In the past few weeks since gas has passed $3.40 per gallon, misunderstandings of what drives gasoline prices have once again become prominent. This has included a resurgence of the old supply-side myth with an emphasis on the source of the oil. Since this is a presidential election year, the opposing candidates have used and perpetuated these misunderstandings and myths as planks in their campaigns. Today, I’ll leave out the more detailed analysis that some will consider to be mere opinion, and will only look at indisputable facts.
Here are the monthly average retail gasoline prices in the USA since 1976:
Take a few seconds to examine the overall price trend and the points where there are major changes in the price of gasoline.
Now that the price changes are fresh in your memory, consider some basic facts:
- Oil is a finite resource.
- Oil is a fungible commodity.
- Population is increasing.
- Car ownership in China and India has increased dramatically in recent years.
Now, consider the dates of several historic events, including:
This is enough to have a reasonable understanding of the price of oil, without a more detailed look. With this understanding of the context of gas prices, consider:
- Given the information above, how much control does the President of the United States have over the price of gasoline?
- If you had to choose one price or trend to represent the cost of gasoline under President Bush or Obama, what would be the most honest price or trend in prices?
- What points do the Republican presidential candidates reference as the price of gas under Presidents Bush and Obama?
- What (if any) price trend do the Republican presidential candidates mention as the trend under Presidents Bush and Obama?
It should now be clear that the major GOP presidential candidates are either misinformed about the price of oil, or are intentionally deceptive. Which is more probable? Is one of these alternatives acceptable?