Why Democrats Blame “Speculators” and “Subsidies” for High Gas Prices

by William Yeatman on May 17, 2011

in Blog, Features

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With gas prices hovering near $4/gallon, Democrats are trotting out fanciful “solutions” to temper the price of oil.

On Saturday, President rolled out a three-part plan to relieve Americans’ pain at the pump. The third part was the elimination of Big Oil “subsidies” (in fact, they are tax breaks, not subsidies). This doesn’t make any sense. The point of the tax breaks to Big Oil is to decrease the cost of production. That is, they make oil cheaper to extract. Removing these “subsidies” will in no way decrease the price of gas.

Meanwhile, Senate Democrats are blaming evil “speculators” for bidding up the price of oil. This is utter malarkey. The price of oil is dictated by a global market.  Ill-defined “speculators” are a straw man.

Removing Big Oil’s “subsidies” and prosecuting “speculators” are empty political gimmicks of the sort that the 2008 version of Obama campaigned against. (So much for “Change,” right?) I suspect that the President and Senate Democrats are relying on these bogus non-solutions because, otherwise, they’d have to acknowledge that the price of oil is a function of supply and demand. And if they concede that the market, and not “subsidies” or “speculators,” is to blame for high oil prices, then they’d also have to acknowledge that increasing supply would decrease the price. That is, they’d have to admit that “drill, baby, drill” works. Of course, they don’t want to do that, because doing so would upset their environmentalist base.

This is why I’m suspicious of the President’s apparent pro-drilling posture during his Saturday address. In addition to prosecuting “speculators” and removing Big Oil “subsidies,” President Obama promised to expand domestic production. Here’s what he said,

Second, we should increase safe and responsible oil production here at home.  Last year, America’s oil production reached its highest level since 2003*.  But I believe that we should expand oil production in America – even as we increase safety and environmental standards.

To do this, I am directing the Department of Interior to conduct annual lease sales in Alaska’s National Petroleum Reserve, while respecting sensitive areas, and to speed up the evaluation of oil and gas resources in the mid and south Atlantic.  We plan to lease new areas in the Gulf of Mexico as well, and work to create new incentives for industry to develop their unused leases both on and offshore.

*[The President is being disingenuous. Expanded oil production in America has been driven primarily by production from the huge Bakken Formation in North Dakota.  And this was made possible by the fact that the oil is underneath private land. Were the Bakken Formation on federal land, it would have been locked up by the Obama Administration.]

The absence of specifics in the President’s pro-production plan gives me pause. I’m not the only one who harbors this concern. The pro-drilling editorial board at the New Orleans Times Picayune is also waiting to see real action before it believes the President.

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