Summary

When an improving economy and recent instability in the Middle East pushed gasoline prices up from artificial lows caused by the recession, conservatives conveniently attributed higher costs to President Obama’s policies. In reality, the president has little control over the price of oil, which is traded on a world market, and neither increased drilling nor the Keystone XL pipeline would have much of an impact on gas prices. Despite conservative rhetoric about the president’s supposed hostility to the oil and gas industries, domestic oil production is at its highest in nearly a decade; there are more rigs in operation than any time since 1985; and American crude oil exports are the highest they’ve ever been.

The Recession Pushed Oil And Gas Prices Artificially Low

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:

[EIA.gov, 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 Are Closely Correlated To Oil Prices. A chart from the St. Louis Federal Reserve shows the consumer price indices of wholesale oil and retail gasoline since 2006. The shaded area indicates the recent recession:

[StLouisFed.org, accessed 2/23/12]

Increase In Gas Prices Did Not Result From Administration’s Policies

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]

Gas Price Expert: Speculators Are Driving 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]

Economic Conservatives Have Conceded That President Obama Is Not Responsible For Rise In Gas Prices

Libertarian Cato Institute: “The Facts Say” Obama Is Not “Responsible For The Spiraling Price Of Gasoline.” From the Cato Institute: “Is President Obama responsible for the spiraling price of gasoline? Republicans say yes, but the facts say no. […] [D]espite the popular perception of President Obama as anti-oil, domestic oil production is increasing for the first time since the Johnson administration. Alas, little of this has to do with the president. Prices increased from $22 in 2002 to just under $100 a barrel average in 2008 and supply has responded. President Obama is no more responsible for production increases than other presidents were responsible for production declines. Unfortunately, presidents get blamed for world market changes that occur during their time in office… but generally, they do not cause them.” [Cato.org, 3/2/12]

GOP Economist Holtz-Eakin: 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 Union, 3/27/11]

Gas Prices Have Fallen In Recent Months

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]

More American Drilling Won’t Reduce Gasoline Prices Due To The Global Nature Of The Oil Market

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.” [EIA.gov, 3/17/11]

Opening ANWR To Drilling Would Lower Crude Oil Prices In The Year 2030 By “Perhaps About One Percent.” At a hearing of the House Committee on Natural Resources, Richard Newell, Administrator of the U.S. Energy Information Administration, testified: “Based on this timetable and the assumption that the largest ANWR fields would be the first to go into production, peak ANWR oil production could occur around 2030 at about 700,000 to 800,000 barrels per day. In this scenario, the greatest impact on crude oil prices could occur 9 around peak ANWR production with oil prices projected to be perhaps about one percent lower as a result.” [EIA.DOE.gov, 3/17/11]

Oil Price Expert: “This Drill Drill Drill Thing Is Tired.” From CNN: “The problem is this: While increased oil and gas drilling in the United States may create good-paying jobs, reduce reliance on foreign oil and lower the trade deficit, it will have hardly any impact on gas and oil prices. That’s because the amount of extra oil that could be produced from more drilling in this country is tiny compared to what the world consumes. Plus, any extra oil the country did produce would likely be quickly offset by a cut in OPEC production. ‘This drill drill drill thing is tired,’ said Tom Kloza, chief oil analyst at the Oil Price Information Service, which calculates gas prices for the motorist organization AAA. ‘It’s a simplistic way of looking for a solution that doesn’t exist.’” [CNN, 4/25/11]

2009 EIA Study On Offshore Drilling Found “Gas Prices Might Drop A Whopping 3 Cents A Gallon” From Increasing U.S. Offshore Production. From CNN: “According to a 2009 study from the government’s Energy Information Administration, opening up waters that are currently closed to drilling off the East Coast, West Coast and the west coast of Florida would yield an extra 500,000 barrels a day by 2030. The world currently consumes 89 million barrels a day, and by then would likely be using over 100 million barrels. After OPEC got done adjusting its production to reflect the increased American output, gas prices might drop a whopping 3 cents a gallon, the study said.” [CNN.com, 4/25/11]

Conservative AEI Scholar: No Matter How Much U.S. Drills, “We Probably Couldn’t Produce Enough To Affect The World Price Of Oil.” Ken Green, resident scholar with the conservative American Enterprise Institute, told the New York Times: “‘The world price is the world price,’ Green said. ‘Even if we were producing 100 percent of our oil,’ he said, if prices increase because of a shortage in China or India, ‘our price would go up to the same thing. We probably couldn’t produce enough to affect the world price of oil,’ Green added. ‘People don’t understand that.'” [New York Times, 1/4/11]

