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Can A President Control Prices At The Pump?
Originally published on Thu October 25, 2012 12:11 pm
MICHEL MARTIN, HOST:
This is TELL ME MORE from NPR News. I'm Michel Martin. Later in the program comedian DL Hughley stops by and gives us his - how shall we say it - unique take on politics. That's coming up later. But before we get to the laughs we're going to take a serious look at energy prices. The U.S. Energy Information Administration predicts that the average price at the pump for this year will be $3.65.
That's more than a 10 cent rise over 2011. But is there really anything that either presidential candidate can do that would significantly lower the cost of energy? We're asking this question as part of the NPR series Solve This. We also reached out on Facebook to find out what concerns or questions you might have. Hundreds of you reached back and we will be hearing some of those comments in a few minutes.
Joining us now to talk about this is Roben Farzad. He is a contributor to Bloomberg Businessweek and he's with us once again. Welcome back. Thanks for joining us.
ROBEN FARZAD: Happy to be here.
MARTIN: Now, we recognize that gas prices are not the only energy issue to be concerned about, but I want to start there because that seems to be the thing that's in people's faces. Like, every time you go by a gas station you're thinking about it. So I wanted to ask if either presidential candidate has taken the position that he has a proposal to lower gas prices. And is that position credible?
FARZAD: They run on this, especially you saw it in the 2008 election where we were hitting $140 oil in the months that preceded the election, and it was front and center. And everybody was talking about it until we had the worst of the financial crisis in September which happened to knock down oil prices. And you saw this mentioned in the debate where Romney accused Obama of not doing anything in the face of gas that has crept up to almost $4 a gallon.
But it's something that you can stump on. You could throw a lot of rhetorical red meat in the direction but long and short of it is no president, especially in a four-year span, has much efficacy in countering what is ultimately a truly globalized market - very peculiar market which has a cartel in it where you have various different types of crude oil.
The man in the White House has not all that much say on it.
MARTIN: Why is that?
FARZAD: It's a market. It's a supply and demand thing. Look, we're not the only ones doing it. If this was a matter of one state in the United States churning out all of this oil, you could lean on that governor. You could drill deeper. But this is a truly globalized market and what has changed in the past 20 years is the enormous emerging market players that are coming online and demanding their swig as well.
China is now the second largest consumer of oil and it's a voracious consumer. And so China has a largely no-questions-asked policy. We'll go into Central Africa. We'll deal with nefarious regimes. It's like, we'll take all the oil and we will bid up global oil prices.
MARTIN: Now, the Associated Press report this week suggested that the U.S. could be on track to become the world's top producer of oil. The Energy Information Administration says that the U.S. - well, it shows that U.S. is second only to Saudi Arabia when it comes to daily oil production. What's contributed to this boom? And I'm sure that a lot of people will wonder why it is that does not affect oil prices here.
FARZAD: It is and it will take time to do it, but this is a fungible commodity. Here's an amazing stat. Don't look now, but North Dakota, as of this year, is the larger than the smallest member of OPEC which is Ecuador. There's been a huge oil rush in North Dakota. So we're suddenly, in some senses, awash in oil because the United States is seeing this renaissance in exploration and production.
MARTIN: Well, let's go to some of the questions that we got from listeners on Facebook. You know, here is a question from Mary Jane Pfeiffer who came to us from Facebook. And noting that last year the U.S. also exported more gasoline and other fuels than it imported for the first time since 1949. So here's Mary Jane's question.
MARY JANE PFEIFFER: If they're exporting it why don't we keep it here to increase our own supply? If they're selling it off to make a profit then why would increasing our production domestically help?
MARTIN: Roben, what about that?
FARZAD: When you say we - that's important to say why aren't we keeping it here. It's not like Congress and the White House can mandate that both domestic companies and multi-nationals like Shell, like BP, other players that are in the United States are in places like the Gulf where obviously Deep Water Horizon was a British Petroleum venture. You can't tell them, you can't decree: you can't by fiat say, no, you can only sell this here.
Obviously, you're going to want to sell it where you can get the highest incremental buck for it. And logistically it makes a lot of sense. If you drill it here, if you can refine it here, of course you're going to want to sell it here, but there's going to be a demand externally.
It's assuming that all of the oil and gasoline that's produced here can immediately be offloaded in a market that's highly globalized, highly fungible. I mean, you can mandate that we not have Iranian oil or Iranian oil byproducts in the United States, but if it happens to get here by way of swap with a Japanese company that then swaps a shipment with a Brazilian and a Venezuelan company, yes, it ends up getting here.
That's how interchangeable and fungible it is. It's almost as difficult to say, you know, you cannot have produce from a certain country end up in the aisles here. Someway or another it's going to end up here or it's going to end up abroad.
MARTIN: We have another question from Jonathan Watkinson. He was wondering why the U.S. isn't more focused on both cleaner and more efficient technologies.
JONATHAN WATKINSON: To me, the way forward is to invest in new technologies and these new technologies can focus on energy policy. I think if I had policy I would invest in those types of companies. I mean, not all of them are going to work but investments are risks. All investments are risks.
