Obama blames gasoline price rise on Mideast, China, speculators

23 February 2012 20:13  [Source: ICIS news]

WASHINGTON (ICIS)--President Barack Obama on Thursday said that the US cannot drill its way out of an energy crisis and blamed rising gasoline prices on Middle Eastern turmoil, Wall Street speculators and high demand from developing nations such as China.

Speaking in Miami, Florida, Obama also said that recent increases in domestic US oil and natural gas production are the result of his administration’s “all of the above” energy policies.

But a leading US energy industry official responded that the Obama administration is taking credit for energy gains enabled by earlier Bush administration policies and that the current administration has impeded oil and gas exploration and development.

In a major energy policy address at the University of Miami, Obama said that “under my administration, America is producing more oil today than at any time in the last eight years”.

“We’ve opened millions of acres for oil and gas exploration [and] all told, we plan to make available more than 75% of our potential offshore oil and gas resources,” he said.

“So we’re focused on production,” Obama said, adding: “But that’s not enough. The amount of oil we drill at home doesn’t set the price of gas on its own.”

He said the principal driving forces for accelerating US gasoline prices – now at around $3.50/gal compared with $3.15 a year ago and under $2.00 when Obama took office – are instability in the Middle East, high demand from China and oil speculators on Wall Street.

Obama renewed his call for an end to what he termed $4bn (€3bn) in federal subsidies for domestic oil and gas companies in favour of taxpayer support for renewable and alternative energy projects.

However, American Petroleum Institute (API) president Jack Gerard challenged Obama’s energy policy claims, charging that his administration’s energy statements are out of sync with his actual policies.

“The administration suggests that its policies are already increasing oil production,” Gerard said, “but this couldn’t be farther from the truth.”

“The administration is restricting where oil and natural gas development may occur, leasing less often, shortening lease terms, going slow on permit approvals and increasing or threatening to increase industry’s development costs through higher taxes, higher royalty rates, higher minimum lease bids and more regulations,” Gerard said.

He said that the White House and the Interior Department “are keeping 85% of our offshore areas off limits”, in contrast to Obama’s claim that he is opening 75% of US outer continental shelf (OCS) regions to development.

“The 75% figure is deceiving because it includes only areas that have already been explored,” Gerard said, and “excludes the entire Atlantic Coast, the entire Pacific Coast and nearly all of the eastern Gulf of Mexico.”

Gerard said that while domestic US oil and gas production have increased since Obama took office in January 2009, those gains are in spite of Obama administration policies.

US oil production is up today because of development on private and state lands, over which the federal government has no control,” he said. “Oil production on federal lands is flat, and oil production on federally controlled offshore areas is down by 22% in 2011.”

Gerard also said that federally controlled oil and gas leasing in the Rocky Mountains region of the US west is down by 70% under the Obama administration, and he also cited the White House rejection of the Keystone XL pipeline and increasing federal regulation on hydraulic fracturing as examples of the administration’s anti-energy policies.

He also rejected Obama’s claims that the private energy sector receives federal subsidies, arguing that “there is not a single targeted tax credit in the Internal Revenue Code available [only] to the oil and natural gas industry”.

“The industry is allowed to take deductions to recover costs off doing business, which has been allowed to all businesses since the inception of our country’s income tax system,” Gerard added.

The increasing price of gasoline and broader energy issues are fast becoming a major focus of the US national elections that will be held in November.

($1 = €0.76)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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