Does the President really have much control over gas prices? The short answer is: not really. One way to understand that is to look at how gas prices have fared under President Obama. When he entered office in January 2009, gas cost $1.81 a gallon . Now it’s nearly $2 a gallon higher, an increase of 95%. That sounds bad, but the main reason gas had become so cheap at the start of the Obama Administration was that he was took office during the heart of the worst global recession since the Great Depression. Recession depress economic demand, and when demand is depressed, fewer people drive — which in turns leads the price of gas to fall like any other commodity would when demand falls. As the economy recovered and economic activity picked up — both in the U.S. and elsewhere — the price of gas rose as well.
But what about encouraging more production of oil, both in the U.S. and in friendly nations like Canada, with its vast oil-sands reserve? For one thing, domestic oil production has increased under President Obama, thanks largely to the new unconventional reserves in states like North Dakota. Does Obama deserve much credit for that increase in domestic oil? Probably not. Though Obama has put some additional regulations on the oil industry in the wake of the Deepwater Horizon disaster, it’s hard to imagine that oil companies wouldn’t have been just as eager and able to tap those new resources under a Republican as they have been under a Democrat. And more to the point, that additional domestic oil has done little to alleviate gas prices, in part because oil functions on a global market, and extra American crude is just a drop in that much larger bucket.
Republicans will counter by charging that Obama blocked the Keystone XL pipeline, which would have transported over 800,000 barrels a day of oil-sands crude into the U.S. They’re on firmer ground here — the oil sands are a potentially massive resource, and if that crude can flow unimpeded to the U.S., there’s every reason to expect it would help reduce gas prices somewhat. (That’s ignoring the very real environmental and climate risks presented by the oil sands.) But even so, Keystone would have little immediate effect, especially since there’s already sufficient pipeline infrastructure in place for the next few years. The extra oil brought in by the pipeline might — might — reduce gas prices a few cents a gallon.
In truth, gas prices have increased largely because the U.S. economy is doing better, raising demand for gas along with everything else. Europe’s economy has remained sluggish and risks falling apart completely, which has acted as a drag on oil, but China has kept chugging along — chances are it will use 5% more oil this year. And then there’s Iran, which exports 2.2 million barrels of oil a day. That’s just a tiny part of the 89 million barrels of oil that are consumed globally, but if something goes seriously wrong in Iran — imagine an Israeli attack on the country’s nuclear facilities or even a total ban on exports — the impact on oil markets and gas prices would be ugly.
