Gas prices and presidents
The opposing party often blames rising gas prices on the president. For example, we don’t have to look back too far to find Democrats blaming Bush:
And now, of course, Obama’s to blame. But in reality, neither Bush nor Obama was or is the main driver of high gas prices, although each party will try to blame the other, to its own advantage. One difference, though (at least as best as I can remember) is that the MSM jumped on the Blame Bush bandwagon, whereas there’s a lot of patient explaining that Obama’s not really to blame.
Charles Krauthammer correctly point out that Obama really doesn’t have much control over oil prices, but that the American public rightly perceives that he’s antipathetic to oil as a fuel, and that he’s taking some credit for the policies of others:
Yes, of course, presidents have no direct control over gas prices. But the American people know something about this president and his disdain for oil. The “fuel of the past,” he contemptuously calls it. To the American worker who doesn’t commute by government motorcade and is getting fleeced every week at the pump, oil seems very much a fuel of the present ”” and of the foreseeable future…
But the event that drove home the extent of Obama’s antipathy to nearby, abundant, available oil was his veto of the Keystone pipeline, after the most extensive environmental vetting of any pipeline in U.S. history. It gave the game away because the case for Keystone is so obvious and overwhelming. Vetoing it gratuitously prolongs our dependence on outside powers, kills thousands of shovel-ready jobs, forfeits a major strategic resource to China, damages relations with our closest ally, and sends billions of oil dollars to Hugo Chavez, Vladimir Putin and already obscenely wealthy sheiks.
Obama boasts that, on his watch, production is up and imports down. True, but truly deceptive. These increases have occurred in spite of his restrictive policies. They are the result of Clinton- and Bush-era permitting. This has been accompanied by a gold rush of natural gas production resulting from new fracking technology that has nothing at all to do with Obama.
I read recently that he keeps asking his advisers when all the green jobs will come on line. He really believes that stuff!
It gave the game away
what game?
That he is supporting the communist regimes over America… duh…
as has every communist president including fullbright scholar to soviet union (instead of vietnam) Clinton…
so maybe Malia is named for martin Malia, and Alexander, i mean Sascha is for Pushkin…
sad thing is we are about 20 years too late to change the outcome… heck, we couldn’t see things as a group until half way through this term, then we started…
nothing to do but wait and watch and hop you survive whats coming… and what they ALWAYS bring…
Martin Edward Malia – was a historian specializing in Russian history. He taught at the University of California at Berkeley from 1958 to 1991. He is the author of the foreword to the English version of The Black Book of Communism.
oh… i forgot and just remembered!!!!!!!!
NOT Pushkin.. HERZEN!
Alexander (Sascha) Herzen…
then it may be malia’s work too
Alexander Herzen and the Birth of Russian Socialism
Aleksandr Ivanovich Herzen
was a Russian pro-Western writer and thinker known as the “father of Russian socialism”, and one of the main fathers of agrarian populism (being an ideological ancestor of the Narodniki, Socialist-Revolutionaries, Trudoviks and the agrarian American Populist Party). He is held responsible for creating a political climate leading to the emancipation of the serfs in 1861. His autobiography My Past and Thoughts, written with grace, energy, and ease, is often considered the best specimen of that genre in Russian literature. He also published the important social novel Who is to Blame? (1845—46).
Herzen drew criticism from both liberals who were against violence and from radicals who thought Herzen was too soft
Liberals led by Chicherin and Kavelin believed individual freedom would be achieved through the rationalisation of social relations. Their etatist variety of liberalism was opposed by Herzen as it supposed that Russian society would evolve to an ideal state based on a Hegelian view of reason. They believed the revolutionaries would merely postpone the establishment of the ideal state, while Herzen thought that, on the contrary, they were blind to historical reality. Herzen would always reject grand narratives such as a predestined position for a society to arrive at, and his writings in exile promoted small-scale communal living with the protection of individual liberty by a non-interventionist government.</bi
they are not talking classical liberals nor neo liberals… 🙂
Herzen aggravated Russian radicals by appearing too moderate.
who else is like that?
