American Energy Alliance: “Nine Dollar Gas”

An ad from the American Energy Alliance (AEA) lambasts President Obama for gas prices that have “nearly doubled” since the start of his administration, but the ad’s claims rest on a series of distortions obscuring the fact that the president has little control over globally determined oil costs. Obama didn’t, as the ad claims, categorically write off Alaskan energy. A loan to a clean energy company has nothing to do with gas prices. Approving the Keystone pipeline wouldn’t bring energy prices down to pre-recession levels. Finally, Energy Secretary Steven Chu has recanted his 2008 statement about driving up gas costs, citing the recession and saying that “there are many, many reasons why we do not want the price of gasoline to go up.”

Gas Trends Show Obama Isn’t To Blame For Higher Prices

Gas Prices Collapsed During The Recession, And Began To Rise Again Just Before President Obama Took Office. Below is a chart of Energy Information Administration data on average pump prices for a gallon of gasoline since 2006:

[, accessed 2/23/12]

U.S. Gas Prices Have Followed The Same Trend As Global Gas Prices. The following graph from the New York Times illustrates the price per gallon of gasoline in the United States, Britain, Germany, and France between 1996 and October 2011:


[New York Times, 3/17/12]

Gas Prices May Fall Below $3 By Fall 2012. According to USA Today: “The darkening clouds of the slowing economy could provide a bright spot for consumers: gasoline at $3 a gallon — or less — by autumn. Nationally, regular gasoline averages $3.47 a gallon, down 47 cents from this year’s high in April and well below the $5-a-gallon fears fanned earlier this year by energy speculators, Middle East tensions and oil refinery glitches that crimped supplies. Those issues appear to be over, at least for now.” [USA Today, 6/21/12]

Domestic Policy Has Little Impact On Gas Prices

Gas Prices Are Determined By Global Markets. From the Wall Street Journal: “U.S. gasoline prices, like prices throughout the advanced economies, are determined by global market forces. It is hard to see how Mr. Obama’s policies can be blamed. […] When Mr. Obama was inaugurated, demand was weak due to the recession. But now it’s stronger, and thus the price is higher. What’s more, producing a lot of oil doesn’t lower the price of gasoline in your country. According to the U.S. Energy Information Administration, Germans over the past three years have paid an average of $2.64 a gallon (excluding taxes), while Americans paid $2.69, even though the U.S. produced 5.4 million barrels of oil per day while Germany produced just 28,000.” [Wall Street Journal, 3/10/12]

Energy Information Administration Head: “Globally Integrated Nature Of The World Oil Market” And Influence Of OPEC Means That Domestic Oil Drilling “Not Have A Large Impact On Prices.” At a hearing of the House Committee on Natural Resources, Richard Newell, Administrator of the U.S. Energy Information Administration, testified: “Long term, we do not project additional volumes of oil that could flow from greater access to oil resources on Federal lands to have a large impact on prices given the globally integrated nature of the world oil market and the more significant long-term compared to short-term responsiveness of oil demand and supply to price movements. Given the increasing importance of OPEC supply in the global oil supply-demand balance, another key issue is how OPEC production would respond to any increase in non-OPEC supply, potentially offsetting any direct price effect.” [, 3/17/11]

Gas Price Expert: Speculators Are Driving Current Rise In Gas Prices. From Businessweek: “Strangely, the current run-up in prices comes despite sinking demand in the U.S. ‘Petrol demand is as low as it’s been since April 1997,’ says Tom Kloza, chief oil analyst for the Oil Price Information Service. ‘People are properly puzzled by the fact that we’re using less gas than we have in years, yet we’re paying more.’ Kloza believes much of the increase is due to speculative money that’s flowed into gasoline futures contracts since the beginning of the year, mostly from hedge funds and large money managers. ‘We’ve seen about $11 billion of speculative money come in on the long side of gas futures,’ he says. ‘Each of the last three weeks we’ve seen a record net long position being taken.’” [Businessweek, 2/14/12]

GOP Economist Holtz-Eakin In 2011: Rising Gas Prices Were “Inevitable” Component Of Recovery From “Massive Global Recession.” On CNN’s State of the Union in March 2011, Republican economist and former Congressional Budget Office director Douglas Holtz-Eakin said: “I think there are three lessons on the oil and gas front. Lesson number one is we have oil at $140 a barrel in 2008. And it went down not because we somehow discovered a lot more oil. No, it went down because we went into a massive global recession. As economies recovered, it was inevitable that prices were going to rise. And this was utterly foreseeable. Second piece is that Libya’s not really the concern. That’s not what markets are pricing. It’s the broader Middle East. Libya is 2% of oil supplies. That’s not our problem. It’s what happens in the rest of the Middle East. And the third is, something like this is always going to happen. There is always some piece of bad news out there. So, the key should be to build an economy that’s growing more robustly, it’s more resilient to bad news that inevitably will happen.” [State of the Union3/27/11]

