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What Michele Bachmann would do about high gas prices

Michele Bachmann waves during a rally in Florence, South Carolina, on Thursday.
REUTERS/Maryann Chastain
Michele Bachmann waves during a rally in Florence, S.C., on Thursday.

It has been a week since Congresswoman Michele Bachmann told the country that she would bring gasoline prices down to under $2 per gallon if she were president. The reaction has run from “Wow! Can she really do that?” to “There is no way a president can determine the cost of gasoline.” Candidate Bachmann has been pilloried by the left for her hubris, grandiosity, cynical political posturing and failure to grasp the realities of a world petroleum market.

The critics are wrong. A president of the United States can drive gasoline prices down, and the promise to do so is not new. Though Bachmann did not immediately provide a plan on how she would drive prices at the pump lower, there have been many plans promoted to lower the price of gasoline, and she may have drawn from some of them.

She may have been listening to The Donald. In his short-lived run for the White House, Donald Trump said he would bring the price of oil down by seizing the oil fields of Iraq and Libya and putting total production of these two countries in our gasoline stations. Two problems with that scenario: First, the seized oil would have to first pass through the world market where it would be available to the highest bidder. And two, it would be a criminal act of the highest order. Details.

More likely, she is looking at Newt Gingrich’s plan from 2008. Gingrich proposed opening up the spigots on the country’s Strategic Petroleum Reserve (SPR) and dumping the whole stockpile on the open market. Gingrich said that the sudden influx of new oil would drive speculators out of the market and the price of petroleum would drop significantly. Economists agree that the market would see a sudden drop if that were to happen.

Newt Gingrich
MinnPost/Terry Gydesen
Newt Gingrich

But once you have emptied the 727 million barrels of crude from the SPR on the market, which the world would drink up in a month (faster, if cheaper), there would be nothing left in the strategic tank to offset real supply disruptions caused by war, OPEC manipulation or natural disaster.

Political gag
A president could order such a thing, however. The International Energy Agency may punish such misbehavior, but the price of gasoline at the pump would fall below $2 a gallon for about a week before oil investors figured out it was only a political gag.

Of course, she could, with Congress’s help, open the Arctic National Wildlife Refuge (ANWR) to drilling. That would cause a slight lowering of prices for a short time. The U.S. Geological Survey estimates there are roughly 7 billion barrels of recoverable crude in the ANWR. Americans consume more than 20 million barrels of petroleum a day. So if we kept all that oil for ourselves, we would use every last drop of it within a year. But the price of gasoline at the pump would likely fall to $2 a gallon before the markets realized politicians had just been dreaming.  

One will hear Congresswoman Bachmann say as a candidate that there is more oil in three western states of America than in Saudi Arabia. She will bemoan the fact that it is currently against the law to drill and explore in much of that area. She will also say that the bulk of that petroleum is in the form of shale-oil.

There is no question there is a lot of it, but it is locked up inside of rocks, like marlstone. The rock is super-heated and the petroleum vaporizes. It is then condensed. It is so simple that high school students can perform the operation in chemistry class. But the kids aren’t paying the bills for the energy required to heat the rocks.

Such annoying details, however, are the first calculations of companies like Exxon-Mobil. It threw itself into shale oil recovery, and then exited when it found it simply cost too much to make a profit. Royal Dutch Shell is interested in shale oil, but costs are high and the process of extraction uses an awful lot of water. Water is, increasingly, a concern in the West. It is an increasing concern in Estonia, where oil shale is the main source of petroleum. According to a 2004 technical paper called “Shale Oil. A Scientific-Technical Journal” by Anto Raukas, 91 percent of all of the water consumed in Estonia was consumed by the oil shale industry.

You may not hear this from the candidate, but shale oil is not crude oil. It contains a higher level of nasty chemicals that tend to pollute and harm humans. The process, known as retorting, also yields significant amounts of mercury. I’m not sure how she squares her comfort with that kind of mercury with her horror for the mercury in compact fluorescent light bulbs. Details.