He argued that the Russian Radicals were not united and strong enough to seek successful political change, stating “You want happiness, I suppose? I dare say you do! Happiness has to be conquered. If you are strong, take it. If you are weak, hold your tongue”
-=-=-=-=-
The radicals describe Herzen as a liberal for not wanting immediate change, but Herzen rejects their pleas arguing for change at a pace that will ensure success. Herzen briefly joined with other Russian liberals such as Kavelin to promote the peasant ‘awakening’ in Russia
J. William Fulbright
http://en.wikipedia.org/wiki/J._William_Fulbright
President’s do influence the economy, often in a negative manner. BHO (along with Bernanke) has helped to drive up the price of all commodities, including oil. His entire agenda has created uncertainty and pessimism in nearly every aspect of the economy except the TBTF fraudsters in Wall Street. He’s made it impossible to develop new domestic oil resources, his policies threaten the coal industry, and he actually said during the 2008 campaign that energy prices would rise during his presidency. That was one of the few times he revealed his true intentions.
“I read recently that he keeps asking his advisers when all the green jobs will come on line. He really believes that stuff!”
He definitely believes in a centrally planned economy. I’m not sure he “really believes” in ‘green’ jobs but there is no denying it has been a slick Chicago way of funneling billions to his supporters.
I thought that the Wan ran on a plank favoring ramping coal taxes and restricted, green drilling.
At EVERY turn he’s told the nation that drilling is NO SOLUTION to higher gasoline prices.
(!)
As for the current ramp: it’s being triggered by way of flight from the US Dollar.
Red China is stepping in with both hands — buying up crude and refined products — placing them in a massively expanding national strategic reserve.
Somehow, that reality doesn’t make our news.
IIRC, Red China needs something like 150,000 bbls per day for her strategic petroleum reserve. She’s behind the eight-ball because her current reserve is scarcely fifty-days of demand.
Beyond that: India and Red China price fix farm tractor fuel: middle distillate — ie Diesel fuel.
Hence, price on the open market does not cause any reduction in their farm sector demand. ( This also crosses over to all Diesel fuels. )
And so it is that California is exporting refined products to Red China on a massive scale — while local transportation fuel demand staggers lower.
This fall off in demand is very evident in motor fuel taxes. It’s blowing up Brown’s budget.
It’s also causing a profit surge for California casualty insurers: empty freeways are almost accident-free. (!)
Auto body shops all over California are going broke.
Doubt me? Scan CraigsList – tools for sale in California. Among the dying tradesmen are countless auto body shops.
And of course, our rush hour is significantly less congested. It’s remarkable.
Obama has done all he can to improve our energy situation. For example, he suggested during the 2008 campaign that energy saved inflating tires would be the energy equivalent obtained from increasing drilling.
Talk about flat earth society!
At the root, both sides are making the wrong argument. Oil and gasoline cost more dollars because each dollar is worth less.
Look at the black line.
Market conditions certainly influence the price of oil relative to everything else. And policy which constrains supply must lead to higher prices. But after a century of manic distortions to the market mechanism, we truly don’t know how much gasoline should cost.
If we back out just the past 30 years of inflation, and remove the taxes, the pump price of gas would be about 85¢.
A further point of amusement with THE WON is his labeling those who disagree with him on energy as belonging to The Flat Earth Society. Obama has depreciated energy solutions THAT WORK, such as increased drilling, in favor of UNPROVEN energy solutions. Who is that who belongs to the Flat Earth Society?
I can see why the POTUS avoids situations where he can be asked questions, such as press conferences.
“If we back out just the past 30 years of inflation..”
In my experience, it is difficult to get people to wrap their thoughts around this issue. Many can not or will not ponder the harm the FED has done.
I’d surmised that the rise was due to inflationary expectations amongst the oil producers.
blert, your points are interesting. Can you suggest where I could read more about them?
