It's been growing more and more clear that the Republican party is drowning for this election, and they've been reaching out for any straw that they can possibly find.
I say that because the new rhetoric I've been hearing often is how gas prices are so high. Newt Gingrich jumped on this train by announcing that under his Presidency, gas would be $2.50 a gallon. The morning show Fox and Friends spent a fair amount of time lambasting the President for the gas prices.
As I watch and listen to these attacks on Obama, I couldn't help but think to myself: "Wait... the President is responsible for gas prices?"
And as I researched what dictates gas prices, I found my answer: not really, and certainly not nearly to the extent that the Conservatives have been saying.
So let's go into this. First of all, what we have here is an economics lesson in supply and demand. When Obama first came into office, gas was around $1.81 a gallon. Now the national average sits somewhere in the upper $3 dollar range (one article from Time where I got a lot of my information says $3.53).
It's no coincidence that the low price of gas fell during the deepest part of the recession that Obama inherited. When people don't have a lot of money, or are worried about the economy, they drive less. When the demand for a product goes down, so too does the price. (That same article I mentioned earlier states that "If future President Gingrich were to somehow be able to deliver $2.50-a-gallon gas, it would probably mean the economy had tanked again" which was an interesting concept to think about.)
One other factor that people claim Obama has a lot of control over, in reference to gas prices, is domestic oil production. But that's not necessarily true either. In fact, under the Obama Presidency, domestic oil production has actually increased. This is because new oil reserves had been found, but, no matter who's in the White House, those would have been tapped.
Also under consideration is the pipeline that was proposed, known as the Keystone XL pipeline. This pipeline would transport 800,000 barrels of crude oil per day into the southern region of the United States. But saying this would have affected CURRENT gas prices holds no basis in fact, since it would take years to build and have any effect on our oil reserves.
Even so, domestic oil doesn't matter as much as people seem to think it does, since oil is a global commodity, and functions within a global market.
According to this Gather Business article, oil prices are determined by two variables: the price of crude (which has a 55% effect on gas prices), and the cost of transport, taxes, and refining the crude (the other 45%).
The only effect an American President could have on oil prices is with his/her international diplomacy policy. But even that's a shaky correlation at best. Acts of war that cause exports to stop coming out of Iran, for example, would be detrimental to the oil imports of some countries, but most have reserves. Gas prices would increase, but not by much. The recent Iranian threats of closing the Strait or Hormuz affected the gas prices by only about six percent (If gas was $3.00 in your area, and it suddenly cost $3.18, now you know why).
The real lesson we can use here is that the Republican party in America seems to be uneducated in the ways of global economics... so why would I want them running a country?
Actually, the more realistic lesson to be learned here is not that they don't know how the oil markets work, but, even worse, are willing to lie and deceive to win the hearts and minds of the American people.
Which is way, way worse.
Brian, I agree it's naive to believe any president has much sway over gas prices directly. Perhaps this is somewhat irrelevant since your aim is mainly to address the fact that republicans are toting gas prices as a platform, but the logic of your research points to a greater problem, or question.
ReplyDeleteGas prices have increased over the past two decades. I myself can remember a time stations in town sold it for about a dollar a gallon. This price inflation is not only due to supply and demand.
I would postulate a different theory. The oil market is a dirty market-ha pun- but seriously, the issue is one of corruption and the democrats and republicans and both are content to profit from it.
Take diamonds for instance: if the consuming public had access to the number of diamonds that exist they'd be nearly worthless.
The individuals who actually control our access to the supply of gas are exploiting their ability to make a profit.
Another interesting fact, huge quantities of domestic oil and gas being drilled right now are being sold to China. Interesting eh?
Anyways interesting entry, haha sorry if I cluttered up your blog with this comment.
Interesting thoughts, Weston. And of course there's going to be profiteering in any market, especially a global one. But in local terms, and in the recent short term, I don't know if that necessarily has as much of an effect as these other variables.
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