One other troubling detail Congresswoman Bachmann may have some difficulty explaining. First, it is well established that President Ronald Reagan is an icon of Bachmann’s political career. How then will she explain that it was President Ronald Reagan who, in 1986, signed a bill into law that abolished the United States Synthetic Liquid Fuels Program. Reagan took the government out of the shale oil business.

Supply and demand
Martin Feldstein was President Reagan’s chairman of the Council of Economic Advisers. In a July 2008 opinion piece in The Wall Street Journal, Feldstein wrote on the subject of lowering oil prices. Boiling it down, Feldstein said there were two roads to bringing prices down. One was the immediate expansion of supply. By flooding the market with oil, the price drops because the supply would exceed demand for a time. The other solution (and remember, this is a conservative writing) is “increases in government subsidies to develop technology that will make future cars more efficient, or tighter standards that gradually improve the gas mileage of the stock of cars, would lower the future demand for oil, and therefore the price of oil today.”

So there are two approaches to lowering the price of petroleum. Her proposal to increase supply through the development of shale oil will likely drive prices higher because of the increased well-head cost of the production of a barrel of oil from rock. Her calculations fail to take into consideration the environmental and health costs to the taxpayer of shale oil production. Expanding the supply in that fashion will not, according to a number of oil experts weighing in on her proposal, bring prices down.

As president, Michele Bachmann could drive prices for gasoline below $2 per gallon. She could reduce demand by putting the full force of her office behind conservation, technology and efficiency and drive the demand for oil as low as it can go. Or she could get it as low as it was in the last days of the George W. Bush administration and as low as when President Obama took office by simply sending us back to a world-wide depression.

As I said, Michele Bachmann, as president of the United States, could keep her promise of lowering the price of gasoline. What voters must ask themselves is: “What will that cost me?”

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Comments (32)

  1. Submitted by Paul Udstrand on 08/23/2011 - 09:48 am.

    Actually a are lot of more basic reason’s why Bachmann’s promise is empty and undeliverable.

    First this business of capturing oil fields… Don, do I really need to point out that Bush already did that? That’s what the Iraq war was all about and it boosted rather than lowered oil prices.

    Second, this idea that you can boost production runs into the wall of peak oil, the capacity to increase production has pretty much collapsed. The notion that we’ll get all kinds of oil from shale is also a pipe dream, turns out the projections on that plan far exceed reality, same with all the fracking and natural gas. Energy companies boosted projections by hundreds of times in order to gain environmental concessions, but they’re not delivering anywhere near what they promised they could.

    The only way Bachmann would really bring gas prices down would be to subsidize the industry. Since she won’t raise tax to pay for the subsidy, she’d do what Republican always do, she’d rack up debt subsidizing the industry probably with tax cuts.

  2. Submitted by Greg Kapphahn on 08/23/2011 - 09:52 am.

    As with so many of Ms. Bachmann and the Tea Party’s ideas, the idea that she, as president, would possess the power to lower the price of gasoline to $2/gallon,…

    isn’t EVEN half baked.

    In fact, it’s a poorly mixed dough with the leavening (actual research and awareness of factual realities) left out.

    Throw this mess into the oven of constitutional law, Washington politics, and international markets and it will get you nothing more than a hard, flat, deflated chunk of useless nothingness.

    Of course, as is often the case with Ms. Bachmann and the Tea Party, their approach to the inevitable results their “ideas” would produce would just be to turn up the heat higher, and higher, and bake it longer and longer, until the whole mess caught fire with such ferocity that it melted down the oven, escaped the range and burned down the house.

    Then they’ll blame everyone else for the destruction they’ve caused and, likely, start a war by scapegoating and attacking some innocent oil-producing country to cover their tracks (and to help them avoid EVER considering the possibility that they, themselves, were wrong from the beginning).

  3. Submitted by James Hamilton on 08/23/2011 - 09:59 am.

    Extracting the oil from shale’s a snap, Don. We just build a field of neclear reactors above the shale fields and then use the reactors’ waste heat to crack the shale. Once the fields have been drained, we dump the spent nuclear fuel down the drill shafts. It’s a completely self-contained system!

  4. Submitted by Rachel Kahler on 08/23/2011 - 10:09 am.

    Yes, *technically* she could keep that promise. But, as Don points out, how long?

