Some things to remember about blame, credit for gasoline prices
I'm the first to admit that I should have paid closer attention to Samuelson when I took Econ260, but one thing that I do remember is that high prices are an antidote for high prices.
It makes sense. If you increase the price of something, people will buy less of it or find cheaper substitutes or just go without. And when demand goes down, so do prices. However, with a commodity like gasoline, that gets trickier. In the last year, we have seen gas prices rise more than a dollar a gallon and the president is being blamed.
One could debate whether Americans have some sort of God-given right to cheap gas. One could talk about the trillions of dollars in federal subsidies provided to the oil industry over the decades or the wars in the Middle East to ensure that the supply of oil kept flowing. Or climate change and the need to move away from fossil fuels. Americans probably don't care that they were paying more for gas eight years ago or that a driver in Amsterdam is paying $6.48 a gallon.
But before enacting political vengeance, consider:
• This is a simple matter of supply and demand. As the world's economies come out of the pandemic, demand is rising quickly and supply is lagging.
• Oil is a global commodity and the U.S. cannot, on its own, set prices.
• Gasoline prices rise and fall in parallel to the price of oil.
• At the moment, OPEC and Russia have not ramped up oil production to pre-pandemic levels and they rather like the higher prices.
• President Joe Biden, along with other countries, can try to jawbone them, but no president has the leverage to force them to pump more oil.
• The U.S. is still, potentially, the world's largest oil producer, but when the pandemic struck, demand died, prices collapsed, and many American drillers and frackers were hurt. They have shown a reluctance to jump back in and cannot increase production was swiftly as OPEC. Anyway, these are private business decisions.
• The U.S. lost some significant refining capacity in the last year, primarily due to Hurricane Ida, which struck refineries along the Gulf Coast. It will be a year before that can been restored.
• President Biden's decision to release 50 million barrels of oil from the strategic petroleum reserve, while getting a handful of other nations to release oil from their reserves, is a political gesture, but little more. The U.S. consumes some 20 million barrels every day and the entire reserve only holds enough oil to cover the country's needs for a month. It is more of a backstop for the American military, which is the largest consumer of fuel in the world. We've released tens of millions of barrels from the reserve before with negligible impact.
Presidents have very little power to impact the overall economy using regulation, executive orders or the broken budget process. The Federal Reserve arguably has more power. Yet all presidents will invariably take credit when things are going well.
It's not fair that any president gets credit for a strong stock market, low unemployment or rising wages (all of which are occurring now). But that's what happens. And, it is not fair that presidents get the blame when unemployment goes up, or prices rise, or shelves are bare. But they do. Look at the president's poll numbers on "handling" the economy. You gotta blame someone, right?
The economy -- and the price of gas -- is impacted by millions of individual decisions each day around the world out of his control. Want cheaper gas? Buy an electric vehicle.
• Keith Peterson, of Lake Barrington, served 29 years as a press and cultural officer for the United States Information Agency and Department of State. He was chief editorial writer of the Daily Herald 1984-86.