Until recently the prices of natural gas and oil have moved in tandem, but fracking shale gas has so increased the supply of natural gas that the result is a dramatically lower price. Once sold on long-term contracts linked to the price of oil, more and more natural gas is purchased in spot markets. However, this delinking of natural gas from oil prices occurred in the U.S. largely because natural gas can be transported largely to the domestic market. Gingrich ignores the fact that oil is traded and its price set in the global marketplace. So unlike natural gas, the relevant supply and demand situation is international, not domestic.

While Gingrich is right that domestic demand for oil is down, global demand is up. In addition, global crude prices start rising when global spare production capacity begins to drop below the threshold of 3 million barrels per day. Spare capacity prevents and cushions price shocks. During the 2008 price run-up to $147 per barrel, global spare oil production capacity fell to as low as 1 million barrels per day.

If Gingrich wants to lower oil prices, perhaps he should stop his saber-rattling against Iran. “If there’s an effective diplomatic outreach here that pushes back the prospect of a military confrontation with Tehran, we probably have something on order of $20-$30 a barrel geopolitical risk premium that could drop out of the oil price very dramatically,” wrote Tim Evans, energy analyst at Citi Futures Perspective in New York in the Financial Times. Oil consultant Lynch agreed. “The recent run up the price of oil is almost completely the result of concerns about losing Iranian oil or Iran attacking shipments in the Strait of Hormuz,” he says.