Why is this happening? Analysts and commentators like to say oil is "very complex," but in reality it's fairly simple. Oil is a futures market. Traders in oil futures deal with what they think will happen with respect to their commodity. They are far more aware than ordinary citizens of who is doing what (or not!) about oil supplies. What did they see during the past year? And what were the consequences of what they saw?
Before July 2008, traders and speculators saw that the USA had locked up significant oil reserves - in the Alaskan National Wildlife Reserve (ANWR) and off-shore, on both east and west coasts - for political reasons. Those reserves couldn't be touched because of presidential executive orders signed by George H. W. Bush and Bill Clinton, which blocked drilling for that oil. Also, the Congress had ordered the same restrictions, via riders to the Department of the Interior's appropriations, every year since 1982. With those orders in place, traders could bid oil futures up, secure in the knowledge that nothing would change the USA's supply situation anytime soon.
But in July 2008, with oil prices leaping upward, and with gas heading for $5.00 a gallon, President Bush undid the orders previously signed by Presidents Bush (41) and Clinton, with his own executive order. Although this release could not enable new drilling, since the congressional ban still remained, the price of oil immediately began to fall on world markets. On the very day Mr. Bush signed his new order (July 14, 2008), oil fell by $6 a barrel. Traders sensed that the market had peaked, and prices continued to drift downward through the summer. By mid-August, oil stood at $113 a barrel - a drop of 23% since the high point in mid-July.
Politics is the wild card in this game of commodity "chicken." With media attention focused on oil and gasoline prices, Congress dared not renew its annual blockage of offshore drilling. When their 2007 order expired, on September 30, 2008, oil prices went into freefall. By year-end, oil was trading at $31 a barrel, and gasoline was well under $2 a gallon.
In a previous article I said Mr. Obama and the Congress had the Luck of the Irish, as the crash took high gas prices - the killer of several previous presidents - off the table as an election issue. I also expressed a hope that Mr. Obama would not be foolish enough to re-instate the prohibition on coastal and ANWR drilling. I predicted that such action would send prices soaring again.
With so many other economic problems on his plate, one would have thought Mr. Obama would simply have left oil alone. But one would have been wrong. With very little fanfare or media attention - much to his advantage - Mr. Obama quietly took action to block offshore drilling plans that the Bush administration issued in January 2009. As detailed in a Washington Times article of February 11, 2009,  the Obama administration's actions blocked not only offshore drilling but also drilling on public lands in Utah. Interior Secretary Ken Salazar criticized Mr. Bush's new drilling plans - put in place just days before his term expired - as a "headlong rush of the worst kind."
"Renewable energy companies and the interests of American consumers and taxpayers were overlooked," said Mr. Salazar.
Hardly anyone noticed what Mr. Obama had done, but a few bloggers fired shots across the Obama bow. I have excerpted some of their comments below.
(dittoman) "It was a headlong rush of the worst kind... a process rigged to force hurried decisions based on bad information," said Salazar. If this were a statement describing the bailout/stimulus/spending/pork/earmark bill it would make sense and be insightful... These people are so short sighted and hell-bent on pleasing the greens. When our gas prices rise it will be their fault and they should be held accountable.
(Jaeger) ...it seems that our ignorance of history is going to doom us to relive the 70s and Jimmy Carter's second term. I love this Wash Times quote: "Mr. Salazar also chastised the Bush administration's snubbing of offshore wind farms..." Why doesn't Mr. Salazar also chastise Sen. Ted Kennedy who blocked offshore wind farms from being built near his seaside estate?
(chuck4201) Offshore drilling is absolutely necessary to ease our dependence on foreign oil and natural gas. Renewable projects like wind turbines and solar panels are far too expensive and unreliable to be very useful.
(caseclosed) Remember this change when O-bankrupt-u brings back the Jimmy Carter gas lines. This will happen when the oil producing nations find out that he is on their side not ours.
