Why Romney is Lying about the Causes of high Prices at the Pump

After his wins on Tuesday, Mitt Romney is clearly the Republican standard bearer in the 2012 election, and he is already flailing about attempting to find some mud to throw at President Obama in hopes some of it will stick. He has trotted out a tired talking point attempting to blame Obama for high gasoline prices, saying that the president’s environmentalism has gotten in the way of US drilling. The charge is full of factual and logical holes.

But the attack of Romney2 on Obama is undermined by the positions taken by Romney1. In 2006, Romney opposed temporarily suspending gasoline taxes because of a spike in the price of petroleum, asserting, “high gasoline prices are probably here to stay.” Then in his 2010 book, “No Apology,” he actually saw rising gasoline prices as a good thing: “Higher energy prices would encourage energy efficiency across the full array of American businesses and citizens … It would provide industries of all kinds with a predictable outlook for energy costs, allowing them to confidently invest in growth.”

Romney had it right the first time. Oil prices are a matter of supply and demand, and Romney only wants to talk about supply. The US imports 8.7 million barrels of petroleum per day (the world produces roughly 87 million barrels a day). If you wanted to put down its price, you could begin by slashing imports by not wasting so much gasoline. If we moved more things by train instead of by trucks; if we gave more tax breaks for buying hybrids and electric vehicles; if we did more to encourage wind and solar energy and integrated it with electric vehicles; if we lowered the speed limits; if we held Detroit’s feet to the fire and required much higher gasoline efficiency much sooner, if we set policies that encouraged people to live in cities near their work– if we did all that we’d put down the price of petroleum. We only have 4% of the world’s population and we use about a fifth of the world’s petroleum, and that is one of the problems.

Of course, the upward pressure on prices is coming mainly from increased use of petroleum by China and India, where large numbers of people have forsaken bicycles and discovered the joys of urban gridlock. Prices jumped the other day on good news about China growing a little faster this year than had earlier been forecast. When China grows, the price of petroleum goes up. So to get firm downward pressure on pricing you’d need China and India and Europe to stop wasting so much gasoline, too.

We can’t affect the supply part of the equation. The United States just doesn’t have many petroleum reserves by world standards, and drilling in nature reserves and off pristine beaches is not going to produce enough fuel to lower world prices. We’ve already increased our production of petroleum and liquid fuels by about a million barrels a day since Obama has been president, and Obama isn’t doing anything to stand in the way of that kind of thing.

And, there are currently some international issues affecting supply:

1. the boycotts on Iran (which Romney supports, in fact he wants more! The more you boycott Iran’s oil, the more you put up the price of petroleum; hint: you’ve reduced supply). Talk of war also raises gasoline prices because the futures markets get nervous.

2. Declining production from old fields. China’s domestic production is down 200,000 barrels a day this spring because an old field is being worked out. China’s good economy is also roaring along, so that Chinese demand was up about 18% in February.

3. Political instability and quarrels. The Kurds in northern Iraq say they will stop pumping oil until the central Iraqi government gives them the share of profits it had promised. Syria used to produce 400,000 barrels a day and is now not doing much because of the upheaval there. South Sudan has shut down production as part of its quarrel with Sudan, through which it pipes its oil, over how much Khartoum skims off.

Romney doesn’t have a magic wand to address these issues, and most of his policies would make things worse (he’d pursue heightened tensions with Iran, would oppose green energy and more efficient use of fuel, etc.)

So why is Romney flipflopping and lying about the president and gasoline prices?

Petroleum companies, oil services companies, and pipeline companies, which can collectively be called Big Oil, spend millions on lobbying politicians in Washington. Some 90% of their contributions go to Republicans. As the likely incoming leader of the Republican Party, Mitt Romney is eager to attract more Big Oil campaign money (the industry liked Rick Perry slightly better) and to support a major constituency of his party.

That constituency is a coddled one.

The Center for American Progress points out, US taxpayers give the 5 biggest oil companies $4 billion a year in tax breaks, even though they made nearly $140 billion in profits last year:

“High oil and gasoline prices in 2011 enabled the big five companies to rake in $137 billion in profits last year. These enormous earnings contributed to the $1 trillion in profits they earned from 2001 through 2011. Despite a profit figure with 12 zeroes—count them: $1,000,000,000,000—these oil giants are major players in the lobbying efforts to retain $4 billion in annual tax breaks for oil and gas companies that they clearly do not need. In the scheme of all things Big Oil, these tax breaks are small, particularly in relation to their profits and in light of the fact that in 2011 these companies also had a combined $58 billion in cash reserves, nearly 30 times more than they received in special tax breaks.”

So Romney wants a political narrative that casts the oil companies as heroic victims. Why, they could supply us with cheap gasoline if only mean Obama didn’t interfere so much with their attempts to drill in Santa Monica beach and in nature reserves.

