Energy Experts Undermine MRC's Demand That Press Blame Obama For Gas Prices
Blog ››› ››› JOCELYN FONG
With gasoline prices nearly $1/gallon higher than they were a year ago, some media outlets -- echoing Republican politicians -- have sought to place the blame on the Obama administration's energy policies, pointing to the temporary ban on deep-water drilling (but not production) imposed for several months following the BP oil spill. It's an easy enough claim to make: Obama restricted oil drilling, and now prices are higher. The only problem is that no credible economists -- including those who favor expanded U.S. drilling -- will say this claim is valid.
But the Media Research Center is so certain of Obama's culpability that its Business and Media Institute produced a study criticizing network news outlets for failing to blame Obama's drilling policies while reporting on high gas prices. From the study:
Out of 280 oil price stories since the disastrous pill, just 1 percent (3 out of 280) mentioned any connection between Obama's anti-oil efforts, such as the drilling moratorium, and rapidly rising gas prices.
Instead of asking whether Obama's anti-oil policies could be increasing the cost of gas, the networks blamed other factors such as Mideast turmoil or the "money game" played by speculators. Certainly, the turmoil in Libya, Egypt and surrounding nations has increased worries about oil production and can influence the price. But the networks also should have looked for explanations much closer to home.
MRC president Brent Bozell appeared on Fox News to promote the study, saying that "drilling is down 13 percent in the last year -- down 13 percent in the last year. That is a huge, huge contributor to the problem that we have now of rising gas prices." He said "huge" twice, which is almost like providing support for his claim.
According to its website, the MRC's Business and Media Institute exists to give journalists "a helping hand to have an informed understanding of our nation's free enterprise system."
So how's that going?
The Wall Street Journal reported that U.S. offshore oil production is expected to be 13 percent lower this year, in part due to the Gulf drilling moratorium. But just 32 percent of American oil comes from offshore sources, and total U.S. production of crude oil and liquid fuels in 2011 is expected to stay near 2010 levels, which were higher than any other year in the past decade. According to the Financial Times, private forecasters think total U.S. production will actually rise this year due to increases in onshore output.
More to the point, energy experts say that given the scale of the world oil market, any decrease in U.S. oil production resulting from the deep-water moratorium cannot be blamed for the high oil and gasoline prices that we're seeing. For instance:
- "It's Not Credible To Blame The Obama Administration's Drilling Policies For Today's High Prices." Michael Canes, a distinguished fellow at the Logistics Management Institute and former chief economist of the American Petroleum Institute, disagrees with Obama's drilling policies. Still, he said: "It's not credible to blame the Obama Administration's drilling policies for today's high prices because of the relative scales involved." He further stated that "world oil prices are determined in a market of around 85 million barrels per day of production and consumption, while the consequences of domestic drilling, particularly in the Gulf, likely would be more in the range of several hundred thousand to one million barrels per day, and most of that production would not occur for a number of years." [Email to Media Matters, 3/10/11]
- Moratorium Has "A Miniscule Impact On The Price Of Oil." Severin Borenstein, director of the University of California Energy Institute and business professor at the Haas School of Business, said that "the economic value lost from reduced production is real, especially when the price is so high," adding, "BUT these numbers are very small relative to the world oil market and have a miniscule impact on the price of oil. The best estimates are generally that even a very short run output decline of 1% raises world oil prices by about 5%. Even that is probably overstated given the slack capacity that other producers have. So, the changes we're talking about here, probably are raising oil prices no more than 1%-2%, which is 2-5 cents at the pump." [Email to Media Matters, 4/22/11]
- "It Doesn't Even Move The Needle." Fadel Gheit, energy analyst at Oppenheimer & Co. told FactCheck.org that "[o]nly the naïve will think that" the deep-water moratorium "will have a direct impact." He added: "It doesn't even move the needle. Is 100,000 barrels (a day) going to make a difference? It's not. A cent or two per gallon? It might. But there are much bigger factors." [FactCheck.org, 3/24/11]
- "The Loss Of A Small Amount Of Domestic Production Has Had A Minimal Effect On Gasoline Prices." Chris Lafakis, economist at Moody's Analytics, said: "If we take the EIA and Makenzie at their word, the effect of this lost production has been an increase in gasoline prices of anywhere from 3 to 5 cents per gallon." He added: "Given that gasoline prices have jumped by 68 cents per gallon just since late February (which is largely the result of turmoil in Libya), it is safe to say that the loss of a small amount of domestic production has had a minimal effect on gasoline prices compared to other factors such as the loss of oil and natural gas liquid production in the Middle East and North Africa, the depreciation of the U.S. dollar and the expansion of the oil supply uncertainty premium. You can call this last factor the rise in oil prices related to non-fundamental factors (fear of further unrest, speculation, financial demand)." [Email to Media Matters, 4/21/11]
- "Americans Tend To Exaggerate The Price Effects Of Fluctuations In Domestic Production." Joseph Dukert, independent energy analyst and former president of the U.S. Association for Energy Economics, said in an email: "The dip in offshore production brought about by the partial moratorium will more likely be felt 8 to 10 years down the road because of the interruption to exploratory efforts as a result of uncertainty. Overall, though, Americans tend to exaggerate the price effects of fluctuations in domestic production in relation to the total amount of oil in global trade. On the larger stage, the perception of geopolitical risks is more important." Dukert added, "Over the next few years, decreases in demand for gasoline (whatever the reason for this possible factor) could also have greater impact -- a favorable one for consumers in that this would restrain pump-price increases." [Email to Media Matters, 4/21/11]
- It's A "Total Stretch" To Blame The Moratorium For Spike In Gasoline Prices. John Kingston, director of news at energy information firm Platts, stressed that all oil produced in the U.S. "goes into the great big world supply" where "nobody could hide" from events around the world that affect the price of gasoline. He said that while the U.S. can and should work to increase the global supply of oil, it's a "total stretch" to say that the deep-water moratorium has had a significant impact on gasoline prices. [Phone conversation with Media Matters, 4/22/11]
- "Gasoline Prices At The Pump Would Be Higher Either Way." Lou Crandall, chief economist of Wrightson ICAP LLC, said: "Higher oil prices today are a global phenomenon, and the additional supply from increased drilling by the U.S. would not alter the global balance of supply and demand greatly. Gasoline prices at the pump would be higher either way. The only difference is that a somewhat larger share of the revenue would accrue to domestic interests (governmental and private) rather than to foreign suppliers." [Email to Media Matters, 3/14/11]
So there you have it: a purported media watchdog organization calling for news outlets to report a false talking point as fact.
UPDATE: Eric Bolling, a Fox Business Network host who also appears on Fox News as a business analyst, hosted Cliff Kincaid of Accuracy in Media to discuss the MRC report. Kincaid said: "The fact is most of our reporters don't understand economics. They don't understand supply and demand ... They probably didn't take economics in college":
Bolling later added: