Is President Obama Manipulating Gasoline Prices?

Executive Summary for Those with Short Attention Spans

For those who tend not to read much past the headline, the answer to that question is “No.” If you want to understand a bit more about the issue of falling gas prices during election seasons, read on.

The Rotating Roles of Accused and Accuser

It never fails during election season that when gasoline prices are falling, the party out of power and media members sympathetic to that party will start to make accusations and insinuations that the President is manipulating gasoline prices in order to win elections. It happened when Clinton was in office, it happened when Bush was in office, and now it’s happening while Obama is in office. The only things that change are the party that is being charged of manipulating prices, and the people who are defending or accusing that party. This year it’s Fox News doing the accusing, and MSNBC defending.

As I occasionally feel the need to point out â€" especially in an election year â€" there are fundamental, predictable reasons that gasoline prices fall at this time of year. This happens most years, even in non-election years. Gasoline prices fell at this time of year in 2011, 2012, and 2013 â€" two of which were non-election years. It is just that the political accusations only arise during election years.

Why Gasoline Prices Actually Fall in Fall

First of all, why do gasoline prices fall at this time of year? A couple of reasons. Summer driving season is over, and demand is typically declining at this time of year. At the same time, the gasoline specifications switch over to a winter blend that is both cheaper to produce, and that contains ingredients (butane being the most significant) in greater abundance. See my article Why Gasoline Prices are Falling for a deeper understanding of this issue.

So you have lower demand, greater supplies, and lower production costs all converging at about this time every year. This year, add in the fact that oil prices have retreated sharply since summer (due to both the fracking boom and weakening demand around the world), and gas prices are falling more than normal this year.

Sometimes other factors do trump the factors that push gasoline prices down. Hurricane Katrina in 2005 took a large fraction of oil production offline in the Gulf of Mexico at a time that the oil supply was already tight, and this drove oil prices sharply higher. So that year we didn’t see the typical fall price decline.

How a President Can Impact Gasoline Prices

There are only a couple of handles a president has on short term gasoline prices, and both are readily apparent when they happen. A president can announce a release of crude oil from the Strategic Petroleum Reserve (SPR) in order to flood oil into the market and depress prices. President Clinton actually did this leading up to an election, so the charge that he manipulated prices has some support.

A president can also convince Congress to temporarily lower the federal gasoline tax in order to reduce gasoline prices. Again, that would be an obvious attempt to gain political favor if done just before election, and it is a gimmick that then presidential candidates John McCain and Hillary Clinton both proposed when they were running.

In the longer term, presidents can enact policies that influence the price of gasoline. Any policy that either reduces or increases the supply of oil, changes demand for oil, or that makes renewables more cost competitive with oil, will eventually impact the price of gasoline at the pump. But these are policies that take years to have an impact, and probably won’t be fully felt until after a president is out of office.

Conclusions

So, is President Obama manipulating gasoline prices? No. Did Bush leading up to elections? No. There is some evidence that President Clinton attempted to, because he did use one of the political handles that a president can use to temporarily lower prices. But most of the time, these conspiracy theories have no basis in fact. Gasoline prices generally fall in the fall, and for just the opposite reasons they rise in the spring just ahead of summer driving season.

Link to Original Article: Is President Obama Manipulating Gasoline Prices?

By Robert Rapier. You can find me on Twitter, LinkedIn, or Facebook.