But they can’t, and Obama isn’t. And besides, Romney already praised the high prices as a good impetus for greater private sector efficiency. Is that cold comfort to the middle class vacationers this summer paying an arm and a leg at the pump? Yup, but Romney is going to provide the middle classes with so much cold comfort this summer that they won’t need air conditioning.

12 Responses

  1. Professor Cole,

    You are most certainly right about almost everything. However, China and India are far more efficient in their use of petroleum than the US. Very small cars and very high mileage. A gallon goes much further over there. As for declining oil production there has also been substantial declines in the North Sea, both the UK and Norway, and the Alaskan North Slope and Mexican production. World petroleum production has stagnated for 5 years in spite of high prices even when NGL’s are added in. Russian production has leveled off at about 10 million barrels a day after growing by 4 million barrels a day over the last 10-15 years. Saudi production also seems topped out at about 10 million barrels a day. If either Russian or Saudi output goes into decline it is likely that world production will have seen its peak. We will be scraping around for very expensive, hard-to-get, and very dirty oil. While these resources may last some time in ever diminishing quantities, the price will be very high!

    • “China and India are far more efficient in their use of petroleum than the US.”

      How true. China’s per capita oil consumption is about one tenth that of the US, and India’s is about one twentieth. I think framing oil consumption in terms of nation state vs nation state creates a political tension that can only lead to unproductive adversarial relationships.

      And, in our current culture, adversarial relationships seem to be the prime political currency.

  2. And none of this matters.

    There are many, many people desperately looking for any sort of excuse or rationalization to “Stop Obama.” That is the beginning and the end of it.

    To be fair, on the other side there is a population that will support him, regardless. The question becomes which group is going to be better mobilized.

    Amongst Obama’s 2008 supporters we can perceive an understandable disenchantment, liable to lead to nonchalance this fall (at best). Amongst Romney’s supporters I perceive a simple hatred that is empowered primally. Assuming they would otherwise offset each other, which group is more liable to get out their vote?

    In 2008 there was huge energy for Obama, with the dream of change and the undeniable presence of a fresh burst of breathtaking competence, coming on the heels of Bush. That had to compete against an energetic old man with old and disproven ideas.

    Amongst the bigots down at the corner cafe there was a concern about Obama, but there was also a certain smugness….”he will never be elected (it’s unimaginably), and if he is, just watch things him fail. After all, he just a…” This was, of course, all unspoken, since we are all so much more enlightened these days, and better educated on what is OK to say out loud, rather than with a eye-roll. (It will take a couple generations to get past the reality that segregation did not end (and even this is arguable) until the 1960’s.)

    The etch-a-sketch gaff was as on-target as Obama’s remark about the rural hardscrabble clinging to their guns and religion. Combine that with the electoral college and how the election will be decided by the electoral college in a relative handful of battleground states, and Obama has very real grounds for concern.

    ADD TO THIS, the idea that a second term is practically a referendum and I’d be very, very concerned. At this point you have supporters who have lost their enthusiasm and opponents who, as a matter of self-image, could now simply not STAND to see Obama’s presidency essentially endorsed as adequate, (if not successful).

    Oh yes….be very afraid.

  3. With a dwindling middle class there are likely to be less vacationers, as people struggle to keep their homes and food on the table. The parents of the fifties, coming out of the World War II, maybe the first and last generation to live their lives out in a retirement they could count on – that is if they worked for one of the big companies. Before that grandma and grandpa went to live with family, and often moved from one family member to another.

    The children of the fifties and sixties are seeing they need to work into old age. With pensions lost in companies they worked for, or cut back to the point they are not survivable to live on. Heaven help their children and grandchildren.

    Outside of Romney trying to find some mud to stick on Obama one needs to realize, Obama is a big boy with a war chest of his own to lob back stones and mud at Romney. It is the average Joe and Joettee who have to fear Mr. Romney, for them they have little resources to protect themselves from Romney.

    Romney wants pensions to be privatized and social security. As normal, American’s have kept steadfastly kept their blinders on, and are not playing attention to what is going on in Japan after Japan deregulated their pensions. Billions and billions of pension dollars have been lost to investment companies through fraud by investment firms.

    Like Romney’s firms, they took to using off shore accounts to hide pension assets from the aging and elderly investor, leaving millions and millions of Japanese seniors facing retirement age with little funds to support themselves.

    Romney being the vulture investment capitalist, can see the billions he and his associates will make off of American seniors. In America fleecing the nation’s people does not carry the same loss of face as it does in Japan when one is caught in corruption. Like Romney’s buddy’s did with the Delphi bankruptcy making millions and millions of dollars off the workers who lost their jobs and retirement benefits.

