There’s gas, and then there’s just hot air!

       I have said frequently here and elsewhere that POTUS has relatively little to do with gasoline prices. That has not stopped Republicans from railing on the subject and POTUS blaming, however. What is amazing is not simply their relative naiveté but the scope of their numerous grossly incorrect assertions,  samples of which follow below, beginning in the 2012 campaign and ending with a Trump tweet, wrong as usual.

       

Mitt Romney:  “the doubling of gasoline prices obviously follows a presidential policy.” He said Obama deserves blame “for what’s happened to gasoline prices under his watch.”

The Republican National Committee blamed the high pump prices on “the Obama economy.”

Senator John Barrasso of Wyoming said that Obama should be held “fully responsible for what the American public is paying for gasoline.”

Paul Ryan  then veep candidate, said that Obama was going “to great lengths to make gas more expensive.”

Rick Santorum said that Obama and his liberal wonks caused the pump price to rise because “they want higher energy prices. They want to push their radical agenda on the public.”

Newt Gingrich said that Obama’s “anti-American energy government” would give us “$10-a-gallon gasoline.”

Mike Lee, the tea-partying Utah senator, said that if Obama got re-elected, gas would cost $5.45 a gallon by the start of 2015. (it was actually less than half that)

Mitch McConnell said that the high pump prices were “the painful effects of President Obama’s energy policy.”

And the looniest of the lot, Michelle Bachmann, promised “$1 per gallon gasoline” if elected during her ill-fated campaign for the Republican nomination.

And now, this:

"Gas prices are the lowest in the U.S. in over ten years!"

— Donald Trump on Tuesday, July 4th, 2017 in a tweet

       It’s difficult to comprehend that all these persons, many advanced degree holders, managed to graduate university and seem to have skipped Economics 101. The petroleum industry is the poster child for prime example of supply and demand at work. It’s not as if this concept was new.  Adam Smith described markets and market forces in his 1776 masterpiece “The Wealth of Nations.” As a primer for specific commodities, it remains relevant.  

        When discussing petroleum, however, it is also instructive to point out that it was the proving ground for market manipulation, price fixing, monopoly and corporate greed. John D. Rockefeller and Standard Oil were a prime impetus for the enactment of the Sherman Anti-Trust Act, although in truth others followed Standard’s lead. Characterizing the petroleum production and refining industries as “good corporate citizens at the mercy of the whims of POTUS” is as ill informed and incorrect as referring to Kim Kardashian as a vestal virgin.

          

       So, what’s the reality behind all the smoke and mirrors regarding gas prices? First, it’s imperative to understand that a prime factor in regional differences in prices of fuel is the fact that states and counties can (and boy, do they) levy taxes on every gallon, and that these, unlike federal fuel tax, which has remained a constant, unindexed, 18.4 cents per gallon since 1993, vary widely from state to state. Another point of interest is that the effect of federal gas taxes has actually diminished by about 65% due to inflation during those 25 years.

       Tax rates from state to state, however are a different ballgame altogether, ranging from Alaska’s 12.4 cents per gallon to California’s 52.8 cents. Funny, isn’t it, that few persons ever blame their governors for high gas prices?

So let’s look at how or if the Obama administration “caused” high fuel prices and if Trump has been responsible for their reduction.

In total energy consumption, the U.S. was between 86% and 91% self-sufficient by 2016. (Who was President?) Indeed, gas cost less during most of President Barack Obama’s last year in office than it does now. As I write this, prices are rising again, up 25 cents per gallon locally between fill-ups (not Trump’s fault), but I digress.

        In fact (remember fact?) the country became a net exporter of refined petroleum products by 2011, before Obama’s second term. Fuel prices dropped steadily from 2011 to 2016, dropping as low as a national average of $2.23 per gallon in 2015.

        What is well worth remembering in all the smoke and mirrors surrounding gasoline prices is the simple fact that the "Boomer" generation’s nostalgic recall of  29 cent a gallon fuel in 1965 is relatively meaningless when the price is adjusted for inflation. In truth, US gas process are today, when the average increase in consumer price index is factored (the only “fair” comparison), very close to what they have historically been. See the graph below.       

        The decrease in adjusted price from 1929 until 1974 reflects artificially low prices and relatively low state taxes per gallon.  The green line (gas prices adjusted for inflationary considerations and retro-adjusted to 1929, show that the effective price per gallon in 1929 was around $2.40 per gallon. During Obama’s next to last year in the White House that real price hit 2.23. Making it the cheapest gasoline in US history. It also is of interest that none of this has a damned thing to do with the Keystone Pipeline!