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LAMBRO: Recovery in jeopardy
Obama’s oil aversion drives fuel costs up and economic growth down
Question of the Day
Americans are getting hit on all fronts nowadays. Wages are flat or falling. Income-tax bills are due by April 18. Food prices are rising. And gas prices that are soaring toward $4 a gallon now threaten to reverse the nation's economic-growth rate.
Gasoline prices are rising because of the skyrocketing price of oil, which this week topped $108 a barrel. A gallon of regular averaged $3.71, according to AAA's daily tracking survey Wednesday, up by nearly 90 cents in the past year. But in many parts of the country, gas prices have soared above $4.
This is not only squeezing consumers and businesses across the board, it threatens the nation's economic recovery to the point where top economists are now dramatically lowering their previous growth forecasts. That means a weakening recovery and slower job growth.
"The surge in oil prices since the end of last year is already doing significant damage to the economy," says chief economist Mark Zandi at Moody's Analytics.
Mr. Zandi says economic growth will be a 0.3 percentage point lower if oil prices remain more than $100 a barrel this year. Should prices surge to $125 a barrel, economic growth would be cut by a full percentage point, and if it goes higher, that could drive the economy back into a recession.
The economy was modestly growing by a little more than 3 percent in the fourth quarter of 2010, though not enough to make a big dent in a nearly 9 percent unemployment rate.
But Mr. Zandi estimates that oil prices have sliced a half a point from the January-March first-quarter growth rate. That will push economic growth to a feeble 2.6 percent, which could drive jobless rates back to higher levels again.
Bernard Baumohl, chief economist at the Economic Outlook Group, has reduced his growth forecast this year from 3.5 percent to 2.8 percent.
As consumers are forced to spend more at the pump, that means they have less to spend on everything else. An Associated Press-GfK poll released this week found that "two-thirds of Americans say they expect rising gasoline prices to cause hardship for them or their families in the next six months."
Seventy-one percent say they're cutting back on other purchases to offset higher gas prices; 64 percent were driving less; 53 percent said they were abandoning vacation plans this summer and staying "closer to home."
What is the Obama administration doing about higher oil and gas prices? The short answer is "not much."
President Obama came into office, emphasizing a major switch in energy policy to biofuel research (still years away from becoming a viable, cost-efficient, energy alternative), costly electric cars few can afford, and other green-energy alternatives that remain a distant dream and come with a costly price tag.
But Mr. Obama played down or opposed new oil exploration here at home and more gasoline refineries to make the U.S. more energy independent.
Now, as he officially begins his presidential campaign, and with gas prices turning into a growing political and economic issue that could damage his re-election prospects, he's speaking out about energy independence again, though it sounds like the same old, same old.
"Presidents and politicians of every stripe have promised energy independence, but that promise has so far gone unmet. That has to change," Mr. Obama said in a speech last week as oil and gas prices soared and polls showed it was becoming a threatening issue for his presidency.
The Associated Press said the speech contained some new ideas, "but many he's previously announced" before. It had the hallmarks of a hastily put together message to show he was on top of this issue. He isn't.
Energy independence means developing our own vast resources of oil in the Arctic region and in deep-water, offshore fields in the Gulf of Mexico and elsewhere. But drilling permits have slowed to a snail's pace in the last two years. And drilling in the Arctic National Wildlife Refuge, along with other reserves, is off-limits.
The administration, in an attempt to blunt Republican criticism that the president remains hostile to fossil fuels, particularly oil, now says it's begun approving deep-water permits - at least seven in recent weeks and others in shallow-water drilling. Wow. Do you think this is in response to our energy needs, or damage control on the rising price of gas?
The fact is that Mr. Obama's moratorium on deep-water exploration has made us more dependent on foreign oil, not less. And it is going to take a long time before these permits result in oil production.
Mr. Obama knows that America still runs on oil, but his heart isn't in it. In his speech last week, he talked wistfully of developing four new biofuel plants over the next several years. But these biofuels - made from switch grass, wood chips and other plant matter - are far from becoming economically viable energy sources, and in the end, they may never be.
The administration said that Mr. Obama's futuristic energy plans will require a lot of money for research and development, but they gave no estimates of what it will cost us. Meantime, he ordered every government agency to buy a fleet of costly alternative-fuel vehicles by 2015, including hybrid and electric. The taxpayers, who are paying through the nose to gas up their own cars, will have to foot the bill.
Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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