Speaking at a fist-pumping rally on Tuesday when gasoline was at an average price of $3.58 a gallon, Republican presidential candidate Michelle Bachmann said, “The day that the president became president, gasoline was $1.79 a gallon. Look at what it is today. Under President Bachmann, you will see gasoline come down below $2 a gallon. That will happen.”
No, it won’t. That makes a great campaign applause line, but presidents don’t control gas prices—they’re set on the international spot market. Bachmann lacks a magic wand, and virtually no oil analyst sees the pain at the pumps easing to that degree, not in 2012 or anytime in the conceivable future. If I was a speculator (which I’m not) I’d be betting on higher prices for the foreseeable future.
First, let's go to the videotape. Here's Bachmann on energy:
Maybe she missed it, but last year, former Shell president John Hofmeister told Fox News that he expected prices to reach, not $2 but $5 a gallon by 2012. Sometime between 2018 and 2020, he said, the supply problem will become so bad that some gas stations in regions farthest from oil refineries won’t be able to get supplied. He predicted that we’ll go back to the rationing of the 1970s, with cars being able to fill up only on certain days.
And let me remind Car Talk Readers that, back in March, I interviewed early Volt driver James Brazell, who doubles as the former coordinator of worldwide exploration and production for oil giant Texaco. He told me, “I think we’re very close to peak oil. Production might plateau where we are for a while, maybe a year or two, but then it will start to decline. If demand [especially from China] keeps rising as it has been, the stress point on worldwide production is going to be reached, and that will happen this decade for sure.”
These oil insiders are saying that prices are going to go up and stay up. Bachmann says that she has leverage, as a supporter of both developing the vast oil shale deposits in the Rocky Mountains and, finally, drilling in the oil-rich Arctic National Wildlife Reserve (ANWR). But neither one will influence gas prices during a theoretical 2012-2016 presidency.
Big words, right? But objectively true. Let’s start with oil shale, which President Bachmann would presumably green-light on day one of her presidency. She’s absolutely right that we have tremendous reserves, enough to produce between 500 billion and 1.1 trillion barrels of oil from recoverable reserves. The shale oil there is three times Saudi Arabia’s huge stash. But it remains undeveloped because it’s both difficult and expensive to recover, as well as environmentally very damaging.
And according to a joint Department of Energy/RAND study, the spade work necessary for permitting oil shale operations takes six years, followed by another six to eight years of permitting, designing, constructing, shake down and performance confirmation. “Consequently, at least 12 and possibly more years will elapse before oil shale development will reach the production growth phase.” In other words, not during Bachmann’s time in office, even if she’s a two-term president.
One of the main problems with drilling in the Arctic reserve, long a conservative touch point, is that there simply isn’t enough oil there to significantly affect international oil prices. And, again, it’s a long-term prospect. The U.S. Geological Survey estimates that the federal part of the reserve may contain 7.7 billion barrels of oil, which makes it only 8.7 percent of the recoverable oil in the U.S., as well as a tiny fraction of the oil shale riches.
And drilling won’t happen tomorrow. According to both the late Alaska Senator Ted Stevens (a big drilling supporter) and the Energy Information Agency, the start of oil production is 10 years away from any president (Bachmann, say) giving the go signal. Why? Leases will have to be obtained and exploratory wells drilled, all within a fairly limited window in Alaska. So that takes us to 2021, which is also outside the theoretical Bachmann presidency.
By 2020, oil drilling from the home of polar bears and seals would be only two percent of what is already fairly limited U.S. production. It could reach 10 percent of U.S. oil by 2030, but that wouldn’t last long, because by 2027 or 2028 it would be reaching peak of production. And according to HowStuffWorks.com, working from EIA estimates, “ANWR oil reserves would represent 0.4 to 1.2 percent of world oil consumption by 2030, so ANWR oil would have little impact on world oil prices.” We’d still be importing more than 10 million barrels of oil daily with ANWR roaring along.
One quick way to reduce oil prices would be cutting or eliminating the 18.4-cent federal gasoline tax, but as CBS' BNET reported, no less an influential Republican figure than anti-tax crusader Grover Norquist just came out for an extension of the tax, which is set to expire September 30.
So for all these reasons, neither Michelle Bachmann or any other 2012 contender is likely to return us to the glory of $2 a gallon gasoline. Making claims like that could provide a bump in the polls, but it simply won’t happen.