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Economic reports are breaking President Obama's way -- unemployment and joblessness are down, the stock market and GDP are up -- but there is one little fly in the petroleum, as it were, that could sap momentum from the economy and prove to be a troubling issue for Obama in the Presidential election campaign this year: rapidly rising gasoline prices.
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U.S. regular gasoline prices hit an average of $3.59 in the week of Feb. 14-20, according to the U.S. Energy Information Administration. That's up nearly seven cents from the previous week. And in the traditionally slow month of February, it's up more than 40 cents from a year ago -- a factoid that Obama's likely rivals in November, Rick Santorum and Mitt Romney, repeat every chance they get on the campaign trail. In their view, the President is allowing gas prices to rise by not encouraging more drilling for oil offshore and onshore.
But can the Obama administration do anything to alleviate rises in gasoline prices?
In a word, no, said Bill Wicker, the communications director of the U.S. Senate Committee on Energy and Natural Resources. The government has little power "to mitigate prices of a commodity that is globally priced in nature," Wicker noted.
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Not only that, some analysts added, by trying to hold gas prices down artificially, the government might actually encourage more gas consumption at a time when rising prices are indicating that a long-term policy to minimize the use of oil and the U.S. dependence on other countries for gas is in the public interest. "The problems are too big, the problems are too deep that are causing the prices to go up," said Patrick DeHaan, a senior petroleum analyst at GasBuddy.com. "And unfortunately, any sort of attempt to put a Band-Aid on the problem to temporarily alleviate prices will actually make things worse in the long run."
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CAPPING GAS PRICES/MORE REGULATION
When applying simple Economics 101 lessons here, the realization is that there is little the U.S. government could do to immediately reign in prices. Especially through methods of more regulation for the oil and gas industry, like capping gas prices.
The free market will adjust, DeHaan explained. Oil companies will start to diminish their output if prices are capped. In turn, supply will drop. This will lead to shortages and higher prices.
"Nothing really works," DeHaan said. "It's just the free market."
TAX REBATES
Ron Klain, a former chief of staff to Vice President Joe Biden and senior adviser to Obama on The American Recovery and Reinvestment Act of 2009, penned an editorial on Bloomberg on Monday. In it, he proposed an idea of a "pocketbook protection" plan.
The plan: If the national average jumps to more than $4 a gallon -- which, according to the EIA, has about a 25 percent chance of happening -- the government would enact an additional payroll-tax cut of one percent. That, Klain wrote, would amount to as much as $50 per person. It would stay in effect for at least 90 days and until gas dropped below $4 a gallon.
How would this be funded? Klain proposes funding his idea through a surcharge on corporate taxes on profit gained from the higher gas prices. Profits would still remain at highest-ever levels even with the surcharge, and the political benefits for the Obama campaign with the middle class would prove important.
But that theoretical policy, too, has its doubters.