    We already know that she’s against conservation, at least mandated conservation. We also know that car companies and the like will not increase fuel efficiency on their own. Even the hybrids that are marketed to enviros barely exceed the fuel economy of regular small-car models of today, and are easily less efficient than cars that came out in the early 1990s. The numbers show that if we rely only on consumer pressure for higher fuel economy, the rate at which fuel economy increases is much lower than if fuel economy is mandated and will actually drop if fuel is cheap and abundant. In the meanwhile, manufacturers continue to make the gas guzzlers, which requires the consumption of resources (and oil!).

    Increasing fuel economy, may be the slower route to cheaper gas, but it is the most stable and permanent route to inexpensive fuel. And even if fuel prices don’t drop, the overall cost of transportation goes down because we simply need less fuel to power our cars.

    The other, more likely option, as Don pointed out, is that she favors booming the supply. This solution is temporary, and depending on the source of that boom, may cause gas prices to rise even higher. Imagine if we used our oil reserve. Once that is gone (if we don’t use it as our sole source of oil, it’ll last longer, but will only delay the inevitable), we no longer have a buffer. Should OPEC decide that it wants to bring the US to its knees, it could. We’d have to tap our own domestic oil sources at great cost monetarily and environmentally. In a few years, that’ll be gone or too expensive to continue. Then what? Will we have found an alternative? Maybe. But probably not without a lot of suffering as oil prices skyrocket and cars compete with heating homes and the transportation of food. In the end, the cost of oil will be that much more expensive, assuming we, as a country, even survive such a thing.

    Ms. Bachmann claims to want to limit the scope of government. Fine. But, an essential role of the Federal government is to protect this country’s interests. It is sound policy to reduce our dependence on foreign oil. It is sound policy to do so by reducing our dependency on ANY oil. By mandating fuel economy, we would be making national security policy. And I don’t think Ms. Bachmann would argue that the Federal government has nothing to do with national security. But, I don’t think that Michelle Bachmann cares about these things because she either: 1. doesn’t get it; or 2. really doesn’t want what’s best for this country. While it would be more charitable to assume that she’s ignorant (and the evidence abounds for this possibility), it’s equally plausible that her goal is to actually destroy the working class in this country (evidence for this position also abounds). I, personally, don’t care which. I don’t want the office of President, arguably the most powerful position in the world, held by someone that is either stupid or mean enough to take out an entire country to punish those she deems unworthy.

  5. Submitted by Ray Schoch on 08/23/2011 - 10:24 am.

    Good piece, Don, and it’s that last question that a lot of Bachmann supporters will be in denial about.

    Having come to the Twin Cities from Colorado, I can vouch for both the energy consumption of trying to wring oil from rock, and more importantly to the Colorado locals, the amount of water necessary to do so. Unlike Minnesota, where water quality is the primary concern, in Colorado quality means little if there’s no water to begin with. Quantity is the issue in a state that, for practical purposes, has virtually no water flowing into it. A lot of big rivers get their start in Colorado high country, but they’re carrying water elsewhere, and by numerous legal documents and agreements, Colorado doesn’t get to keep the water that originates in the form of mountain snow during the winter.

    Colorado’s western slope has taken decades to recover from the “all the eggs in one basket” scenario that developed when shale oil was first proposed as a “solution” to our addiction to big cars with lousy fuel mileage. When Exxon pulled out, it was a huge blow to the western slope economy in general.

    And, as I’ve reminded a Minneapolis neighbor whose bumper features a sticker that says, “Drill here. Drill now. Pay less,” oil companies are under no legal or ethical compunction to favor the United States as a customer. Oil is a fungible commodity that, no matter where it’s extracted, goes on the world market and sells to the highest bidder. If Exxon or some other company gets permission to drill in the ANWR, for example, there’s nothing to prevent the company from selling the oil to the Chinese, or to India, or to European countries. The only way for the United States to guarantee that ANWR oil actually came to the United States would be for us to pay the highest price for it. If we “Drill here. Drill now…” we won’t necessarily pay less, and may end up paying more.

