Three executive actions the Obama Administration can take to lower gasoline prices


Posted by Chris Prandoni on Tuesday, February 12th, 2013, 3:01 PM PERMALINK


Since Obama was sworn in, the price of gasoline has risen from $1.84 to $3.60. Much like perpetual high unemployment rates, expensive gasoline might be one of the lasting legacies of the Obama presidency.

But this doesn’t have to be so. Blaming Republicans for Congressional gridlock, President Obama has not shied away from using his “privileges” as executive of the United States: from the illegal drilling moratorium after the Macondo disaster to unconstitutionally appointing members to the NLRB, Obama flexes his muscles with some regularity.

While the below suggestions would likely upset blocks of Obama’s base, his reelection should allow the president to put policy before politics, and alleviate Americans’ pain at the pump.

Approve the Keystone pipeline
If Republicans and Midwest Democrats sound like a broken record, it’s because TransCanada filed the Keystone XL pipeline paperwork over 1600 days ago. Even after Environmental Impact Statements found that the pipeline was totally safe, Obama refuses to approve the project. Apart from the immediate 20,000 jobs the $9 billion project would create, the Keystone pipeline would also be a boon to American refiners which currently import heavy crude from Venezuela.

Refining gasoline is a lot like making a fancy cocktail – it is a multistep process that requires many different ingredients. One such ingredient is heavy, dense crude – the same oil that would be transported by the Keystone pipeline or imported from Venezuela.  Not only is it cheaper to ship oil from our northern NAFTA ally – boats and the requisite insurance isn’t free – it is also safer.

Obama should approve the Keystone pipeline which will deliver 830,000 barrels of oil to refiners in Texas and Oklahoma every single day.

Suspend the Jones Act
The cheaper it is to get American oil to refiners, the cheaper manufactured gasoline will be. While pipelines represent one way for oil producers to transport oil, another means is to ship the oil by boat. Unfortunately for American consumers, an arcane union subsidy referred to as the Jones Act requires that all shippers transporting goods between two points in the United States to use vessels built in the U.S., owned by U.S. companies, and manned by American crews. This strange protectionist policy is a holdover from the 1920s and is inflating the cost of shipping oil by over 300 percent per barrel. From the WSJ:

John Demopoulos of Argus Media, which tracks pricing, estimates that foreign-flagged carriers could move oil from the Gulf Coast to the Northeast for about $1.20 a barrel, compared with $4 a barrel on U.S. ships.

Mr. Kunkel said the ships cost about $35 million to $50 million to build in Europe. But under the Jones Act, he'd need to buy American. The U.S. price: more than $100 million per ship. He shelved his business plans.

Since the Administration is dragging their feet on Keystone approval, temporarily suspending the Jones Act so oil producers can ship North Dakota oil through the great lakes, for a reasonable price, makes sense. This move would not be unprecedented – President George W. Bush waived the Jones Act immediately following Hurricane Katrina. Of course, full repeal of the Jones Act is preferable but suspension as a bridge to Keystone pipeline completion is a good place to start.   

Scrap EPA’s Tier 3 sulfur rule
Last spring the EPA delayed Tier III sulfur rules – apparently only until after the election –since on January 29, 2013, the EPA submitted the rulemaking to the Office of Management and Budget. Presumably, the EPA would not have delayed the Tier III regulation if it was something consumers wanted.

Tier III is a discretionary rule meaning that it is not mandated by the EPA. It is entirely legal and appropriate to scuttle the rulemaking, especially given that a recent analysis of the regulation could impose capital costs on the refining industry for as much as $10 billion. Refiners will not pay the cost of this regulation – consumers will in the form of higher gasoline prices. And all for little to no benefit, the prior Tier II rulemaking reduced gasoline sulfur emissions by 90 percent.

 

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