Every election season, the incumbent president has to start praying to the God’s of Oil that the oil prices don’t go up. If oil prices do go up, then the incumbent knows that the public may very well blame him for the pain that they feel at the pump. This election cycle is no different. Americans are paying higher oil prices than they were just a few months ago and the President’s approval ratings have been taking the hit.
But really, can Obama be blamed for people having to pay $4 a gallon to fill up their SUV’s? The U.S. is producing about as much oil as the nation can, in part due to the former President George W. Bush opening up more land for drilling by oil companies. The progressive website Think Progress notes that the number of drilling rigs in U.S. oil fields has quadrupled under Obama and domestic oil production hit an 8-year high in 2011. For the first time in 60 years, the U.S. is now a net fuel exporter. The U.S. only has about two percent of the world’s proven oil reserves, thus there is no way that the nation can drill its way to lower oil prices–America just doesn’t have enough oil to flood or dry up the world oil market.
Unsurprisingly, the Republicans are trying to use the spike in oil prices to their advantage (just as Obama did while he was running for President). Newt Gingrich claims that if he were to become President oil prices would go down to $2.50 a gallon. Obama’s is getting in the game of using the price of oil to affect voters too: Obama’s campaign is trying to portray Mitt Romney as more of a friend to the bigwigs who work at oil companies than to the average citizen.
Consumers have to realize that oil prices are set on the world market, not in the Oval Office or on the floors of Congress. The Organization of Petroleum Exporting Countries (OPEC) controls 79% of world crude oil reserves and 44% of the worldâ€™s crude oil production, affording them considerable control over the global market. OPEC can greatly affect the supply of oil by deciding how much oil they will or won’t produce for the world market.
Oil speculators are driving up the price of oil too. According to Bloomberg BusinessWeek: “Tensions over Iranâ€™s nuclear program have people spooked that a potential attack would disrupt the countryâ€™s 2.2 million barrels of daily oil exports. And so money has been pouring into oil futures contracts, driving up the price without any significant change in the underlying supply and demand fundamentals.”
South Sudan, another major oil producer, ceased oil production earlier this year after disputes with Sudan over oil revenues–South Sudan controls the oil production but Sudan has the oil refineries. The two nations have had frosty relations since South Sudan broke away from Sudan last year; border disputes between the two have yet to be fully resolved.
Clearly, there is much going on in the world today that is affecting oil prices–from the speculators driving the future cost of oil up, to the threat of open war between Sudan and South Sudan, to sanctions on Iran.
It is up the public to educate themselves about where the cost of oil comes from and how the cost of oil influences the price they see at the pump. Otherwise, gas prices will continue to be a wedge issue that is used to accumulate favor with voters instead of a good jumping off point to start a national discussion about how the U.S. can wean itself off the need to import oil.