    The sensible solution, Republican and Democratic rhetoric notwithstanding, is to reduce our dependence, not just on “foreign” oil, but on oil in general. This requires not just a vehicle fleet that gets much better mileage than the current one, but elimination of some of that fleet, and replacement of much of the remaining vehicle fleet with inexpensive, widely-available, fuel-efficient public transit, not only for running errands, but also for intra- and inter-city travel. Bringing back passenger rail, streetcars, commuter trains, encouraging the use of that public transit through tax policies and subsidies, as well as the building or rebuilding of viable, walkable neighborhoods instead of shopping malls, and numerous other stratagems would all do their part to make our dependence on oil, regardless of its price, a non-issue.

  6. Submitted by Tim Walker on 08/23/2011 - 10:26 am.

    Oy vey!

    I hope Rep. Bachmann doesn’t hear about JH’s proposal (#3), because she’d probably latch onto it and actually begin promoting it as a serious plan!

  7. Submitted by Tom Christensen on 08/23/2011 - 10:59 am.

    She is going right down the same path of desperation that Pawlenty did when he was trying to find something that would stick. He went the route of 5% GDP growth and he was immediately put in the ridiculous column and shortly thereafter left the race. Michelle’s flaming star will lose its shine just as soon as the public starts paying attention and then she will be put in the ridiculous column too. The political pendulum swings hard left and it swings hard right. America is at its best when the pendulum is centered. Right now we have zipped right past hard right all the way to stupid. If you need light bulbs, Michelle is your candidate. If you have all the light bulbs you need, you better look elsewhere for your candidate.

  8. Submitted by chuck holtman on 08/23/2011 - 11:05 am.

    And beyond all else, promising cheap gas is pandering of the highest order. The actual “market” price of gas, when social costs are internalized, is upwards of $10-12/gallon — well upwards once one includes the military budget and the monetized cost of climate change. Any denizen of the Right who prefers the market to the government should oppose subsidized gas, no? If we choose as a society to barrel to our own destruction with hands firmly gripping the sacred wheel, let’s at least be principled and do it at the market rate.

  9. Submitted by Peter Nickitas on 08/23/2011 - 11:27 am.

    Mr. Shelby:

    Thank you for a reasoned and cool analysis of the facts that surround Rep. Bachmann’s campaign promise.

    Thank you for showing the President’s capability of fulfilling a promise of $2 per gallon gasoline — and the attendant costs.

    Thank you for showing the truth of Rep. Bachmann’s demand for drilling ANWR and western states — and the low, if measurable, return on energy invested.

    Please take two more steps, being the responsible, retired journalist you are. Say “Peak Oil” and explain it to the readers. You can. Second, say “Michael C. Ruppert,” author of “Crossing the Rubicon”, authority on Peak Oil, and publisher of http://www.collapsenet.com. Please interview him for MinnPost, too. Thank you.

    Peter J. Nickitas of Minneapolis.

  10. Submitted by Richard O'Neil on 08/23/2011 - 11:28 am.

    “What will that cost me?”

    The most relevant question to ask of all of our pols – including Ms Bachmann.

  11. Submitted by myles spicer on 08/23/2011 - 11:34 am.

    With one exception, $2 gas would be the worst thing that could happen to our planet environmentally. (The one exception is that expensive gas is effectively a regressive tax on the poor).

    Very simply, fossil fuels are a finite resource, so the question then becomes not “if” we will run out, but “when”.

    Bachmann’s scheme just accelerates the “when”, and retards development of vital alternatives which are already behind the curve in bringing on line.

    It is just another one of her (and social conservatives) ideas that is literally 100% wrong for our nation, our people, our future, and the planet.

  12. Submitted by James Hamilton on 08/23/2011 - 12:46 pm.

    @Tim Walker: Glad you recognized my plan for what it is(n’t). But I’d love to see Ms. Bachmann pick it up and run with it!

  13. Submitted by Neal Rovick on 08/23/2011 - 01:07 pm.

    Face it. The days of “cheap oil” are over. $2.00/gallon gas will never be seen again, absent a total, catastrophic collapse of much of the world’s economy (a collapse that somehow left the oil fields, pumps, tankers, pipelines, distributors and stations operating).

