10 Ways Obama Could Reduce Gasoline Prices Now

Obama: No magic bullet to lower gas prices

WASHINGTON — President Barack Obama says there is no easy answer to the problem of rising energy prices, dismissing Republican plans to address the problem as little more than gimmicks.

“We know there’s no silver bullet that will bring down gas prices or reduce our dependence on foreign oil overnight,” Obama said Saturday in his weekly radio and Internet address.  …

Obama said Republicans have one answer to the oil pinch: Drill.

“You know that’s not a plan, especially since we’re already drilling,” Obama said, echoing his remarks earlier in the week. “It’s a bumper sticker.”

Speaking of bumper stickers, remember “Yes We Can”, Mr. President? No one understands the concept better than the oil and gas industry. The main thing holding domestic energy companies back from making a stronger commitment to future domestic supplies is uncertainty. Capital hates uncertainty, avoids it like the plague. Your rhetoric may appease your doctrinaire base, but it makes domestic energy producers hold back, fearful that you will punish their success, or that you will change the rules on them in the middle of the game.

Erasing uncertainty is the #1 thing you can do as a national leader if you truly desire to lower gasoline prices. Not only could it change the psychology of energy investing, there is still time for companies to change their 2012 investment plans.

Below the fold is my humble 10-point plan: Things President Obama could (but won’t) do to reduce domestic gasoline prices by November 2012.

1.  Commit to a strategic goal of North American energy security. That includes reasonable and responsible domestic drilling. That includes taking the lead on the Keystone XL Pipeline; we could find a way to make it happen while addressing the legitimate environmental concerns of Nebraskans. It includes a commitment to maintaining the Trans-Alaska Pipeline System and opening ANWR.
2.  Ditch the anti-industry, anti-capitalist rhetoric. It is not the President’s or the government’s place to decide when an industry’s profitability is “high enough”. High oil company profits fund more drilling; more drilling means more future supply and lower prices. Besides, American oil companies are not owned by a cabal of wealthy executives, but by America’s pension funds, mutual funds and private investment accounts. “They” are “us”.
3.  Stop targeting the oil industry for punitive tax treatment. States such as Texas and Louisiana have production tax abatement programs that have successfully encouraged new drilling. If you don’t believe that the threat of increased taxes discourages drilling, just ask Governor Perry or Governor Jindal.
4.  Realize that Uncle Sam is in the energy business and is a partner in industry’s success. Oil and gas royalties are the federal government’s #2 source of revenue, after the income tax. Offshore slowdowns hurt not only industry and jobs, but government revenue.
5.  Recognize that industry does not need to be led by government; industry needs to be unleashed and encouraged to innovate. The resurgence of the domestic energy sector was rooted in the private sector, not matter how much President Obama and Dr. Chu would like to take credit for it. The growth in North Dakota, Pennsylvania and Texas happened in spite of the federal government, not because of it.
6.  Trust that no oil operator wants to be the “next BP”. The BP spill cost that company something on the order of $40 billion. Industry safety and environmental commitment is motivated more out of self-interest and less out of fear of the government. When it comes to federal regulation, the nation would be better served by Sheriff Taylor, not Barney Fife.
7.  Return offshore permitting to the pre-Macondo pace.  Your overreaction to the BP Spill has cost on the order of 500,000 barrels per day of domestic oil production from the Gulf of Mexico. The ridiculous “Worst Case Discharge” calculation as a routine part of offshore permitting is engineering malpractice, in my humble opinion. The professional staff of the Bureau of Safety and Environmental Enforcement is capable of reasoned regulation, but they currently operate in fear of their political masters.
8.  Declare hydraulic fracturing & well design to be the regulatory domain of the states, not the EPA. Geology and environment vary widely; Pennsylvania is not Louisiana is not North Dakota is not California. It is insanity to think that one broadly-applied set of rules can be applied to regulate industry without suffocating development.
9.  Rescind the recently-enacted royalty rate increase for new onshore Federal oil and gas leases. Secretary Salazar’s stated rationale for increasing the government’s take by a whopping 50% – from 12.5% to 18.75% of gross production – was to equate onshore royalties with the offshore royalty rate. That makes no sense. Higher royalties mean less drilling, poorer economics of production and premature abandonment of wells. Besides, an IHS-CERA Study recently showed that the federal government’s total take of offshore cash flows makes the Gulf of Mexico the second-most punitive fiscal regime in the world, after Hugo Chavez’s Venezuela. [Update: In keeping with the First Rule of Holes, rolling back the royalty rate increase may be the first thing the government should do if it is serious about reducing energy prices. – Ed.]
10. Encourage development of a nationwide distribution system of natural gas as a transportation fuel. Natural gas is clean, abundant and nearly 100% domestic. Its potential as a transportation fuel has scarcely been tapped.

