President Obama's appearance in Cushing, Oklahoma today is politically tangled, and for good reason: Gas prices are the most potent political weapon in the Republican arsenal right now and the White House seems to know it. The question is whether any positive action will emerge from all this talk and help either a short-term gas price problem or a longer-term misshapen energy policy plan.
Some of that action will happen today when the President partially "walks back" his permit halt of Keystone XL, that pipeline proposed by TransCanada increasing the flow of oil sands from the Athabasca to the gulf coast. By appearing in Cushing, the site of the proposed "elbow" between the top and bottom half of the proposed pipe, and by "expediting" the permits for building this southern portion, the President is signaling that he won't get in the way of the latest permit process, re-submitted by TransCanada this month. Keystone XL will be built, whether or not the President wins reelection.
Not that the building of Keystone XL will have any noticeable effect on gas prices. The United States is a net exporter of gasoline, our demand is down to levels not seen in 12 years, our domestic production continues to grow, now up 1.5 million barrels since 2007 and our imports of foreign oil are down 5.6 million barrels a day. Want more? OK -- our cars are more efficient than they've ever been and getting more miles per gallon by the month, our total miles driven are dropping and even small increases in the number of electric vehicles are helping.
So why are we stuck with high gas prices? One reason is that the United States is tethered to a (self-created) global oil market, where we collectively generate a single price for a barrel of oil.
To put it more simply, the U.S. consumer is paying for the oil that the Chinese and Indians are increasingly using -- emerging market growth is helping to drive prices higher, and the U.S. is also captive to that global energy demand increase.
And herein lies a solution: If you are tethered to a global market for your gasoline price, one way to help yourself is to get out of that market and get your price from a local market instead.
Natural gas IS that market.
Here in the US, natural gas is pricing at $2.35/mmBTU, while it is pricing at $9-13/mmBTU in Europe and even more in Japan. Because natural gas isn't easily stored and transported, it has to trade locally instead of globally, where local supplies set price. The United States has entirely missed the opportunity to capitalize on this disconnect up to now.
But maybe, just maybe, the President will see that nat gas provides the cornerstone to a new US energy policy that will also get him out of the political fix he's in. One way to do that almost immediately is by forcefully pushing the nat gas act, the subsidies for truck engines and fuelling stations that failed recently to be included in the highway funding bill in Washington.
Mostly, it was Republican senators that voted against that bill, and it would be smart political turnaround to ask them publicly why -- when natural gas is domestic, cheap and greener than oil.
Maybe it would be a miracle in this political climate, but the potential of an advocated switch to natural gas would not only defuse the "gas price" issue being brought by the GOP, it would also help this country get off the imported oil treadmill.