Gas prices are the same as they were in 1918

In real dollars adjusted for inflation, that is.

Here’s an interesting statement on Quora from oil company engineer Ryan Carlyle, in response to the question: What could the Obama Administration have done differently to prevent the cost of gasoline from increasing by nearly 2x since January 2009?

Carlyle’s answer:

Absolutely nothing.

Presidents don’t decide how much gasoline costs. It is a very broad commodity market that is completely priced by supply & demand. Nor do national energy policies have much effect within the timeframe of a single presidential term – it takes years to bring new oil supplies to market or shift usage patterns. For that matter, almost all budgetary and economic changes that happen in the first 1-2 years of a president’s term were caused by their predecessor! This causes a lot of misconceptions about presidential effectiveness. (Did you know almost every cent of spending increases under the Obama Administration was enacted under Bush? Neither party wants to talk about that.)

Please don’t take this as defending Obama’s policy decisions. I was severely disappointed by his handling of the Deepwater Horizon oil spill – the moratorium kicked the Gulf Coast while it was down – but it would be factually incorrect to claim he had anything to do with high gasoline prices.

Looking at the chart of real gas prices below. Which presidents seem to have had an impact on gasoline prices?

Source

The largest rise in US history occurred under the “oil-friendly” president, George W. Bush. Most of the profits from high oil prices go to petrostates such as Saudi Arabia,Venezuela, and Iran – I promise you Bush was not trying to enrich those countries in the post-9/11 world. Simple fact is, presidents cannot control the oil price. Attempts to do so (for example price controls enacted under Richard Nixon in 1973) disastrously backfire by creating supply shortages.

The US already has the lowest non-subsidized gasoline prices of any developed nation. For prices to go any lower we would have to follow the populist policies of the likes of Hugo Chávez or Mahmoud Ahmadinejad and subsidize gasoline. This, aside from being terrible energy policy, is a fairly bold-faced way of bribing the poor into voting for the incumbent. In my book, the less the president tries to change energy prices, the better.

 

  • Michael_busby

    The argument the writer makes is incorrect. Oil producing states such as Texas have a state commission that regulates how much oil is allowed to be pumped out of the ground each month. (The commissions also regulate how many new drilling permits are issued each month.) The commissions are political in nature and usually are controlled by the oil magnates. Drive around an oil producing state – see the pump jack that is sitting idly? It has been turned off in the attempt to reduce the amount of oil produced thereby causing the price to increase. Any President has the power to order the pump jacks turned on, but if he/she does, do you think they are going to get any oil dollars in their re-election coffers? Probably not. 

  • Joe Fink

    @6e61382a17d302e344145fadc668188a:disqus The Texas Oil and Gas Commission was put in place to optimize field production and prevent improper lease drainage.  California has oil that will likely never be recovered from hasty, inefficient producers.  Producers who did not allow field recovery, who coned well production or blew off the gas cap as they rushed to “out produce” their neighbors in an effort to drain surrounding leases.  The commission was put in place to prevent this inefficiency by controlling the rate of production and drainage.

    Think of it like the parent who watches over their children with two straws in the same milkshake.  It never was intended nor used to control price.  

  • Bob

    “Gas prices are the same as they were in 1918″ When only the rich elite owned cars & drove.

    • LEGeorge

      And your point ?

  • http://www.facebook.com/people/Travis-Gruver/1058717686 Travis Gruver

    So in the past 14 years we have seen over 250% inflation of gas prices. Is it no wonder our economy has died out over the past decade and is in such trouble now? With such a monstrously huge increase in energy costs, Americans have far less disposable income to buy other items in our more than 2/3rds consumption based economy. Two out of every three dollars of our economy and economic growth comes from Americans buying products sold in stores, car dealerships and etc.

    If Americans are having to spend 250% more on fuel and energy then that is almost 250% less spent growing the rest of our economy that is responsible for FAR more job growth than oil companies. (I say ‘almost’ because I have to give a little credit to some very small growth in jobs from the oil companies though VERY FAR from the growth that could have been expected had fuel prices increased at the same rate as the average rate of inflation in the 50 years prior.)

    This is exacerbated by the current very low purchasing power (value) of our national minimum wage. If the national minimum wage were properly adjusted for inflation/purchasing power from 1968 ($1.60 per hour), the current the minimum wage would be over $10 per hour rather than $7.25 that it is currently. In 1998 the minimum wage was $5.15 per hour and people were paying on average nationally under $1 per gallon for gasoline. Today we are paying an average of $3.90 per gallon. It has gone from 20% of an hourly income in 1998 to buy a gallon of gas to well over 50% of a person’s hourly income at minimum wage today. Fuel and energy costs hit the poor and middle class hardest in living standards.

    Is it any wonder that our poverty rates are increasing and the middle class is shrinking?

  • Dwigley1

    Not true at all. The major oil companies would love for you to believe that BS about supply and demand. With demand at an all time high this theory could hold water. But when we as americans practiced the day of don’t buy gas and the demand dropped as well as the money taken in by the oil companies. You know what they said ? Our profits have dropped due to low consumption of feul so we are going to have to raise gas to compensate for loss of revenue. This completely blows the law of supply and demand out of the equation. When demand dropped gas still went up. Face it- the oil companies are screwing us and there is nothing we can do about it.

  • Vlrt

    Thank you for your honest and precise answers.

  • Pedro Cedos

    Presidents do not influence the price of gasoline? really? so… let’s say that Mr Obama decides today that he’ll authorize oil extractions everywhere in the US and that 5 new refineries will be built in the next 5 years… that would not lower the price of gasoline, right?

  • pete0097

    The trouble with the premise is that the price of fuel is the single driving factor in the inflation rate.  Before this period in time, labor costs and material costs were more important

  • Texasmanker

    Presidents don’t decide how much gasoline costs.

    Really? Tax and regulations dont affect gas prices?

  • http://www.facebook.com/people/Mike-Alwardt/1244578840 Mike Alwardt

    The statement that it takes 1-2 years for any decision to effect gasoline prices is completely false. Just pay attention when OPEC announces a reduction in oil production to see how quickly the threat of less supply effects the price of gasoline. Speculators alone can make the prices go up and down daily.