NEED TO KNOW
HIGH GAS PRICES
America is a resource-rich nation and the third largest producer of oil in the
world. In fact, the Congressional Research Service says the United States has
the world’s largest endowment of recoverable oil, natural gas, and coal (1).
So why is it that the price of gasoline has nearly doubled since January
2009, putting financial strain on American families (2)?
While many factors affect the retail price of gasoline, such as global demand
and the debasing of the dollar, the federal government’s policy decisions
have also fueled this rapid increase in prices. Two specific examples are
highlighted here. More can be found by visiting AFPF’s “Running on Empty
Tour” website (3).

“PERMITORIUM” IN THE GULF OF MEXICO
On April 20, 2010, the Deepwater Horizon oil rig exploded in the Gulf of
Mexico, a terrible tragedy that resulted in the loss of 11 lives and the spilling
millions of barrels of oil. In response, the Obama administration imposed a
moratorium on drilling in the Gulf. Despite a court order invalidating the
moratorium, the administration refused to allow production to continue until
October 2010.

QUICK FACTS
Since October 2010,
regulatory approvals of
drilling permits in the Gulf of
Mexico have slowed by 86%.
The price of gasoline has
almost doubled since January
2009.

NOTABLE & QUOTABLE
“The actions and policies of
President Obama and his
Administration to block,
prevent, delay, hinder, revoke,
tax, and drive up the cost of
American-made energy is
simply mindboggling.”
- Congressman Doc Hastings,
Chairman, House Committee
on Natural Resources

Even with the official moratorium now lifted, production has yet to recover.
The leading cause if the administration’s slow handling of new drilling permits, now dubbed the “permitorium.”
According to a recent study, in the six months since the moratorium was lifted permit approvals have been cut by
86 percent. Those permit applications that have been approved faced a 38 percent longer wait time. An enormous
backlog of applications sits pending (4). Fed up with the delays; oil companies are bringing their business
elsewhere. Since the Deepwater Horizon accident 10 oil rigs, over one-third of the total fleet, have left the Gulf of
Mexico. An additional eight planned rigs have been detoured to other locations.

DECLINING PRODUCTION IN OIL-RICH ALASKA
Regulatory and permitting slowdowns have likewise plagued drilling on Alaska’s Northern Slope. As delays mount,
oil production has fallen dramatically. Now experts say the Alaska Pipeline, which transports oil from the North to
refineries and shipping ports in Southern Alaska, is at risk. With oil coming into the pipeline at less than 30 percent
of its peak capacity, experts are concerned that ice crystals could form inside within two years, forcing a shutdown
to prevent damage. Per the pipeline’s contract, if a shutdown occurs the entire pipeline must be disassembled,
costing millions of barrels of domestically-produced oil annually (not to mention the thousands of jobs lost for
workers employed by the pipeline).

WHAT’S REALLY GOING ON HERE?
The moratorium in the Gulf, the slowdown in drilling on Alaska’s Northern Slope, and the resulting spike in oil prices
are desired outcomes from the Obama administration’s perspective. Administration officials are on record stating
that the goal is to wean Americans off cheap and abundant petroleum-based energy sources (oil, coal and natural

 gas) and move towards heavy use of “renewable”
resources like wind, solar, and biofuels – energy
technologies that are not yet economically viable and
significantly more expensive to use. Energy Secretary
Steven Chu himself said, “Somehow we have to figure
out how to boost the price of gasoline to the levels in
Europe” (5).

The spike in oil prices fits nicely with
the Obama administration’s “green”
agenda, but they seem to be ignoring
the effects on American families and
businesses: the pain felt by everyone
when energy prices skyrocket.

Europe currently pays $8-$10 per gallon of gasoline (6).
The effects are easy to predict: when domestic oil is constrained, prices go up, foreign oil imports
increase, or both. This devastates the economy. When the cost to fill up a gas tank doubles, that leaves
less money for consumers to spend on other things, driving down sales for other businesses. Moreover,
gas prices affect the bottom-line of every American business, big and small. As companies’ costs go up,
they are forced to hike prices for their products, leading to higher prices for all goods and services
consumed by American families.
Environmental concerns are important to consider, but even as the administration aggressively
interferes in the nation’s energy markets to pursue a “green” agenda, they seem to be ignoring the
effects on American families and businesses – the pain felt by everyone when energy prices skyrocket.
Consumers acting in the free market should decide the future of American energy, not federal
bureaucrats. Washington needs to stop stalling production of the nation’s vast oil resources. Credible
attempts to accelerate permitting and decrease regulatory red-tape will lead to a significant price drop,
easing the pain felt at the pump and putting hard earned dollars back into every American wallet.

Endnotes:
1.
Gene Whitney & Carl E Behrens, US Fossil Fuel Resources: Terminology, Reporting, and Summary (November 30,
2010) (online at
http://epw.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=04212e22-c1b3-41f2-b0ba-0da5eaead952).
2.
Calculated using historical gas prices (“Weekly U.S. Regular Conventional Retail Gasoline Prices”) on January 19, 2009
($1.83/gallon) and April 11, 2014 ($3.67/gallon). Historical gas prices are available online via the Energy Information
Administration (online at http://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_w.htm) (accessed April 11, 2014).
3.
Please visit www.runningonemptytour.com to read more.
4.
IHS Global Insight & IHS-CERA, Restarting ‘the Engine’ (July 21, 2011) (online at
http://www.ihs.com/images/IHS_Report_Restarting_the_Engine_21July11.pdf).
5.
Neil King, Jr. and Stephen Power, Times Tough for Energy Overhaul, Wall Street Journal (December 12, 2008) (online
at http://online.wsj.com/article/SB122904040307499791.html).
6.
Europe’s Energy Portal (online at http://www.energy.eu/) (accessed August 25, 2011)

Americans for Prosperity Foundation’s “Need to Know” informational series explores current events
and recent scholarship on public policy isues from a free-market economics perspective. A full list of
“Need to Know” briefings is available at www.AmericansForProsperityFoundation.org/NeetToKnow.
©2012 Americans for Prosperity Foundation. All Rights Reserved.

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