At the peak of the recent run-up in gasoline prices in early May, regular went above $4 in 17 states, while averaging $3.98 nationally. Commuters were understandably aggrieved, and America’s political leaders took immediate action — if you consider pointing fingers a form of action.
Republicans blamed President Obama for allegedly restricting oil production in the Gulf of Mexico. Obama blamed the oil companies for allegedly reaping excess profits and criticized Republicans for defending their tax breaks. Wall Street mavens blamed the Federal Reserve’s loose monetary policies, while Fed economists blamed rising demand in China and India. And everyone blamed high gas prices for the economy’s stall-out in the second quarter.
In the meantime, though, a funny thing happened: Gas prices started to go down, a lot. The national average is roughly 30 cents a gallon lower today than it was a month ago, according to the Energy Department.
So we have a question: Who deserves credit for this sudden boon to the American consumer? Did Obama open the gulf to unregulated drilling? Did Republicans slap a huge tax on ExxonMobil? Did the oil giants turn into charitable foundations? No, no and no.
We have no idea whether the recent downtick will be sustained. But the point here is obvious: Neither politicians in Washington nor their various whipping boys have much to do with short-term fluctuations in fuel prices. Yes, broad changes in public policy can make a difference over the long term, as do global trends such as the rise of the Chinese market. (The Fed’s economists are right about that.) But the world price for crude oil accounts for 69 percent of what we pay at the pump, and our government cannot fine-tune that.
And then there are seasonal variations: U.S. gas prices normally rise in the spring and peak around Memorial Day, according to the Energy Department, as they did this year. For what it’s worth, last week the department forecast that regular gas will average $3.75 a gallon over the April 1-Sept. 30 period — six cents cheaper than what the agency predicted in May.
To be sure, Mideast unrest and Fed policy, neither of which is determined by Obama or his Republican opponents, probably added speculative froth to the recent price surge. But the market’s fever has apparently broken for now; crude is down about $14 a barrel since April. Americans responded to the price spike as they always do: by driving a bit less, which reduced global demand, which ca used crude oil to get cheaper, which caused gas prices to drop, which will eventually permit more driving until the whole cycle starts again.
The economics of gas prices are comprehensible. It’s the politics that don’t make sense.