Increased Drilling Won’t End Need For Imports. From the Los Angeles Times: “More domestic drilling will not end the need for imports, however. The United States holds only 2% of the planet’s proven oil reserves, but Americans consume 25% of the world’s daily output of crude oil.” [Los Angeles Times, 3/12/12]

Keystone XL Pipeline Won’t Reduce Gas Prices Either – And Might Even Raise Them

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]

• Keystone XL Could Raise Pump Prices By 10-20 Cents Per Gallon In The Midwest. From a Cornell University Global Labor Institute study of KXL’s economic impacts: “According to TransCanada, KXL will increase the price of heavy crude oil in the Midwest by almost $2 to $4 billion annually, and escalating for several years.  It will do this by diverting major volumes of Tar Sands oil now supplying the Midwest refineries, so it can be sold at higher prices to the Gulf Coast and export markets. As a result, consumers in the Midwest could be paying 10 to 20 cents more per gallon for gasoline and diesel fuel, adding up to $5 billion to the annual US fuel bill.” [“Pipe Dreams? Jobs Gained, Jobs Lost By The Construction Of Keystone XL,” Cornell University Global Labor Institute, September 2011, internal citations removed]

Keystone XL Pipeline Wouldn’t Be Major Source Of Long-Term Jobs

While TransCanada Describes Keystone XL As A $7 Billion Investment In The U.S., Only $3-4 Billion Of That Will Actually Be Spent In American Economy. From a Cornell University Global Labor Institute study of KXL’s economic impacts: “These figures essentially mean that transCanada’s claim that KXL is a $7 billion stimulus to the US economy is misleading on three levels. First, $1.6 billion will be spent on the Canadian portion of the pipeline, drawing largely on Canadian material and labor inputs. Second, at least $1.8 billion of the $7 billion has already been spent, mostly on design, permitting, and material inputs. Third, in addition to the $1.8 billion already spent, another $1.3 billion of KXL costs has already been committed. These committed costs may be incurred regardless of whether the project is actually constructed. Therefore, we calculate that the actual spending relevant to the US economy, and the figure from which US new job creation projections should be calculated, is around $3 to $4 billion, not $7 billion.” [“Pipe Dreams? Jobs Gained, Jobs Lost By The Construction Of Keystone XL,” Cornell University Global Labor Institute, September 2011, internal citations removed]

• Remaining Keystone XL Spending Into U.S. Economy Would Create Fewer Than 25,000 Total Jobs Per Year For Two Or Three Years. From a Cornell University Global Labor Institute study of KXL’s economic impacts: “Fortunately, the job projections submitted by developers of other major pipeline projects provide a useful guide for estimating potential impacts for KXL. On this basis, for the purposes of estimating total employment impacts, it is reasonable to assume a multiplier of approximately 11 person-years per $1 million pipeline project capital costs. […] Given a multiplier of 11 person-years per $1 million, this translates into total employment impacts of 33,000 to 44,000 person-years. So a reasonable estimate of the total incremental US jobs from KXL construction is about one-third of the figure estimated in the Perryman study and used by industry to advocate for the construction of KXL. Moreover, any job impacts associated with KXL construction would be spread over 2 and more likely 3 years. So the annual impacts are at most about 22,000 person-years of employment per year, for two years. But the annual impacts could also be as low as 11,000 person-years per year, for three years.” [“Pipe Dreams? Jobs Gained, Jobs Lost By The Construction Of Keystone XL,” Cornell University Global Labor Institute, September 2011, internal citations removed]

Keystone XL Would Directly Create Fewer Than 5,000 Construction Jobs. From a Cornell University Global Labor Institute study of KXL’s economic impacts: “Based on jobs information provided by TransCanada for the FEIS, KXL US on-site construction and inspection creates only 5,060-9,250 person-years of employment (1 person-year = 1 person working full time for 1 year). This is equivalent to 2,500-4,650 jobs per year over two years. On-site construction labor thus accounts for only a small share (about 5-10%) of overall KXL US project costs. Stated another way, KXL US on-site employment is only about 1-2 person-years per $1 million project cost.” [“Pipe Dreams? Jobs Gained, Jobs Lost By The Construction Of Keystone XL,” Cornell University Global Labor Institute, September 2011, internal citations removed]

