Tags: jacob | wolinsky | us | economy | gasoline | gas | obama

We Need Energy Reform Not Obama’s Short-term Tricks

Thursday, 10 Mar 2011 06:58 AM

By Jacob Wolinsky

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The price of gasoline has recently risen dramatically, averaging close to $3.50 a gallon. In some parts of the country, the price is closer to $4.00 a gallon.

The average price of regular gas in most parts of the country was closer to $1.60 a gallon in December 2008, according to Weekly U.S. Regular Conventional Retail Gasoline Prices data.

This rise in gasoline is really taking a bite out of consumer’s wallets.

When average Americans see such soaring prices, it scares them into spending less.

According to Chris Lafakis, an economist at Moody’s, “every 1 cent per gallon increase in the average gasoline price over the course of the year will translate into $1 billion in extra expenses for consumers.”

Using this math, Americans are now paying close to $200 billion a year extra for gas versus two years ago.

The price of oil is almost completely correlated with the price of gasoline. Oil is now close to $107 a barrel.

What are the reasons behind the rise in gas prices? One of the obvious answers is the turmoil in the Middle East.

Although Libya exports a small percentage of the world’s oil supply, Libya has light, sweet crude, which is the finest type of oil. However, the real concern in the oil markets is the spread of unrest to Saudi Arabia, which holds the world’s largest oil reserves.

However, the media is ignoring some of the other reasons that might be keeping oil prices high. It would be political suicide for President Barack Obama to announce it publically, but I think he wants higher gas prices. His reasoning resonates with a lot of environmentalists: make gas expensive and people will turn to alternate energy sources.

This isn’t a conspiracy theory. In a 2008 response to a question about whether higher gas prices are good, Obama answered, “I think that I would have preferred a gradual adjustment.”

Steven Chu, now Obama’s energy secretary, in December 2008 stated that "somehow we have to figure out how to boost the price of gasoline to the levels in Europe (which run in the $7 to $9 a gallon range)."

While, there is near unanimous support for producing more of our own energy, Obama’s policies are dangerous.

Obama’s new proposal is to fix the problem with releasing more oil from the Strategic Petroleum Reserve (SPR).

This is a Band-Aid and not a permanent fix to the problem. Obama simply wants to lower gas prices in the short term to forestall a massive voter backlash.

This proposal is also very dangerous and naïve. The SPR only contains 34 days’ worth of oil to supply America’s energy needs.

Additionally, the SPR is meant for national emergencies like a potential massive conflict in the Middle East, which looks increasingly likely.

The SPR was created in 1975 after the Arab oil embargo of 1973-1974. With some of the biggest oil producers experiencing possible huge civil unrest this would be the worse time of all to tap into the SPR.

There are now large protests being called for Friday, March 11, in Saudi Arabia, which holds the world’s largest oil reserves. If oil supplies were cut off from Saudi Arabia it would have a massive effect on oil supply and prices. This is a time we should be adding to the SPR, not tapping into it.

The SPR is not meant to be used for political reasons to appease votes.

We need real energy reform, not dangerous political tactics to appease voters.

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