Curbing fuel prices
This week, as the election draws to a close, we will find out who our national leader is going to be. The historical election on Nov. 6 will have a major impact on our domestic and global policies and economy. I cannot recall when an election has been so close, as many polls were claiming an even tie six days before Super Tuesday.
The week before the election, every single news station left the topics of the current election to focus on Hurricane Sandy’s destruction and aftermath. This northeastern storm, at its largest, spanned more than 900 miles. Early estimates say Sandy left behind $30-50 billion in damage and more than 8 million people without power for an extended period of time as well as forced over 16,000 flights to be cancelled across the globe. In comparison, Hurricane Katrina left damages totaling over $120 billion.
With the storm now passed, we realize the effect on the economy will be minimal, since the $30-50 billion in losses only accounts for 0.2 to 0.3 percent of Gross Domestic Product. In optimistic reporting, some economists are calling for lower gas prices as people fled the area and were not consuming fuel. An estimated decrease in demand for 1.5-1.7 million barrels forecasted a sharp decrease in gas prices as a bottleneck effect of daily consumption took place; however, as these people have returned to their homes, lines formed at gas stations and gas prices should return to current levels.
After I read these reports, it got me thinking on a hot debate topic of the current election—gas prices. In recent history, we have noticed as elections draw near, gas prices seem to dip closer to Election Day and spike shortly after the race has concluded. This trend obviously draws concern on how a standing administration might be able to affect gas prices.
After doing some research and hoping to find an answer that, in fact, a U.S. president can impact gas prices, my findings were that, in the global economy, a president cannot influence the price of oil. Most economists blame gas prices on the fact that prices are spiking globally and our prices have been somewhat modest compared to European countries. Since 2008, gas prices in the United Kingdom have jumped 53 percent (speedlimit.org. uk). Current demand for gas domestically has dropped and that has curbed an even more drastic spike in prices.
However, a standing leadership can have an effect on a portion of domestic gas prices. Domestic oil production accounts for about 8 percent of domestic oil consumption. Continued regulation on policies and permits has driven our domestic storage upward. Currently, the U.S. Strategic Petroleum Reserve (SPR), a national storage of oil maintained for emergency purposes, has risen to 99 percent full at 720 million barrels. Beyond the SPR, proven oil reserves in the country currently sit at 21 billion barrels, and that number doesn’t include oil reserves from shale, tar sands, etc. Therefore, the leadership does have an effect on domestic oil production through regulation. One problem lies with how fast the regulations play into effect during the time you pump that gas into your vehicle. The other problem is that the Obama administration has decreased drilling permits by 36 percent domestically (foxnews.com).
When you take this into account, you quickly realize the lopsidedness in our oil supply.
For example, in 2008, the U.S. became a slight exporter of refined petroleum products. In 2011, the U.S. imported 8.9 million barrels of oil per day compared to the 5.7 million barrels per day produced domestically. That equals $756.4 million in imports of oil each day compared to the $490.2 million produced domestically. In November 2008, gas at the pump cost $1.78/gal, whereas today, it costs $3.56/ gal. So, if you have a vehicle that averages 20 miles per gallon and drive 15,000 miles per year, you were buying $1,335 worth of fuel in 2008. Today, that same car costs $2,670 in fuel. Add that across this nation’s population and you quickly realize how much money is leaving our economy for one product.
In summary, our nation’s leadership plays a small role in the global marketplace for oil, but as you would expect, our government has quite a substantial influence on the market domestically. Through regulation and strategic expansion of domestic drilling, our fuel prices could be somewhat curbed, and in my opinion, would really add to a rebounding economy. — LOGAN IPSEN