Presidents have little immediate power over fuel prices

A motorist pumps gas into his vehicle Friday in Los Angeles, where gasoline prices have risen for the 25th straight day in Los Angeles County, reaching ﻿their highest ﻿point since July 25, 2008. ﻿ A motorist pumps gas into his vehicle Friday in Los Angeles, where gasoline prices have risen for the 25th straight day in Los Angeles County, reaching ﻿their highest ﻿point since July 25, 2008. ﻿ Photo: FREDERIC J. BROWN Photo: FREDERIC J. BROWN Image 1 of / 1 Caption Close Presidents have little immediate power over fuel prices 1 / 1 Back to Gallery

Soaring gasoline prices tempt politicians in a way that many can't resist.

Newt Gingrich has pinned his presidential campaign's fading hopes on a promise to bring back $2.50 gas. Michelle Bachmann before him vowed $2-a-gallon gasoline, until she dropped out of the race.

Lest anyone forget, then-candidate Barack Obama used record high gasoline prices in 2008 to push plans for renewable energy. To opponent John McCain, the same price spike proved the need to "Drill, baby, drill!"

All were trying to tap the anger and frustration voters feel when pump prices jump. But American presidents can't control the markets for oil and gasoline. They have several tools for influencing prices in the future, but all take years to have an effect - and the effect isn't guaranteed.

"If you ask what the president can do now, there's very few options," said James Sweeney, director of the Precourt Energy Efficiency Center at Stanford University. "That's one of the unfortunate things about energy problems. The system is so big, it really is like steering a tanker ship. You can't change the direction very quickly."

In the short term, presidents can try to tame the bull market for oil by selling crude from the nation's emergency stash, the Strategic Petroleum Reserve, which holds 696 million barrels. Obama is under pressure from his own party to do so now.

But past sales from the reserve have had only a brief - and debatable - effect on gasoline prices. Many energy experts caution against using the reserves for any reason other than a genuine shortage or emergency.

"That is exactly what you use a strategic stock for - you put it in store for a rainy day, and when one of the world's largest producers goes offline, that's a rainy day," said John Kingston, director of news for the Platts energy information service. "We don't have a rainy day right now. We have uncomfortably high prices."

Long-term options

Gasoline prices are, indeed, uncomfortable. The national average for regular hit $3.74 on Friday, according to the AAA. In Houston, the average reached $3.56.

Long-term options to try to influence prices include boosting domestic oil production, cutting gasoline demand, using more biofuels and encouraging drivers to buy electric cars. The United States is doing all of those.

Domestic oil production has grown each year since 2008 - the first multi-year increase since the 1980s. Gasoline consumption, meanwhile, has fallen, as people switch to more fuel-efficient cars. It's almost 7 percent lower now than a year ago, according to the Energy Information Administration.

Global influences

Yet prices are rising anyway, for a simple reason. More than at any time in history, gasoline prices are set by a global market, based on global supply and demand.

In other words, it's no longer just about us.

"Small reductions in our imports - which is what we're really talking about - have to be measured against the world supply and demand of oil," Sweeney said. "The price we pay is shaped by the world price."

Obama has argued that America needs an "all-of-the-above approach," with more drilling as well as efforts to cut consumption and find alternatives. Many congressional Democrats and Republicans have pushed the same basic idea, although they differ on the details.

Gingrich, in contrast, focuses solely on increased production.

In a 28-minute online video on energy policy, he argues that a combination of offshore drilling and onshore hydraulic fracturing can produce enough oil to render Middle Eastern turmoil irrelevant. Gingrich also would approve the Keystone XL pipeline expansion to bring fuel from the Canadian oil sands to America's Gulf Coast.

Finally, he says he would scrap fuel-efficiency standards for cars. Under his plan, America would have enough oil and gasoline, Gingrich says, that the standards wouldn't be needed.

Production, demand

Critics, including Obama, counter that the U.S. has just 2 percent of the world's oil reserves while it consumes 20 per- cent of the world's oil. Gingrich says the nation's potential oil supplies are far larger, now that using fracturing for oil has become economical.

Many energy experts say the government must focus both on increasing production and decreasing consumption. And even that won't guarantee low prices, although it could help.

"You're seeing an increase in domestic oil production - that's all great," said Ken Medlock, an energy research fellow at Rice University's Baker Institute for Public Policy. "But you can't forget about the demand side. The trouble is, you have to do both. And that's where you run into political trouble, because one side of the aisle wants to do one and the other side wants to do the other."

For a policy to work, Medlock and others say, it must be left in place for years, so that companies can invest in long-term projects with certainty. But the government often doesn't work that way.

dbaker@sfchronicle.com