Why Rising Gas Prices Could Backfire on the GOP in November
Eight months before the fall elections, Republican strategists are in a dour mood.
· The economy has begun to gain traction.
· Their leading candidate for President, Mitt Romney, is universally viewed as an uninspiring poster child for the one percent, with no core values anyone can point to except his own desire to be elected.
· Every time Romney tries to “identify” with ordinary people he says something entirely inappropriate about his wife’s “two Cadillacs,” how much he likes to fire people who provide him services, or how he is a buddy with the people who own NASCAR teams rather than the people who watch them.
· The polls show that the more people learn about Romney, the less they like him.
· The Republican primary road show doesn’t appear to be coming to a close any time soon.
· Together, Bob Kerrey’s announcement that he will get into the Senate contest in Nebraska, and the news that Olympia Snowe is retiring from the Senate in Maine, massively increase Democratic odds of holding onto the control of the Senate.
· The Congress is viewed positively by fewer voters than at any time in modern history – and two thirds think the Republicans are completely in charge.
· Worse yet, the polling in most Presidential battleground states currently gives President Obama leads over Mitt Romney and Rick Santorum.
The one thing Republican political pro’s are cheering right now is the rapidly increasing price of gas at the pump and the underlying cost of oil.
The conventional wisdom holds that if gas prices increase, it will inevitably chip away at support for President Obama – and there is a good case to be made. After all, increased gas prices could siphon billions out of the pockets of consumers that they would otherwise spend on the goods and services that could help continue the economic recovery – which is critical to the President’s re-election.
But Republicans shouldn’t be so quick to lick their chops at the prospect of rising gas prices.
1). What you see, everybody sees. The sight of Republicans rooting against America and hoping that rising gas prices will derail the economic recovery is not pretty.
The fact is that Republicans have done everything in their power to block President Obama’s job-creating proposals in Congress, and they were dragged kicking and screaming to support the extension of the President’s payroll tax holiday that was critical to continuing economic momentum.
Senate Majority Leader Mitch McConnell actually announced that his caucus’ number one priority this term was the defeat of President Obama. The sight of Republicans salivating at the prospect of $4 plus per gallon will not sit well with ordinary voters.
2). Democrats have shown that they are more than willing to make the case about who is actually responsible for rising gas prices – and the culprits’ footprints lead right back to the GOP’s front door.
Who is really to blame for higher gas prices?
· The big oil companies that are doing everything they can to keep oil scarce and the price high;
· Speculators that drive up the price in the short run;
· Foreign conflicts, dictators and cartels – that have been important in driving up prices particularly in the last two months;
· The Republicans who prevent the development of the clean, domestic sources of energy that are necessary to allow America to free itself from the stranglehold of foreign oil -- all in order to benefit speculators and oil companies.
The fact is that the world will inevitably experience increasing oil prices over the long run because this finite, non-renewable resource is getting scarcer and scarcer at the same time that demand for energy from the emerging economies like China and India is sky rocketing.
Every voter with a modicum of experience in real-world economics gets that central economic fact.
That would make Republican opposition to the development of renewable energy sources bad enough. But over the last few months the factor chiefly responsible for short-term oil price hikes have been the Arab Spring and Israel’s growing tensions with Iran – all of which are well beyond direct American control.
But with only 2% of the world’s oil reserves, any idiot knows we can’t make ourselves materially more energy independent solely by drilling for more domestic oil. In fact, it is obvious that to have any hope of controlling the prices we pay for energy in the future, we must free ourselves from the dependence on oil in general and foreign oil in particular.
We need an emergency “all of the above” energy independence program that accesses all of the domestic sources of oil that can be developed in an environmentally safe way – plus a major investment in renewable, clean energy sources that free us from dependence on oil – and especially foreign oil.
President Obama has proposed a big first step in exactly that direction, and the Republicans have answered: “Hell no – drill baby drill.”
If they are forcefully challenged by Democrats this year – as I believe they will – that Republican position is simply laughable.
Domestic drilling has increased substantially under President Obama’s administration. And our dependence on foreign oil imports has gone down every year of his Presidency. The President has put in place new mileage standards for cars that will save massive amounts of potential oil imports -- standards that Republicans have opposed for decades.
But that fact remains, that for all his administration can do on its own to increase energy independence, it is impossible to free America from the stranglehold of foreign oil dependency without the kind of massive national commitment to domestic, renewable energy that must be passed by Congress. The Republicans have said “no”because their biggest energy patrons – the oil companies -- oppose a crash program to create renewable energy sources for one simple reason. Every day that we fail to act, the value of their oil goes up – it’s that simple.
If you doubt that Mitt Romney and the Republicans are bought and paid for by Big Oil – just ask the infamous Koch brothers -- who finance major Republican “Super-Pacs” -- how much they stand to make personally every time the long-term price of a barrel of oil increases by another dollar.
Simply put, the Republicans have put the profits of their patrons in Big Oil well above the economic and national security interests of the United States of America.
The Republicans even continue to do everything in their power to block the elimination of the astonishing taxpayer subsidy of the oil industry, that continues notwithstanding the fact that big oil companies are more profitable today than any other companies in the history of humanity. And the Republicans do it all the while they blather on about how if we once again install them in the White House, they will bring us $2 a gallon gasoline.
Whoever is pushing those kinds of lines must be studying the techniques of the late, famous circus impresario, P.T. Barnum, who famously said, “There’s a sucker born every minute.”
But in fact, polling shows that American voters simply are not so gullible that they buy either of these preposterous positions.
3). Speculators. A final contributing factor that has recently amplified increases in gas and oil prices is the role of speculators.
In a purely competitive market, oil prices should settle in the long run at the marginal cost of producing the next barrel of oil – currently between $60 and $70 a barrel. Oil closed last week at about $106 per barrel and ran up to twice the marginal cost of production during the Bush era 2008 oil spike.
Currently about 80% of positions on oil commodity markets are held by “pure speculators” – who bet on changes in oil prices – rather than “end users” who actually consume oil and use the markets to hedge against price increases.
Academic studies have demonstrated that there is a big speculative premium in oil prices, above and beyond any “risk premium” that might normally develop from fear of some immediate, short-term shortage. That speculative premium could be materially dampened if steps were taken to limit the market’s domination by pure speculators.
The Dodd-Frank Wall Street reform bill – which was opposed by most Republicans in Congress and all of their Presidential candidates -- allows the Commodities Futures Trading Commission to limit the percentage of market positions held by pure speculators as opposed to end users.
Already the CTFC has position limits on the percentage of positions that can be held by individual companies or investors to prevent one from cornering the market. Many economists have proposed imposing similar position limits on pure speculators as a class.
Ordinary voters don’t like speculators. But far from supporting limits on speculation, Mitt Romney wants to go back to the “good old days of yester-year” where wild, unbridled speculation led to the worst economic collapse in 60 years and costs eight million Americans their jobs.
None of this is good politics for Republicans.
Voters don’t want to be held hostage by the big oil companies or foreign oil. They don’t want to have their pockets picked by oil market speculators. They understand that when world oil prices go up, it benefits oil-state dictators: it’s like allowing Iran’s Ahmadinejad to levy a tax on American consumers. And voters sure as hell don’t want to pay a taxpayer subsidy to oil companies like Exxon that made more in profits in one minute last year (about $85,000) than the average American worker earns all year long.
If Republican strategists think they can reverse their fortunes by focusing on the gas price debate, the odds are good they will be wrong.