UK: Politicians can not control the cost of fuel

The Economist

The politics of the pump
A rhetorical blowout
America’s politicians cannot control the price of petrol—but they still try

THE last time the price of petrol (gasoline) was at its current level, Barack Obama observed in March, “you had all kinds of slogans and gimmicks and outraged politicians…The truth is, none of these gimmicks, none of these slogans made a bit of difference.” Yet as the petrol price again nears the fearsome threshold of $4 a gallon, America’s politicians, including Mr Obama, are at it again, resorting to exactly the same sort of theatrics, with equally meagre results.

The reflex is understandable. According to this week’s Economist/YouGov poll, 80% of Americans consider the increase in the price of petrol a very or somewhat serious problem. Fully 68% claimed to be driving less as a result; 43% said they were cutting back on other spending to pay for petrol. Some pundits reckon the re-election prospects of Mr Obama and many members of Congress hinge on the pump price, as much or more than they do on the unemployment rate. Mr Obama himself implied as much at a recent fund-raising dinner in California, when he said that rising prices were weighing down his approval rating.

No wonder, then, that the Republicans who run the House of Representatives have dusted off one of the slogans the president was complaining about: “Drill, baby, drill”. They claim, quite inaccurately, that the dollar-a-gallon rise in prices over the past year is somehow a result of the administration’s caution in approving drilling permits and opening new territory for exploration following the massive oil spill in the Gulf of Mexico last year. (The real culprits are the strong global growth rate and turmoil in the Middle East.) In an attempt to force the president’s hand, the House has passed a series of bills setting an accelerated timetable for new lease sales and speeding up the process of applying for drilling permits.

It is true, although hardly surprising, that the government is issuing permits to drill in deep water at a much slower pace than before the spill. It is also true that there is significant scope to expand America’s output of oil and natural gas: by the equivalent of 4m barrels of oil a day—roughly a fifth—by 2025, according to a study commissioned by the American Petroleum Institute, a lobby group. But America’s oil output is already growing, for the first time in decades, despite Mr Obama’s supposedly ruinous policies. Moreover, as API’s study suggests, it will take a decade or more of exploration and development to bring new offshore basins into production. Anyway, as Mr Obama keeps pointing out, even in the rosiest of scenarios, America will still be consuming far more oil than it produces (it currently produces 8m a day and uses 18m). Drilling, in short, is neither an immediate nor an adequate cure for America’s addiction to oil.

But the Democrats’ preferred remedies are even less effective. They propose stripping oil firms of various tax breaks—something that could not possibly lower the price of petrol, but might make angry motorists feel better nonetheless. Happily, the changes they have in mind are too inconsequential to deter much investment either, given the high price of oil, although they could dent spending on natural gas. Mr Obama, meanwhile, has set his sights on speculators, a habitual if elusive scapegoat, creating a special new task-force to hunt them down.

Yet as Paul Bledsoe of the Bipartisan Policy Centre, a think-tank, points out, the most effective step to protect Americans from rising petrol prices has already been taken. In 2007, as the oil price climbed towards its previous peak, Congress agreed to raise fuel-efficiency standards for cars for the first time in a generation. Last year the Obama administration tightened them further. By 2016 cars made in America should average 39 miles to the gallon, compared with 27.5 last year. That will save 1.8 billion barrels of oil, the government calculates, over the lifetime of the vehicles sold between now and then.

In September the administration will propose fuel-efficiency standards for the nine years from 2017. It is debating whether they should increase by 3% or 6% a year, which would translate into an average rating of 47 or 62 miles to the gallon by 2025. Mr Obama tends to talk more about flashier schemes to reduce America’s oil imports, from promoting electric and natural-gas-fuelled cars to developing high-tech new biofuels. But, mundane as it sounds, the best hope for America’s irate drivers is more of the same.


http://www.economist.com/node/18682298