(ajclay) Why do the Democrats and the greenies insist that we depend on hostile foreign countries for our petroleum? I have nothing against developing alternative sources of energy, but until those sources are as accessible as petroleum-based fuels, we need oil. We have it RIGHT HERE in our own country. It makes no sense to restrict drilling where we KNOW the oil is. This is not about "the environment" or "climate change," it's about reducing the American standard of living and weakening us to third-world status for "the greater good." Makes me SICK!
(dbl06) The goal here is simple. Drive the price of gas back up to $4.00 a gallon to justify the cost of developing "green" energy.
(stratabuse) This really proves Obama's inability to understand our economic situation. As I recall, during the election he said that he supported drilling as public opinion supported it, just like public financing of his campaign... The people get the government they deserve.
(Jamalagrin) President Obama said we must stop depending on foreign oil. Is this how we do it - by refusing to drill under the ground and off of our shores for the billions of barrels of oil, while our enemies race to drill for oil off our coasts? Just another example of how our nation is going down the toilet at light speed.
(Loadmaster) Obama will be a one term POTUS. When is America going to wake up and see the direction this country is heading? It will take us years to undo what this guy has done in 3 weeks. Drill baby Drill!
(Unbelievable) ATTENTION OIL SPECULATORS! Yes you, the ones who drove prices to 150 bucks a barrel last year. Time to get back in the market. This time see if you can push gas to $5 a gallon!
(ds80) The Obama Energy Solution: increase sources and quantities of energy by reducing sources and quantities of energy. All you Obama voters out there: you had better start realizing you didn't get what you thought you were voting for. Remember that, when gasoline is above $4/gallon and you're in a gas-line.
(adcran) It is certainly Jimmy Carter time in Washington D.C. again: OPEC laughing their heads off; Chavez sends his best to our new president!
(Svenolafson) OK, so during the election when gas prices were high the Dems agreed to allow offshore drilling. Now, since they won the elections, they have banned it. Remember when we had those insane prices? Remember the blah-blah, about how any new drilling wouldn't affect the markets for 5 to 10 years? The next time we get high gas prices we'll hear the same spiel about how it won't have an affect for 5 to 10 years. Pathetic. If I hear that argument again I'm going to punch that person in the nose.
(JFKdem) What a shame. Our first black President - a historic event - will join Jimmy Carter as our nation's worst president because he has chosen to govern from the far left rather than the middle. The 60 million Americans who voted against him mean nothing to him. The radical left is his base. Every day those that voted for him are having second thoughts, and that 60 million number is increasing. If he continues on this path, in four years he will become a single term president.
(Smallgovt) You've got to be kidding. This is satire, right? Will someone please explain basic economics to Barry? Maybe tie in the national security implications associated with giving all our money to jihadi funders? Obama's pork-fest knocked the bottom back out of the stock market too. So our first and best weapon against terrorism, a thriving economy, is off the table as well.
(Maranatha.Shalom) When Americans finally wake up and throw out the Democrats, I hope there is a country left to salvage.
As several bloggers suggested, someone else was watching what Mr. Obama did in February: i.e., oil-futures traders. Hardly was the ink dry on his new orders when oil prices began a steady rise. At $70, oil is now more than double its low price of December/January. We're within hailing distance of $3-gas. Soon people will be shelling out $40, $50, $60 and more for a tank of gas, once again. Those halcyon days when we shipped hundreds of billions a month to foreign satrapies will have returned. Glorious! (And how about that economic recovery?!!)
Oh, yes, we'll see recurring attempts to blame the whole thing on George W. Bush, but that horse has been beaten to death. Mr. Bush is long-gone, and Mr. Obama will be in a soup of his own making. (He already is, but he's trying to keep us from noticing it with distractions like Israel, North Korea, Iran, and the Great Apology Tour.)
Smooth words won't do it this time. You can talk, you can globe-trot, you can apologize, you can grovel. You can talk, talk, talk, talk, talk. (You can grovel.) You can run, but you can't hide.
Nobody likes high gas prices! Mr. Obama is about to find that out the way Richard Nixon, Jimmy Carter, Al Gore, George W. Bush and John McCain did. Good luck to him. He's going to need it. Even his friends in Big Media won't be able to save him.