Gas prices redux

Nice column from Yglesias on gas prices and politics:

A good rule of thumb is that if politicians are talking about the price of gas, they’re talking nonsense. This week is no exception.

Boehner’s line is a good place to start. Gas prices are indeed way higher than they were on Inauguration Day. That’s in part because the winter of 2008-09 was the cheapest moment for gas prices that we’ve seen in years. Do we remember what else was going on back then? That’s right—a global financial crisis that tipped the entire world into recession.  It turns out that driving to work, ferrying stuff from the warehouse to the store, hauling containers across the Pacific Ocean, and flying around to meetings all takes oil. If you manage to orchestrate a situation in which millions of people lose their jobs, retail sales plummet, stores close, and economic activity generally grinds to a halt, this frees up a lot of extra oil. Cheap oil leads to cheap gasoline, so if you did have a job at the depths of the recession your commute got cheap.

And good for you. But this should all serve as a reminder that there’s little constructive action the American government can take to lower the price of gasoline.

What’s more, while voters would obviously prefer cheaper gas to more expensive gas, there’s little reason to believe that expensive oil per se is a sign of political trouble for the president. Last—but by no means least—it can’t be emphasized enough that gasoline is actually unusually cheap in the United States in a way that’s problematic for our economy over the long run…

Conversely, increased global supply of oil would be economic good news. But it’s simply not true that Obama’s policies are curtailing oil production. On the contrary, U.S. oil production tumbled during the Bush administration and has skyrocketed under Obama. Obama really has hurt the oil industry by declining to approve  the Keystone XL pipeline, but as the point of this pipeline is to facilitate the export of fossil fuels its construction would, if anything, make gasoline more expensive.

Meanwhile, nothing Santorum or Boehner or Gingrich or Obama says is going to change the fact that the United States is an increasingly small part of the global demand picture. When China, India, or Brazil get richer, their citizens start trading bicycles for scooters and mopeds for cars. They’re flying more airplanes. This increases the global demand for oil and pushes prices up. All else being equal, this is inconvenient for American drivers. But it’s far from clear that it’s on net harmful to the American economy. American firms are hoping to export goods and services to rapidly growing economies. Every time Boeing sells a plane to an Asian airline, that increases the demand for jet fuel and makes driving marginally more expensive. But we’re better off in the fast-growing world than in the slow-growth, cheap-gas world of three years ago.

Short version: 1) no, rising gas prices are not going to singlehandedly submarine Obama’s re-election prospects and 2) short of changing gas taxes, there is very little that American politicians can do to affect the price of gas in a significant way.