For my part, I suspect Presidents only have a brake, not a throttle, in dealing with the economy.
A further point of amusement with THE WON is his labeling those who disagree with him on energy as belonging to The Flat Earth Society.
AGW acolytes who don’t know my background have accused me of being anti-science.
Good times, good times.
May I share a story?
In 2002 I heard Lester Thurow speak (former Dean, Sloan School of Business, MIT). He ended his presentation discussing genetically altered food (aka Frankenfood) and used this metaphor (here paraphrased).
In 1492 when Columbus set sail, he wasn’t trying to prove the earth was round. Intellectuals knew the world was round since Erastothenes accurately calculated its circumference in c. 500 BC.
Why then had no one sailed before Columbus? Sea Monsters. They were afraid they’d be eaten by sea monsters.
Well, When Columbus returned, he was obviously just lucky. By the time two voyages had set out and returned, people began two think that maybe there were no sea monsters. By the time the hundreth voyage sailed, they KNEW there were no sea monsters.
Thurow concluded by pointing out that those who made the first trips, when the danger of sea monsters was the greatest became the colonial GOVERNORS, while those that made the hundreth trip became the colonists.
The anti-petroleum crowd is afraid of sea monsters. Their sea monsters are environmental catastrophe and in a sense, even oil itself. Even though the BP Spill and the Exxon Valdez disaster were two of the largest disasters, such are rare and over time are repaired through the action of mankind and the natural development of the earth. One of the rationals for not building Keystone was environmental disaster, but just how many pipeline disasters occured over the past 30 years in Alaska, where the weather is far more inhospitable and extreme than in Nebraska?
The Obama administration, and the environmentalists, what to prohibit us from taking the lead in our own energy independence (even though they claim to support the same) because they want us to be the colonists, right alongside Europe, rather than the colonial governors as we have been in the past. Obama’s apology tour, Holders complaints about the country, Michelle Obama’s comments, Bill Maher’s comment about coiwards lobbing cruise missles . . . . These people are ashamed of our success across the globe and want us to fall in line with the rest of the less successful crew. They want us to be the colonists just like everyone else (except themselves, of course).
I read an op-ed in the Wall Street Journal today about gas prices, and there was not a single mention of the devaluation of the dollar caused by rampant borrowing and spending.
“I read an op-ed in the Wall Street Journal today about gas prices, and there was not a single mention of the devaluation of the dollar caused by rampant borrowing and spending.”
Ssshh, they want to quietly monetize the debt/deficits so use a whisper whenever trillions of QE to infinity are concerned. Its all Greek to the unwashed MSM masses and they want to keep it that way.
Robert Zubrin says: “President Obama says his energy policy is a great success. In support, Democratic-party stalwart John Podesta trumpets the claim that the United States is now producing more oil than it imports. A recent article in the Bloomberg News goes even further, saying that the U.S. is now a net oil exporter. New York Times columnist Tom Friedman instructs us to rejoice: High oil prices are now good for the United States.”
It is to weep! We have been at the mercy of the OPEC cartel since 1973. Interestingly the EPA was formed in 1970. That is when our oil production ceased to increase at 3% per year. Surprisingly, non-OPEC oil producers have continued to increase their production by 3-4% per year for the last 40 years. Had we continued exploring and producing at the same rate, OPEC would no longer have the leverage they now have. In the name of national security we should be drilling here and drilling now. Just opening ANWR and the Santa Barbara Channel would have a couple of million of new barrels on line within three years. Had we started drilling ANWR and Santa Barbara at the beginning of Bush’s term we would be so much more energy secure today. We know the oil is there, we just need to drill the wells. The “watermelons” (green on the outside, red on the inside) who have been pushing the anti-petroleum agenda care not about that. Their agenda may have been well meant or premeditated evil. Whatever, it has been ruinous for the U.S.
