Gasoline prices in America are on the rise as a result of the civil unrest in the Arab world.
But Middle East turmoil alone does not explain why oil prices have risen sharply in recent months — nor why they will likely continue to. President Barack Obama’s energy policy must be taken into account.
Unhelpful policies
The widely reported spike in the price of oil that has come about as a result of the ongoing anti-government protests in Libya and Bahrain has not affected American domestic oil prices yet.
Gasoline prices have skyrocketed during the past two years. When Barack Obama took office, the average price of a gallon of gas was $1.83. Today, that average is $3.14.
The administration has yet failed to introduce a cap-and-trade scheme for energy companies that would limit their carbon dioxide emissions as is currently the case in Europe
In an effort to reduce America’s dependence on hydrocarbons, the president has planned large public investments in renewable energies in his budget, however, and crippled domestic oil exploration in the wake of the Deepwater Horizon oil spill in the Gulf of Mexico last summer.
After lifting a moratorium on deepwater drilling last October — which was struck down in court as “arbitrary and capricious” — the president’s Bureau of Ocean Energy Management, Regulation and Enforcement has not approved a single permit for future drilling in the Gulf. More than a hundred permits are awaiting review.
The president has also reversed an earlier decision to open access to coastal waters for exploration, instead placing a seven year ban on drilling in the Atlantic and Pacific coasts and eastern Gulf of Mexico.
The Heritage Foundation, a conservative think tank based in Washington DC, has estimated that a full ban on offshore drilling could cost the American economy some $5.5 trillion between now and 2035. The country would have to spend nearly $737 billion instead to import oil.
Untapped reserves
Meanwhile, there are vast reserves of oil and natural gas waiting to be exploited underneath the Atlantic coastline, beneath the northern coast of Alaska, and on land, in Colorado and Wyoming. Combined, these regions hold over two hundred billion barrels of oil and 2,000 trillion cubic feet of natural gas that are recoverable with today’s technology. If fully developed, it would be enough to free America from the import of foreign oil for almost fifty years.
Yet, according to the president, “drilling alone cannot come close to meeting [America’s] long-term energy needs.”
Both Obama and his energy secretary have called for more investment in clean energies instead, yet these account for but a fraction of the total American energy supply. The bulk of clean energy is provided by hydrogen and biomass while nuclear plants provide more energy than all renewables combined. Solar and wind are still largely unprofitable.
Currently ethanol accounts more than 40 percent of American corn consumption which provides less than 10 percent of transportation fuel — and causes food prices to rise. Three sizable production platforms in the Gulf of Mexico could provide an amount equivalent to all of the biofuels produced in the United States.
Affront
The administration’s clean energy effort is an affront to oil and natural gas producers.
The Democratic leader in the Senate still support plans to fine energy companies if they exceed a cap on production while the president’s energy secretary believes the government had to “boost the price of gasoline to the levels in Europe” in order promote alternative energy investment.
If the administration continues its restrictive drilling policy, that is just a matter of time.