Rising gas prices are always a bad thing for an incumbent president, especially one heading into a tough re-election battle.
But President Obama admitted in a speech in Miami last week that there’s not all that much he can do to blunt the impact of prices, which some analysts think could be heading toward $5 per gallon nationwide this summer.
“The amount of oil that we drill at home doesn't set the price of gas by itself," Obama said. "The oil market is global. Oil is bought and sold in a world market. And just like last year, the single biggest thing that's causing the price of oil to spike right now is instability in the Middle East — this time, around Iran. When uncertainty increases, speculative trading on Wall Street increases, and that drives prices up even more.”
There are two tactics readily available to presidents to blunt the impact of rising gas prices: release oil from the Strategic Petroleum Reserve and try to limit the ability of oil “speculators” to drive up the price of oil in futures markets.
The problem for Obama is his administration has already done both of those things.
In June, the Obama team released 30 million barrels from the reserve, citing ongoing unrest in Libya as a factor that was then driving up gas prices. At the time, gas was averaging $3.61 for a gallon of regular gasoline, according to AAA. Today, the price is $3.70.
On Friday, Treasury Secretary Tim Geithner signaled the administration is open to using the strategic reserve again this year.
“There's a case for the use of the reserve in some circumstances, and we'll continue to look at those and evaluate that carefully,” Geithner said. “But again, the right thing for the country is to make sure we are focused on long-term investments in energy, changes in energy policy that help solve these long-term problems.”
Triple-A itself, however, is not pushing for use of the strategic reserve this year.
“We don’t think it should be done in response to simply higher prices,” said Avery Ash, manager of regulatory affairs at AAA. “Despite the geopolitical uncertainty and disruptions in the Middle East, we are not seeing disruptions in supply at this point.”
And the Obama team has also taken steps to minimize the impact of commodity speculation on oil markets. In October, the CFTC voted to curb trading in a host of commodities, including in oil, in an attempt to use position caps to mute wild price swings. The new rules blocked traders from purchasing too much of any commodity at any one time.
Since then, the regulatory agency has been fighting in court to keep the position limits rule, beating back an effort by the financial industry to force a federal court to block the measure.
What’s more, excessive oil speculation can be a tricky thing to prove. The last time oil speculation was blamed for driving up gas prices, in 2008, a federal inter-agency task force was unable to find evidence that the speculators were to blame at all.
“The Task Force’s preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices,” the group’s 2008 report said.
In Miami, President Obama acknowledged the tricky position he’s in — even as he pledged to do everything he can to solve the problem:
“You know there are no quick fixes to this problem. You know we can't just drill our way to lower gas prices,” he said. “If we're going to take control of our energy future and can start avoiding these annual gas price spikes … we've got to have a sustained 'all of the above' strategy that develops every available source of American energy: yes, oil and gas, but also wind and solar and nuclear and biofuels and more.”