Wednesday, April 02, 2008

Gas prices and pander politics

In his bid to bond with blue-collar Pennsylvanians during the runup to the April 22 primary, Barack Obama engaged yesterday in some old-school substance-free politicking. He denounced the price of gasoline.

"Gas prices are killing folks," he said in hardscrabble Wilkes-Barre. "I got an email from a friend of mine. It says, 'just in case you're not living in the real world, being driven around by the Secret Service, it just cost me $85 to fill my tank.'" Obama continued, referring to the oil companies, "They have been in fat city for a long time. They are not necessarily putting that money into refinery capacity, which could potentially relieve some of the bottlenecks in our gasoline supply. And so that is something we have to go after. I think we can go after the windfall profits of some of these companies."

Politicians love to rail against high gas prices and Big Oil; it's easy rhetorical populism, a way to stand up for the little guy. And it's a potentially good tactic for Obama, who's trying chip away at Hillary Clinton's Pennsylvania lead by demonstrating that he's more than just a guy who wows the intelligentsia with pretty speeches; that, in fact, he also empathizes with the working stiff (especially the modest-income white male swing voter). And there's no faster route to the heart of the average Joe than a lament about pain at the pump - as he also demonstrates in a Pennsylvania TV ad.

But, dandy soundbites aside, it's basically a phony issue.

The last thing that presidential candidates want to tell voters is that, quite frankly, there is little they can actually do, once in office, to control (much less lower) the price of gas. There is an increasingly robust global market for oil these days, and America is merely one of the buyers - competing in particular with China and India, two nations with burgeoning economies and a billion people in each. With those nations driving up demand, and demonstrating an ability to pay, then the price of oil will naturally stay high. That's capitalism.

Americans like to think of themselves as Number One; woe to the politician who tries to truthfully explain the facts of life in the 21st century. Americans also believe in the right to drive their gas-guzzling SUVs; woe to the politician who tries to explain that voters themselves are actually part of the problem on the demand side. (John Zogby, the pollster, once told me a story: "My son and I went to a book party for Arianna Huffington. She waxed eloquent about the pitfalls of SUVs. everybody listened - and when we left, maybe 11 SUVs were parked outside, waiting to pick up guests. Point is, you can't call on Americans to sacrifice during a presidential campaign. That's a loser.")

Yet while demand in America and abroad has sharply increased, supply has not kept pace, for a host of reasons. Such as: OPEC, the 12-nation combine that produces roughly 40 percent of the world's oil, has barely increased its output since 1979. Ongoing civil unrest in Nigeria has hurt production there; Venezuela during the past several years has nationalized its oil fields, and its regime, which is hostile to American interests, has been routing oil to China - oil that was supposed to go to Exxon refineries in Louisiana.

But none of that makes for good campaign rhetoric. It's catchier for Obama to attack "windfall profits," as he did yesterday, or for politicians to charge Big Oil with "price gouging," as Republican politicians did several years ago. In fact, when gas prices rose in the aftermath of Hurricane Katrina, even President Bush asked the Federal Trade Commission to find out whether the oil companies were manipulating the market at the consumer's expense. The FTC found no such evidence. As one energy analyst drily noted in 2006, the companies weren't "price gouging"; rather, this analyst said, they were charging the highest price that the global market would accept - which is another definition of capitalism, at least in its more rapacious form.

Democrats also have a big blind spot on this issue. They'll get on the stump and call for cheaper gas prices, yet the laudable environmental measures that they champion are virtually guaranteed to drive the price higher. For instance, I remember a 45-cent spike at the pump in California five years ago, and the politicians yelled "price gouging" - while somehow overlooking the fact that the state had just enacted strict environmental rules that forced refineries to mix in two new low-pollution fuel blends. And two years ago, there was a national spike in gas prices - thanks in part to a new congressional law requiring that the oil refineries convert to cleaner fuel blends for the warmer weather, a process that slowed production and tightened supply.

Meanwhile, it's amusing these days to hear some Democrats still pine for Al Gore. Gore's whole pitch is that gas prices should be a lot higher, in order to wean more Americans from their cars; to reduce greenhouse gas emissions; to ease traffic congestion; to lower the pollution-related health risks and costs. He knows darn well that if he was ever to be a candidate again, there's no way he could say on the stump what he truly believes, not if he wants to win.

In fairness to Obama, he did call yesterday for the investment in new technologies, "so we can replace the internal combustion engine," but such a process, even if fully engaged, would require decades to complete. And many energy analysts believe that high gas prices are beneficial, because they would hasten the day when alternative fuel sources are economically viable.

That, too, is capitalism. But such talk won't work on the stump, and sure won't deliver Pennsylvania in this election cycle.


But speaking of Pennsylvania, congressman John Murtha did Hillary Clinton no favors yesterday when he declared that she would win the state primary by double digits. Murtha, who has endorsed Clinton, would have been far wiser to lowball the expectations for victory - particularly since the latest polls show that the contest is tightening. One new survey even puts Obama ahead.