The Washington Post had an article celebrating the fact that the public is confused about the causes of higher oil prices. This is sort of like a fourth grade teacher being delighted that his students don't know arithmetic. 

Undoubtedly much of the public is confused about the cause of higher oil prices because of articles like this one. It treats the issue as a he said/she said dispute, at one point quoting President Obama:

"the amount of oil we drill at home doesn’t set the price of gas on its own. That’s because oil is bought and sold in a world market. And just like last year, the biggest thing that’s causing the price of oil to rise right now is instability in the Middle East — this time in Iran."

This is not just something that President Obama says, this is true. The price of oil is determined in the world market. If the price of oil plummeted in the U.S. because we drilled everywhere, all the time, then we would lose supply from the rest of the world, because no one will sell us oil at below the world market price.

There is no remotely plausible story where the U.S. could become energy independent (even if we drilled everywhere), but if even if we no longer needed imports oil prices would still be determined on the world market. Oil companies would export their oil if they could a higher price in Europe or Asia then they were getting in the United States.

When the media report the truth as a debatable point, it is not surprising that the public is confused about the cause of the rise in the price of oil.

If the Post felt a need to be bipartisan it could have told readers that President Obama's plan to end subsidies to the oil industry would have almost impact on the industry. The $4 billion in subsidies that President Obama claims is at stake comes to about 4 cents per gallon of gas. It might make sense to end these subsidies, but it will have relatively little consequence for either consumers or the oil industry. 

Read more posts on CEPR »

Read the original article on CEPR. Copyright 2012.