    As, far as oil – well, the Romney’s are not coming clean. When oil prices rise the Romney family rakes in millions of dollars more dollars through their oil investments. No, Romney’s are not being honest. Obama has a war chest and people to fight for him; it is the average American who is getting suckered into Romney that one should be worried about.

    Romney is counting on Americans brains being the size of a apple seed and not remembering Mitts various changes in stand, or to follow the actual words he speaks. Romney expects Americans to remember only one phrase “Anyone but Obama”, as they vote Mittens into office. Romney who has no respect for women, child or man that is outside his elite circle.

    Romney is arrogant, emotionally removed, a man who believes in brutal tortures, expanding and heaping war on helpless people, and a man who is a clear and present danger.

  4. Dear Professor Cole,

    As a Canadian I followed the primaries and watched the republican candidates. As much as they are trying to look different from each others, they all sound phony, greedy and with a not so well hidden agenda to serve the interests of their contributors. Most likely the contributions come from big oil, military industrial complex and financial. It is hard to believe that the average voters does not see any of that.

    Of course Romney is lying about prices of oil and a lot of other things, like all the other candidates. Without the lobbying, most of the measures you mentioned would have been in place long time ago. The oil and gas industry certainly does not need tax breaks.

    Monica

    PS: Love the site

  5. Obama just declared that, basically, sanctions against Iran will not really affect the oil prices. So, as usual, he does not have principal disagreements with the GOP! Rather, republicans are ahead of him, and he defends some old GOP policy: link to nytimes.com

  6. Excuse me — you’re shocked, shocked to find dishonesty and inconsistency from W.M. Romney?

    Dealing with his lies and hypocrisy is like sweeping the beach. This is a man who can contradict himself in the same paragraph without even blinking.

  7. shouldn’t the oil that remains, which has uses, be treated as a precious resource?

    conserved? It is a very useful substance, for things other than burning in cars.

    And the really unlimited, and harmlessly harnessed resource that we have, the sunlight that arrives 24 hours a day, around the world, can supply our energy.

    and it’s hard to imagine going to war, to get control of sunlight.

  8. Watch what happens to speculator controlled oil market prices if Obama walks back his sanctions and war threats against Iran.
    Pump prices will go down as they went up when he imposed sanctions and war threats.

    For obvious reasons, Obamatons just make fun of the Repubs
    nonsense but refuse to acknowledge Prof Cole’s factor #1 after “and..”

  9. The remarkable thing about all this, plus the Big Oil-financed ad campaign pimping GOP drill-baby-drill, is that it only works if conservatives are completely ignorant about how markets work. Consider the implications the next time you’re tempted to debate a conservative based on his support for free enterprise.

    It’s never been about free markets; it’s never been about less government; it’s always been about nostalgia for a Golden Age of tribal monopoly of power. Any conservative will gladly accept state-rigged markets (Reagan’s deal with the Saudi king to crush oil prices in ’86 to bankrupt the USSR), or vast and tyrannical power in the hands of armed militias like the KKK and Mississippi Citizens’ Council or local church-run censorship boards. What matters is not principle but outcomes, exactly what they accuse the Left of doing. Except they want radically and eternally unequal outcomes. The debate must clear away all ruses like “separate but equal” and “equality of opportunity” and focus on conservative movement ties leading to the true authorities of the far right, monsters like R. J. Rushdoony and the sovereign citizens and neo-Confederate movement who openly proclaim the goal of a wildly unequal society. Annoy them, provoke them, expose them in front of cameras. Get them to admit that they will never tolerate an America of successful minorities with values comparable to middle-class people in the rest of the First World.

    These are the people Romney must make happy, however much it pains him. Make him pay for that, relentlessly, or those people will eventually enslave our country while we were standing around minding our own business. They literally have nothing better to do with their lives.

  10. The Jerusalem Post reported on Wednesday.

    “We are trying to reach an agreement with the US that will spread out over a number of years,” a senior Israeli official said, referring to the additional funds that the US allocates to Israel’s missile systems such as the Arrow, which destroys ballistic missiles, and the Iron Dome, which intercepts short-range rockets.

    According to Israeli officials, the negotiations on the new funding are expected to be concluded within the coming months.

    The US already grants Israel about USD 3 billion in military assistance annually under a 10-year memorandum of understanding signed in 2007.

    Israel’s new request seeks about USD 1 billion in aid from the US to purchase four additional Iron Dome batteries and to fund the development of David’s Sling, another missile system, which is built against medium-range rockets.

    Another Israeli official said that the discussions were being held ‘despite the budget problems that the Americans are having.’

    According to a report published by the Congressional Research Service, Washington has given more than USD 67 billion in military aid to Israel over the years. This year alone, Washington has allotted USD 3.1 billion, around one-fifth of its military budget, to Tel Aviv.

    Americans also allow the Israeli Army to use their emergency reserve arsenal in Israel. The value of the weapons held in the emergency supplies is USD 1.2 billion.

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