It’s no secret that the price of gas has been steadily rising over the last four years on a nationwide. This simple fact has become one of the central challenges that Barack Obama must tackle in his bid for re-election this year.
On September 8th, vice presidential nominee Paul Ryan visited Google headquarters where he hosted a Google+ Hangout session to take questions from supporters. The topic of the price of gas came up, and Ryan said that the Obama administration has “gone to great lengths to make oil and gas more expensive.” The question then becomes, how accurate of a claim is he making? Can the President control gas prices?
Aside from the obvious question of why a sitting president, hoping for re-election, would knowingly pass on unsustainable costs to the American people, the focus should be whether or not this claim is factual. General consensus with Republican candidates would seem to indicate yes, but the evidence says otherwise.
While crude oil does sway to normal supply and demand principles like any other product, the market for oil is much more complex. The price of oil globally is determined by what is referred to as an oil futures market. The price is determined more by proven oil supplies and market sentiment. Due to the fact that the oil futures market is highly speculative, it can be volatile. Typically, it follows an average boom and bust cycle like other products and, more importantly, it follows a 20 to 30 year bell curve based on oil discovery and proven reserves.
This is known as the “Hubbert Peak Theory”. It is important to note that the president has no control over the factors listed. The question then becomes, does the president have the ability to effect the global price of oil? To assume he could would be to ignore important facts. On top of basic market principles, domestic private sector drilling has increased under the Obama administration.
If Paul Ryan’s claim that President Obama has gone to great lengths to keep the price of gas high is true, it would be reasonable to also assume that many former presidents have made the exact same choice in the past. This list includes President George W. Bush and President Bill Clinton. Under both presidents, gas prices rose steadily.
It is clear that there is no meaningful pattern when it comes to who occupies the White House and what the price of gas is. Gas prices have risen steadily under every presidential administration since the early 90′s. Prices only dropped a meaningful amount in 2008 during the peak of the financial crisis that shocked several markets, including commodities. Until he presents a better case for what the president can do to impact the price of gas in a meaningful way, Paul Ryan’s claim will continue to be false.