The presidency of the United States is often described as the most powerful job in the world. And in many respects that’s true. After all, the president does have the power to unleash nuclear weapons, start undeclared wars, dispatch SEALs to assassinate enemies, control the air we breathe, get us cheaper drugs, appoint idiots to big jobs, loan public money to personal friends, tell whoppers without consequence, promote and veto legislation.
The president can also go on vacation using his own plane whenever he wants or throw big parties at his own home (Halloween was a blast), all on the taxpayer’s dime. Nevertheless, there are limits to presidential power. There are things that are simply beyond his control, even though he may wish or say otherwise — things like gas prices.
Gasoline prices are back up and rising. In California, they exceed $4 per gallon throughout the state. The average across the U.S. is $3.72. Normally, for a president this would not be a good thing. In an election year it could be a disaster — and just when things were looking better too. But there are at least four factors that prevent any president, even future ones, from manipulating the price of gasoline.
The first factor of course is the supply/demand dynamic. Oil is the world’s go to commodity for a host of activities like transportation and heating. Demand has been increasing steadily for decades along with simple population growth but also augmented by emerging economies such as China and India. Alternate renewable energy resources (wind, solar) are still way too expensive to curb the use of oil. Recessions can dampen demand for awhile, but cannot reverse the continuing trend. Supply has been keeping up as new finds and technological extraction methods come into play. Long term, this may help slow price increases.
Another factor is the pricing of oil is U.S. economic policy. Oil is priced in dollars and therefore reflects the amount of dollars sloshing around the world. Expansionist U.S. monetary policy with low interest rates means more dollars sloshing around which ultimately translates to lower purchasing power per dollar, which requires higher prices by producers wanting to remain economically whole. Every $10 increase in per barrel oil prices adds about 25 cents to a gallon of gas.
Hedge funds speculation in oil futures has in some studies been shown to add as much as 22 cents to the price of gasoline. Oil has simply become another investment vehicle with lots of players betting on future prices.
Perhaps the most potentially influential factor is the turmoil in the Middle East. A lot of oil emanates from the area and any open military action could serve to dramatically affect supplies in the short term. If the Iran, U.S. and Israel situation blows up (literally), watch for a huge spike in oil prices.
All presidents speechify about gas prices making promises they cannot possibly keep. The only way to really mitigate the effect of higher gas prices is to drive less or get a more fuel efficient car.
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