Why Gas Prices Are Out of Any President’s Control

From the New York Times...

Here is a one-item test to see whether you are guilty of cloudy thinking about gas prices: Do you believe that they are something a president can control? Many Americans believe that the answer is yes, but any respectable economist will tell you that the answer is no.

Here is why: Oil is a global market in which America is a big consumer but a small supplier. We consume about 20 percent of the world’s oil but hold only 2 percent of the oil reserves. That means we are, in economics jargon, “price takers.” Domestic production has increased during the Obama administration, but it has had minimal effects on global prices because, as producers, we are just too small to matter much. And even if domestic oil companies further increased production, they would sell to the highest global bidder.

...Republican presidential candidates are blaming the policies of President Obama for the current high level of gasoline prices. Mitt Romney has said that the president should fire three of his cabinet members for failing to get oil prices down... So, to evaluate a leader, we must determine the factors over which that leader has a modicum of control.

http://www.nytimes.com/2012/04/01/busin ... ntrol.html

I hope this article shuts up the conservatives who think that Obama has anything to do with gas prices.

When Bush was in office he was manipulating the global oil market to benefit his big oil buddies. That's fact. I know, liberals told me so. Now, people are saying our President has no control over global markets and gas prices? Imagine that.

http://www.thegatewaypundit.com/2012/02/video-flashback-obama-and-dems-blast-bush-for-gas-prices-in-2008/

OmniScience wrote: When Bush was in office he was manipulating the global oil market to benefit his big oil buddies. That's fact. I know, liberals told me so. Now, people are saying our President has no control over global markets and gas prices? Imagine that.

http://www.thegatewaypundit.com/2012/02/video-flashback-obama-and-dems-blast-bush-for-gas-prices-in-2008/

Did you read the entire article? Bush's non-effect on the market was discussed in detail. The article is about if the president can really effect oil prices, not who blamed who for the prices. It was a non-partisan insight into oil prices and you are simply doing the same thing the left does, and you comment does not influence or address the real problem.

Your answer is the problem.

But Obama implied he could do something about gasoline prices.

I'd bet my house on the fact that if any president called a press conference, and announced that the USA would immediately begin to drill anywhere oil is available, prices would drop immediately, and by large $$.

RenegadeCJ wrote: I'd bet my house on the fact that if any president called a press conference, and announced that the USA would immediately begin to drill anywhere oil is available, prices would drop immediately, and by large $$.

Or what a concept, offer tax incentives to drill rather than threatening to take away any tax deductions due them? So to disagree with the OP, there is much a POTUS can do to convince the global market that new oil production is being encouraged.

Thaler may teach economics, but he also has an agenda with his commentary. This is not a news article, it is a political editorial. Would you agree or disagree with the statement that there are different reasons why oil prices increased under the Bush administration and the Obama administration? Would you agree or disagree with the statement that the foreign policy decisions of the Obama administration in regards to Iran have influenced the cost of oil more than an increase in global demand for the commodity has?

Demand was down during the recession, yet the costs kept going up, and stayed up. That increase was due to the decline in the value of the currency that is used to buy and sell oil. Does presidential policy have anything to do with the value of the USD? We keep hearing that it takes up to a decade to see any benefits from opening up new plays.

The price of any commodity goes up or down depending upon the ability of the market to supply the demand for that commodity. When we have a bad peanut harvest the price of products made from peanuts goes up. When there is a bumper crop, the prices go down on those products. Sometimes the number of acres planted with peanuts is artificially limited to keep the price of the commodity higher - which is what FDR did during the depression when unemployment was so high and people were standing around in soup lines in limiting the number of acres of wheat that a farmer could grow.

We have been hearing since the Clinton administration that it takes upwards of a decade to realize any effect from a new oil find. Thaler's parroting of the 20% - 2% talking point of the administration establishes the purpose of his editorial. The United States has more than 2% of the global oil reserves. That 2% number represents the proven reserves, which do not include ANWR, do not include the oil located on the outer continental shelf and do not include many other locations where oil is known to exist.

What will lower the cost of oil is increasing the proven reserves of the commodity compared to the demand for the commodity. When prices increased during the Bush years the reason for the cost increase was that ability to supply demand was not keeping up with the growth in demand. The ratio of supply to demand was continuing to become smaller. When we look at increased supplies and lowered demand and the cost is still going up, that is due to the worries that the supply will be interrupted. And while that too is based upon a supply/demand problem, it has a different reason at its root than the growth in demand is growing faster than the growth in supply.

I'm not economist but I still believe that the foreign policy actions (or inactions) of world leaders such as our President do have an impact on oil futures which then affect gas prices.

That being said, here is the plan:

"A better approach would be to gradually raise the gasoline tax to levels similar to those in Western Europe, where fuel-efficient cars are the norm. N. Gregory Mankiw — the Harvard economist who advises Mr. Romney and is a fellow contributor to the Economic View column — has long advocated such a policy. I agree with him, as do most other economists."

I wonder (if) why most economists agree that we should raise the gasoline tax? So we can reduce our use? Or does the middle class just need more taxes?

And here is the tell:

"Richard H. Thaler is a professor of economics and behavioral science at the Booth School of Business at the University of Chicago. He has informally advised the Obama administration."

Yet another Chicagoan on "the team".

I think the president can affect gas prices. Just start a war in the Middle East and see prices go up (I'm waiting on the Iran attack).

And when prices went up in 2008 under Bush, Democrats had suggestions like having a federal gas tax holiday or releasing the US oil reserves. Just removing the federal gax tax would cut prices at the pump by 18 cents a gallon. The Dems thought it was a good idea in 2008, how about now?