When gas prices are high especially in an election year, the president is going to be blamed. His opponents promise to lower the price and quickly. On Anderson Cooper the other day, I argued that this is pure political pandering. The president can't do much in the short term to affect the price of oil. I discussed this with Anderson Cooper and Stephen Moore, senior economics writer for the Wall Street Journal. Here's a transcript of our discussion:
Anderson Cooper: President Obama spent today attending fund-raisers for his re-election campaign raising more than $5 million. The men who want the president's job were also on the trail ahead of Tuesday's primary in Illinois. One line of attack picking up considerable steam for the leading Republican candidates is the rising price of gas. They would have you believe that bringing down gas prices is as simple as casting a vote for president.
But our question is, can the president, any president, really do much to affect the prices, or is it all just, well, politics? We are "Keeping Them Honest" tonight. There is no doubt an issue a lot of Americans care about. Gas prices rose again just today to a national average of just over $3.83 a gallon, that's up almost 56 cents since the beginning of the year. Now, Newt Gingrich has made it his mantra. He says if he's elected president he can bring the price down to $2.50 a gallon. Here's a quote: "I'm happy to say the Gingrich plan moves you towards $2.50 or less. The Obama plans moves you towards $9 or $10 or more."
Fareed, is this just rhetoric?
Fareed Zakaria: It's pure political pandering.
Look, the world consumes about 80 million barrels of oil a day. The total U.S. increase in production, if you were to do everything that Newt Gingrich fantasizes about, would be less than half a percent of that. So the chance that it would have any impact on the price of oil, particularly in the short run, is pure fantasy. Newt surely knows better.
The truth of the matter is that we are in the middle of a great boom in domestic gas production. We are at the highest levels in 30 years. The United States for the first time is actually exporting gas rather than importing gas, and it has made no difference to our prices. In fact, as we can see, gas prices have gone up. Why? Because, (A) China is growing, India is growing, etc. and (B) people are worried about a possible war with Iran - geopolitical concerns. So these are not things that you can easily fix. You're not going to get China to slow down. You are not going to change the fact that there are genuine concerns about Iran. Increasing American domestic production is such a marginal issue at this point that it's really totally irresponsible for Newt Gingrich to be saying this.
Anderson Cooper: Stephen, you disagree?
Stephen Moore: Well, look, I agree in the short-term. Fareed is right that it's not much that Barack Obama can be done over next month or something to reduce the high price of gasoline and Fareed is also right that major reason we're seeing the spike right now is because of what's happening in the Middle East. I agree with those two things.
But it's also true, Fareed as you know, that this president has been completely hostile to domestic production of oil and gas. It is true we have a big increase, but that's not because of Barack Obama. He's opposed the drilling - the permitting we could do.
You're right we've seen an increase, but I just got back from North Dakota. What's going on there is a miracle. I mean, we have more oil right now in states like North Dakota, Oklahoma, Colorado, California, than Saudi Arabia has oil. And I think the reason this is a political problem for the president is Americans are connecting the dots. They're seeing the fact that when we're not doing things that make so much common sense, like building the Keystone pipeline, that we not doing the drilling, or not doing the permitting to exploit our own natural resources, I think the Americans understand, 'Wait a minute, that hits me in the pump.'
Fareed Zakaria: But as Stephen is pointing out, all this oil is being drilled. In point of fact, whether or not the president is enthusiastic about it or whether what's happening is over his grudging objections, the truth of the matter is, we are in the midst of a huge oil boom and still prices are rising.
And Keystone is a total red herring because, of course, the Keystone oil is going to be excavated, it is going to be produced, it is going to be used. It is going to be used by China or us. It makes not a jot of difference to the price of oil because that oil will reach the world market.
And so, when we talk about this, yes, maybe hypothetically, if there were a president who would green light every single project that Stephen would like, maybe you'd increase production marginally. We have actually increased production substantially and it's not led to any reduction in price. In fact, there are increases in demand and there are geopolitical fears.
Anderson Cooper: Stephen, do you believe that Newt Gingrich can bring it to $2.50 a gallon?
Stephen Moore: Yes, I do. I have seen presidents do this when one of the reason this is such a hot button issue, Anderson, is because of the fact that one of the reasons that Jimmy Carter lost the election 1980 was because of very high gasoline prices a result of very high inflation.
Fareed Zakaria: Let me ask you a question?
Stephen Moore: Yes, hold on. Let me finish my point. Reagan brought the inflation rate down with Paul Volcker, and by the end of Reagan's first term in office, the price of gasoline fell in half. So, yes, I have seen it happen.
Fareed Zakaria: Because the economy went into a recession. Oil prices are also collapsed when we had the global financial crisis. But, Stephen, let me ask you this –
Stephen Moore: Wait. By 1984, the economy was booming. We have oil prices half what they were. Look, I'm not disagreeing with you in the short term. What I'm saying is for example, I have been in Washington 20 years, Fareed. We've been debating whether we should drill in Alaska for 20 years. If we'd done those 20 years ago, we'd have the oil right now and I do believe that would affect the world oil price.
Fareed Zakaria: You know, Stephen, that the quantity of oil we're talking about is not going to make a difference. Let me ask you though: Do you agree the short-term increase in prices is because of geopolitical uncertainty?
Stephen Moore: Yes.
Fareed Zakaria: I would love to hear some Republican candidate say this. In the short term you wanted to bring the price of oil down, here's the way to do it: Promise that under no circumstances you will invade or attack Iran. Say that you will freely accept all Iranian oil and that, in fact, encourage them to increase production. Would that or would that not be the single thing that would bring the price of oil down right now?
Stephen Moore: Well, that's a little bit out of my realm of expertise. I'm not expert.
Fareed Zakaria: But you know it's true.
Stephen Moore: Well, look. I mean, we all want stability in the Middle East and want Iran to demilitarize. But my point is, look, because we've had 50 years of turmoil in the Middle East, Fareed, what I don't understand about the president's energy policies, why aren't we doing everything we possibly can to drill for as much oil as we can here in the United States?
It is especially important now because the price is so high. If the price of oil goes to $110 a barrel, don't you think that makes sense not just from an economic standpoint from a national security standpoint, Fareed that we drill as much as we can here so we don't have to send so much money abroad to countries like Venezuela, Iran and Saudi Arabia?
Fareed Zakaria: I will say it one more time. We are at a 30-year high, we are exporting gas for the first time. That has not driven the price down. The idea that marginal influences and a few more drills even in Alaska - and by the way, I actually agree with Stephen that we should be doing more in terms of domestic oil production - but the idea it would have an effect on the price seems to me quite silly. It could have an effect on energy independence, which mostly now comes from Canada, with us not importing as much oil from the Kingdom of Saudi Arabia.