Happy New Year. Get ready to pay more at the pump.
You have probably heard all the news that gas prices are up and are poised to move even higher. The national average for a gallon of gasoline recently reached $3.12 and experts say a price of $5 is quite possible within two years. That would put gasoline prices well above the levels reached during that memorable summer of 2008, when some commuters said they could no longer afford to drive to work.
Here’s the back story consumers may not be as familiar with: Large swaths of the oil-rich Gulf of Mexico remain off limits to exploration, months after the Obama Administration lifted its ban on deep water drilling.
The Wall Street Journal reported this week that Gulf drilling remains stalled, and that multibillion dollar projects in the region are on hold, hurting major oil companies and independent operators alike, as well as the entire Gulf Coast economy. To illustrate just how onerous regulations and permitting processes in the region have become, the Journal reports that shallow water drilling has also fallen under increased scrutiny, even though that was never formally included in last year’s temporary moratorium.
Three years after the country entered the worst recession since the Great Depression, there are finally some signs of economic recovery. But that recovery is extremely fragile and may not be able to withstand a gas price shock. When oil prices rise, prices of just about everything else are also pushed higher. At first, this is most noticeable for those of us with lengthy commutes, but the ultimate impact is much broader. Prices for food staples like milk and eggs rise as the cost of transporting them goes up. Ditto for consumer durables – those products like refrigerators and furniture that consumers delay purchasing when times are tight and return to when they have a little more disposable income. But if prices of such goods are prohibitive, or if consumers are spending too much on essentials like transportation and home heating oil, discretionary purchases are further delayed.
In short, our entire economic outlook is tied up in the price of oil. Yet, at a time when our economy needs all the support it can get, we are failing to tap our own supply of domestic oil.
Make sense? We don’t think so either. In the coming weeks, we will have more to say about domestic gas prices and domestic drilling, the domestic economy and the ongoing shortage of jobs. We hope you will join us in supporting reasonable policies that promote growth and recovery.