How $4 Gallon Gasoline Will Drive the Energy Politics of 2011

With gasoline prices having reached $3 per gallon for the first time since 2008 and well in advance of the typical spikes during the summer driving season, fuel prices are threatening to stall the burgeoning economic recovery and will be a key driver of this year’s energy debates in Congress and the beginning of the 2012 Presidential election.  Despite a sluggish economic recovery, rising demand from the developing world is pushing oil prices upward, with some observers predicting gasoline hitting the $4 per gallon mark as early as this spring. Already the debate over offshore oil drilling and alternative transportation is taking on a new tenor as  Congressional Republicans press the Obama Administration to remove regulatory obstacles to increasing domestic oil production, including offshore.  In this Energy and Climate Brief, Garten Rothkopf assesses the impact of rising gasoline prices on the political debate over energy in the coming year.

Where Oil Prices Stand

Since oil prices spiked in 2008 and then fell amid the global economic crisis, crude prices have slowly been climbing back up.  In just the past few months, oil prices have been moving upward, and while sometimes knocked off by economic events like the EU having to come to Ireland's financial rescue in November, there appears to be growing confidence in a global economic recovery, primarily driven by Asian markets.  Even so, the world's largest oil consumer continues to show weak gains in employment and GDP growth has somewhat dampened the rise in crude prices.  Since the New Year, oil prices are down nearly four percent, with the recently announced job numbers doing little to convince that a more robust recovery is on its way. 

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