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High gas prices and foreign oil heating up 2012 campaign debate

Picture of high gas prices at a gas station
REUTERS/Mike Blake
In the past month, the price of gas has shot up about 30 cents a gallon and some Americans are paying more than $4 a gallon.

Oil, the lifeblood of American commerce, is causing political headaches for an unlikely duo: Democratic President Obama and North Dakota Gov. Jack Dalrymple, a Republican.

As the current occupant of the White House, Obama is being blamed by some angry consumers for high gas prices. In the past month, the price of gas has shot up about 30 cents a gallon and some Americans are paying more than $4 a gallon.

In western North Dakota, exhausted and frustrated residents want Dalrymple and his administration to quickly build an infrastructure to help them cope with the massive influx of people who are working in the oil fields.

Obama is being criticized because the United States remains dependent on foreign oil, and some industry leaders believe he should support more widespread drilling.

In North Dakota, drilling from 6,664 wells produced 152 million barrels of oil in 2011 — a level that is overwhelming for some residents. They see heavy traffic, housing shortages and lines of people at every store and restaurant. Oil workers are living in man camps. Staffers at hospitals, schools and law enforcement agencies are rushing to keep pace with expanding demands.

It is a peculiar juxtaposition to see Obama and Dalrymple in the news at the same time.

Despite the huge output of oil by North Dakota — which has quickly become one of the nation's top-producing states — the United States remains vulnerable to tremendous price volatility in gas prices. What Americans pay at their gas pumps is linked to world market demand for oil. China and India have been increasing their demand for oil, and that action has a ripple effect on prices around the globe.

Politics in the Middle East also have created a rollercoaster scenario for gas prices in the United States. Recently, concerns over Iran's nuclear program have pushed the price of crude oil higher, because there are worries that Iran's oil production may be reduced or disrupted.

"We cannot simply drill our way to lower gas prices," Obama said in his Saturday radio address. "We must have a long-term strategy that uses every available source of energy — including oil, gas, wind, solar, nuclear, biofuels, and more." The president also talked about "the important role that increasing the efficiency of our cars and trucks" can play, which he said would reduce dependence on oil and save consumers money.

Gingrich factor

Former House Speaker Newt Gingrich wants to score points with GOP voters through his pledge to bring gas prices down to $2.50 a gallon. Gingrich hopes to rejuvenate his presidential campaign by hammering the president on his energy policy. Gingrich is using public anger over high gas prices as a strategy to woo supporters taking part in the Super Tuesday primaries and caucuses on March 6.

While high gas prices can be an emotional issue in the upcoming presidential election, they also could stunt the economic recovery. Gas prices are eating into consumers' discretionary spending and pushing up the cost of doing business, which then prompts companies to raise their prices on goods and services.

In western North Dakota, the oil industry has overtaken the landscape, daily life and economy. The Republican-controlled Legislature has allocated $1.2 billion over a two-year period to address housing, infrastructure and safety needs in North Dakota's oil country.

North Dakota officials recently listened to hundreds of people at 14 public meetings to identify what kinds of help are needed to address some of the unmet needs.

Dalrymple announced last week that he would name a state energy impact coordinator to help local officials tackle their problems. The governor also stressed that $806 million of the $1.2 billion still remains to be allocated for oil-related projects. That money will be used to construct truck bypass routes to move oil industry traffic out of city centers. It also will be used to address growing student enrollments, water supply systems, emergency services and a host of other issues.

Dalrymple is dealing with the immediate effects of the rapid increase in oil production in North Dakota. President Obama and the GOP presidential contenders should keep talking about the nation's energy challenges and how they would address them.

One topic that is sure to get more debate is the proposed Keystone XL pipeline, which would carry oil from Canada to Texas. Environmentalists have strongly opposed the project and the Obama administration rejected the pipeline's permit application in January.

Obama said that he was not making a judgment on the merits of the pipeline project, but that his administration couldn't do a full assessment because of a "rushed and arbitrary deadline insisted on by Congressional Republicans."

Keystone disagreement

Heidi Heitkamp, who is the presumptive Democratic nominee for an open U.S. Senate seat in North Dakota, disagrees with Obama on Keystone.

Heitkamp, a former North Dakota attorney general, sent Obama a letter in January in which she urged him to reverse his position.

"The Keystone pipeline would mean billions of dollars invested in our economy when we need it most, and tens of thousands of well-paid construction jobs at a time when too many Americans are out of work," Heitkamp wrote in her letter to Obama. "Keystone would help lower prices at the gas pump for consumers and small businesses, and help us reduce our reliance on oil imports from the Middle East. It would allow our Canadian allies to ship their oil to the United States instead of China."

The president hasn't endorsed Heitkamp's position on Keystone. But the Obama administration on Monday backed construction of a segment of the pipeline that would run from Oklahoma to Texas. TransCanada Corp., which is unhappy that the U.S. State Department delayed a regulatory decision on the full pipeline, wants to move ahead with a southern portion of the line.

Yet the sticky issue of a cross-border permit still exists, because TransCanada also has renewed its desire to ultimately build the full Canada-to-Texas line.

Heitkamp is running for the seat of retiring U.S. Sen. Kent Conrad, a Democrat. North Dakota historically supports Republican presidential candidates and Sen. John McCain carried the state with 53.3 percent of the vote in 2008.

But Heitkamp is expected to wage a close battle with Republican Rick Berg, a member of the U.S. House. If President Obama and Senate Majority Leader Harry Reid want to keep the Senate in Democratic hands, they most likely will need Heitkamp to win in North Dakota.