All the new production that is coming on line in North Dakota (The Bakken Shale) is being drilled on private land. The government has not been able to prevent that, but they are preventing drilling on all Federal lands in the West. With all the new seismic technology, directional drilling, fracking, and well completion techniques that we have now, hydrocarbons are more easily found and produced. We also now have the means to drill offshore in deep water. There are promising areas in the Eastern Gulf of Mexico – now closed, and off both coasts – now closed.
In addition we have more coal than anyone. We should be working to perfect the commerialization of the coal to oil process (Fischer-Tropsch) that the Germans used during WWII.
I have said many times on many blogs, “Modern economies float on a sea of affordable, secure energy. It is the lifeblood of commerce and production. Nearly everything we enjoy deponds on it. We ignore this fact at our peril.”
Oh yes, Be sure to read all of Zubrin’s essay:
http://tinyurl.com/7unj5s2
JJ formerly Jimmy J wrote:
“Interestingly the EPA was formed in 1970. That is when our oil production ceased to increase at 3% per year.” Fear of sea monsters!
“Had we started drilling ANWR and Santa Barbara at the beginning of Bush’s term we would be so much more energy secure today.” Fear of sea monsters!
“There are promising areas in the Eastern Gulf of Mexico — now closed, and off both coasts — now closed.” Fear of sea monster!
“Their agenda may have been well meant or premeditated evil. Whatever, it has been ruinous for the U.S.” Welcome colonists!
Devaluation of the dollar under Obama’a fiscally irresponsible spending and the Fed’s ultra-low interest policies is a huge factor driving up oil prices. Moreover, the threat of large quantities of US production coming on line will elicit extra production now. OPEC producers would prefer to compete against low US production now rather than high US production a few years down the track. Obama is doing all he can to remove the threat to OPEC of US production increasing. That means oil prices will remain “necessarily high”.
… neither Bush nor Obama was or is the main driver of high gas prices, although each party will try to blame the other, to its own advantage.
I won’t let either one off the hook. It supposedly takes 3 years to bring new drilling leases into production, and it takes 3 years to build a new refinery and bring it online from when the leases and permits are granted.
Bush had 8 years, Obama had 3.
The Republican candidate should make a campaign promise to grant new drilling leases and refinery permits in the first year of his administration, and the Keystone pipeline as well. Then, four years later, when he is up for reelection, we’ll see how the energy economy is doing.
Oil is a future’s market. Drilling will make a difference in prices. Saying it won’t is disingenuous. If not then what is the reason for tapping the strategic oil reserve?
The point that Steve, right above, makes spotlights the fact that both neo-neocon and Krauthammer are to a large extent wrong. Expectations drive the futures mkt and hence the present price of oil which includes the cost of higher-priced replacement oil in the future.. Presently these mkts are projecting scarcity due to Obama’s throttling of the oil, coal, gas and nuclear industry. Any movement forward on all these fronts to increase supply will change perceptions about future availability of energy supplies and hence present pricing which will no longer have to reflect future higher replacement costs.
Steve and Virign Xenophon,
A clear encapsulation of the effect of the futures market.
One thing I have yet to quite figure out yet is the impact of accounting procedures on oil company claims. It’s my understanding that they use a Last In First Out (LIFO) method which means that gasoline is priced based upon the latest spot price for oil regardless of the price actually paid for the oil in the inventory. Clearly this method is advantageous in rising markets, for one sells previously purchased oil (cheaper) for a higher price (last in = most expensive). Are the oil companies calculating their supposedly 6-8% net profit margin based upon a “last in” price? In which case the true profit is probably a much higher percentage.
Can anyone here clarify or expand on this idea?
Accounting! What it reveals is interesting, what it conceals is vital.
sorry, Virgil not Virign (sloppy fingers)
Oil is part future and part present market value. It is not all futures.
Otherwise what people pay to use the product now would have no influence.
However people do change their driving behavior and consumption is affected and that does affect price.
Therefore Virgil is wrong 🙂
I drive 500 miles a week to and from work.
I have some tips for reducing fuel costs.
1) Inflate your tires properly.
