As I watched Tuesday’s debate I hoped that one of the questions would be about energy policy, even though both candidates would likely give insufficient answers strewn with falsehoods and misconceptions.
Well, my wish came true early in the debate when Philip Tricolla asked President Obama: “Your energy secretary, Steven Chu, has now been on record three times stating it’s not policy of his department to help lower gas prices. Do you agree with Secretary Chu that this is not the job of the Energy Department?”
The president gave a predicable and rambling answer, “The most important thing we can do is to make sure we control our own energy, so here’s what I’ve done since I’ve been president” and so forth. Then it was Governor Romney’s turn. Moderator Candy Crowley said, “Governor, on the subject of gas prices.”
And that’s when it got ridiculous, as it always does when politicians discuss gas prices. Inevitably what happens is that presidents, regardless of party, are almost always blamed for high prices at the pump. FACT: Presidents have no effect (well, maybe a tiny impact at best) on oil and gasoline prices. Zero. Nil. Goose egg. Nothing. Zilch.
Here’s what Romney said: “The proof of whether a [energy]strategy is working or not is what the price is that you’re paying at the pump. If you’re paying less than you paid a year or two ago, why, then, the strategy is working. But you’re paying more.”
WRONG. As I said, and everyone from oil industry officials to economists know and agree, U.S. presidents have almost no effect on worldwide energy prices and what people pay at the pump for gas. Almost all energy prices are set on commodity exchanges (futures market) around the world and are not determined entirely by supply, demand and worldwide market sentiment toward the product itself. Oil futures contracts that are traded on the commodity exchanges by speculators combined with world supply and demand (and other factors such as Mideast unrest and OPEC production quotas) are the main items that determine the price of oil and the price of gasoline in the U.S.
It should also be noted that when Obama took office in 2009, the world was in the midst of a worldwide recession and financial crisis. This led to plummeting world demand for oil that helped reduce prices. Crude oil and gasoline prices have since rebounded partly because of increased demand in Asia and other developing regions.
We just need to look back at President Bush (or any president), who presided over $150-bbl. prices when he was president, to show what little power or effect presidents have on what you pay at the pump.
In 2008, President Bush went to Saudi Arabia to appeal to the Saudis and King Abdullah to increase oil production in order to help reduce record oil prices. He was politely turned down. It was the second time that year that Bush’s request had been denied. At the time of Bush’s appeal to the Saudis in May 2008, the price of crude oil had hit a new high of over $127 bbl.
But also in 2008, the Bush administration began a crackdown on surging oil prices and oil traders when the Commodity Futures Trading Commission launched a major investigation into oil price manipulation. It led to a $14 million settlement with a “high-frequency” trading firm. The CFTC needs to be even more vigilant.
Still, Bush had no effect on gasoline prices, Obama has also had no influence on them, and if he becomes president, neither will Governor Romney.