Earlier this year, when President Obama's critics were in overdrive trying to blame the White House for rising gas prices, we wrote that there were three main ways to bring gas prices down: end oil speculation to prevent market distortions, reduce tensions with Iran, and meaningfully increase investment in alternative energies to diversify our fuel supply. We also noted that if Americans drove more fuel efficient vehicles, fluctuations in gas prices would be less of a big deal. In short, there was little that the President could do by himself to lower gas prices.
In turn, the President cannot take credit for the last five weeks of falling gas prices given that he hasn’t implemented any of the policies that would decrease gas prices. Rather, gas prices are falling because the price of oil has fallen globally due in part to an increase in supply from OPEC countries, which offset the decreased output from Iran, and a perceived decrease in demand due to a weak U.S. jobs report and uncertainty around the Eurozone recovery. The decrease in gas prices is expected to continue through the peak summer months and the Energy Information Agency has decreased their forecasted price per gallon by ten cents from April. But again, there was little the President could, or did, do to impact these prices.
The rapid turnaround in gas prices is more proof that all the other explanations for high gas prices, like over regulation and not enough domestic drilling, are also incorrect. If the gas price spikes were a result of too much regulation or too much interference by the EPA, why would they be able to decrease so rapidly? Wouldn’t over-regulation make prices permanently high?
Likewise, more drilling has little impact on gas prices. During the time of the spiking prices, domestic oil production was at record levels, yet because oil is a global commodity, the high production levels did nothing to decrease gas prices. Not to mention that even if we drilled every last drop of available oil, it wouldn’t come close to meeting our oil demand because while we have two percent of the world’s oil reserves, we consume 20 percent of its supply.
All of these rapid fluctuations point to the inevitable conclusion that we need to significantly reduce our oil consumption and diversify our energy sources to reduce our dependence on oil. Even more than stopping oil speculation, reducing our demand for oil is the clearest and permanent solution to ensuring stability in gas prices. Let’s remember this the next time we go through the drama of a gas price spike.