Oil and the Economy

Here are some numbers on the impact of oil in our economy—and so why the government’s oil policy is important to our economic future.  These data have been collected for a Fox News article on a related subject.

Our economy grew at an anemic 1.7% for 2011.  This performance is especially poor in context: that rate did not come at the end of an extended period of prosperity, but at the beginning of a “recovery” from an especially deep recession—a time when growth normally is much stronger, in the 5%-8% range.

Global oil demand is expected to increase by 1.5% (to 89.25 million barrels a day) in 2012, and against this backdrop, the price of North Sea oil (comparable to Middle east oil, but which supply is more stable) is up 11% over last year, to $119 per barrel, while oil produced in Texas is up 19% to $103 per barrel.  This is apart from Iranian shenanigans.

This has driven gasoline prices, nationally, to $3.53 a gallon, up a quarter of a dollar just since the start of 2012, and it could well go $4.25 by April—just in time for the summer driving season, such as it will be.  That’s also up nearly $1.65 per gallon since the 2009 beginning of the present administration.

And the money (sorry) datum: each 25-cent jump in the price of gasoline over the course of a year represents an annual total of $35 billion that’s spent on gasoline and so is not available for use in other parts of the economy. Those $35 billion equate, roughly, to a bit over a third of the cost of the just-passed payroll tax cut.  Thus, in President Obama’s three years, we’ve already had to spend that payroll cut on gasoline.  Indeed, just last year, we spent 8.4% of our household income on gasoline alone—double the per centage of 10 years ago.

Karl Rove, former senior advisor to President Bush the Younger, notes that

One out of every six Americans is unemployed, working part-time, looking for full-time work or so discouraged they’ve dropped out of the workforce altogether.

As the saying goes, work is somewhere else, and you get there in a car.

The government’s oil policy?  President Obama, through his campaign spokesman Robert Gibbs, insists

Our domestic oil production is at an eight-year high, and our use of foreign oil is at a 16-year low.  So we’re making progress.

Others, though, don’t see the increase, or the progress.  John Hofmeister, former CEO of Shell Oil and founder of Citizens for Affordable Energy, points out that national oil production today is 7 million barrels per day—down from 10 million a few short years ago.  Furthermore, Obama has killed the Keystone XL pipeline that, aside from the tens of thousands of jobs the pipeline’s construction would have represented, also would have brought nearly 625,000 barrels per day from Canada into the US.  The current oil policy’s negative impact on oil production only worsen our economy.

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