2) Drive at a consistent speed.
3) No jackrabbit starts.
4) Vote Obama out of office.
5) Drill baby, Drill.
Everyone blames “speculators”.
As steve and virg x point out, the speculators are betting that supplies will go down.
It is surprising that Krauthammer doesn’t see this.
If a president can control supply (as this one does in a negative fashion) then the speculators will buy against later higher prices, themselves driving the price up.
When people point out that we are exporting oil (so supplies MUST be greater than demand), they neglect that demand is higher elsewhere than here as blert and T pointed out.
demand is lower here because so many don’t have a job to drive to. Soon, I may not me able to cost justify my daily commute of 100 miles round trip.
I’m paying over $400 a month in fuel alone.
That used to be a car payment.
One less car sold.
But I won’t qualify for unemployment by virtue of quitting instead of being laid off.
Grreat comments by T, JJ, and Virgil. Thanks, gents!
baklava/
I was not wrong, I just had “underincluded” some additional points which you so helpfully added. 🙂 For a really interesting and revealing discussion on pricing go to a 12 Mar 2012 art in The American Thinker by Seldon B. Graham, Jr entitled “Oil and Gasoline Prices” @ http://www.americanthinker.com/2012/03/oil_and_gasoline_prices.html
Not only immensely informative but reveals yet MORE perfidy on the part of the Obama Administration to keep the public in the dark about what they are doing..
RE: “Charles Krauthammer correctly point out that Obama really doesn’t have much control over oil prices.”
I don’t agree. In the first place, President Obama’s anti-oil policies are adding to the uncertainty that is causing alarm in the industry. These policies will hurt us in the long run, but the impact on today is what is does in the mind of oil speculators who have to believe that America is even more addicted to foreign oil — especially from the Middle East.
The second problem is that Obama weak foreign policy encourages the Iranians, and they, in turn, are threatening the Middle East oil supply and driving up prices.
But the biggest reason why Obama is responsible for this mess — to a great extent — has nothing to do with oil; it’s the value of the dollar. We are greatly expanding the number of dollars in the world. The government stopped telling us officially how rapidly the money supply is expanding. We can see estimates, and it isn’t pretty. “Qualitative Easing” is essentially paying off our huge debt by printing money. The result is that the supply goes up, and the value of the dollar goes down. The only reason this isn’t more obvious is that other currencies (especially the Euro) are in worse shape than us. The price of oil is going up because the price of many commodities are also going up (especially gold and silver). Obama’s spending issues are to blame, but also his pro-inflation policies. Many of his advisers believe that the way to get the economy moving is to encourage people to spend more by encouraging them to empty their savings ahead of inflation.
By the way, when your liberal friends talk about oil, remind them that they talked about ANWR as unimportant because it would take 7-10 years to get any oil out of it. The debate was in 1996. Oil from ANWR would really help about now. Those short-term decisions to ignore the long-term do hurt you eventually. The keystone pipeline is this generation’s ANWR decision.
kevino, et.al.: the operative words there are “much” and “control.” Obama definitely has some influence on oil prices; never said presidents don’t. But he does not have much control over them. People give him (and Bush before him) too much credit and blame for gas/oil prices; many people think presidents have a lot of control over those things.
Neoneocon,
Perhaps a more accurate way of stating this is that the president has no DIRECT control over the price of oil but he does an indirect influence as he affects the economic environment in which those prices are set. He can directly affect prices (e.g., in the executive branch by slow-walking drilling permits) or indirectly affect prices (e.g., by presenting or not presenting legislation to Congress to relieve the problem).
Neo-
Control, Shmuntrol. He certainly has a lot of INFLUENCE, all negative. He is the head of the opposition to the available energy effort. Access and use of energy to an important extent make our remnant individual liberty possible. Smart Growth and the UN’s Agenda 21 are widely overlooked components of the movement to stifle individual liberty. Obama is the American tip of this spear, and if America goes, the globe will too.