MARTIN: Isn't that something that's become an issue in the campaign? Isn't the Republican candidate accusing the White House of being wasteful in investing in these kinds of technologies?
FARZAD: Yes. There are two very differing schools of thought. There's one, a free market sense, that says you know what? Let a thousand flowers blossom. Don't have the government go in there and pick winners or you'll get a situation like Solyndra, the solar company that Mr. Obama brandished as an example that got government aid.
Recently, another government-backed car battery company filed for bankruptcy. But then you have another school of thought - and it's quite compelling when you think about it - is that we need something on the order of a Manhattan Project, or put the man on the moon thing, where only the direct guidance of the government and the purse strings of the federal government in Washington, D.C. to commit to one big push technologically.
It could be a hydrogen based economy. You saw George W. Bush talk about that, I think, when he was running for office the second time around. But the problem with that is, how do you then decide what's fair and what isn't fair? Do you want government picking a national champion? Suppose it's a solar player. Suppose it's a wind player.
Suppose all the natural gas companies in the United States are saying are you crazy to invest all that money in solar and nuclear and these pie-in-the-sky cellulosic ethanol techniques when we have what we could say under our earth here in the United States, we could be the Saudi Arabia of natural gas?
Why don't you give that money to us? It opens up a huge political and economic can of worms.
MARTIN: If you're just joining us, we're talking about solving national energy issues. It's part of our series Solve This. We're focusing particularly on gas prices and we're talking with Bloomberg Businessweek contributor Roben Farzad. There's another form of natural gas energy that's been causing a lot of controversy and that's hydraulic fracturing or fracking. That's a way to extract gas out of the ground by pumping water.
Critics have become increasingly vocal about this. They say that the method hasn't been tested enough, it can pollute the water system, that it could contribute to earthquakes. And of course, on the other side of it there are those who would argue that the U.S. needs to explore all avenues toward, you know, energy independence and ultimate energy sources. I wanted to ask about that.
FARZAD: It's a microcosm of the entire debate, kind of autonomy versus ecological concerns versus should we be doubling down on an energy input that's still carbon-impacting and obviously has huge externalities if you see what's entailed in putting down a fracking rig and the water that's consumed and the chemicals and the sand that you have to blast. But on the other hand, this has had more efficacy than anybody in Washington, any other company, in changing the price of energy over the past three or four years.
There's been such a boom in places like Pennsylvania, in Ohio, in Colorado that it has caused a collapse in the price of natural gas. It's a fascinating debate.
MARTIN: Roben, at the end of the day is the real debate here about energy independence? Is it really about - is it about cost? Or is it about controlling our access to energy over the long run?
FARZAD: You know, Michel, it's a catch basin for so many different fears and agendas and concerns from national security to economic concerns to the very mundane kind of, you know, in an environment where you have near eight percent unemployment, how are we asking the American driver to be paying something on the order of $3.60 at the gas pump? And there are other people that are saying, you know what? Get over it. The British and Germans have been paying multiples of what we've been paying at the gas pump for years. We're under-pricing gasoline.
We are making ourselves really susceptible to these wild fluctuations where you can go in a few short years from paying $2 at the pump to $4 at the pump, and if that collapses the economy, it falls back down again.
This is an enormous issue and you've seen 40 years of presidents try to kind of take at least a rhetorical whack at it. Don't forget Jimmy Carter in his cardigan effectively exhorting us to turn down our thermostats. He put solar panels on the roof of the White House and then Ronald Reagan took them down.
You have all of these people in the White House running on this idea of energy independence, far easier said than done. This is something that takes decades of market forces and policy incentives and a lot of luck. Ultimately if somebody could discover a killer app, you know, a Google for energy independence, I mean that's something that could push us over the hump.
MARTIN: Well, speaking of a killer app, while we're on the topic of energy, Thomas Edison is back in the news. I just want to play this clip for you. It was just unveiled and it's about to be showcased at the Museum of Innovation and Science in Schenectady, New York. It is the first ever recording of a musical performance. Here it is.
(SOUNDBITE OF MUSIC)
MARTIN: You know, that's from 1878 and Thomas Edison recorded that on a piece of tinfoil. I'm dating myself by even using the word tinfoil. But my question for you, Roben, is - is there a Thomas Edison out there? You know, you cover this stuff all the time. Is there a Thomas Edison out there who you think stands on the cusp of revolutionizing the way we handle energy?
FARZAD: I'm confident that in our lifetime there is going to be one or two or three Edison type people out there who truly changes how we approach energy. They're out there. There are these thousands of skunk works. There are companies that are working on this. There are start-ups that are working on this. Something will stick. Something will get financing and the market is changing as we're speaking about it.
The market is shifting to new technologies. Vehicles are much more efficient than they used to be. It's a really ripe opportunity for that Thomas Edison-type figure to kind of show up again and apply himself in the way of energy independence.
MARTIN: Roben Farzad is a contributing writer to Bloomberg Businessweek. He joined us from Richmond, Virginia. Thanks, Roben.
FARZAD: Thank you, Michel. Transcript provided by NPR, Copyright National Public Radio.