Bonus #11: Get real about the promise of alternative fuels. Recently you said“You’ve got a bunch of algae out there; If we can figure out how to make energy out of that, we’ll be doing alright.” Maybe so, but I will stick my neck out and say it ain’t gonna happen, at least not in my lifetime, not on a scale that will impact pump prices.

Cross-posted at RedState.com.

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19 Responses to 10 Ways Obama Could Reduce Gasoline Prices Now

  1. Garyett says:

    Obama is horrible. I’d rather vote for Newt.

  2. Pingback: Angry about gas prices? So was someone ELSE (when he was trying to get elected in 2008) « A TowDog

  3. Pingback: Angry about gas prices? So was someone ELSE (when he was trying to get elected in 2008) | Sago

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  5. Dr. Ray says:

    You forgot signing an executive order eliminating the production of regional/state/seasonal boutique blends of gasoline. One formulation across the country during a national emergency.

  6. Jake_in_Louisiana says:

    Excellent job here steve!

    I just found you linked from the Washington Examiner and I will be back. Too bad it’s so late, because I want to look around.

    I love straight honest talk about the petroleum industry. Over the past several days I’ve been getting my fill of liberal alchemists telling me that supply and demand, production costs, and regulatory burdens have little or nothing to do with our current oil crisis. This was refreshing.

    And put me down for a “ditto” on Dr. Ray’s comment above about eliminating boutique fuels.

    I’ll be back.

  7. Joe from Chicago says:

    I agree Dr. Ray. Let’s have a more refineries and fewer gasoline blends.

  8. Jared says:

    mentioning on ANWR – unless you’d allow the oil company to up and crush your place of living without giving you time or notice to relocate I don’t think we should open the ANWR – that is of course I’d open it with a heavy heart if we opened up a whole new wildlife refuge the same size, same geographics (by this I mean we don’t open up a new refuge on a winter wastleland compared to their last winter forest refuge), with the allotted time of 3 years so whatever we were doing there had time to disappear and revert to natural land), and the land not used from the current ANWR were left alone to still be wildlife refuge. Pretty much I don’t want the animals moving from the white house to the ghetto (of land).

    The rest of those, eh, I don’t see any realism behind them, more like a macho front/great speech with nothing behind it.

    • Steve Maley says:

      ANWR is pretty much a featureless coastal plain the size of South Carolina. Oil drilling might impact 2000 acres (~ 3 square miles) of that. I don’t mind asking the caribou to give up their view. The same types of issues were raised to stop the Trans-Alaska Pipeline. I’m glad your side lost that argument. Even the caribou are probably glad.

      The rest of those, eh, I don’t see any realism behind them, more like a macho front/great speech with nothing behind it.

      Well, there’s nothing I respect more than a reasoned argument. Since you “don’t see any realism in them”, I guess we may all as well go home.

  9. Robert says:

    Would love for his holiness to tell me how you will gather this moss. You can’t put a drill rig so far out it can’t be seen, yet he thinks that FL will open their arms to trawlers going up and down the coast 50 feet out to harvest the moss?
    Algea doesn’t grow out in deep water, it likes warm shallows. How do you get around the nuts who claim the manetee will be harmed by the propellers as they cruise the beaches.

    We could do more to lesson our dependence if he just makes his wife fly with his ignorant *ss, and cancell his 5 days a week all over the country golf outings.

  10. Jesse says:

    I found your blog while I was trying to find some information regarding the amount of revenue the government takes from oil and gas royalties. I like what I see and am now a follower. If you know how much revenue they are getting I wish you would post it…

    • Steve Maley says:

      Historically, offshore leases were 16.67% to the Feds, and 12.5% in Deepwater. All new leases are now 18.75% royalty.

      On federal lands inland, the royalty rate has been 12.5% forever, only recently changed to 18.75%.

  11. Pingback: Obama, Energy Promises, and Empty Rhetoric | Maley's Energy Blog

  12. Robert says:

    Ground the airlines for a three day weekend like bush did. That caused a massive drop in price.
    A long week for the european flights. Remember how much it dropped when they grounded their planes during that volcano.
    Since bush did it, obama could also do it.

  13. rblee says:

    Millions of people per year die from pollutants placed in the air from fossil fuel use. This includes huge amounts of radiation from coal. There is no such thing as “clean coal” (or gas or oil). I’m sure the energy companies don’t figure the cost of dealing with all this illness and death into their bottom lines, just as they ignored safety at Upper Big Branch, Macondo, etc. Then, there’s global warming which will make large tracts of now dry land on the planet uninhabitable without aqualungs and swim fins. And, here we are arguing about how to bring the price of gas down a dollar or two. Obama at least has some vision about overcoming this real threat to humanity–unlike (failed, except for Bin Laden money in Arbusto) oilman W. Bush and the “drill, baby, drill” loonies.

  14. Pingback: If you voted for Obama, here’s the “Mandate” you got in return. Happy about it? Want more? Why? « A TowDog

  15. Pingback: If you voted for Obama, here’s the “Mandate” you got in return. Happy about it? Want more? Why? | Sago

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