One of the reasons people say they’re not going to vote for President Obama is because of oil prices being over $3 a gallon. While this is clearly not something that a president has any control over, people don’t seem to understand that. Ironically, when gas prices went up under President Bush, Republicans were saying he didn’t have control over them. When they went up under President Obama, he’s solely to blame. Partisan politics as usual. As well all heard in the State of the Union address, the US is producing more oil than it has in the past several years. So why are gas prices still so high?
The first thing you have to look at is demand. While the global economy is still fairly stagnated, there is still a high demand for oil in countries like the US, China, and India. However, this alone isn’t the sole reason for higher prices. What we need to look at then is the political side. One of the biggest risks to oil supplies is war. A war in the Persian Gulf would be horrific and would push gas prices through the roof. Think of the saber rattling going on with Iran who’s threatening to close to Straits of Hormuz.
The next thing to look at is the major oil producing countries outside of the US. The world’s largest oil producer is Russia. Despite the fact that the media has largely ignored the issue, there are protests going on in the streets of Russia. The people aren’t happy with the government. Speculators realize that. Not to mention, Russia is fully supporting Iran, who we’re currently sanctioning. Speculators notice that. Look at Iraq. We just left and the country is slowly slipping into a civil war between Sunni and Shi’ite Muslims. Then you have all of the countries involved in the Arab Spring. The biggest country that had their oil production shrink was Libya. Nigeria is also a country that is a large producer of oil. There are mass protests going on there. Venezuela is a big South American oil producing country, but the entire country is slowly collapsing thanks to the horrible dictatorship of Hugo Chavez.
So, with the Arab Spring, protests in large oil producing countries, and rumors of war, there is plenty of reason for speculators to fear the supply of oil could be impacted. Also, don’t overlook the fact that many of the countries I mentioned has increased spending to try and keep peace in their countries with all the unrest among the people. This increased spending would lead them to want oil prices to remain high so they can keep their finances managed. A perfect example of this would be Saudi Arabia. Based on the amount of oil they produce, and the amount of money they spend, they need oil to sell at around $80 a barrel to keep their country financed. A decade ago, they needed it to sell for $25.
So in conclusion, the President of the United States has about as much influence over oil prices as you do. Also, because of the reasons I listed, don’t expect gas prices to go down anytime soon. If anything, they’ll go up. So there is clearly no better time to invest heavily into the production of alternative energy sources and once and for all, break our dependence on oil.