Red, Green, and Blue

You don’t have to be an overpaid political tele-pundit or campaign strategist to notice that the Republican Party wants to make oil the critical issue in the 2008 election. From the onslaught of illogical television advertisements paid for by Republican presidential hopeful Senator John McCain that blame Barack Obama for high gas prices, to the GOP sit-in on the floor of the House, and the most recent calls to “Drill, Baby, Drill,” Republicans have made “energy” their raison d’etre in this prickly campaign season.

Republicans are hoping to use oil to create a so-called “wedge issue” and divide Democrats, bringing some extra votes to their side on November 4. Despite where your politics lie, you’ve got to tip your cap to GOP cohesiveness on the oil issue - Republican leadership has all of their underlings following in lock-step - but the misdirected focus will be a fatal flaw for the Republicans if they stick to the “oil or nothing” strategy. Here’s why:

1. Demand for oil is down. Demand for oil in the U.S. continues to fall, dropping by 891,000 barrels per day in May compared the same month a year ago, according to the latest Energy Information Agency numbers. The U.S. Transportation Department reported that U.S. drivers logged 9.6 billion fewer vehicle miles in May — or 3.7 percent — compared to the same period last year, the biggest drop ever for the historically busy summer driving month. And after a long telephone conversation with economist Jim Williams of WTRG Economics this morning, I’m of the belief that consumption will continue to fall, triggering further declines in demand and, ultimately, prices of oil. Also contributing (however slightly) to a drop in demand is an uptick in fuel economy. For the fourth consecutive year, EPA is reporting an increase in the average fuel efficiency for cars and light duty trucks, to a projected 20.8 miles per gallon (mpg) for 2008.

2. The Price of Oil is Down. Concomitant with falling demand are falling oil prices. When I first started working on this post back in August (I shelved it for a little while), I planned on remarking on the falling price of oil. In the early part of August I wrote about the sudden and rather surprising drop in the price of oil. “Light, sweet crude for September delivery fell to $122.84 a barrel on the New York Mercantile Exchange. Prices have now fallen more than $25 from their high of $147.27, reached July 11,” I wrote. Little did I know back then that we would see a further collapse of global financial markets bringing the price of light sweet crude oil even lower. As of yesterday, NYMEX price of Crude Oil Futures closed at $97.88/barrel - dropping below the $100 mark - a figure some economists and energy analysts suggested we might never see again.

3. Democratic pragmatism. The willingness of not small ‘d’, but large ‘D’, Democrats to alter their position on political issues is not a detractor. Since when is contingency a bad word? If a person (or a party) is so entrenched in the politics of conviction, then they must already know everything, right? Conviction only goes so far, what happens when someone (or some people) are convinced about something, refuse to alter their position on that thing, and then turn out to be wrong? Democrats should take ownership of their pragmatism, and not shy away when they are accused of “flip-flopping.”The swelling ranks in the bi-partisan coalition “Gang of 16” give more credence to the notion that Democrats would be willing to discuss some increases in offshore drilling if renewable energy tax credits are part of the deal. Recent public comments and actions from Democratic presidential nominee Barack Obama and Speaker of the House Nancy Pelosi suggest they would be open to discussing limited increases in offshore drilling.

4. “Drill here, drill now” and “Drill, Baby, Drill” philosophies are turning people off. I don’t get it. If Americans don’t believe an uptick in domestic oil drilling will have any appreciable effect on consumer gas prices, why are Republicans hammering away with these catchphrases? PR professionals have roles to play in most any political campaign, but formulating energy policy should not be one of them. may be perceived as a move to sate McCain’s big oil donors that began fatten his campaign coffers earlier this summer. The Washington Post reports Campaign contributions from oil industry executives Sen. McCain rose dramatically in the last half of June, after the senator from Arizona made a high-profile split with environmentalists and reversed his opposition to the federal ban on offshore drilling.

5. Climate change and carbon taxes. I’m really surprised I put this last, but that does not mean it is any less salient from my point of view. At some point the reality of increasing production will come face-to-face with the very real possibility of a carbon tax. Whether we see a true tax on carbon, or we see some sort of cap-and-trade (even though former GOP presidential candidate and current McCain economic adviser Steve Forbes disparaged Sen. McCain’s cap-and-trade plan), there will finally be a cost to pumping GHGs into the atmosphere, the question is how much will that cost be. Regardless, it will add to the price of gasoline, making drilling for even more oil a questionable move, at best.

Related Posts:

• “Drill, Baby, Drill?” Republicans Try Out Stupid New Catchphrase
• Obama Campaign Seeks to Make Oil Prices Irrelevant
• Poll: Americans Don’t Think More Drilling Will Lower Gas Prices
• McCain Credits Bush for Drop in Crude Oil Prices, White House Replies: ‘It wasn’t us.’
• McCain Calls for More Offshore Drilling: What Else Would he Say in Houston?
  

Photo: Nestor Galina via flickr under a Creative Commons License
Graph: Courtesy of WTRG Economics

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