President Obama addressed a cheering crowd of supporters in Miami recently on the less than cheery topic of rapidly rising gasoline pump prices. One might think that such a serious topic of concern to voters might have been addressed in the Oval Office instead of in a campaign-style setting, but that wasn’t the case. The president brandished one of his favorite themes in his speech in Miami: that a problem (in this instance higher gasoline prices) isn’t his fault and he should not be assigned any blame for it. The buck in the current Oval Office always seems to stop elsewhere.
There are many reasons for the rising trend of gasoline prices. One of the most obvious is the fact that gasoline is a commodity with intrinsic value that is traded daily on a worldwide basis. Gasoline in this respect is no different from gold, sugar, or pork bellies. Numerous factors influence the rise and fall of commodity prices, but one is often more dominant than others, that being the value of the U.S. dollar. Most commodity trades are conducted in dollars. When the dollar strengthens in value compared to other currencies, more of the commodity can be purchased for the same dollar amount, which works to lower commodity prices. When the dollar weakens in regard to other currencies, the reverse happens and commodity prices increase.
Our federal government – through soaring federal budget deficits and numerous rounds of “quantitative easing” of the money supply by the Federal Reserve Board – has kept the value of the dollar artificially low. Those actions have had the effect of increasing the cost of gasoline and other commodities.
Perhaps the most incredible comment that President Obama made in Miami – outside of the implication that he needs five more years to fix the problem – was that higher taxes on the oil and gas industry would somehow be part of a solution to rising prices. Say what? Higher taxes will flow through in the form of higher cost to consumers.
The president has long espoused higher prices for fossil fuels and energy sources used by residential and commercial consumers. His support for cap-and-trade legislation was strong. He believes that his dream of universal “green energy” usage can occur only when higher energy prices force consumers away from fossil fuels. Of course, President Obama would undoubtedly not like to conduct that economic experiment in the throes of a year in which he is seeking re-election to the White House.
The president likes to brag that domestic energy production has increased during his three years in office. Unfortunately for Obama, that truth is tainted by the fact that actions of previous administrations led to the production increases, not the stifling regulations that he has placed on the oil and gas industry. The lengthy moratorium on oil and gas drilling in the Gulf of Mexico took considerable production off line, and the U.S. will soon be dealing with that decline. Likewise, President Obama’s refusal to approve the Canadian XL pipeline will block significantly larger quantities of gasoline and other petroleum products from reaching markets and having a stabilizing influence on prices.
President Obama certainly is not solely responsible for the increase in gasoline prices. Unfortunately, his policies –foreign and domestic – will have little positive impact on a politically sensitive commodity that operates in a global marketplace. His wish for higher fossil fuel prices that he has espoused numerous times in the past is coming true. But, as the old adage says, be careful what you wish for.