The Truth About Gas Prices

Steve Benen tries to inject a little reality into the veins of Americans, now that Republicans are demagoguing higher gasoline prices:

Republicans aren’t just demanding expansive drilling. They’re also pushing a talking point that’s quickly become ubiquitous on the right.

“The president would like everyone to forget that gas prices have doubled over the past three years while he consistently blocked and slowed the production of American-made energy,” a spokesman for House Speaker John A. Boehner, Brendan Buck, said in a statement.

The second part of this is just silly; oil production has increased every year under Obama’s presidency, and is now higher than it was at any point in Bush’s second term.

Benen goes on to explain the reason gas prices were so low when Bush left office:

there was a global economic catastrophe. GOP officials may not understand this — or they may chose not to — but gas was cheap because the economy had fallen off a cliff. As the economy improved, demand went up, and the price of gas started climbing. It’s Economics 101.

He then quotes Matt Yglesias, who gave George Bush credit for engineering cheaper gasoline this way:

If you manage to orchestrate a situation in which millions of people lose their jobs, retail sales plummet, stores close, and economic activity generally grinds to a halt, this frees up a lot of extra oil. Cheap oil leads to cheap gasoline..

Touché.

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18 Comments

  1. Duane, this is so true. In fact, it would be ripe material for an SNL skit.

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  2. The USA needs to be working frantically on ALL energy sources and infrastructure. The republicans in congress should be real patriots and work WITH Obama towards this goal.
    People with differing political and social views can all agree that energy production and conservation are paramount to our country’s future. The government should intervene with a solid plan to begin this work now.
    Endless tax cuts will not create the investment in energy we need. The Nordquist worshipers need to wake up to the reality and gravity of our situation. Tax cuts and tax ‘holidays’ are mostly fueling investment in ventures overseas.

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  3. ansonburlingame

     /  February 25, 2012

    To all,

    In my view there is something far more fundamental to the price of oil. It is the value of the dollar accepted by all countries exchanging oil for dollars. The a barrel of oil goes from $80 a barrel to $100 a barrel, is that only caused by supply and demand, OR in part at least because a dollar today buys less than yesterday.

    Look at food prices. People still need to eat, whatever the current “state of the economy”. Track the percent increase in oil prices and “bread” prices and see what I mean. We grow our own wheat and make our own bread yet…….

    Now WHY might the value of the dollar be going down, rather dramatcially. One reason is that we have printed so much money over the last 3-4 years.

    The value of the dollar is ultimately based on worldwide faith and trust in the US government. The dollar is NOT backed by anything other than such faith and trust, today.

    Just consider, “what if” Saudi Arabia no longer sold its oil for dollars and said instead give us …….. in its place. Remember, we used to back the dollar with gold in Ft. Knox but certaily no longer.

    Think some folks around the world might want to get Saudi Arabia to do just that, no longer accept dollars for payment or at least ask for “wheelbarrows” full of dollars for each drop of oil sold. Our printing presses would NOT be able to keep up.

    Then go try to buy a “loaf of bread”.

    Anson

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  4. I disagree with AB. The price of oil is not high because the dollar is devalued, it is high because speculators are buying up oil futures for two principal reasons:
    1. They anticipate a likely restriction in supply from the middle east because of Iran and Syria.
    2. Continued growth of demand, principally from the growing middle classes in China and India.

    FYI, I was surprised to hear on a TV news broadcast the other day that U.S. oil imports are now down to 42% of our needs, based primarily on the success of fracking all over the country and especially, of all places, around PA and NY! Apparently fracking is very effective at tapping trapped oil as well as natural gas. Who knew? The commentator said some experts were predicting that fracking was so good that it could potentially drive imports to zero!

    And here’s another thought. The rising gasoline prices should have a silver lining in that they encourage sensible alternatives to one person vehicular travel, i.e., public transportation, car pooling, buying more efficient vehicles, more careful planning of trips, not to mention as the President and Sekanblogger say, making all alternative forms of energy more competitive. Let’s hope Detroit is nimble enough to keep up with trends.