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Comments (16)

Oil isn't the only fuel in North Dakota

From today's Fargo Forum:

"The sale of ethanol-blended fuel in North Dakota nearly doubled from 2010 to 2011. State Tax Department figures show more than 1.3 million gallons were sold in 2011. This is a 97 percent increase over the 663,727 gallons sold in 2010."

I realize that a little more than a million gallons looks small next to the Bakken Boom, but it's a start. Unlike petroleum, biofuels are renewable.

Oil vs ethanol in ND

Actually, Bob, on a percent basis the ethanol output looks pretty good. That so-called "huge" oil output of 152 million barrels in ND oil is about 2% of US oil consumption of near 7 billion barrels in 2011. Growing oil production from the Bakken is important, but it is still in the 'drops in a bucket' category, and notions that ND is another Saudi Arabia are premature.

Nice to put energy figures in perspective, Rolf.

In more populated Minnesota, drivers bought about 20 million gallons of E85 last year. There are roughly a quarter million flex fuel vehicles that can use E85 and other high-ethanol blends registered in Minnesota, which has more E85 stations than any other state.

Related note: My colleagues and I will be at the Twin Cities Auto Show later this month to talk about the new cleaner diesel engines and locally made biodiesel. Watch for more details in the news soon.

Here's how you fix it.

Gas in Caracas, Venezuela costs 12 cents a gallon. In Iran, it's 41 cents.

The oil and gas in our ground belongs to you and me. When an oil company applies for a lease to drill, the lease should specify that a certain percentage (20%? 50%? 80%?) cannot go onto the world market but must be set aside for the domestic market. It's our oil.

Even for allowing for a 10% profit margin, the dometic oil companies in North Dakota, Texas and elsewhere will still make a profit because the cost of refining a gallon of gas has remained relatively stable for years. The only things that have affected the price at the pump are taxes and oil prices on the world market.

The Alaskan model, which Sarah Palin was all set to unveil also involves royalty checks from the oil companies directly to the citizens! Ask an Alaskan about it sometime.

Mr. Tester, are you proposing

Mr. Tester, are you proposing nationalization of oil?

It's not nationalization of oil

in the traditional sense because the state is not taking over the oil companies. The state is already saying they (we) own the oil or they'd be no need for leases.

But a lease is just a contract that defines the conditions under which they can extract the oil. We just need to change the conditions in the lease.

...We just need to change the

...We just need to change the conditions in the lease....

Easier said than done.

Or are you suggesting price

Or are you suggesting price controls? Profit controls?

We will have to all remember the day when Mr. Tester wants to follow the lead of Venezuela (Chavez) and Iran (Ahmadinejad).

Speaking of "free lunch",

Speaking of "free lunch", does Mr.Tester seriously think that the cost of royalty checks given to Alaska citizens would not be reflected in the ultimate selling price of the oil? The price of oil increases by the amount of the royalty checks, plus a little more to cover the cost of making the check, plus a little more for the shareholders.

The US is a net EXPORTER of

The US is a net EXPORTER of gasoline. Not importer, exporter.

(quote)

The U.S. exported more gasoline, diesel and other fuels than it imported in 2011 for the first time since 1949, the Energy Department said.

Shipments abroad of petroleum products exceeded imports by 439,000 barrels a day, the department said today in the Petroleum Supply Monthly report.

http://www.bloomberg.com/news/2012-02-29/u-s-was-net-oil-product-exporte...

(end quote)

That's 160 million barrels a year.

That should tell you that it is world price issue as opposed to supply constraint in the US.

We are a net exporter of REFINED oil

Neal,

You are correct that we are now a net exporter, but you have to dig deeper to understand the whole story. We still import about 60% of our liquid fuel needs. Since the Nixon administration, we have imported more and more oil in order to satisfy American demand. We hit our peak production in 1970, and have been declining since then (even with Alaskan oil in the 70s, and the shale oil we are finding now).

The oil we are exporting comes from oil we have imported, then refined, and sold back in the international market. We do this because our energy companies profit from selling refined fuels, made from imported crude oil:

http://www.consumerenergyreport.com/2012/01/09/whats-so-bad-about-export...

Yes, I am aware of the

Yes, I am aware of the difference between oil and gasoline. The current situation shows it is the world price and supply of oil that is the problem, not a shortage of gasoline to sell in the US.

those exports are great business

Our very efficient refineries add value to the crude oil and sell it to Latin America at a profit for the US companies. Many employees have good jobs, and the sales earn export credit to offset all the imports we buy at Walmart and Best Buy. The sales have no effect on the price of gasoline which is tied to the world price of crude oil.

Government cannot now or ever

Government cannot now or ever has denied the market. It only can delay the inevitable.

Throwback Gingrich throwing it down

Love it that Gingrich is promising to bring back $2.50 per gallon gas. His whole campaign has served as his own personal nostalgic tour of 20th century politics. References to moon challenges and Laffner curves and Saul Alinsky. At any moment, I expect Gingrich to break out in a "historically and fundamentally bad" version of Billy Joel's "We Didn't Start the Fire." For a few bi-partisan laughs involving past and present political figures, check out this funny YouTube video about "Obama's Secret Service" -- http://tinyurl.com/6sevqsj

Mr. Gingrich claims to be

Mr. Gingrich claims to be able to reduce the price of gas to $2.50 per gallon AND go to war with Iran.