Americans are outraged over the steady rise in gasoline prices, and as president, Barack Obama has to take responsibility for what happens on his watch. A recent Reuters/Ipsos online poll indicated that 68 percent of Americans disapprove of how Obama is handling rising gas prices.
While the backlash is inevitable, it raises a key question: How much control does the president really have over oil and gasoline prices? How people perceive the answer to that question could well decide the results of the next election.
A sensitive issue
- Gasoline prices are an especially sensitive issue right now, for a few reasons:
- The economic recovery is fragile.The economy is growing again, but rising oil prices nearly stalled the recovery a year ago. It could happen again.
- Gas price increases seem out of whack. With low wage increases and even lower interest rates on savings accounts, seeing gas prices rise by over 8 percent in a month is pretty galling to most people.
- It is an election year. High gas prices look like they could be a key point of vulnerability for Obama, so expect his opponents to keep the issue front and center from now until November.
Revealing facts about oil prices
There's no doubt that Obama will be held accountable for gas prices, but how much impact has he really had on them? Fast-rising prices are grabbing headlines, but some additional facts can lend a more detailed perspective:
- Oil prices were actually higher four years ago. For those who associate high oil prices with Obama's policies, it may come as a shock to note that while a barrel of oil was 105.11 as of March 15 of this year, it was 110.21 on the same date four years ago.
- There is a fair amount of financial speculation in oil prices. Looking at oil futures, prices are much lower if you look at contracts expiring in a couple years or more. This is fairly unusual for a commodity like oil, which normally would be presumed to rise with the rate of inflation (at least) over time. This type of inversion was very much in evidence just before oil prices peaked in mid-2008, and suggests that financial speculation may be playing a role in current prices.
- Lately, gas prices have continued to rise even though oil prices have stalled. Oil prices more or less leveled off in the first half of March, while gasoline prices continued to rise. So far this year (as of March 19), oil prices were up 9.4 percent, while retail gas prices were up 16.8 percent. Could oil company profiteering be at work here?
With the presidential election coming up, high gasoline prices will provide one key test of Obama's leadership. Releasing strategic oil reserves could provide some short-term relief for gas prices, but it would be a very risky move in a world where oil supply is hardly reliable. It will be interesting to see whether the President can resist the temptation to take this risk for the sake of winning a few more votes in November.
The original article can be found at Money-Rates.com:
"Road rage: The truth about gasoline prices."
Kinda like.."Evryone wants to go to Heaven, but nobody wants to die to get there.."
The problem is Gasoline Refining capacity, we've lost several refineries over the last 15 years.
I trade oil for a living...and its not fun right now....!
Why do you focus on the number of refineries? Shouldn't refinery throughput capacity be the important parameter?
If I tell you that Peru has 5000 fishing boats, and Japan has 4300, does it mean that Peru catches more fish? I think the capacity of each boat is important information, don't you?
Us refinery capacity has grown to match US population growth, The number of refineries is down, but the existing refineries have been expanded. This is a fact. Here is the data, if you are really interested.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRRIUS2&f=W
Can we stop doing this every 2 years? Please? Every election if prices are high, those trying to be elected hollar about how those in power are to blame for gas prices. And those in power hollar about how they can't control gas prices. And, if gas were say $1 per gallon, those in power would hollar about how well they've controlled gas prices, while those trying to be elected will hollar about how no one can control gas prices.
It's a stupid "issue" and it needs to stop rearing it's ugly head every election. (and no...I didn't blame Bush II for gas prices when he was in office)
Seen in the news last week the Saudi oil prince said there was no reason for oil to be so high right now.
I would belive him over those here that always say it supply/demand.
Yes they supply it and demand we overpay for it....greed, greed and more greed.
1) 37% of the world's population live in India and China. They are buying cars and consuming petroleum at an ever increasing rate. China will become the 3rd largest consumer of gasoline within the next 2 years.
2) The US dollar is weak.
The President of the USA has nothing to say about gasoline prices. He has no power to lower them.
you should be grateful
How many miles does the average driver there drive per year?
The USA is much, much larger than the UK so we do alot of driving and many depend of tourism to help drive economies.
I live in Kentucky but will drive to Florida or Alabama to visit the ocean. Once drove all the way to NYC but wouldn't now due to the high fuel cost.
IF US fuel prices would drop to around $1.50 a gallon, it would really help the economy turn around. Americans could afford to go out and spend money elsewhere, like buy new things, go on vacations, buy cars, mowers, pay off bills, go out to eat more, etc.
But most of that money is sent to the Big Oil companies for their record profits.
Not trying to blast on you, I just don't want some morons in our government wanting us to pay the same fuel prices as Europe as I've heard mentioned before. It would truly be disastrous.
you are right there is a significant tax element (actually called duty but same thing) and it is stifling our growth. It goes up another 3% in August.
Average miles p.a 12,000 in the UK but business people can easily rack up 50,000 plus (I did before I was laid off)
Lord I hope you don't go the way we have gone brother
If that's what you believe, then please explain why gasoline prices to fall by over 60% in late 2008/early 2009, and why the price of natural gas fell from over $6.00/mcf then to under $2.00/mcf today. Why aren't oil companies profiteering on natural gas? After all, natural gas also has a reactively inelastic demand response in the short term, since people don't shut down their stoves and water heaters, and natural gas powered utilities (supplying 20% of US electricity) can't simply switch to another fuel source overnight.
Indexmundi.com shows that while WTI spot has only increased by 2.11% YTD, Brent is up by almost 8%. As you know, the US imports about 50% of its oil. US refiners must buy oil on world markets. There is not nearly enough WTI to supply US refinery capacity, so why index WTI exclusively? So the increase in US gas prices is due at least in part to the increase in international prices, and also in part because the low winter driving season is behind us.
I also note from indexmundi that rubber, silver, tin, and oranges are up more than gasoline YTD. Are those industries also profiteering? If not, why don't you think they are, but oil is?
The easy solution is always the conspiracy. Dig deeper.
we just buy more gasoline than oranges....