Congresswoman Michele Bachmann (R-Minn.) caused quite a stir last week when she said if elected president she would bring back $2/gallon gasoline prices.
On CNN's "Reliable Sources" Sunday, New York Times columnist Tom Friedman - without supplying any economic data to support his claim - called Bachmann's pledge "flat out nuts" (video follows with transcript and commentary):
HOWARD KURTZ, HOST: Tom Friedman, among the things that you have written about -- in fact, you've written books about it -- is economics, international economics. In the presidential campaign we have Michele Bachmann the other day saying that she will make sure that America gets $2.00 gasoline once again. She didn't offer a lot of specifics. Her Web site says, well, she's going to ease restrictions on drilling, roll back federal regulations on the shale gas industry.
Is that a responsible pledge for a candidate to make, $2 gas?
TOM FRIEDMAN, NEW YORK TIMES: It's flat out nuts. There's no way that that's going to happen. We're heading just -- I wrote a book, "Hot, Flat, and Crowded." OK? And I often hold it up when I'm going to talk about it.
KURTZ: You're trying to sell it.
FRIEDMAN: No.
KURTZ: You can sell it right now.
FRIEDMAN: Yes. I don't need to sell anymore. And I often say to audiences who don't believe in climate change, oh, you don't believe in hot? OK. Anybody done your research (ph) out there? Let's take hot off. But you better believe in flat and crowded.
Now, when you put flat and crowded together, more people and more people want to -- and able to live like us -- energy prices are only going to go one way, and they're not going to go toward $2.00 a gallon.
KURTZ: But, in fact, you don't think there should be $2.00-a- gallon gas, even if it could be achieved.
FRIEDMAN: Not at all.
KURTZ: You want more expensive gas, or a gas tax --
FRIEDMAN: Absolutely.
KURTZ: -- because you think we need to discourage consumption. That's not a very politically popular stance, which probably has something to do with the fact that it hasn't happened.
FRIEDMAN: And that's why she's playing to that. But it's so unrealistic.
And at the end of the day, let's think about it from the jobs point of view. If the world is getting flat and crowded, what's going to be the next great global industry?
It's got to be clean energy that can satisfy that huge growing middle class market. So do you want to be actually telling Americans, let's keep investing in this old technology and this fuel that's a diminishing resource, or should we be looking to actually create this whole new industry?
Let's do what neither Friedman nor Kurtz did, namely, look at some facts.
According to the Energy Information Association, crude oil inventories are currently higher than they've been throughout most of the past 30 years with some exceptions:
As for gasoline inventories, these are currently at about their average for the last 30 years:
As such, the rise in oil and gas prices over the past eleven years has nothing to do with the American supply of either.
But obviously, this is a global market. Therefore, what might be quite surprising to most readers is that according to the EIA, total world crude reserves have more than doubled since 1980. In fact, they go up virtually every year.
As a result, the international reserves to production ratio has stayed rather static for the past 20 plus years (interactive chart):
via chartsbin.com
What this means is despite increasing international demand for oil, producers are constantly finding more of it to match the increase.
Meanwhile, according to EIA, total world oil demand has declined since its 2007 peak, and likely will continue to do so if Europe and America go into a double-dip recession.
Add it all up, and apart from speculation and the weak dollar, there is absolutely no supply/demand reason for oil and gas prices to be as high as they currently are.
Even with such factors, U.S. retail gas prices were at $2/gallon as recently as May 2009, just a little over two years ago.
Why Friedman thinks this is impossible to return to is likely based more in his own biases than facts.
He did admit to Kurtz that he wants far more expensive gasoline to inhibit consumption. So why should his view of this natural resource be taken at all seriously?
As it pertains to Bachmann's pledge, any change in posture towards domestic oil drilling in America would further impact the supply/demand equation putting additional pressure on prices. Combine this with weaker demand caused by a slowing economy, and $2/gallon is easily attainable.
Finally, isn't it funny to hear Friedman discouraging investment in "this old technology" while pushing for "clean energy?"
I guess he hasn't gotten the memo that the whole idea of green jobs has been a total failure and that one of the reasons Texas leads the nation in employment gains since the recession "ended" is due to "this old technology."
And his colleague at the Times, Paul Krugman, wonders why voters are so ill-informed.