AEA Misrepresents Obama’s Stance On Drilling In Alaska

The Administration Has Supported Drilling Exploration In Alaska As Long As It’s Not In ANWR. From a USA Today analysis of AEA’s ad: “The AEA says part of the problem is Obama’s opposition to exploration in Alaska. Obama said he would not pursue drilling in the Alaska National Wildlife Refuge after the GOP-led House passed a bill last month that would lift a ban on drilling there. Obama has backed oil exploration elsewhere in Alaska. In November, the Obama administration proposed 15 potential lease sales, including three off the coast of Alaska. Last month, the Department of Interior approved Shell’s oil spill response plan for drilling in the Chukchi Sea.” [USA Today, 3/29/12]

Solyndra Loan Approval Process Started During The Bush Administration

In 2006, Under The Bush Administration, Solyndra And 15 Other Applicants Were Selected To Submit Full Applications. From testimony of Jonathan Silver, executive director of the Department of Energy’s Loan Programs Office, before the House Energy and Commerce Subcommittee on Oversight and Investigations: “The 2006 solicitation resulted in 143 submissions. The loan program staff and others at the department reviewed those for eligibility, which is a thinner review than the full due diligence, and recommended 16 applications to file a full application. A dozen did so. Solyndra was one of those. And the department conducted due diligence on all of those 11.” [Jonathan Silver Testimony via Nexis, 9/14/11]

Under The Obama Administration, The Loan Proceeded Along The Same Timeline Laid Out Under The Bush Administration. From testimony of Jonathan Silver, executive director of the Department of Energy’s Loan Programs Office, before the House Energy and Commerce Subcommittee on Oversight and Investigations: “After the Obama Administration took office, the loan programs’ staff, and their advisors, continued their comprehensive review of the transaction and, in March 2009, on the exact timeline that had been developed during the Bush Administration, the program issued Solyndra a conditional commitment for a $535 million loan guarantee. Subsequently, in September 2009, following several more months of rigorous and comprehensive due diligence and documentation by the loan programs’ staff and external advisors, and the raising of almost $200 million of additional private investment by the company, the transaction reached financial close and DOE formally issued its loan guarantee.” [Jonathan Silver testimony, 9/14/11]

The Program That Backed The Solyndra Loan Was Designed To Take Some Losses

The Loan Guarantee Program Was Structured To Withstand – Even Expect – Some Defaults. From a blog post by Michael Mendelsohn, a Senior Financial Analyst at the Department of Energy’s National Renewable Energy Laboratory: “Importantly, the DOE Loan Guarantee program was never expected to be risk-free, but rather was designed to support a portfolio of promising energy technologies that, when combined, represent a manageable level of risk. Chadbourne’s Hansen argues that, ‘if the Loan Guarantee program has no defaults, it’s simply not taking on the risk it was designed to.  The overall risk of the portfolio is the critical metric, and for that, given the DOE’s conservative assessment of the projects, the credit subsidy costs provided under ARRA should provide the taxpayer plenty of insurance.’” [, 12/28/11]

Solyndra Was “Barely 1%” Of DOE’s Clean Energy Portfolio. From Time’s Swampland blog: “Nobody’s going to care that all successful loan programs have failures, that the Solyndra venture was barely 1% of the Energy Department’s $40 billion clean-energy portfolio, that there will still be over $2 billion in reserves for busted loans no matter how Solyndra shakes out.” [Time’s Swampland, 9/14/11]

Congress Set Aside $10 Billion For Losses. From Businessweek: “Congress set aside $10 billion in the clean-energy and auto loan programs for possible losses, and the Energy Department had initially anticipated as much as $5 billion in losses, [White House Spokesman Eric] Schultz said in an e-mail.” [Businessweek, 2/13/12]

The Keystone Pipeline Wouldn’t Do Much To Reduce Gas Prices

Amount Of Oil Provided To U.S. Markets By Keystone XL Would Save Consumers Just 3 Cents Per Gallon. From Businessweek: “The gas price argument rests on the bump in supply the Keystone XL will bring to market. Keystone XL would deliver around 830,000 barrels a day. Not all of that would be used in the U.S., however: The pipeline delivers to a tariff-free zone, so there’s a financial incentive to export at least some of this oil. This is especially true because area refineries are primed to produce diesel, for which there’s less stateside demand. But let’s say two-thirds of the capacity—half a million barrels a day—of Keystone oil stays in the U.S. That’s a convenient estimate on which to gauge the impact of Keystone oil, because it’s the supply increase the U.S. Energy Information Administration, which provides independent data on energy markets, expected in a recent study of the expiration of offshore drilling bans. In 2008, it studied what 500,000 barrels more per day would save consumers at the pump: 3¢ a gallon.” [Businessweek, 2/17/12]

