An Obama-nation And A Ca-gas-trophe

Obama and Gas Prices

First of all, the word “the” appears twice, which makes me think this is the work of a Photoshopper and not somebody who had to climb up there and place these letters by hand.

Second, I don’t think gas stations could or would post “just kidding” prices on their boards, lest they draw the ire of their customers and their suppliers.

Having said that, let’s start by stating what should be obvious: The President of the United States of America has precious little to do with the price of gasoline. If you don’t believe me, I invite you to take a look at this list from Curiosity (the Discovery Channel program, not the Mars rover). While this list is by no means comprehensive, you’ll probably notice that at no point does it mention that the President is in charge of regulating the prices of goods and services. If gas prices are higher now than they were when Barack Obama took office in 2009, that has more to do with market forces than it does with anything Obama has or hasn’t done during his tenure. (I would also point out that gas prices were lower when Bush II took office than they were when he left, and that they fluctuated wildly during his presidency; if you’re going to unfairly blame Obama for the rise in gas prices, you should unfairly blame Bush as well.)

People don’t want to believe it, but gasoline prices really are driven by the same basic market forces that dictate, say, the price of a gallon of milk. Well, not the exact same forces, but the principle is the same. There are four basic components that influence how gas prices change over time: supply, demand, inflation, and taxes.

Supply


I assume that most people know that gasoline ultimately comes from crude oil, which must be extracted from beneath Earth’s surface. What people may not know is that not all crude oil is created equal. Oil is judged based on its viscosity (its thickness or resistance to flow) and its purity. In oil trading lingo, light refers to oil that has a low viscosity (is more runny) while heavy refers to thicker, more viscous oil. Highly pure oil is called sweet; oil with many impurities is called sour. Light sweet crude oil has always been highly sought after because it requires less processing; consequently, the price of a barrel of light sweet crude has been the market standard. Nowadays, light sweet crude is getting harder to come by, although heavy sour crude oil is still relatively plentiful. Heavy sour crude oil sells at a lower price due to its lower demand, but the trade-off is that oil refiners must invest more money in the equipment needed to process it. Not every oil refinery is set up to process heavy sour crude, which means that the actual cost of gasoline leaving oil refineries is determined by a complex mathematical formula so daunting that the combined intellects of Einstein, Hawking, and Feynman would be utterly stumped by it.*

It’s actually more complicated than that: oil buyers don’t buy barrels of oil now; they shop in the future, as this HowStuffWorks webpage explains. Therefore, the incoming price of oil is made even more muddled by the fact that they’re responding to market forces that may or may not actually come to pass. Truthfully, the revelation that the money I pay for gasoline is being drawn by vague auguries makes me a little queasy and uncomfortable, but such is the oil market.

Demand


Demand is a measure of how much people want gasoline, and they want it a lot. The growing middle classes in China and India, along with those countries’ announced intentions to develop thousands of miles of new roads, means that demand is going to continue increasing in the foreseeable future. Although demand isn’t the only factor that influences gasoline prices, it certainly does make an impact. We could decrease demand, but we’d have to start, I don’t know, walking, bicycling, or using public transportation. Right, let’s move on…

Inflation


This is where the President comes the closest to being able to directly influence gas prices, which means he’s still about one hundred light years from having any meaningful impact. A President does not directly control inflation, although his fiscal policies or tendencies to get us into expensive wars might ultimately prompt the Federal Reserve to print money like it’s going out of style. And of course, one could argue that President Obama’s Congress-approved borrowing has effectively driven up inflation, and by extension the cost of gasoline. But by how much? Well, not that much. If we assume that a gallon of gasoline was $1.84 when Obama took office in 2009, it would only be about $2.00 now (if you believe this handy inflation calculator), assuming that all other factors stayed the same. So even if Obama’s policies did have an adverse effect on the price of gasoline, it’s nowhere near as big as this meme author would have you believe.

Taxes


Before you start smirking and convincing yourself that you’ve won this argument, Mr Meme Maker, please allow me to remind you that under United States laws, the President does not have the power to levy taxes. That can only be done by Congress, but of course the President can make suggestions. The United States does demand a federal excise tax on gasoline of 18.4 cents per gallon. Surely Obama – the tax-monster of so many conservatives’ imaginations – has driven that to historic highs?

Nope. The federal excise tax on gasoline has been 18.4 cents per gallon since October of 1993, or so says the Tax Foundation (and they ought to know, right?).


So what’s the take-home message here? Well, you can blame a lot of stuff on the President – but you can’t blame him for high gas prices. If you’re that concerned, buy a more fuel-efficient car, drive less, walk more. Those are the only choices that are going to have a real impact on how much money you shell out for gasoline.


*But probably not really. I mean, those are/were some really smart guys.

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