With its public support leaking away as gas-prices rise past $4.00 per gallon, the White House is siccing the Justice Department on the energy industry, just like George W. Bush and legislators when they were hit by oil-price shocks.
“The Attorney General is putting together a team whose job it is to root out any cases of fraud or manipulation in the oil markets that might affect gas prices, and that includes the role of traders and speculators,” Obama announced at his April 21 townhall meeting in Reno, Nev.
President George W. Bush adopted the same tactic in 2006, back when gas prices were still under $3.00. “This administration is not going to tolerate manipulation… Americans understand, by and large, that the price of crude oil is going up and that the prices are going up, but what they don’t want and will not accept is manipulation of the market,” Bush declared at the annual conference for companies in the ethanol industry, the Renewable Fuels Association.
“Every time the price of energy goes up, the politicians who are most responsible for getting us in this situation scream the loudest about high oil prices,” said Dan Kish, the research director for the Institute for Energy Research. “They won’t allow us to drill in [Alaska’s Arctic National Wildlife Refuge] or offshore, the price goes up and they scream.”
Politicians and pollsters say gas prices are pushing down the President’s approval numbers. The price has risen from roughly $2.70 a gallon when he was inaugurated to $4.00 now, and perhaps $5.00 by next year. A recent Gallup poll shows a sharp decline in Obama’s approval rating to 41 percent, a CNN poll from March shows that 64 percent said gas prices are causing hardship to their household. The gas prices are also unnerving consumers, possibly reducing confidence in future economic growth.
“My poll numbers go up and down depending on the latest crisis, and right now gas prices are weighing heavily on people,” Obama acknowledged at April 21 fund-raiser in California.
The political risk for the administration is clear. High gas prices can push swing-voters out of the Democratic column in November 2012. “This gas issue is serious,” Obama told the Reno audience. “It hurts because you know every time you go to work a big chunk of your paycheck is being eaten up. And you might already be having trouble making ends meet at the end of the month… We’re going to make sure that nobody is taking advantage of American consumers for their own short-term gain.”
Republicans are eager to take advantage of the problem, partly because few voters blame the out-of-power party for gas-prices. “The White House is terrified of the gas price issue because many of their policies – like the national energy tax – are explicitly designed to raise energy prices,” said Michael Steel, a spokesman for House Speaker John Boehner. “It was the President himself who said [in 2008] that under his plan, electricity prices would ‘necessarily skyrocket.’” Steel said.
In contrast, the GOP’s legislative package, dubbed the American Energy Initiative, will “increase the supply of American energy to lower energy costs, reduce our dependence on foreign oil, and create American jobs,” said Steel.
The GOP plan is sharply different from Obama’s energy plan, which seeks to boost federal support for the development of efficient energy technologies, such as solar power and battery-powered autos. Obama’s plan is supported by the new-energy industry and the environmentalist movement. These groups stand to lose if oil prices go back down, because that would reduce consumers’ interest in electric cars and low-pollution technologies.
However, oil-industry insiders says prices will probably continue to rise because of rising demand for gasoline form new drivers in China, India and other developing countries.
Obama’s Oil and Gas Price Fraud Working Group includes officials at the Justice Department, the National Association of Attorneys General and several federal finance-related agencies. “We will be vigilant in monitoring the oil and gas markets for any wrongdoing so that consumers can be confident they are not paying higher prices as a result of illegal activity,” Attorney General Holder announced April 21. “If illegal conduct is responsible for increasing gas prices, state and federal authorities should take swift action.”
“The Justice Department and every agency might want to check with the Secretary of the Interior who is restricting oil supplies deliberately” at the request of the environmentalist lobby, Kish responded. “They might want to check the Federal Reserve to ask [Fed chairman Ben] Bernanke why he is dropping the price of the dollar and pushing the price of oil up through the roof,” he said. International gas prices are set in dollars, and gas prices rise as the dollar declines in exchange value. Over the last year, for example, the value of each dollar has declined by 9 percent compared to the Euro, partly because the Treasury Department is increasing the quantity of U.S dollars. “It is Obama’s own policies that are creating the problem,” Kish said.
The American Petroleum Institute took a cautious stance. “Strong growth in oil demand around the world and tighter supplies in part caused by the Libyan conflict have produced the higher gasoline prices the administration is about to investigate,” said a statement from John Felmy, API’s chief economist. “The administration’s own experts in the Energy Information Administration have been saying as much, and the FTC which has been closely tracking gasoline prices and markets for more than a decade has said nothing to indicate fraud is a factor … If the administration wants to help consumers, let it work to turn around the decline in U.S. oil production by eliminating the obstacles to increased development its own policies have created.”