Friday, January 14, 2011

Gas Prices: Historical Perspective

(Note: I've updated this post to use a better chart going back 6 years and also showing the price of crude oil).

Some folks on the intertubes are wondering why people aren’t blaming President Obama for rising gas prices the way they did President Bush. I’m not entirely sure that’s true, but perhaps the reason there isn’t more outrage about rising gas prices is because, well, we’ve been here before:

Note gas prices have actually been more stable during Obama's term, and have yet to reach some of the peak prices that they did under Bush (and note the chart only goes back to 2005). Now, I’m not giving Obama the credit for this -- the sucky economy and drop in manufacturing has done more to reduce demand than anything else, hence the more stable gas prices (note gas prices took a nosedive along with the economic crash at the end of Bush's term). But there it is.

Gas prices are a lot like that metaphor about the frog in the boiling pan of water: throw a frog in boiling water and he'll jump out; slowly warm the water to boiling with him in it, and you're eating boiled frog legs for dinner. I remember being so outraged when gas exceeded $2 a gallon for the first time! Now it's like, "Meh. Been there, done that."

There’s a lot of misunderstanding about what affects gas prices, oil prices, etc. People tend to think of gasoline in terms of simple “supply-and-demand” economics but this is only partially true ... in addition to which, Newt Gingrich-types pushing “drill here, drill now, pay less” talking points tend to conveniently overlook a key component of the supply cycle, which is the refineries. Oil companies have been getting out of the refining business for years because the profit margins have shrunk.

Every time gas prices tick upwards Sitemeter tells me people are furiously Googling “why are gas prices going up?” For that answer, read my previous posts here (2009), here (May 2009 again) and here (2010). They all pretty much say the same thing: gasoline is not just a supply and demand business. The price of oil and gasoline is affected by a lot of things -- world events, the value of the dollar, refinery capacity, and yes, demand such as summer travel.

So here’s an actual conversation that was had recently between a liberal and a conservative about gas prices. The liberal mentioned that refineries are cutting capacity to maintain high prices. The conservative said that the U.S. government should build its own refineries if the private ones refused to refine enough to keep prices low.

Chew on that one for a second. Apparently nationalizing certain industries is fine with conservatives as long as it keeps gas prices low. I mean, I just wanted to bust out laughing when I heard that one. Actually, I did.

Anyway, I’ve long been of the belief that we need gas prices to be as high as they are in, say, Europe. Why the hell not? Using less oil and gasoline is in our national interest. It keeps us out of hostile regions of the world, is better for our health and environment, can spur domestic job growth as we manufacture the infrastructure necessary to transition to the new energy economy.

Want to piss off a Yemeni terrorist? Conserve energy. Ride the bus. Support solar and wind energy. Get off the oil tit.

And don’t tell me we can’t, I’m sick of hearing this shit. America was able to completely transition its industrial and manufacturing base away from civilian goods to armaments and war materiel to take on World War II. We can do this.