In Tom Fowler’s WSJ piece this morning, we hear again the lesson that short term fixes can’t bring down oil and gasoline prices,  ”that the global economy and geopolitics, not the U.S. industry or economy, are driving” them.  This is too true, and is the answer to the question Fowler poses at the beginning of his piece:

“America is pumping more oil out of the ground than it has in years thanks to a surge in onshore drilling. U.S. refineries are producing more gasoline and diesel than ever. And Americans’ gasoline consumption is at an 11-year-low.  So with all that supply and not much demand, why have gasoline prices risen high enough this year to resurface as a national political issue?”

To say that the global economy and geopolitics drive oil and gasoline prices is not the same thing as saying American policy-makers can’t do anything about the dangerous linkages between high energy costs and dismal economic performance.

As Fowler reports:   “Experts say that over the long run, increased oil production in the U.S. might temper global prices, and getting that oil to more refineries across the country could help bring down prices at the pump. But for now, U.S. prices remain tied most firmly to Brent, which is being driven mainly by factors such as China’s sharp economic growth, even as that has moderated recently.”

So one side of the equation is increased domestic production — something we are enjoying under this Administration due to actions taken by previous ones.  And of course much more can be done there.

The other side of the equation is diversifying our fuel mix so our economy is less dependent on petroleum from any source.  Congress took strong action on that front in the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007 when advanced biofuels were given market incentives and new R&D authorizations.

The next step is to turn our abundant domestic natural gas into a much more common alternative transportation fuel — both directly, where it makes sense (in the freight sector, for example) and indirectly, through the generation of electricity for an increasingly electrified personal transportation system.

Demand is down today due primarily to a poor economy and high prices.  In future, demand will drop as cheaper (and cleaner) alternatives take more and more market share away from petroleum — spurring, not impeding economic growth.

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