    Demand is up, especially in the rest of the world, and will continue upward. Virtually all of the easy oil and giant oil fields have been found. The oil to be extracted is deeper or bound up in sand or stone. The costs of recovery will forever be higher than it was last year or any of the years before. The days of oil flowing from the ground, as in Pennsylvania or in large sweet shallow reservoirs as in Saudi Arabia is gone. Countries who have oil will no longer allow their valuable asset to be stripped at little or no return to them.

    $2.00 gasoline? Delusion again from Bachmann. But her’s is a faith-based candidacy–stubbornly resistant to facts.

  14. Submitted by Bob Quarrels on 08/23/2011 - 01:11 pm.

    Thanks for a solid, enlightening piece. Now we just need someone to confront her with it.

  15. Submitted by Jim Halonen on 08/23/2011 - 01:41 pm.

    Back in the 90’s Congress passed a bill that opened up ANWR to drilling, but President Clinton vetoed it. Had he signed it, we would probably be enjoying $2 gas now. President Bachmann would have signed it – common sense solutions is what Bachmann is all about.

  16. Submitted by Jeff Urbanek on 08/23/2011 - 01:47 pm.

    This intrepid new cub reporter really shows some promise…

  17. Submitted by Darryle Owens on 08/23/2011 - 02:04 pm.

    Great, but what IS Bachmann’s plan to get gas below $2 per gallon? All these are guesses, and the comments from the readers comment on the guesses. I, for one, wouldn’t hold her to it. If she comes close $2, I’m happy. All the candidates, including the president, will make promises that they will not keep.

  18. Submitted by Dan Hintz on 08/23/2011 - 03:40 pm.

    Don, you are talking about facts and Bachmann and her supporters just aren’t interested in facts. Just look at the comment by Jim Halonen (#15) who ignores how much oil is in ANWR (even though its in your piece) and states that if we had opened it up in the 1990s everyone would be enjoying $2 gas now. Jim, why not just add that everyone gets a free pony while we are at it? Its so much easier to come up with “common sense solutions” when you aren’t contrained by the facts.

  19. Submitted by Dan Hintz on 08/23/2011 - 03:40 pm.

    Jim, if your piece was a joke – which in re-reading it I think it might be – then my apologies.

  20. Submitted by Phil Dech on 08/23/2011 - 04:30 pm.

    The problem is that this article (and others like it) does not lend itself well to a soundbite.

  21. Submitted by Alec Timmerman on 08/23/2011 - 07:40 pm.

    Jim,
    You do understand that what ever we do to affect supply, the Prince of Saud will be on the other end turning the crank a little to the left, or a little to the right.

    All these drill more folks seem to think the profit motive will just disappear and oil companies will joyously work to drive the prices down.

  22. Submitted by Tim Larson on 08/23/2011 - 07:47 pm.

    The problem is that this article (and others like it) seem to take Bachmann seriously. What a waste of virtual ink.

  23. Submitted by Dale Hoogeveen on 08/23/2011 - 08:48 pm.

    One very simple way for a Bachmann Presidency to get gas under $2.00 a gallon would be to tank the world economy into the next Great Depression. What she has already done is a significant start, and we are not that far off from that anyway. At that point it wouldn’t make any difference to those few left with cars they could afford to run anyway.

  24. Submitted by Gregory Lang on 08/23/2011 - 10:37 pm.

    The Bakken, North Dakota deposited are conveniently excluded from this story. Bakken oil tends to be “light sweet crude” which is sought after even by the advanced Midwest refineries. Right now the key limits on the Bakken are infrastructure and regulations.

    BTW: Jim Kramer will be hosting “Mad Money” this Wednesday from the Bakken range. All day tomorrow CNBC will have “on site” stories from the Bakken.

    When testifying under-oath at a congressional hearing EPA head Lisa Jackson said that there have been no documented cases of groundwater pollution for “fracking”.

  25. Submitted by Gregory Lang on 08/23/2011 - 10:40 pm.

    Crude oil is not as “fungible” as it used to be. There is now a 20% or more spread between (benchmark) Brent light sweet crude) and Texas light sweet crude. At one time they were almost even.