TransCanada Itself Says Keystone XL Would Raise Gas Prices For Midwestern U.S. From an op-ed by journalist and environmental activist Bill McKibben in The Hill: “But in the case of the Keystone pipeline, it turns out there’s a special twist. At the moment, there’s an oversupply of tarsands crude in the Midwest, which has depressed gas prices there. If the pipeline gets built so that crude can easily be sent overseas, that excess will immediately disappear and gas prices for 15 states across the middle of the country will suddenly rise. Says who? Says the companies trying to build the thing. Transcanada Pipeline’s rationale for investors, and their testimony to Canadian officials, included precisely this point: removing the ‘oversupply’ and the resulting ‘price discount’ would raise their returns by $2 to $4 billion a year.” [McKibben Op-Ed, The Hill, 2/21/12]

Chu Recanted His Gas Price Comments – Which Never Aligned With Obama’s Position

Chu Has Recanted His 2008 Comment About Boosting Gas Prices To European Levels. From USA Today: “Energy secretary has withdrawn a 2008 statement that Republicans have used ever since to bash the administration over high gas prices. The statement: ‘Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.’ During a Senate hearing yesterday, Chu said, ‘I no longer share that view,’ because of the fragile state of the economy.” [USA Today, 3/14/12]

  • Chu: “There Are Many, Many Reasons Why We Do Not Want The Price Of Gasoline To Go Up.” From USA Today: “After yesterday’s Senate hearing, Chu himself said: ‘There is a real hardship that Americans are suffering at the gasoline pump. The recovery is fragile. Another spike in gasoline prices could put that recovery at jeopardy. So there are many, many reasons why we do not want the price of gasoline to go up.’” [USA Today, 3/14/12]

Chu’s Original Comment Was About Increasing Prices Over 15 Years To Encourage Energy Efficiency – Not About Rapid Cost Increases. From the Wall Street Journal article in which Chu was originally quoted: “Mr. Chu has called for gradually ramping up gasoline taxes over 15 years to coax consumers into buying more-efficient cars and living in neighborhoods closer to work. ‘Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,’ Mr. Chu, who directs the Lawrence Berkeley National Laboratory in California, said in an interview with The Wall Street Journal in September.” [Wall Street Journal, 12/12/08]

Obama Has Consistently Opposed Raising Gas Taxes. From a USA Today analysis of AEA’s ad: “Chu called for a gradual increase in prices over 15 years. But even before he took office, Obama rejected the idea of increasing the federal gas tax, citing the burden it would put on families. At a news conference this month, Obama noted, ‘No president going into re-election wants gas prices to go up higher.’ He said, ‘I want gas prices lower because I meet folks every day who have to drive a long way to get to work, and them filling up this gas tank gets more and more painful.’” [USA Today, 3/29/12]

“Failing Energy Policies”? Under Obama, U.S. Oil Production And Exports Are Up

U.S. Crude Oil Production Is At Its Highest In A Decade. According to the Energy Information Administration, U.S. field production of crude oil in May 2012 (the latest data available) was 194,227,000 barrels, and it has been over 180 million barrels per month in every month since October 2011. Prior to October 2011, the last time monthly oil production was over 180 million barrels was in March 2003. [, 7/30/12]

Domestic Liquid Fuel Production Is Higher Than At Any Point During The Bush Administration. The following New York Times graphic illustrates the amount of crude oil and other liquid fuels produced during the Bush administration and the Obama administration, in millions of barrels per day:


[New York Times, 3/17/12]

Under Obama, Oil Exports Are At Their Highest Ever. According to data from the U.S. Energy Information Administration (EIA), 110,028,000 barrels of oil were exported from the U.S. in December 2011, the highest number the EIA has in its records. Exports in May 2012, the latest data available, remained higher than at any point prior to the start of the Obama administration at 98,999,000 barrels. The following graph from the EIA depicts the monthly exports of U.S. exports of crude oil and petroleum products since 1981:


[, 7/30/12]

[NARRATOR:] Since Obama became president, gas prices have nearly doubled. Obama opposed exploring for energy in Alaska. He gave millions of tax dollars to Solyndra, which then went bankrupt. And he blocked the Keystone pipeline so we will all pay more at the pump. Obama’s energy secretary said we need to, quote, “boost the price of gasoline to the levels in Europe.” That’s nine dollars a gallon. But what does he care? [ENERGY SECRETARY STEVEN CHU:] “I don’t own a car at the moment.” [NARRATOR:] Tell Obama we can’t afford his failing energy policies. [American Energy Alliance via, 3/27/12]