People are increasingly concerned about the possibility of crippling gas prices this summer, perhaps none more so than Barack Obama. And you can rest assured that he’s getting ready to do something about it. His plan? We’re going to figure out a solution which involves a new way to talk about it.

President Barack Obama will try to head off the political impact of rising gasoline prices as Republicans vow to make the price at the pump an issue in the 2012 election campaign.

Obama this week plans events focusing on his administration’s efforts to expand domestic exploration and development of alternative energy sources to combat cyclical spikes in gas prices.

Obama’s political team has been preparing to counter Republican attacks since the administration denied a permit for TransCanada Corp.’s Keystone XL oil pipeline, White House officials said. The renewed focus on what Obama has described as an “all-of-the-above” energy strategy kicks off with a speech tomorrow at the University of Miami.

So basically our response to rising gas prices is to figure out a way to talk about it differently. Well… now that that’s all sorted out I guess we can move on to finally developing those flying cars.

Obama almost deserves some sympathy here because he’s caught between something of a rock and a hard place. His approach – crafted in meticulous talking points – focuses on two aspects of the energy issue, neither of which are going to do much to help his prospects. The first will be his repeated call for more alternative energy supplies. Sadly, these primarily deal with generating more electricity, which is nice, but doesn’t address our need for bulk liquid fuels. (OK… the algae kind of, sort of will someday.. maybe.)

The second and more pressing issue is the raw supply of gasoline which, of course, rides on the supply of oil. Obama will claim that he’s doing what he can to open up domestic drilling options. (Unfortunately ignoring that the permits currently in circulation still can’t touch 85% of our combined onshore and offshore potential.) But the real fly in the ointment is the fact that even if we modestly bumped up our domestic crude production, the downstream effect is completely muted by the fact that everyone is fighting to supply a global market, not just our needs in the US. This is explained at length in a recent article from Joe Weisenthal.

NOTE: The global market argument is valid, but Joe also discusses domestic refinery capacity. His view on this should, for the moment, be taken with a grain of salt. We’ll have more on American refinery capacity later this week.)

  • Demand is booming in Asia and the Former Soviet Union, offsetting mediocre demand in US and Europe.
  • Inventories are low.
  • Supply has been hit in several countries due to geopolitical and technical problems.
  • To some extent, all of the above has been a modest surprise to the market, at least as compared to official predictions.

Add in some kind of “fear” premium due to a possible war with Iran, and it’s just not that hard to see why the price of a barrel of oil has surged like this.

So basically, external demand continues to grow even when domestic demand dips. And we don’t just sell our refined petroleum products at home… we sell them to whoever will pay the going price which is set by demand. It would take a massive surge in domestic production to move that needle very much. Combine that with the fact that day to day oil prices are frequently driven by speculation and nervous nellies who react to things like Iran threatening to shut down the straits, and you’ve got a recipe for rising prices per barrel.

Still, corrective actions can be taken, both in short term foreign policy efforts and long term domestic supply improvements. But it’s going to require more than a new way to blame somebody else.