Alert reader freedom2learn wrote in with this question: I have an OT[off topic] question.....
What does the price of gas have to do with the presidency? Will prices be lower if a democrat is elected in November?
Excellent question for an election year, especially when gas prices are the highest they've ever been.
Answer: In the short term, the president has absolutely nothing to do with gas prices. Politicians will use high gas prices to fuel dissatisfaction toward and resentment of the party that currently holds the office, but that works only because democrat voters, as always, want somebody to blame for their problems, and then fix them.
The President can, however, do something to exacerbate the situation. Look no further than the disastrous presidency of Jimmy Carter. When gas prices went up, he defeated the entire supply/demand/price structure by instituting price controls which any private or home-schooled child will tell you, creates shortages.
Gas prices are set by the world crude oil market. China and India, enjoying economies that are roaring along at 10%-20% growth, are demanding more and more oil. The world's oil exporters will sell their oil to who ever will pay the highest price....as they should. And that in turn, creates a tightening of the oil supply in the US, which causes prices to go up.
Actually, there is not so much of a shortage of crude oil in this country as there is a shortage of refineries. The nutty environmentalists have protested and maligned the petroleum industry to the point that politicians haven't allowed a new refinery to be built in this country in 20 years. There's enough crude oil, but our refining capacity cannot meet the demand with adequate supplies of gasoline. High demand + low supply = high prices. It's really that simple, and the President has absolutely nothing to do with it. I wouldn't let gas prices affect my choice of president, unless that person has promised to "do something" about gas prices. Then vote against that person because whatever they do will be a disaster.
9 comments:
Yes, I agree, there really is absolutely nothing a president can do about gas prices that will help the American Economy in the long run. Short run, I can think of a number of things he/she can do, but all of the things they could do would do more harm than good.
Hey - Thanks! People tell me they can't wait until the election is over because they are sick of the price of gas - or that it's GW's fault that gas is so high. I didn't know how they came to that conclusion. I thought maybe I was missing a link. I always thought it was the market - supply/demand, but people say Bush and Cheney profit from the high oil prices - I confess my ignorance - I have no clue what the truth of the matter is.
We don't have a few kool aid drinkers around here - it's in the water supply. Sometimes it's hard to think straight when everyone around you is brainwashed. This must be what it feels like to be stuck in a cult :-)
Obama is running an ad here in PA promising to do "something" - I think it's invest $150 Billion in green energy.
ED: We will have to disagree here. The president can do something to solve this problem this time. One the ;leading factors in the skyrocketing of gasoline prices has been the shortage of 2 chemicals used in the cleaning process demanded by the US for sake of pollution. A short term adjustment to our petro-chemical policies would allow our suppliers to make gasoline less expensively and therefore pass along savings to consumers. As these chemicals become more available, then we could retroactively move back to the standards requiring their usage. You are old enough to remember regular and ethyl. Before solvents were added, our motors ran on a different gas. Production capabilities now allow for the higher octanes, without all the solvents/chemicals for air pollution. It won't happen for a variety of reasons, but it stil could and could be started by a presidential proclamation. Thought you would want to know
The President can affect gasoline prices by insisting on a sane financial policy, e.g. balanced budget. I think the devaluation of the Dollar is partially to blame for the pinch at the pump.
Robert and David, 1: the environmentalists would never allow chemical-free gas to be sold, it kills polar bears and makes Indians cry. 2: No President has ever, to my knowledge, reduced the federal tax on gasoline...tax revenue being the lifeblood of political power. 3: While it's true that a balanced budget would make the purchasing power of the dollar greater, it wouldn't affect the international price of crude and we remain bound by the laws of supply and demand.
-expensive, designer gas-blend mandates that vary from state to state,
-refusal to allow petroleum exploration in the Gulf and the God-forsaken wilderness of ANWR,
-refusal to build a single refinery in 20 years to meet demand,
-refusal to build safe, renewable nuclear energy plants,
-failure of Americans to reduce consumption
-failure of Americans to demand alternative-fuel or extremely fuel-efficient vehicles
These are the major domestic reasons for high gas prices, and looking at the list, none of them is actionable by executive order....not realistically.
Americans are going to be willing to pay for gas as long as gas stays affordable. People will pay for gas even if it is 15$ dollars a gallon! That is just how much we depend on gasoline every day. What needs to happen to lower gas prices is for Americans to no longer need it. I personally don't see the gas prices falling ever again.
One other thing, if you are on the ethanol crazy train, research it some more, because it is more expensive, less efficient, and harms the environment more than you think. It destroys land, seeing as how it is corn based, and corn drains land of nutrients, and it requires about 1.5 gallons of petroleum based fuel to produce 1 gallon of ethanol.
What about corporate greed? Oil companies get billions in tax breaks while making record profits. That doesn't sound right.
There is an oligopoly in the oil industry right now. Until those few companies that dominate the market begin to lose money, the prices will not fall.
When supply is short and demand remains constant or goes up....prices rise. The only way to lower gas prices as supply remains fixed, is to decrease demand.
It doesn't matter how few suppliers there are, they aren't fixing prices among themselves. When prices get painfully high, Americans will do what Americans are always the first to do....innovate. Alternative fuels become profitable, demand shifts to alternative means of transportation, new companies jump into the market to take advantage of the high prices thus increasing competition, dumb environmentalist feel the pain too and change their tune about new refineries and drilling for oil in ANWR, thus increasing supply which lowers prices.
You see the big picture? It's all just a big dynamic market in constant flux. As market pressure increases in one direction, pressure releif comes from other directions.
Damn, I should have been an economist like my advisor told me.
Post a Comment