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  5. Jan. 1, 2012

    NEW YORK (AP) — For the first time, the top export of the United States, the world’s biggest gas guzzler, is — wait for it — fuel.

    Measured in dollars, the nation is on pace this year to ship more gasoline, diesel, and jet fuel than any other single export, according to U.S. Census data going back to 1990. It will also be the first year in more than 60 that America has been a net exporter of these fuels.

    I don’t know how to make sense of it, but this is what I read and hear.

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    • The reason for that, Helen, in a word, is refining. Oil refineries are enormously expensive, complex, (and potentially dangerous) and the U.S. leads in that category. Just pumping the stuff out of the ground is child’s play by comparison.

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  6. ansonburlingame

     /  February 26, 2012

    To both,

    First, Helen I agree with Jim. IMPORTED oil is sent to our refineries and then we export the finished product. For sure that is a “win” for us as the cost of the finished product includes the cost plus profit of the oil imported.

    Now, who or how can Jim and my disagreement be resolved. I say the value of the dollar is in fact going down rather dramatically. If forced I can find the curves to reflect that. I used the simpler comparison to increasing food prices instead of some government or think tank curve.

    Jim claims “other (no longer third) world” demand is causing the price increase as well as the short term concerns over war in the Middle East. Note war in Iraq did little to affect oil prices way back when.

    I suppose it is a combination of various things, dollar value, other world demand, speculation, and of course someone is going to say Big Oil is gouging us, based on high profits, historically high profits. I wonder how much those profits are affected, percentage wise” by our exportation of refinery products as well, however.

    Whatever the causes might be my guess is $4 gas prices before Memorial Day and maybe $5 before the election depending up what happens with Iran. Then the question becomes what CAN or SHOULD government do about such fuel prices.

    As well, if Jim and Sekan are correct, and I believe from a technology standpoint today they are, the higher gas prices go the better chance of the public, not government will turn to now more expensive alternatives.

    But “big business” knows that for sure as well. Want to get “gouged” right now? Go shop for a Prius. No discounts, no “deals” and well below blue book on trade ins is what the local dealers are doing right nowl

    If you want MPG now, you are going to pay a premium for the best around, for sure.

    Anson

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  7. And yet not a word of “truth” of how the gas prices had already started coming down BEFORE the recession due to Bush opening up millions of acres offshore and sending the world markets a message that the United States was going to increase it’s own supply. A supply that Obama quickly shrank when he reversed and closed off the very areas Bush had approved. Not to mention the million of additional acres Obama has removed since he became President and the killing by regulation/permit death of ever more platforms in the gulf.
    But yet it’s OK for us to loan billions to Brazil to buy THEIR oil, sit back and let China drill off the coast of Cuba while we lose out on even more oil.
    Then let’s not forget the fact that the left, (the EC and Obama) always use the talking point that more drilling will not decrease prices and even if so would take years to come online. Of course they’ve been saying the same thing for almost 30 years now so how many more barrels of production could we have had by now?
    And why is it that Obama and the left can excuse away high gas prices because of the fear of supply disruption and increased world demand, yet completely ignore the other side of the economic coin that supply INCREASES lower prices as well.
    We need to be opening up every thing we’ve got, drilling wherever and however we can while at the same time over the next two decades developing the new green technologies along side the established.
    Energy prices would remain lower and more stable, the economy would grow at a faster rate, more people would be in job lines than unemployment lines, and the national treasury would bring in more money.
    Too bad we don’t have a President that would put country before party and implement such a plan. Instead he worships at the altar of the left and shoves not-ready for prime time hugely expensive green energy fantasies at us to garner political cash from the enviornuts.
    Obama 2012: Kick him out of Kiss it goodbye.

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    • PS Geoff, I didn’t mean to sound curt, but I’m afraid I did. I apologize if my response sounded sharper than I intended.

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      • Helen,

        Curt? Your reply, although exactly correct and not the least bit sharp, will fail to convince a man who is so full of hatred for Mr. Obama that he can taste it in his sleep.

