Mrs. Palin asserts:
Is it really any surprise that oil and gas prices are surging toward the record highs we saw in 2008 just prior to the economic collapse? Despite the President’s strange assertions in his press conference last week, his Administration is not a passive observer to the trends that have inflated oil prices to dangerous levels. His war on domestic oil and gas exploration and production has caused us pain at the pump, endangered our already sluggish economic recovery, and threatened our national security.
Mrs. Palin unfortunately does not elaborate as to why Mr. Obama's assertions were strange, nor even which assertions with which she took issue and as such I will assume it is simply posturing.
She proceedes to list three exhibits:
- His drilling moratorium
- His 2012 budget
- His anti-drilling regulatory policies
- His drilling moratorium
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And what is the net result of the President’s (in)actions? A large drilling company was forced to declare bankruptcy,
Mrs. Palin states that Mr. Obama's drilling moratorium is directly to blame for the Chapter 11 bankruptcy of Seahawk Drilling Incorporated. Seahawk (HAWK) drilling spun off of its parent company in September 2009 with a stock price of around $25 and a market capitalization of about $290 million. It peaked at $35 a month after its spin-off, but then began a downward trend that only ended whith its subsequent purchase by Hercules Offshore Drilling (HERO). It is not clear that Mr. Obama's policies had either a direct or indirect effect on the eventual failing of Seahawk who had seen its market capitaliation already drop by 30% of its October high before the Deepwater Horizon oil spill. In the approximately nine months following Mr. Obama's Exectuve Order 13543 on May 21st and before Seahawk filed for bankruptcy, Seahwak's stock price slippeed another 30%. Unlike Mrs. Palin's assertion, it seems equally likely that Seahawk would have failed or sought to be acquired regardless of Mr. Obama's policies.
Mrs. Palin implies that there might have been more that Mr. Obama could have done (the President’s (in)actions) but offers no suggestions or alternatives where he may have acted where he didn't. While there are times where the government may arguably want to step-in and bail-out companies—such as they did with General Motors (GM) or Bank of America (BAC)—active attention to Seahawk would have been undue. Seahawk was a relatively small, recent, company and the reorginizational protection of Chapter 11 suited its situation.
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The Administration even ignored a court order halting his moratorium.
The fifth-circuit—although taking umbrage with a misleading summary—ruled against the moratorium primarily because of its vaguness and broadness:
The Court recognizes that the compliance of the thirty-three affected rigs with current government regulations may be irrelevant if the regulations are insufficient or if MMS, the government’s own agent, itself is suspected of being corrupt or incompetent.10 Nonetheless, the Secretary’s determination that a six-month moratorium on issuance of new permits and on drilling by the thirty-three rigs is necessary does not seem to be fact-specific and refuses to take into measure the safety records of those others in the Gulf. There is no evidence presented indicating that the Secretary balanced the concern for environmental safety with the policy of making leases available for development. There is no suggestion that the Secretary considered any alternatives: for example, an individualized suspension of activities on target rigs until they reached compliance with the new federal regulations said to be recommended for immediate implementation.
Department of the Interior, Ken Salazar, issued a second moratorium in an attempt to address the shortcomings that the district court found. To the contrary of Mrs. Palin's assertation, Mr. Obama's administration's actions indicate an acceptance and knowledge of the court's findings, reasoning, and order. In defference to Mrs. Palin's assertation however, the Department of the Interior was cited for contempt for, in effect, threatening the second moratorium.
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Mrs. Palin links to another article as an indicator of Mr. Obama's negative effect on the economy. This article has a number of misleading statements.
Gas Prices Are Skyrocketing Under President Obama: The oil futures market is just that, a futures market. The price-per-barrel spikes in oil this week have not affected the domestic market yet. In fact, former Shell Oil President John Hofmeister made the prediction in December 2010 that America would face $5/gallon gasoline by 2012, a full month before the revolution in Egypt began. At the end of President George W. Bush’s two terms in office, prices were 9% lower than when he took office (adjusted for inflation). The day before President Obama was inaugurated; the average price of a gallon of gas was $1.83. Today, that average is $3.14.
It's true that, ignoring inflation, prices were relatively flat from the beginning to the end of Mr. Bush's presidency. When he began his second term, gas prices were on average $1.83—the same as when Mr. Obama was sworn in. However, looking at just these dates ignores the realities of prices during the intervening time. If we were to shift our frame of reference one year—from January 2004 to January 2008—prices go from $1.579 per gallon to $2.991, representing a a 167% increase after adjusting for inflation. Likewise, the difference in price from January 2008 and January 2011 ($3.074) is less than 2% before inflation.
So what can you take away from all of that? Oil is a highly volatile commodity, and prices have generally been increasing over the past decade. As Mr. Obama's explained in his press conference:
Of course, rising prices are not a new phenomenon. Three years ago, before the recession hit, a combination of factors, including rising demand from emerging economies like China, drove gas prices to more than $4 a gallon. The worldwide recession and the decrease in demand pushed prices back down. But over the past year, as the economy has picked up steam and global demand for oil has increased, prices have increased again. Turmoil in North Africa and the Middle East has added uncertainty to the mix and lost production in Libya has tightened supply.
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7 rigs moved out of the Gulf area to other parts of the world while many others remain idle.
The article referenced mentions that four of those rigs are re-assigned temporarily, two of which are already planning to return to the Gulf.
