It seems like a noncontroversial statement to say that increasing the supply of a product will lower its price. But because of politics, that statement still elicits arguments and recriminations in Washington when the discussion is about oil or gas production. At a March 20, 2012 press conference, American Petroleum Institute President and CEO Jack Gerard stated the obvious, that increased oil and gas production domestically will relieve the price at the pump, and said that President Obama needs a “reality check” about the mixed signals his administration is giving to the market. The President’s comments about releasing oil from the Strategic Petroleum Reserve, and encouraging other countries, like Saudi Arabia, to step up production, proves that even the Obama administration understands that supply is a big factor in the high gas prices Americans are facing at the pump in the midst of the summer driving season. At the same time, the Obama administration is talking about raising taxes on gasoline, which sends the opposite message to the market and increases prices.
Mr. Gerard stressed in his press conference that voters understand that tax increases are not the solution to the high price of gas, and voters are overwhelmingly supportive of the oil and gas industry in America. He discussed the findings of an API Harris International poll that questioned 1,009 registered voters in early March. According to Mr. Gerard, 81 percent of those polled believed that more US oil and natural gas development would reduce gas prices. Another 84 percent thought it would help US energy security, and 90 percent of those polled think that more oil and gas development will lead to more American jobs.
Mr. Gerard explained his prescription: “A true all-of-the-above energy strategy would include greater access to areas that are currently off limits, a regulatory and permitting process that supported reasonable timelines for development, and immediate approval of the Keystone XL pipeline to bring more Canadian oil to US refineries. This would send a positive signal to the market and could help put downward pressure on prices.” As evidence of the impact of market signals and increased supply, he points to gas prices over $4 a gallon during President George W. Bush’s administration, and how lifting the moratorium on Gulf of Mexico drilling resulted in a dramatic drop in the price of oil, and therefore the price of gas, within days. He further asserted that the US has ample domestic energy reserves and can safely produce more oil and gas as the country needs it.
This issue is becoming more critical to Americans by the day. Business Week reported that the national average price for a gallon of gas is $3.97, which is an increase of almost 4 cents in just two weeks. These prices affect every American, and none of us can afford to be shelling out so much money unnecessarily.
For further reading on this subject, I urge you to look at the American Petroleum Institute’s new website, explaining to non-industry consumers the details about gas prices.
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