Posts tagged “gas prices”
In response to Republican claims that the Obama administration is not working to lower gasoline prices, U.S. Department of Energy (DOE) Secretary Steven Chu said that the DOE is on track to lower gasoline prices through some indirect methods, including promotion of alternatives such as biofuels and electric vehicles. Speaking at a White House hearing on the DOE’s budget, Chu said his department is making investments in technologies to improve automobile gas mileage, expand battery life for electric vehicles and develop biofuels to reduce U.S. oil imports. “We very much want to not only slow the price, but reverse the rising cost of gasoline,” Chu said. “We definitely feel the pain that every American and every business feels when the… Continue»
Newt Gingrich — Gas Price Fairy
If you have been following the news at all, you know that President Obama is catching a lot of heat over rising gas prices. He used his weekly radio address this week to talk about the issue:
Most of his critics are way off the mark, for reasons I will get into below, but Newt Gingrich is perhaps the most out-of-touch with reality:
“If you would like to have a national American energy policy, never again bow to a Saudi king and pay $2.50 a gallon, Newt Gingrich will be your candidate,” he said to cheers. “If you want $10 a gallon gasoline, an anti-energy secretary, and in weakness requiring us to depend on foreigners for our energy, Barack Obama should be your candidate.”
Inflation Adjusted Data
Gas prices are spiraling through the roof like never seen before. People often point to specific years that gas was so cheap, in an effort to blame politicians, Big Oil, or whomever else is the flavor of the day. Indeed, a gallon of gas was going for only a quarter of a dollar in the years after World War I, and even less than that before and after World War II.
But the key fact that’s missing from all the ranting and raving is the rate of inflation. The simple definition of inflation according to Wikipedia is: “A rise in the general level of prices of goods and services in an economy over a period of time.” Keep in mind, that at the end of World War I, average annual income was only $1,500. Currently, annual income is around $50,000.
For this exercise I plotted various sets of data in graphs — sometimes combined — based on information compiled by the U.S. Department of Energy’s (DOE) statistical office, the Energy Information Administration (EIA). The purpose of this two-part segment is to provide a clearer understanding of how much the price of gas has actually gone up relative to a family’s budget and other household costs, and most importantly, during what time frame.
Rising Gas Prices Prompt Calls For Release of Oil From SPR
Rising gas prices are back in the news again. Oil has gone back above $100 a barrel, and gasoline prices are about to push through the $4 a gallon price. This has led to President Obama sparring with Republican Congressional leaders and his potential opponents. It has also led to Congressional Democrats asking for a release of oil from the Strategic Petroleum Reserve (SPR) in an effort to dodge this issue any way they can. Fellow columnist, Robert Rapier, has often criticized the usage of the SPR as a political tool in an effort to lower gas prices.
Don’t count me as one who thinks that, if only we allowed drilling anywhere, we would suddenly have $2.00/gallon gas. I sat through Newt’s 30 minute speech on energy policy, and it drives me crazy that people actually expect that simply pushing more domestic drilling will fix the problem. I went on the record as supporting Jon Huntsman’s energy policy because it lived in the real world and acknowledged that there were no quick fixes.
Oil prices are a factor of global supply and demand, both currently, and in the future. Prices are being pushed up by increased demand for oil from developing countries, combined with prospects of renewed conflict in the Persian Gulf. I would suggest reading Dr. James Hamilton’s Econbrowser “Crude Oil and Gasoline Prices: Betting on Iranian Tensions” post about what’s driving prices.
Today’s column was supposed to be about what has happened with ethanol exports following the expiration of the ethanol tax credit. That is an interesting story (and exactly what I felt would happen once the credit expired), but it will have to wait until next week, because there is a story of much greater public interest. In fact, this current column was originally about President Obama and gasoline prices, but there is a peripheral issue of importance that I thought I would address first. I will get to the gas price discussion in a day or two.
I did two interviews on the subject of Obama and gas prices last week. One was with Brian Beutler at Talking Points Memo (TPM):
The second was with Alan Colmes from Fox News Radio. (A podcast of this is available at the link).
I will summarize the highlights from these interviews in the next column, elaborate on some points (like why I favor both expansion of renewable energy and the Keystone XL pipeline), and explain why President Obama is not to blame for current gasoline prices.
Crude oil prices this week reached their highest level since last April. What will that mean for U.S. consumers at the gas pump?
The first question to be clear on is which crude oil price we’re talking about. Two of the popular benchmarks are West Texas Intermediate, traded in Oklahoma, and North Sea Brent. Historically these two prices were quite close, and it didn’t matter which one you referenced. But due to a lack of adequate transportation infrastructure in the United States, the two prices have diverged significantly over the last year.
My rule of thumb has been that for every $1 increase in the price of a barrel of crude oil, U.S. consumers are likely to pay 2-1/2 more cents for a gallon of gasoline. The yellow line in the graph below plots the average U.S. retail price of regular gasoline in the U.S. over the last 4 years. The blue line is the gasoline price you’d predict if you applied my rule of thumb to the WTI price (assuming 80 cents/gallon for average tax and mark-up), while the fucshia line gives the prediction if you assume that the U.S. retail price is based on Brent. The three lines were quite close until Brent began to diverge from WTI at the beginning of last year. Since then, the U.S. retail price has tracked the world Brent price much more closely than it has WTI.
Question: What do President Barack Obama and ex-President Jimmy Carter have in common? Answer: Both presided over strong increases in domestic oil production that were a result of decisions made before they took office, as I explain in this post. In my recent post The Oilman in the White House, I posted the following graphic: Is There More to this Graphic than Meets the Eye? The purpose of the graphic was to get people to think about why oil production had behaved in this manner over the past decade. A lot of people took the bait, and asked how I could possibly believe that President Obama was responsible for this rise in production given his apparent hostility toward the oil… Continue»
The Promise: Gas Below $2 a Gallon Like many of you, I am often unhappy with our political leaders. One thing that annoys me the most is that many will say or do just about anything to get elected. By now, you have surely heard the news that Republican presidential hopeful Michele Bachmann has promised a return to $2/gallon gasoline if she is elected president: GOP candidate Michele Bachmann: I’ll bring back $2 gas NEW YORK (CNNMoney) — President Michele Bachmann has a promise: $2 gas. “Under President Bachmann you will see gasoline come down below $2 a gallon again,” Bachmann told a crowd Tuesday in South Carolina. “That will happen.” “The day that the president became president gasoline was… Continue»
In my travels around the globe, I have never been to another country that regards their oil companies as we do here in the U.S. I have actually been in countries where people view their domestic oil companies as a source of national pride. Here in the U.S., the average person on the street views our oil companies as vile, greedy parasites on taxpayers that should be tarred, feathered, and run right out of the country. While this belief is commonly held among Democrats, even staunch Conservatives like Bill O’Reilly have gone on anti-oil company rants, while offering suggestions like “American oil companies must supply the federal government with a written explanation every time they raise the price of gas… Continue»
While Robert continues his trip to Europe and across the Continental U.S., a significant piece of news has been dominating the headlines. Although we’ve been closely monitoring the release of 60 million barrels of crude on our Energy Ticker page, we also wanted to generate some discussion on the topic, here, on the R-Squared Energy Blog. Robert has, in the past, covered the topic of using the Strategic Petroleum Reserve as a weapon to control prices. In one article, he argued against politicians who were calling for a release, titling the essay: “Speculator’s Political Reserve?“. Robert also observed the Jekyll & Hyde phenomenon in “Contradicting Goals: Cheap Gas and Lower Carbon Emissions“. The topic was also covered in his “Debunking… Continue»