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Road rage: The truth about gasoline prices

March 30, 2012

| MoneyRates.com Senior Financial Analyst, CFA

Americans are outraged over the steady rise in gasoline prices, and as president, Barack Obama has to take responsibility for what happens on his watch. A recent Reuters/Ipsos online poll indicated that 68 percent of Americans disapprove of how Obama is handling rising gas prices.

While the backlash is inevitable, it raises a key question: How much control does the President really have over oil and gasoline prices? How people perceive the answer to that question could well decide the results of the next election.

A sensitive issue

Gasoline prices are an especially sensitive issue right now, for a few reasons:

  1. The economic recovery is fragile. The economy is growing again, but rising oil prices nearly stalled the recovery a year ago. It could happen again.
  2. Gas price increases seem out of whack. With low wage increases and even lower interest rates on savings accounts, seeing gas prices rise by over 8 percent in a month is pretty galling to most people.
  3. It is an election year. High gas prices look like they could be a key point of vulnerability for Obama, so expect his opponents to keep the issue front and center from now until November.

Revealing facts about oil prices

There's no doubt that Obama will be held accountable for gas prices, but how much impact has he really had on them? Fast-rising prices are grabbing headlines, but some additional facts can lend a more detailed perspective:

  1. Oil prices were actually higher four years ago. For those who associate high oil prices with Obama's policies, it may come as a shock to note that while a barrel of oil was $105.11 as of March 15 of this year, it was $110.21 on the same date four years ago.
  2. There is a fair amount of financial speculation in oil prices. Looking at oil futures, prices are much lower if you look at contracts expiring in a couple years or more. This is fairly unusual for a commodity like oil, which normally would be presumed to rise with the rate of inflation (at least) over time. This type of inversion was very much in evidence just before oil prices peaked in mid-2008, and suggests that financial speculation may be playing a role in current prices.
  3. Lately, gas prices have continued to rise even though oil prices have stalled. Oil prices more or less levelled off in the first half of March, while gasoline prices continued to rise. So far this year (as of March 19), oil prices were up 9.4 percent, while retail gas prices were up 16.8 percent. Could oil company profiteering be at work here?

With the Presidential election coming up, high gasoline prices will provide one key test of Obama's leadership. Releasing strategic oil reserves could provide some short-term relief for gas prices, but it would be a very risky move in a world where oil supply is hardly reliable. It will be interesting to see whether the President can resist the temptation to take this risk for the sake of winning a few more votes in November.

Your responses to ‘Road rage: The truth about gasoline prices’

Showing 8 comments | Add your comment
jeff

8 April 2012 at 2:29 pm

I don't understand this atrtical. I dosen't clear anything up. Where is the truth and where are the answers, someone knows. I want to know. Cheaper oil, higer prices don't make figure in my mind. Someone is making a killing, I need someone to step up and look out for me. Why is this not the #1 issuse in this political arena. Doubled in 4 years, what the heck. How can I afford to get to work at this price. I'll get there but broke again. yea I know I need a better job, so give me one. With gas like it is, I won't have one for long.

Brian

8 April 2012 at 2:12 pm

Excuse me, but I thought this was supposed to be an article about what our President can do to lower gasoline prices. To start, he could sign the Keystone Pipeline. 2ndly, he could rescind his moratorium on drilling in the gulf. He could also be a proponent of allowing for more Oil Refineries in our country. When the President talks, people listen. That includes people in other countries. If Arab Countries think that we are pushing hard for drilling more oil, their response will be to lower prices, in order to make it more practical to buy from them. The last thing they want is for us to do more drilling. That will increase supply, and cause price decreases. So, those are just 3 things our President could do, and would lower oil prices around the world IMMEDIATELY!

JJS

8 April 2012 at 2:05 pm

The cuurency debasement is the underlying reason for the rise. Globally, oil is priced in dollars. Current monetary policies are devaluing the dollar.

dshutts

8 April 2012 at 1:00 pm

No mention of nearly 1 million barrel of refining in US territories have shut down due to transportation costs and Obama controlling EPA and Energy Depts and making Policy with out congressional approval that is shutting down various energy operations

William

8 April 2012 at 11:46 am

Daryl - I think you are wrong about the market not working. The reality is the market is working. Investors are taking a risk that there will be demand for the commodity and that people will still consume it no matter the price. I don't need the government involved in anything else. If anything, the government needs to get out of the way. If you want to drive the price of gas down, reduce the demand for gasoline and let the market work for the consumer.

Daniel

8 April 2012 at 6:32 am

All I have to say is if we want to drop the gas prices, Keep the oil companies from selling our oil to the Europe countries. Just so they can make more money for there pockets. That would also keep from having to dig more oil wells which is what they want.

Richard

8 April 2012 at 5:05 am

This GAS PRICE bullsh*t is getting old. Obama has no control or effect on gas prices? What a crock. 1) He said it was his goal to increase gas prices to those of Europe to stimulate the as yet inefficient Green Industries, (and of course his Solyndra friends). 2) He stopped ALL drilling in the Gulf because of BRITISH PETROLEUM screwing up. 3) He has prevented drilling in Alaska. 4) He has fought the Canadian pipeline tooth and nail claiming it will be an ecological disaster when we have a thousand times the pipeline ALREADY in existence in the US with no significant problems and with lower technology. He also fights natural gas and Nuclear power plants with mountains of federal regulations that delay any attempt to be self sufficient for decades. Watch how prices lower just before election time if you believe his crap. But of course if you believe it, you think he's doing a great job with the economy too so enjoy your welfare check while it lasts.

Daryl

5 April 2012 at 1:47 pm

I just must ask why we tolerate speculators and oil companies taking advantage the citizens by hiking oil prices every time we have a long weekend or just before summer vacation. Each everning newscast we hear the same old blarney from those who are supposedly aware of the world economic situation approximating "gee whiz" thats just the way it goes - imagine if we lived in "pick a name here" Bullfeathers - we are being openly screwed by these villains and governments must regulate both prices and speculation for the welfare of those of us trying to survive. We can kid ourselves all we want - the market system doesn't work for gas prices my sharp little friends - its time to act. Its not like we have an alternative.

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