Half Of The Steel Pipe Necessary For KXL Has Already Been Purchased – From Russia And India. From a Cornell University Global Labor Institute study of KXL’s economic impacts: “In making a case for the thousands of manufacturing jobs offered by KXL, TransCanada provides the assurances that ‘approximately 75% of the pipe for the US portion of the proposed Project would be purchased from North American pipe manufacturing facilities and that regardless of the country of origin, it would purchase pipe only from qualified pipe suppliers and trading houses.’ However, there is strong evidence to suggest that almost half of the primary material input for KXL—steel pipe—will not even be produced in the United States. KXL will require over 800,000 tons of carbon steel pipe. TransCanada has contracted with an Indian multi-national company, the Mumbai-based Welspun Corp Limited, and a Russian company, Evraz, to manufacture steel pipe for KXL. […] Of this writing, TransCanada has not received the Presidential Permit that is required to construct the KXL pipeline, but has already signed contracts for almost 50% of the steel pipe for the project. The Russian company, Evraz, will manufacture about 40% of KXL pipe in its Camrose and Regina mills in Canada. This information is based on Evraz’s own contract announcements and their contracts with Bredero Shaw, the company coating the KXL pipes. The Indian company, Welspun, is likely to be manufacturing the rest of the pipe for the KXL project. To date, Welspun has manufactured and imported almost 10% of the pipe for KXL.” [“Pipe Dreams? Jobs Gained, Jobs Lost By The Construction Of Keystone XL,” Cornell University Global Labor Institute, September 2011, internal citations removed]

Although Firm Behind Keystone Proposal Has Repeatedly Raised Their Job Creation Estimates, State Dept. Estimates Just 20 Permanent Jobs Would Be Created. From Businessweek: “Clearly, the construction of the pipe, most of it below ground, will be a huge undertaking. The estimated number of people it will employ in the process, however, has fluctuated wildly, with TransCanada raising the number from 3,500, to 4,200, to 20,000 temporary positions and suggesting the line will employ several hundred on an on-going basis. The U.S. State Department, which made its own assessment because the pipeline crosses the U.S.-Canada border, estimates the line will create just 20 permanent jobs. One advantage of a pipeline, after all, is that it’s automated.” [Businessweek, 2/17/12]

Oil Production And Exports Have Increased Under Obama

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. [EIA.gov, 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]

2011 Domestic Oil Production Was Higher Than 2010 Production By 120,000 Barrels Per Day. From the Los Angeles Times: “U.S. crude oil production increased by an estimated 120,000 barrels a day last year over 2010, the report says. Current production, about 5.6 million barrels a day, is the highest since 2003.” [Los Angeles Times, 3/12/12]

On Average, The Number Of Rigs Operating Under Obama Exceeds The Number That Operated Under Bush. According to data from the Energy Information Administration, the average monthly number of crude oil and natural gas rigs in operation during President Obama’s term (January 2009-May 2012) is 1,559. The average number in operation during President George W. Bush’s term (January 2001-January 2009) was 1,362. [EIA.gov, 7/5/12]

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 April 2012, the latest data available, remained higher than at any point prior to the start of the Obama administration at 97,894,000 barrels. The following graph from the EIA depicts the monthly exports of U.S. exports of crude oil and petroleum products since 1981:

[EIA.gov, 7/30/12]

The Proportion Of Foreign Oil U.S. Uses Has Fallen Under Obama

America Uses A Smaller Proportion Of Foreign Oil Than At Any Time During The Bush Administration. The following New York Times graphic illustrates the percent oil consumed in the U.S. that is foreign oil:

[New York Times, 3/17/12]

Under Obama, American Imports Of Crude Oil Have Fallen. As the following graph from the Energy Information Administration indicates, U.S. imports of crude oil and other petroleum products has fallen since George W. Bush’s time in office.

[EIA.gov, 8/1/12]

Total And Net Imports Have Dropped Under Obama. From FactCheck.org: “In fact, the percentage of oil the U.S. imports — both total imports and net imports (after exports are subtracted) — have fallen each year under Obama. Total imports have dropped from 66.2 percent in 2008 to 60.3 percent in 2011, while net imports have declined from 57 percent in 2008 to 45.1 percent in 2011 — the lowest since 1995.” [FactCheck.org, 3/16/12]

High Spending On Foreign Oil Is Due To Rising Oil Prices Worldwide, Not Because We’re Buying More. From FactCheck.org: “The price of oil is set on the world markets and influenced by world events. For example, the U.S. buys no oil from Iran but world markets have pushed prices up in response to Iran’s threat ‘to close the Strait of Hormuz, through which passes some 35% of the world’s oil exports,’ as Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, wrote in a March 15 op-ed in the Wall Street Journal. Similarly, the U.S. buys very little oil from Libya (just one-half of 1 percent of all U.S. imports in 2010), yet gasoline prices here spiked when fighting broke out between government and opposition forces. So, the U.S. is spending more on foreign oil because the price of a barrel of oil is going up — not because the U.S. relies more on foreign oil.” [FactCheck.org, 3/16/12]