“When the President took office, the price of gasoline here in Nassau County was about $1.86 a gallon. Now it’s $4.00 a gallon ... If the President’s energy policies are working, you’re going to see the cost of energy come down.”
Mitt Romney provided that answer as a pivot, in response to a question in Tuesday night’s Presidential debate in Nassau County, New York. The question, from an undecided voter in the “town hall” style debate, was whether it is within the purview of the U.S. government to lower the price of petrol.
The short answer is: not really. There are ways for a president or an administration to influence the price of gasoline in the long term, and that is usually by influencing the price of crude oil. But while the U.S. remains by far the largest consumer of crude oil on the planet, global forces and supply trends tend to have greater influence over price than anything the government can do.
With only 5 percent of the world’s population, the U.S. consumes about 20 percent of the world’s daily oil output, though it’s declining. About half of that consumption is used for road travel, though most is for freight and goods transport, rather than passenger transit. Still, America is a nation of drivers and, in an economy where money issues top all others; high gas prices have been a recurring campaign theme.
The retail price of regular unleaded petrol in the United States is about 9 percent lower than the all-time high of July, 2008, but as Romney points out, more than double where they were four years ago. What Romney omitted – and President Barack Obama pointed out – was that the world was in recession four years ago. Slow economic growth is, quite possibly, the most reliable cause of low petrol prices.
There are other ways, though, in which a U.S. president can influence petrol prices. In a nation where driving is a way of life, and where many of the nation’s poorest live in areas without adequate mass transit infrastructure, the issue of gas prices is influential among lower-income undecided voters; the very voters who may determine the outcome of this election. Four years ago, during the last presidential election, two candidates – Republican Sen. John McCain and Democratic Sen. Hillary Clinton – proposed suspending the federal tax on petrol for the so-called “summer driving season,” something that would have saved drivers 18.4 cents per gallon.
It was a suggestion dismissed by the subsequent victor, Obama, but the promise to reduce petrol prices to $2.00 or $2.50 per gallon resurfaced in this year’s Republican primaries. To his credit, Romney has made no such pledge. Because, as a free marketer, he knows petrol prices can’t be controlled without great cost to the government.
Another method that’s been proposed, and sometimes used, is to release crude oil from the Strategic Petroleum Reserve, four underground reservoirs in Texas and Louisiana. But that mainly serves to ensure a steady supply of crude oil to refineries, so that it can be made into petrol and other byproducts. It’s most useful if there’s a disruption to the supply of incoming oil, in the case of a hurricane, for instance. But U.S. petrol prices are nearing historical highs without any supply constraints.
A longer-term solution is to deal with the consumption side of the equation, through higher federal petrol taxes. But higher taxes, particularly those that hit low-income workers, are unpopular at any time, and particularly so during elections. The Obama administration has passed substantially stronger fuel efficiency laws, requiring a manufacturer’s fleet to provide an average of 54.5 miles-per-gallon by 2025, but higher petrol prices have driven the market toward more fuel-efficient cars without regulation.
Back to Mitt Romney’s point, though, North America is becoming more energy independent, largely through more U.S. oil drilling, higher imports of oil from the Canadian Oil Sands and massive technological advances in the recovery of natural gas from shale. While Romney attempted to create a relationship between greater U.S. energy production in general, and lower petrol prices, it’s not really true. Petrol prices are generally a matter of refining capacity, of which the U.S. has plenty, and a globally established market price for crude oil, which is high.
Suggesting that the president of the United States can fix that doesn’t really make sense.
Ali Velshi is a CNN anchor and Chief Business Correspondent. He tweets @AliVelshi. THE DAILY STAR publishes this commentary in collaboration with CNN.