President Barack Obama may want to curb the country's dependency on foreign oil, but his plans to do so are not only ill-fated but are also nothing new — and in reality, only a recession can do the trick, says economist and author Jeffrey Rubin.
Obama says the U.S. should explore for more oil at home and drive more efficient cars.
Every president during the last four decades has said the same, but the U.S. still imports more than 50 percent of the 19 million barrels of oil burned every day, Rubin writes in the Huffington Post.
|Barack Obama (Getty photo)
"In many ways, Obama's plan is reminiscent of his predecessors by supporting more government subsidies for energy alternatives such as nuclear and bio fuels," Rubin writes.
Support for nuclear energy may be tough in wake of the Japanese Fukushima disaster, while ethanol production has pumped up food and fertilizer prices.
"Unfortunately, these initiatives have in one way or another been tried before by previous administrations. And many look less credible than they have in the past," says Rubin, former chief economist at CIBC World Markets.
Downturns in economic activity, meanwhile, have curbed oil imports in the past.
"So far, recessions have been the only surefire way America has cut back on its fuel consumption and the need for oil imports. But, of course, that is not an option any U.S. president can pursue," says Rubin.
Friday, oil surged above $112 per barrel following a drop in the dollar and continued jitters about shipments from the world's major oil suppliers. Benchmark West Texas Intermediate for May delivery jumped $2.45, or 2.2 percent, to $112.75 per barrel in afternoon trading on the New York Mercantile Exchange. Crude oil set new 30-month highs almost every day this week.
Analysts said oil moved higher as the dollar plunged against other major currencies. Oil is traded in dollars and tends to rise when the greenback falls and makes crude cheaper for investors holding foreign currency.
Oil also climbed on fears that violence in Nigeria ahead of the country's national election this weekend could lead to supply interruptions. And in Venezuela a massive blackout appears to have affected some refineries, analysts said. The two countries supply a combined 2 million barrels of oil per day to the U.S.
If crude prices keep rising, experts say, gasoline prices could hit $4 a gallon across the U.S. this summer, the Associated Press reported.
Pump prices have jumped from $3.07 to $3.74 per gallon since the beginning of the year. The swift rise forced the Oil Price Information Service to boost its retail gasoline price forecast to a range of $3.75 to $4 per gallon this year. OPIS chief oil analyst Tom Kloza said it may not be long before the national average tests the all-time record of $4.11 per gallon set in July 2008.
Further price hikes could do serious damage to the U.S. economy, he said. For consumers, "gas prices have more relevance on an emotional level than a lot of other things that they pay for," Kloza told the AP. "People pay more attention to gasoline than phone service, cable TV or other services," Kloza said.
Many agree with Kloza.
"The surge in oil prices since the end of last year is already doing significant damage to the economy," says Mark Zandi, chief economist at Moody's Analytics, according to the Associated Press.
But a top Federal Reserve official said he expected commodity prices to stabilize and have a minimal effect on underlying U.S. inflation trends, even if costly fuel did put a dent on household budgets, Reuters reported.
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