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Republicans Show Inability to Understand Arithmetic in Energy Policy Debate

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Monday, 16 April 2012 04:45

That would have been a reasonable headline for a Washington Post article that told readers that Republicans hope to make the price of gas a major issue in the election. The article says that they hope to blame the rise in the price of gas on President Obama's restrictions on drilling and the construction of the Keystone pipeline.

The Republicans will only have a chance in succeeding in this effort if the media help them deceive voters. The price of oil, and therefore the price of gas, is determined in the world market. Even under the most extreme assumption (e.g. oil companies get to expropriate private property to drill everywhere, with no environmental regulations) it is unlikely that we could increase the world supply of oil by more than 1 percent. 

This could lower the price of oil by 2-3 percent. That means that, other things equal, a drill everywhere policy might reduce the price of gas by 7-8 cents a gallon. If voters knew this simple fact, it is unlikely that the Republican strategy to make gas prices a political issue would have much chance of success.

It is also worth noting that domestic production of oil and gas has increased substantially under President Obama. The main impact of the Keystone pipeline (which would not have yet been operational in any case) would be to equalize gas prices across the country. It would lead to lower gas prices on the East Coast, but higher prices in the Midwest. It is not clear that voters in the Midwest would be upset if they realized that delaying the pipeline has helped keep down the price they pay for gas.

Comments (2)Add Comment
GOP Wants to Nationalize Oil Industry?
written by KBurgoyne, April 16, 2012 10:55
Hey Dean, I think you could have fun playing with this in your write-ups:

Which countries actually have gas for less than world market rates? The countries that nationalized their oil industry and forced the price of gas within their coutry to be less than the world market rate. When GOP politicians talk about how they'll lower gas prices (like Gingrich's $2.50 gas), sould we not then simply assume the GOP is talking about nationalizing the oil industry? :-)
Every time someone says that domestic oil production has increased . . .
written by jhand, April 16, 2012 4:48
. . . under President Obama, the typical Republican response is, "Maybe, but not on federal lands." Anybody know what this is supposed to mean? What does it have to do with the price of gas? If the R's are talking about Alaska, why not say so? It makes no sense to me, but I hear it on TV at least once a week.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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