"Economic Choices 2008"-Obama Economic Policy Director, Jason Furman Coments On The Oil Price Slide
Thursday, July 17, 2008SUSIE GHARIB: Now back to the big news of the day, the falling price of oil. As part of our continuing "Economic Choices '08" coverage, this afternoon Darren Gersh spoke with Obama economic policy director, Jason Furman. Obama and other Democrats blame speculators for driving up the price of crude. Now that the price is coming down, Darren asked Furman whether the oil markets are working.
JASON FURMAN, OBAMA ECONOMIC POLICY DIRECTOR: My biggest worry when you look at these oil prices is that they are a reflection that the market thinks that economy is weakening right now, that that will lead to lower demand and lower prices. And that wouldn't be the most positive, optimistic note for us to view this news on.
DARREN GERSH, NBR CORRESPONDENT: Well, Democrats here on Capitol Hill and also Senator Obama have said speculators play a large role in this, and they are going after the speculators with legislation. Senator Obama has backed that. But did the speculators suddenly change their mind, or aren't they doing what they are supposed to do, which is react to the market and react to fundamentals?
FURMAN: There is no question that supply and demand have a lot to do with oil prices today. There is no question that markets have a lot of noise. On any given day, they go up and they go down. What the real question, though, is, is what role speculation is playing in propping up the price of oil. It is hard to explain how supply and demand have changed so much in the last six months to give us the prices we have today, and the problem is that top McCain economic adviser Phil Gramm inserted a provision in a bill in 2000 which basically took the regulators off the beat. So we regulate commodities futures, we look at the trades, we make sure there is no market manipulation. We are not doing that for energy futures. We need to start doing it again to really know what is going on in this market, make sure that everything is on the up and up, and potentially a result of that would be to bring oil prices down in the short run.
GERSH: But on the question of supply, Senator Obama said today that we can't drill our way to energy independence, but wouldn't it help? Doesn't it make sense to at least try to see how much oil we have in this country and wouldn't that help on prices and oil security?
FURMAN: He is basing his conclusion on the Bush administration's own Department of Energy, which says you are not going to get another drop of oil from that plan for another seven years. Even after 20 or 30 years, the impact on price and supply would be insignificant. What we have to do is recognize the reality that in the short run, there isn't a huge amount we can do to have a major guaranteed impact on lower oil prices, so what you can do that will have a major guaranteed impact on the pocketbooks of families is energy rebate checks. Give that to families, let them use it to help pay down their bills. At the same time, we want to put in place the speculation policy that we have just talked about, and also a set of other measures for conservation, investments in alternative fuels, improving fuel efficiency standards. And finally, yes, we should increase supply, but the place we should start, Senator Obama has said, is on 68 million acres that we have already leased to companies that they are not drilling on right now. Let's start there before we open up all this new water.
GERSH: More general economic question. The Tax Policy Center has looked at the Obama plan. Senator Obama criticized President Bush for fiscal irresponsibility, but the Tax Policy Center says Senator Obama's plan would basically raise the deficit as much as President Bush has. So where is the fiscal discipline there?
FURMAN: Well, Darren, first of all, the Tax Policy Center didn't score a lot of the spending reductions that Barack Obama is proposing, and they are an important part of his deficit reduction plan, along with his tax changes. But second of all, the Tax Policy Center shows two sets of numbers, and one set of numbers compares Barack Obama's plan to what would realistically happen if you continued on the policy course that George Bush has charted for this country. And relative to those sets of numbers, they confirm that Barack Obama's plan would lower the deficit, reduce it from where it is heading, and put us in better fiscal shape than a policy of more of the same, which is what we are getting from John McCain.
GERSH: Jason Furman, we are going to leave it at that, but we are going to have you back to continue the discussion. Jason Furman is an economic adviser to Senator Barack Obama. Thank you.
FURMAN: Thanks, Darren.
