“A sign announces the day’s gas prices at a station in Annapolis, Maryland, on May 12, 2021. Fears that the shutdown of the Colonial Pipeline because of a cyberattack would cause a gasoline shortage led to some panic buying. JIM WATSON/AFP via Getty Images
Critics of any president are quick to blame the commander in chief for things that are totally beyond his or her control. (Of course, presidents and their supporters are equally quick to take credit for things that are beyond their control.) The price of gasoline is a perfect example. Donald Trump and his fellow Republicans took credit for low gasoline prices in 2019 [source: Rainey]. And when George W. Bush was in office, Democrats blamed him for allowing gas prices to rise from $1.45 a gallon on his inauguration day to $4.05 a gallon by June 2008 [source: Thaler].
The truth is that no president — Democrat or Republican, friend of "big oil" or supporter of alternative fuels — can do much of anything to affect the short-term price of oil, and therefore gasoline. The overriding factor that determines the price of oil from day to day is the market principle of supply and demand [source: U.S. Energy Information Administration]. It comes down to simple economics: When demand is greater than supply, prices rise.
The actual price of a barrel of oil is constantly changing, since oil is a commodity that is traded on the futures market. Buying and selling oil futures is called speculating, because you’re making trades based on expectations of future supply and demand.
And for a while, demand was skyrocketing. After the Great Recession ended, demand steadily increased as the global economy recovered and kicked back into high gear. To match that demand, U.S. oil production rose dramatically from around 5,000 barrels a day in 2009 to a record high of 13,100 barrels a day in early 2020 [source: Macrotrends]. Thanks in large part to the drilling technology called hydraulic fracturing (or " fracking"), American oil producers were able to keep pace with demand and keep gasoline prices stable.
The COVID-19 pandemic slashed global demand and hit the oil and gas industry hard. One upside of the global oil glut was lower gasoline prices at the pump [source: Associated Press]. But that changed in May 2021, when the Colonial Pipeline system, which moves about 45 percent of the East Coast’s fuel, had to shut down after hackers got into its servers and encrypted its data, demanding money to restore access. (The hackers are thought to be based in Russia.) The shutdown caused increases in gas prices and fuel shortages in some Eastern states. Panicked buying of gas in response to fears about gas shortages only made the problem worse.
So if gasoline prices are largely at the mercy of global fluctuations in supply and demand (plus the occasional pandemic), what can a president actually do, if anything, to influence gas prices? Find out next.
Gas Prices and the Oil Supply
What about increasing the oil supply? Can’t the president boost U.S. production? It’s true that aggressive increases in U.S. oil production would bring the global supply closer to the demand for oil. Unfortunately, the U.S. is such a small player on the international oil scene — America controls only 4 percent of the world’s oil reserves — that even if the U.S. doubled its current production capacity, it still wouldn’t make much of a dent [sources: NS Energy, Thaler]. It would also take a number of years to assemble the drilling rigs, pipelines and crew to make that type of production increase, meaning oil prices would be unaffected in the short term.
The only way the president can quickly boost the oil supply to lower gasoline prices is by tapping the Strategic Petroleum Reserve, an emergency stockpile of more than 700 million barrels of crude oil stored along the U.S. Gulf Coast (a barrel of oil equals about 159 liters, or 42 gallons). In June 2011, President Obama released 30 million barrels of oil from the emergency reserves in response to crises in Libya and Yemen. President Bush also tapped the reserves in the aftermath of Hurricane Katrina, temporarily lowering gas prices 10 to 15 percent [source: The New York Times]. Experts agree, however, that these reserves should be used for emergencies only, not employed as temporary relief to market-driven problems.
In this current ransomware situation, the governor of Georgia tried to keep gas prices lower by temporarily waiving the state fuel taxes (about 28 cents per gallon). There is also a federal gas tax of 18.4 cents a gallon, used to fund highway repair. However, that is set by Congress, not the president. It has been the same since 1993 and there is some bipartisan support in Congress that it is time to raise it to help pay for infrastructure projects.
