Is Obama to Blame for High Gas Prices? >
It's Not Obama's Fault That Crude Oil Prices Have Increased
Presidents get blamed for world market changes that occur during their time in office
March 2, 2012
About Peter Van Doren:
Peter Van Doren is a senior fellow and editor of Regulation at the Cato Institute.
About Jerry Taylor:
A senior fellow at the Cato Institute, Jerry Taylor is among the most widely cited and influential critics of federal energy and environmental policy in the nation. Taylor has served on several congressional advisory bodies and has testified frequently on Capitol Hill regarding various energy and environmental policy matters. He is the author or coauthor of numerous Cato policy studies addressing energy taxes, the oil market, electricity regulation, energy efficiency, renewable energy, sustainable development, and trade and the environment.
Is President Obama responsible for spiraling price of gasoline? Republicans say yes, but the facts say no.
Why have gasoline prices increased since the start of the year? The simplest explanation is that the price of crude oil has increased. Specifically, the spot price for Brent (North Sea) crude has increased $16 a barrel since January. Given that there are 42 gallons to a barrel, that works out to a 38 cent increase in the price of a gallon of oil. Spot prices for gasoline trade in New York have increased about 41 cents per gallon over the same time frame. So there you go.
[What Obama and Ben Bernanke Should Do About Gas Prices.]
Why is the price of North Sea oil relevant to the price of gasoline in the United States? Well, we import gasoline refined in Europe from North Sea crude. Even though these imports constitute less than 10 percent of U.S. gasoline consumption, they are necessary to satisfy domestic demand and their price sets the market price for all gasoline regardless of whether other cheaper crude sources are used to refine most of our gasoline.
Why is the price of North Sea crude rising? One possibility is that supply is down. North Sea (British) production has been decreasing for some time. During the first quarter of 2007, it was 1.7 million barrels a day, or mbd. By the end of 2011, it was down to 1.1 mbd. Norwegian crude oil production has likewise decreased from 2.7 mbd in the first quarter of 2007 to 2.1 mbd at the end of 2011. And global demand is bidding up the price of crude oil from the North Sea and elsewhere.
[Republicans Aggressively Gouging Obama Over Gas Prices.]
Ironically, during the same time period, U.S. crude oil production has marched upward for the first time since 1971. Since the start of 2007, U.S. production has increased by 2.1 mbd. Sure, more domestic oil creates the possibility of fewer refined imports tied to the price of Brent crude, but given that the price of Brent sets the price for crude generally, the result would be more profit for domestic crude producers rather than significantly lower gasoline prices for Americans (not that there's anything wrong with that).
[Has the 'Peak Oil' Tipping Point Arrived?]
So despite the popular perception of President Obama as anti-oil, domestic oil production is increasing for the first time since the Johnson administration. Alas, little of this has to do with the president. Prices increased from $22 in 2002 to just under $100 a barrel average in 2008 and supply has responded. President Obama is no more responsible for production increases than other presidents were responsible for production declines. Unfortunately, presidents get blamed for world market changes that occur during their time in office … but generally, they do not cause them.
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- Other Arguments
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#123895
Yes — The administration has done little to reduce oil prices
DANIEL SIMMONS, Director of State Affairs at the Institute for Energy Research
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#213683
Yes — The president should know there are viable options on the table
DOUGLAS HOLTZ-EAKIN, President of the American Action Forum
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#311182
Yes — Domestic energy production has increased despite president, not because of him
CHRISTOPHER PRANDONI, Federal Affairs Manager of Americans for Tax Reform
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#4129132
No — Only by lowering our gasoline and oil consumption can we protect against high gas prices
DAVID FRIEDMAN, Senior Engineer and Deputy Director of the Union of Concerned Scientists' Clean Vehicles Program
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#683103
No — We need to prepare for a world with permanently higher gasoline prices
SEVERIN BORENSTEIN, E.T. Grether Professor of Business Economics and Public Policy at U.C. Berkeley's Haas School of Business
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#770123
No — Much is out of the president's hands, but what he can do he must do better
NICOLAS LORIS, Policy Analyst in the Roe Institute for Economic Policy Studies at the Heritage Foundation
