Northeast.
- It is increasingly expensive to extract crude oil because all of the “easy” oil has already been pumped. That means more risk, more spills, and more expense. Domestic or international doesn’t matter. There is no “cheap” oil left in the ground.
While it may not be convenient for the Republicans to accept, the reality is that our best long-term options are not going to come from drilling another hole in the ground. They are going to come from more efficient use of our current resources and development of alternative energy sources and transportation options to replace fossil fuels.
That is best done by everyone getting on the same page regarding the components of a thoughtful energy policy.
Unfortunately, the clowns that populate the current political landscape seem incapable of having that sort of conversation.