        So, I wouldn’t worry about being curt or sharp to such a man, although I find your apology delightfully courteous.

        Duane

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  8. Too bad we don’t have a President that would put country before party and implement such a plan. Instead he worships at the altar of the left …

    Perhaps you’re not aware of how disappointed we (the left) are in our president. I can assure you if he were worshiping at the alter of the left, he would not have a tremendous number of former supporters who are vowing to stay home next election.

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    • I understand Helen. I’m not “anti-environment”. Still have a family farm reaching the hundred years mark. Don’t keep that land productive by abusing it for sure. My only point is that we are being premature in forcing ourselves of what is economically needed for at least a couple decades to come: as low cost and stable as possible supply of oil and fossil fuels.
      Develop the “green” technology alongside our using our own resources (instead of the middle east) and within a generation we truly are not just energy self-sufficient, but weaned off oil and into the cleaner, as yet invented green economy without another man-made recession or worse.

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  9. ansonburlingame

     /  February 27, 2012

    This is another good exchange on an important issue, in my view.

    The price of just auto fuel alone is a political, economic, national security (forget the politics of such security), technological and environmental issue all rolled up into one big debate.

    Sort of complex, it seems to me. Geoff has effectively stated the political argument against the Obama administration. I am sure someone can post a “blame Bush, again” response as well, politically.

    But just take all the issues in paragraph two above. Are any of little consequence for the time being as fuel prices escalate?

    I suggest that taking the environmental issue off the table for now is a good first step. We have all sort of environmental laws already on the books to prevent future “Love canals”. Enforce that which we have and debate reducing them over time, politically.

    Now just who or what will resolve the issue of high fuel prices. Government alone has little power to do so, right now, other than to STOP the declining value of the dollar. That is a whole book on what is needed in that regard, but I suggest stop printing money and balance the budget is a great first step!!

    Then let the market decide. As prices go up, new technology comes into play and at some point a balance is achieved, a market driven balance, not a political one.

    Is that too “Libertarian” for you folks?

    Anson

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  10. The problem with all this (ignoring Geoff Caldwell’s nonsense) is that no one–not even the experts in the industry–completely understand the dynamics that result in increases at the pump.

    Increased demand in the developing world (yes, other folks love their newly-acquired cars, too); instability in various places in the world, particularly in the oil-rich Middle East; refinery capacity; speculation and derivative trading; greed; all contribute in some way.

    And even if currency devaluation were part of it (that is certainly arguable), the Fed’s policies are not subject to political control. Mr. Obama can’t order Ben Bernanke to change his monetary policy or to include food and energy in the core CPI index, which Bernanke uses to monitor inflation despite the fact it excludes food and energy.

    The bottom line is that things are so complicated (given the world market and our place in it) that nobody knows exactly what to do to get prices to come down, except of course those brilliant Republican candidates, who can waive their magic drill, baby, drill wand and down they will go.

    Duane

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    • And how is it “nonsense” Duane. Why is shortage of supply from the middle ease a factor in high prices, but yet increasing the supply would not help decrease those prices? (As it did prior to the recession hitting when Bush opened up vast swaths of additional land that Obama has since closed off which in the real world translates to:………..wait for it…….you just might get it this time…….an elimination of available supply to the markets.)

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  11. ansonburlingame

     /  February 27, 2012

    Duane,

    I agree that no single person, group of persons, political parties, even governments know how to control something as complex as simply world oil prices, as just an example. Many can attempt to tinker around the edges, but really control them, no way.

    But there is something that always achieves such control ulitimately. It is of course the “market”, the uncaring, inhuman force of economic laws that bring empires up and send them crashing back down again.

    Government attempts to control the “market” is like government attempts to control Mother Nature when she really gets in an uproar. All government can do in the latter and former cases is build “shelters” to weather the storm.

    but shelters cost money and when you try to build them for everyone or even select but large groups of someones, well look at debt and deficits to see the results.

    Anson

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