NCPA - National Center for Policy Analysis

How to Lower Gasoline Prices

March 16, 2012

As the economy slowly makes headway on its anemic recovery, Americans continue to face a substantial burden on their household budgets in the form of escalating gas prices.  Prices for crude oil, which contribute substantially to growth in the price of gasoline, have risen sharply during the years of the Obama administration, and many predict they will continue to rise into the near future, says Diana Furchtgott-Roth, a senior fellow with the Manhattan Institute.

  • On January 20, 2009, when Mr. Obama was inaugurated, the average price of gasoline was $1.84 per gallon, but it has since risen to $3.28 per gallon.
  • Simultaneously, the price of crude oil has risen from $39 per barrel in early 2009 to $107 per barrel.
  • Significant gains in domestic oil production have mitigated this price increase: Domestic production averaged 8,184 thousand barrels per day in November 2011, which is up from 6,895 thousand barrels per day average in 2005.
  • Rising prices damage household budgets, with the average household in North Dakota taking on the largest oil burden of $396 per month.

Low energy prices are crucial to economic recovery, as they simultaneously lower the costs of doing business and alleviate budgetary demands on households.  According to the late David Salzman, president of LightSpin Technologies, gasoline will be the primary source of energy for at least the next two decades.  Therefore, the Obama administration should adopt policies that will lower prices.

  • Approve the XL Keystone Pipeline -- this will ease transportation from Canada, North Dakota, and Ohio to the Gulf and allow refineries to operate at higher capacities.
  • Allow additional oil exploration -- states should be given greater autonomy in adopting policies regarding oil exploration off their coasts, such as California and Alaska.
  • Speed up permitting.
  • Add flexibility to boutique fuel requirements.
  • End the ethanol mandate -- ethanol is bad for the environment, historically expensive and damaging to several staple food industries.
  • Do not impose oil taxes -- President Obama's proposed oil tax ($50 billion during the next decade) will undermine American oil's ability to compete.

Source: Diana Furchtgott-Roth, "How to Lower Gasoline Prices," Manhattan Institute, March 2012.

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