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Is it any surprise that oil production in the Gulf of Mexico is expected to fall by 240,000 bbl/d in 2011 alone?
The Department of Energy's 2011 forecasts show (figure 1 in the linked article) that output from the Gulf of Mexico had been around 1.6 million barrels per day from 2003 up until Katrina in 2006, after which output dropped to below 1.4 million barrels per day. In 2009 production increased signficantly to above it's pre-Katrina levels. Even if production were to drop by 0.24 million barrels per day as Mrs. Palin suggests, this still is not outside the average over the past eight years.
- His 2012 budget
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Exhibit B: His 2012 budget. The President used his 2012 budget to propose the elimination of several vital oil and natural gas production tax incentives. Eliminating these incentives will discourage energy companies from completing exploratory projects, resulting in higher energy costs for all Americans – and not just at the pump. According to one study mentioned in a recent Wall Street Journal op-ed, eliminating the deduction for drilling costs “could increase natural gas prices by 50 cents per thousand cubic feet,” which would translate to “an increased cost to consumers of $11.5 billion per year in the form of higher natural gas prices.”
Mr. Obama's “Ending Big Oil Tax Subsidies Act” does indeed eliminate subsidies and tax incentives as Mrs. Palin states. Mrs. Palin does not discuss why these are vital, or even the ramifications of their elimination other than a $37-per-capita increase due to higher natural gas prices next year.
- His anti-drilling regulatory policies
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Mrs. Palin highlights recent findings indicating massve stores of oil and natural gass in the Arctic, and laments Royal Dutch Shell has been unable to secure approval to begin drilling there:
…Shell announced last month that it has given up hope of obtaining the required permits to conduct exploratory drilling this year. That means no jobs and no billions in oil revenue from the Arctic anytime soon thanks to this Administration.
From the referenced LA Times article:
Lawyers representing Alaska Native and conservation groups succeeded in challenging permits granted to Shell by the Environmental Protection Agency for exploratory drilling in the Beaufort and Chukchi seas. The federal Environmental Appeals Board ruled last month that the EPA's analysis of nitrogen dioxide emissions from the drilling ships was too limited. The board ordered the agency to redo the work.
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Royal Dutch Shell has tried for five years to begin work in Arctic seas off Alaska, which poses both environmental and logistical challenges. Environmental groups have opposed the drilling, citing a host of unknowns involved in energy exploration in such an extreme and remote environment. Criticism has increased with the decline of the polar bear, whose habitat encompasses the would-be oil fields.
There's little arguing about how opening drilling would be a boon to the Alaskan economy, or how such massive stores would affect the supply of oil and resulting price of gasoline. The issues here come down to the concerns over the environment versus the demand for the oil, and these are issues that would take much longer than a paragraph in an opinion piece to adequately address. As Mrs. Palin's statements are intended to reflect Mr. Obama's mentality and his culpability, I will simply leave his statements from the same press conference Mrs. Palin references:
Here at home, everybody should know that should the situation demand it, we are prepared to tap the significant stockpile of oil that we have in the Strategic Petroleum Reserve. …
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…[W]e need to continue to boost domestic production of oil and gas. Last year, American oil production reached its highest level since 2003. Let me repeat that. Our oil production reached its highest level in seven years. Oil production from federal waters in the Gulf of Mexico reached an all-time high. For the first time in more than a decade, imports accounted for less than half of what we consumed.
So any notion that my administration has shut down oil production might make for a good political sound bite, but it doesn’t match up with reality. We are encouraging offshore exploration and production. We’re just doing it responsibly. I don’t think anybody has forgotten that we’re only a few months removed from the worst oil spill in our history. So what we’ve done is to put in place common-sense standards like proving that companies can actually contain an underwater spill. And oil companies are stepping up -- we’ve approved more than 35 new offshore drilling permits that meet these new safety and environmental standards.
Through a process of what candidate Obama once called “gradual adjustment,” American consumers have seen prices at the pump rise 67 percent since he took office. Let’s not forget that in September 2008, candidate Obama’s Energy Secretary in-waiting said: “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.”
The article Mrs. Palin links to here for her 67% number again plays fast-and-loose with gas prices, referencing the the first three years of Mr. Bush's presidency, and ignoring the subsequent six years immediately before Mr. Obama where gas stayed over $4 a gallon between June 16th and July 21st 2008. From October 13th to November 24th, gas prices fell from over $3.10 to under $1.90—a drop that correlates to the declining world-wide economic conditions at that time, and a drop that left Mr. Obama with an unnaturally depressed gas price when he took office relative to previous prices.
In the same Wall Street Journal article Mrs. Palin references, there's a quote from the President-elect in 2008 that flatly denies any intention to artificially rase gas prices as a deterrent:
But Mr. Obama has dismissed the idea of boosting the federal gasoline tax, a move energy experts say could be the single most effective step to promote alternative energies and temper demand. Mr. Obama said Sunday that a heightened gas tax would be a "mistake" because it would put "additional burdens on American families right now."
It is not a surprise that oil and gas prices are surging towards the record highs we saw in 2008, now that our economy has to a large extent recovered, that demand from developing nations continues to increase, and that there is continued instability in the middle east. Mrs. Palin fails, however, to prove that any of this is Mr. Obama's fault, or that Mr. Obama is oblivious to its affect on the American people. To the contrary, one of the continuing threads in the items Mrs. Palin references is how acutely aware Mr. Obama is of the affects the gas price has on the working American family.