Politicizing gas prices & the real reasons prices are rising

Politicizing gas prices & the real reasons prices are rising

Washington : DC : USA | Feb 19, 2012 at 12:47 PM PST
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Will gas prices reach $5 a gallon?

Usually gas prices begin to go up after Easter in anticipation of holiday traffic with spring and summer approaching, but this year prices have risen sooner than ever before.

The average price for gas in 2011 was $3.51 gallon. This week’s surge surpasses that at $3.53 gal, which is up 25 cents since January 1.

"You're going to see a lot more staycations this year," says Michael Lynch, president of Strategic Energy & Economic Research, referring to people staying at home on their vacations. "When the price gets anywhere near $4, you really see people react,” according to an msnbc report.

Already, W. Howard Coudle, a retired machinist from Crestwood, Missouri, has seen his monthly gasoline bill rise to $80 from about $60 in December. The closest service station is selling regular for $3.39 per gallon, the highest he's ever seen.

"I guess we're going to have to drive less, consolidate all our errands into one trip," Coudle says. "It's just oppressive."

What happened in 2008, and could it happen again?

When gasoline prices shot to $4 a gallon in 2008, Americans cut fuel demand and helped send world oil prices tumbling by more than $100 a barrel in just five months, reported by Reuters.

Pump prices have returned to near those highs, averaging $3.95 a gallon after rising 36 percent in a year. Oil has also soared, with Brent trading just over $122 a barrel and U.S. crude over $110.

Some believe that Americans have become resigned to the fact of higher gas prices and will not react the same way they did in 2008. Outrage over prices among American drivers, who consume an eighth of the world's oil, is turning into resignation with summer driving season around the corner.

Experts say the tipping point at which prices would slash demand has likely risen sharply since 2008. Does this mean gas prices need to be $4.50 or $5.00 a gallon for people to react?

Politicizing the price of gas

In an election year, the Republicans are already preparing to use the rise in gas prices to condemn President Obama’s energy programs together with arguing that his economic policies are not working.

George W. Bush was asked on April 20, 2005 if there was anything he could do to control skyrocketing prices at the pump. “I wish I could simply wave a magic wand and lower gas prices tomorrow; I’d do that. Unfortunately, higher gas prices are a problem that has been years in the making.”

Bush did nothing, and the price of gas continued to rise unabated until it broke through the $4 barrier before dropping back down due to diminished demand. Here on the West Coast, a gallon of gas cost $4.45 by July, 2008.

But none of the Republicans blamed the president for it.

Six years later, fuel costs again started to climb towards the $4 barrier. Speaker of the House John Boehner said; “[He's] running on empty. The Obama administration does nothing to address skyrocketing gas prices.” Predictions of $5 per gallon gas by July 2011 and $6 by 2012 were regularly being bandied about by Fox News and talk radio.

Fear mongering got us into a war that costs lives and trillions of dollars, now the same tactics are being used to get votes for Republicans in November.

What is the real reason gas prices have gone up?

AOL auto correspondent Kevin Ransom attempts to answer:

Egypt's present political and economic instability is certainly a factor on everyone's radar. Egypt is not a big oil exporter, but if the political turmoil continues and results in a crippling of the nation's infrastructure, it could have an impact on prices. Tankers carrying oil from the largest Middle Eastern oil-producing nations travel through the Suez Canel, and an oil pipeline runs alongside it.

The main factor for the increase in the price of crude over the last year is that there has been a stronger demand for oil and gas in emerging economies like China and India," says Brian Milne, the Refined Fuels Editor and Product Manager for Telvent DTN, a provider of real-time commodity information services. "There has been a much greater demand in those nations for oil. The economies in those nations have continued to grow even as the rest of the world was in recession for a couple of years," reported in the NYT.

Domestic demand has also increased, as the U.S. economy has continued to recover. Demand will continue to increase as the economy further recovers. "The U.S. demand really does take a back seat to the demand in China and India. We've seen flat demand for gasoline here (due to the recession), but we're now competing with those nations, and the rest of the world, for crude.”

Recovery> Jobs> Money> Spending> Demand increases

Wait! Demand is increasing because economic recovery is really happening! People have a little more money to spend, so they are driving more. Therefore, the Republicans attempt to make the argument that the economy is not recovering is in opposition to what some experts are saying. It appears the only thing “running on empty” is the Republican’s argument that the president's economic policies have not been successful.

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gas prices
What are the real reasons gas prices are going up?
Dava Castillo is based in Clearlake, California, United States of America, and is an Anchor on Allvoices.
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