Tuesday, May 01, 2012

A word about gas prices. Happily this most recent tick of the right and the media has disappeared a bit from our daily flood of non-information due to more pressing news and non-news and a leveling off of prices. Still, I need to write something about this pointless posturing on the president's responsibility for the current surge of gas prices.

Man, you'd think we have the memory of a goldfish. Anyone remember last year or any of the years of the last decade that WEREN'T during a recession? Gas prices fluctuate based on a wide variety of conditions including world demand (supply and demand anyone) perceived and real threats to supply (war and terrorism, riots etc.) and speculation.

But let's look deeper. It's astounding to me that people are whining about the cost of gas these days. I've got a few charts to back up my suspicion that the price of gas isn't all that it seems and that's not just when comparing to some of the VERY HIGH PRICES OF THE PAST DECADE!

Charts produced by Wolframalpha.com

As you can see clearly from this graph, gas prices have yet to even hit their highs from the same period prior to the previous presidential election back in 2008. That period capped a run up that began not long after the invasion of Iraq. While one could argue cause and effect there, and I would be likely to do so, but the bigger point is that gas prices have been higher, recently, and that was under a president with an oil industry background who was demonstrably in bed with the industry. Despite eight years under Bush, drill baby drill didn't result in lower gas prices.

Another thing to keep in mind, inflation. This chart shows the inflation rate over roughly the same period:

As you can see, though it hasn't been particularly high, there has been inflation over that period as well. In fact, according to Wolfram Alpha, the inflation rate for that period was a total of almost 61%. Starting at a price of $1.05 per gallon that would account for approximately $0.64 of the increase, leading to a price of $1.69. Interestingly, that figure is approximately the low reached during the depths of the recession. The entire increase in gas prices, both from inflation and everything beyond that, was accounted for prior to Obama's election with the drop at the start of his term accounted for by recessionary, deflation pressures.

In fact, despite record production in the US over the past five years, gas prices overall continue to rise. While peak prices may represent speculation the truth is that the rapid growth of China, India and much of the developing world has driven demand for energy of all types and prices have risen as a result.

The only reason prices haven't risen rapidly until now is the recession and resulting slow growth and reduced demand in the US and Europe. As the US has recovered our oil demand has risen again. Conservation has also dampened demand and helped keep prices in check. Still, the long term prognosis is for prices to increase as along with growth. Canada's tar sands aren't going to change that equation. And approved production, wells or other sources, doesn't have an immediate demand on prices as it takes months or years to come online.

Of course, none of this will stop the GOP from proclaiming Obama's anti-energy, anti-jobs socialist war on oil and the American way. It's just one of the many lies propagated against a hated icon the right can flog repeatedly to drive their fundraising efforts.

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