Data source: AAA Daily Fuel Gauge Report
Michael Isenberg is the author of Full Asylum, a novel about politics, freedom, and hospital gowns. Check it out on Amazon.com.
Friday, September 21, 2012
Daily Reminder
Usually when I bring up the high price of gasoline under the Obama administration, my left-of-center friends point out that many factors that go into gas prices are not under the president's control. That's true, but it doesn't get him off the hook for botched policies on the factors that are under his control.
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03/10/12 - EconLog by David Henderson
ReplyDeleteIs Obama Responsible for Increased Gasoline Prices?
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The world uses 90 MBD (million barrels per day) and prices are inelastic. Cutting supply by just 1 MBD (1.1%) would raise the market price by about 10%. Speculators anticipate this, bid up the future price, and the current price follows upward.
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US oil production was 9.688 million MBD in 2010. Link
Higher US oil production would lower world market prices. Obama is wrong about US oil production being an insignificant fraction of world production. He is correct that oil prices are determined mostly by world production, and incorrect that our production doesn't matter.
The US could easily produce 1% to 2% more of world production, which would lower prices by 10% to 20%. This competition at the current price would remove pricing power from big producers such as Saudi Arabia, Russia, and Iran. They would lower their expectations, set lower long term prices, and increase planned production.
Could the big producers offset US oil production by holding back sales of their own oil? Possibly, by giving up the income which that oil delivers to them. That is a strong incentive to lower their price to preserve their income. Just the threat of increased US production might shake them to lower their market price.
Waiting for Oil
Thanks Andrew for putting some data behind my claim that the president has more ability to influence oil prices than liberals give him credit for.
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