Originally Published: May 22, 2012
Gas Prices FAQ
Who controls the price of gas?
The price of natural gas in the U.S. mainly depends on the market’s supply and demand. Crude oil is used in refineries to make gasoline, so the cost of this also dictates the price of gas.
What makes gas prices go up?
High crude oil prices make the gas prices go up. More accurately, 54 percent of the price of gasoline is affected by the cost of oil, while the remaining 46 percent is affected by distribution, marketing, refining and taxes.
What is the average U.S. gas price?
Crude oil and gas prices are continuously going up as the refinery utilization is lowered. The average U.S. gas price as of May 2021 was $3.00.Â
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Author’s Note: Can the President Control Gas Prices?
While gas prices might be a controversial topic for politicians, it’s an easy one for economists. Virtually all economists agree that the U.S. president has very little control over the global price of crude oil, and therefore the local price of gasoline. If we can’t rely on our leaders to help lower our fuel costs, we should rely on ourselves. The hard truth is that it’s within our power to decrease the amount we spend on gas simply by driving less. I say it’s a hard truth, because like most of you I depend on my car for all sorts of "important" things and resist the idea of cutting back. If I could afford a brand-new hybrid, I’d buy one in a heartbeat. In the meantime, the best thing I can do to lower gas prices is to lower the demand, one "staycation" at a time.
Related Articles
- How Gas Prices Work
- Why Gasoline Prices Vary From Station to Station
- 5 Most Coveted Offshore Oil Reserves
- How Oil Refining Works
Sources
- Associated Press. "Gas Prices Fall to $2.25 per Gallon on Average in U.S." Time. Oct. 11, 2020 (Nov. 9, 2020) https://time.com/5899073/gasoline-price-covid-19/
- Laskoski, Gregg. "The Strategic Petroleum Reserve Won’t Help Obama With Gas Prices." U.S. News and World Report. March 21, 2012 (Nov. 9, 2020) http://www.usnews.com/opinion/blogs/on-energy/2012/03/21/the-strategic-petroleum-reserve-wont-help-obama-with-gas-prices
- Macrotrends. "U.S. Crude Oil Production – Historical Chart." (Nov.9, 2020) https://www.macrotrends.net/2562/us-crude-oil-production-historical-chart
- The New York Times Editorial Board. "Tapping the Oil Reserve." June 25, 2011 (Nov. 9, 2020) http://www.nytimes.com/2011/06/26/opinion/sunday/26sun3.html?ref=strategicpetroleumreserveus
- NS Energy. "Top ten countries, with the world’s largest oil reserves, from Venezuela to Iraq." Nov. 4, 2020 (Nov. 9, 2020) https://www.nsenergybusiness.com/features/newstop-ten-countries-with-worlds-largest-oil-reserves-5793487/
- Rainey, James. "Trump claim credit for cheap gas. Experts say it’s not so simple." NBC News. Jan. 2, 2019. (Nov. 9, 2020) https://www.nbcnews.com/politics/politics-news/trump-claims-credit-cheap-gas-experts-say-it-s-not-n953626
- Sommer, Jeff. "Gas Price Disparity Seems Here to Stay." The New York Times. March 10, 2012 (Nov. 9, 2020) http://www.nytimes.com/2012/03/11/your-money/gasoline-price-disparity-seems-here-to-stay-strategies.html?ref=strategicpetroleumreserveus
- Thaler, Richard. "Why Gas Prices Are Out of Any President’s Control." The New York Times. March 31, 2012 (Nov. 9, 2020) http://www.nytimes.com/2012/04/01/business/gas-prices-are-out-of-any-presidents-control.html
- The U.S. Energy Information Administration. "What’s up (and down) with gasoline prices?" February 14, 2012 (May 16, 2012) http://www.eia.gov/tools/faqs/faq.cfm?id=1&t=10
- Yetiv, Steve. "Why Obama can’t control gas prices." The Christian Science Monitor. April 18, 2012 (Nov. 9, 2020) http://www.csmonitor.com/Commentary/Opinion/2012/0418/Why-Obama-can-t-control-gas-prices