  26. Submitted by Richard Schulze on 08/24/2011 - 09:28 am.

    Petroleum plunged from above $4 a gallon in July of 2008 to below $2 a gallon in January of 2009 thanks to the impact of economic collapse on oil demand. Ms Bachmann, meanwhile, was a strong opponent of an increase in the debt ceiling. Failure to raise the debt ceiling would have produced an immediate cut in government spending of 44%, leading to a larger output decline than was observed in 2008. Personally, I have total confidence that Ms Bachmann can bring back cheap petroleum, one way or another.

  27. Submitted by Don Shelby on 08/24/2011 - 12:08 pm.

    Gregory,
    I have been reporting on the Bakken Formation and the Williston Basin for some years. I did the first reports on television. There is a lot of oil there. Current technology, according to the USGS, allows something near 1% recoverable. It is not a solution. It also involves fracking technologies and those are coming under increased scrutiny for contamination of ground water supplies. Bakken oil is already on the market. It has done little to bring down the price.
    Peter,
    I have been reporting on Peak Oil for ten years. While conventional supplies are disappearing, and no new large finds (Saudi-stye elephants) have been discovered, tar sands, shale and other syn-gasses have changed some of the Peak metrics. However, you are right that there is no denying that soon the supply will not meet demand unless demand is lowered with, either, a crushing economy, or advanced technology and renewables. We are using four barrels for every new barrel discovered.

  28. Submitted by Jim Halonen on 08/24/2011 - 02:13 pm.

    The all-time cheapest gasoline was in 1998-99. Oil was going for about $19 a barrel. Did the oil companies, just for a time, suspend their drive for profits? Oil companies do not have anyhing to do with the price of oil! Governments can strangle (or assist) and over-regulate (no ANWR) their ability to explore/drill/produce which results in low supply, high price. If we have oil in our country, I would much prefer we harvest that than import from elsewhere.

  29. Submitted by Peter Nickitas on 08/24/2011 - 03:47 pm.

    Mr. Shelby:

    Thank you for your brief explanation of Peak Oil and its seriousness. Connection between Peak Oil and the current economic crisis, most especially the dependence of fractional reserve banking and fiat currency upon cheap energy input at the margin, merits further word from you. You may also note that depopulation — by war, pestilence, or disease — causes energy demand destruction, too.

    That’s one request you granted. Thank you. Now I address my second request.

    Have you familiarity with Mr. Michael C. Ruppert or his work, “Crossing the Rubicon” and http://www.collapsenet.com? Will you address his analysis of Peak Oil, loss of human rights at home, and increase of wars abroad? He spoke before a large audience in Minneapolis in 2010 on the local premier of the film “Confronting Collapse”. Dave Moore would have interviewed him in a moment. You can. You should interview Mr. Ruppert, so we Minnesotans will have a better understanding of the chaos and harm in today’s world, and the ways we can still mitigate the harm and salvage some of the world for our children and grandchildren. You moderated a discussion session with Georget Tenet in 2007. Mr. Ruppert will be just as interesting, and, I add, more factual. Thank you again for answering my previous post.

  30. Submitted by Dan Hintz on 08/24/2011 - 06:39 pm.

    “Oil companies do not have anyhing to do with the price of oil!”

    Jim (#15 and #28) thanks for clearing up that your comments were made in jest. Funny stuff!

  31. Submitted by Jim Halonen on 08/25/2011 - 03:53 pm.

    Do pizza stores set the price of pizza? No! The marketplace does. Otherwise, why wouldn’t the pizza store set the price at $400 a pizza? When oil was $17 a barrel in 1998, why wouldn’t the oil companies simply make it $500 a barrel? Supply and demand, The Invisible Hand, etc…

  32. Submitted by Dogen Phillips on 08/27/2011 - 10:39 am.

    Michelle has some great ideas. But realistically, until she is ready to separate herself from the fringe loonatic Tea Party she has no chance.

    She has to make a choice. To forge out for herself or tie herself to a helpless bunch of losers.

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