Oct. 23, 2012 at 2:33 PM ET
In a week that saw President Barack Obama poll dead-even with Republican rival Mitt Romney in the race for the White House, it may have been some relief to Democrats that gas prices have shed 17 cents in the last 12 days.
While that could help boost the president's chances for another four-year term (or at least not hurt them), the drop in prices has more to do with luck than with White House energy policy.
After refinery bottlenecks sent prices surging ahead of a seasonal switch from summer to winter gasoline blends, those kinks have been cleared and gasoline has begun flowing smoothly again.
The global oil markets, meanwhile, are awash in oil thanks to a global economic slowdown that has cut into demand. And while tighter sanctions on Iran have crimped that country’s oil exports, any shortfall has been more than made up by rising U.S. production set in motion by forces in place before Obama took office.
For all the spirited debate about the success or failure of the White House's energy policies, presidents have little control over the market forces that drive gas prices higher or lower.
“(Obama) gets blamed for high gasoline high prices -- which he has nothing to do with -- and he takes credit for higher production -- which he has nothing to do with,” said John Kingston, director of news at Platt’s. “So maybe it all sort of balances out.”
The timing of the pump price plunge comes as the candidates continue to pound each other over energy policy. After surging to more than $4 a gallon in many parts of the country, the national average price of a gallon of regular has fallen by 13 cents to $3.58 in the past week, according to Energy Department data.
The sharp slide is expected continue, according to AAA, pulling average pump prices down to between $3.40 and $3.50 by Election Day and $3.25 to $3.40 by Thanksgiving.
The prospect for that continued decline rests, in part, on continued stability in the price of crude oil, which has remained remarkably steady despite ongoing tensions with Iran over its nuclear program.
As the U.S. and its allies have tightened the noose on Tehran this year, the loss of oil revenues has plunged the Iranian economy into chaos. Crude oil sales generate about half of Iranian government revenues. Oil and oil products make up nearly 80 percent of its total exports, according to U.S. estimates. Oil analysts calculate that the sanctions have blocked sales of roughly 1 million barrels a day, or about a quarter of Iran’s production capacity.
The lost oil income has lopped roughly a third off the value of the Iranian currency, the rial, relative to the dollar, sparking a round of painful inflation for Iranian consumers and putting added pressure on the Iranian regime to end its nuclear weapons development program.
On Tuesday, Iran said it would halt oil exports altogether if Western sanctions tighten any further.
"We have prepared a plan to run the country without any oil revenues," Iranian oil minister Rostam Qasemi told reporters in Dubai. "If you continue to add to the sanctions we (will) cut our oil exports to the world. ... We are hopeful that this doesn't happen, because citizens will suffer. We don't want to see European and U.S. citizens suffer."
Until recently, the threat of a full cutoff of Iranian oil production would have been enough to send crude prices soaring. But with global demand slowing because of sluggish economies, the oil markets have remained surprisingly stable.
That could change if Iran ups the ante and moves to restrict oil shipments from other oil producers in the region. One long-standing worry in the oil markets is the potential crimp in supplies from military action in the Strait of Hormuz, the global pinch point bordering Iran through which roughly 20 percent of the world’s oil flows every day.
An Iranian blockade remains a constant threat to global oil supplies. Last month, more than 30 nations, led by the U.S. Navy, conducted naval exercises that included efforts to thwart a simulated mining of critical shipping lanes.
The results were not reassuring, according to a report by PBS Newshour.
Of the 29 simulated mines that were dropped in the water, “I don’t think a great many were found,” retired Navy Capt. Robert O’Donnell, a former mine warfare director for his service, told the NewsHour. “It was probably around half or less.”
U.S. oil refiners are getting an even bigger break on crude prices. That's thanks to a steady rise in North American production captive to a pipeline system that was designed and built before recent production surges in Canada and revived U.S. oilfields. Much of the credit goes to advances in technology that have had little to do with U.S. energy policy. But the gains have been both unexpected and dramatic.
Since 2009, shortly after Obama took office, U.S. oil output has risen by roughly 1.6 million barrels per day, ending a more than tw-decade decline in production. The glut of oil has depressed domestic prices compared to the global benchmark, providing U.S. refiners with a discount of about $20 a barrel below the global price of about $110. That lower U.S. price will continue to help keep U.S. pump prices in check.
The domestic oil boom has also helped cut unemployment in energy-producing states, adding roughly 1.7 million new jobs this year, according to IHS Global Insight’s energy research group. That number could rise to almost 3 million by 2020, the firm said in a study released Tuesday.
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