There are a number of things that Obama could do to slightly lower gasoline prices, but they would hurt him with his lefty pals. The EPA could reduce the number of unique gas formulations in many parts of the country. Foreign ships could be permitted to transport fuel from U.S. port to U.S. port. The requirement for ethanol blended fuel could be dropped.
Obama could greatly expand drilling permits in sensitive areas and he could approve the Keystone pipeline. While those actions would have no direct effect, they could have a psychological effect on prices.
As bad as Obama is on coal, oil, and gas now, he would be really dangerous in a second term.
Excellent point, Don Carlos, about the distinction between influence and control. The language of “control” which we use without thought shows how pervasive the Progressive frame is.
It is an illusion that a market of billions of agents can be controlled. But if you hold the illusion, you then can be controlled by the illusionist.
Influence on price (setting money/inflation aside) is completely dependent on the time frame. Nobody can credibly influence the average price of oil over the next century. A single terrorist can have a dramatic influence on its price over the next week.
Speculation causes more and wider swings in oil prices than it used to. Why? It used to be 80% of the futures markets were end users (Refiners, chemical companies, airlines, etc.) and 20% were speculators. It also used to be that if you bought a futures contract and it expired, you had to take delivery. Now, thanks to the International Commodities Exchange (ICE), based in London, speculators can just role their contracts over. They may lose some money, but they can maintain their bet on price direction. Now the market is up to 50% speculators.
Another thing that has changed is that some oil storage areas have been built that cater to speculators and hedgers who think oil prices are going up. One of them is on the island of Bonaire in the Caribbean. (I’ve been there.) I’m sure there are others spotted around the free world. They can buy low and hold oil off the market until prices rise. It’s not risk free, but these speculators (hedge funds, Goldman Sachs, etc.) have big money to bet.
The conflict in Libya caused higher prices because they export a lot of oil to Europe. The loss of that oil supply would have caused much higher prices. Things kind of settled down when the fighting ended there.
But the threats by Iran to close the Hormuz Straits have been the other reason why speculators have been staying in their contracts. The speculators are out of reach of the U.S. government unless we can convince the Brits to regulate the ICE and make contract holders take delivery of product. I wouldn’t hold my breath on that one.
If President Obama would sate in no uncertain terms that the U.S. would stand behind Israel if they attack the Iranian nukes and that there is no way in hell that we would allow Iran to close Hormuz, it would, IMO, go a long way to take pressure off oil prices. They might drop back to $80/barrel. Just sayin’.
Careful, J.J., that’s what Bernie Sanders says, too. 🙂
Wasn’t it sometime within the last couple of years that all the storage was full? Tankers were being chartered to hold delivered oil that had no users. And the price went down.
The financial instruments may produce more volatility, but the price is still a servant of real supply and demand. If the gov’t and central banks would stop creating money, the speculators would ease out of rolling over their contracts. Built-in systemic inflation favors the long side of commodities contracts. It’s another way the banksters rip off the rest of us. They make real gains from our loss of purchasing power.
Foxmarks, the price of oil and all commodities is related to inflation, but inflation is not the only factor. The old supply-demand equation still holds over the long term. Most of the big money has been betting on higher commodities prices because of the rise in demand in China and India. They see it as an inevitable reality over the period when those economies are growing at 8%/year or greater. That’s why they have built the oil storage facilities. The Fed is not helping things by doing their quantitative easing because it provides money for the speclators to drive commodity prices higher than they would be without all that money sloshing around the system. However, and I know you are going to disagree, the Fed has needed to maintain liquidity in the system since the 2008 crisis to prevent deflation. Deflation is the real enemy and we have been flirting with it since 2008. Yes the Fed will probably overdue it (Stay loose too long), but inflation is easily stopped as compared to deflation. The answer to increased commodities prices is more supply. And we are getting increased drilling and mining in most parts of the world. But NOT in the USA. And that is a lot of the problem.
If inflation was a big factor, the price of natural gas should be increasing too but the abundant supply is causing the price to decrease significantly.