54% think the Pres, can set gas prices.

I am always surprised by the peope who think the president of the US is an analog of the CEO of a corporation.  They think he has relatively unlimited power over the economy of the country.  The Democrats are now reluctantly admitting that this is not true in the matter of gasoline prices.

How about it?  What power does the president have over this?

I am tempted to think that market play could be regulated to force prices down, but would that just drive the action overseas?  pl 

Comments

[Charles I]

In a word, yes.

The globalized, computerized economy is like a big balloon. Squeeze it one place, by say a domestic market play, and the cash just bulges out somewhere else - where a different set of hands and computers push there, to create a bulge they can profit-take from.

[The beaver]

Colonel

This is an article that I have kept and it may answer your questions:

http://www.politico.com/news/stories/0607/4587.html

As an aside: I was surprised to hear Mitt Romney yesterday putting all the blame on the President. hard to believe that he worked for BCG and Bain&Company !!!!

[charlie]

President's choices:

Further crackdown on speculators. There is no question speculation is out there and pushing up prices. Money has to go somewhere if you can't buy bonds.

Non-market restrictions on gasoline export

Nationalize CITGO

Release more oil from SPR.

Stop talking about war with Iran and allowing said speculators from certain middle eastern countries to drive up the price of crude globally.

Stop riding around in an 8000 pound tank all the time.

What is so interesting is demand in the US is STILL in freefall. Small improvements in MPG ratings can do that.

[fairhavenhorn]

Prices are increasingly set by Asian demand, not by the US. For example, US consumption is down slightly from last year thanks to efficiency improvements. But US demand is increasingly uncorrelated with world petroleum prices, and those strongly drive US prices. China and India are the price drivers to a greater extent.

So not only does the US President lack the power, the whole of US industry and government lack the power to set prices.

The market economy is driving more and more use of fuel substitutions and process efficiencies. Process efficiencies range from telecommuting to more efficient shipping and distribution networks. Fuel substitutions are found in the use of natural gas substitution for local fleets. These don't have much effect on gasoline prices. They just reduce the importance of gasoline prices.

[Matthew]

Col: The ironies abound. The more we seek energy independence by ramping up domestic production, the higher the prices. Our new domestic crude findings are inconveniently nestled in the Gulf--and are expensive to extract.

Additionally, all this War with Iran talk has spooked the markets and driven up the cost of crude.

So our own fear-mongering is creating a real, identifiable cost at the pump. There's rough justice in that, actually. Thank you, AIPAC.

[Warren Jason Street]

This is driven by the mistaken idea that the price of gas is driven by American foreign policy choices. It sort of made sense in the 1970s but it is an idea that has never left the current discussion on getting America off foreign imports of oil.

The POTUS can sign off on releasing the US Strategic Oil Reserves, and this will temporarily flood the market with supplies of oil, but that oil still has to be refined and it still has to enter the supply of automobile fuel and things of that nature.

Of course, one of the selling points of the Iraq War was that we could buy oil from the Iraqis and this would, in theory, give us access to an oil market that would be "grateful" to us, but I think that this was a neocon fantasy.

If the price of gas continues to go up (and the speculation market says that it will), then the POTUS can invade Venezuela or Nigeria and "solve" our supply problems. This is another fantasy of people who think foreign policy drives the price of gas.

[Patrick D]

Reminds me I need to read Healy's The Cult of the Presidency. The power and authority most people attribute to the office and the expectations they have of it are absurd.

[Jake]

"You'll never go broke underestimating the intelligence of the public" .... H.L. Mencken

[William R. Cumming]

You might find this an oddity but some Governors have authority to set gasoline and other energy prices. In a comprehensive opinion the OLC/DOJ analysed all energy emergency authority of the US government and all 50 states and issued the opinion in 1984. Perhaps no surprise it has never been updated. Perhaps no surprise but it was a statutorily required opinion that took several years to prepare.
The energy lobbies have been particularly alert to even the most remote price setting authority of the federal government since that opinion was issued. One example, is that the authority under the Defense Production Act of 1950 as amended largely had authority over energy allocation and apportionment removed by statutory amendment. Yet there is some residual authority in that statute. Witness Eric Fygi, Acting General Counsel of the DoE issuing an opinion that early in the administration of George W. Bush led to the downfall of ENRON. A controversial opinion but it had its impact on ending ENRON's manipulations of electricity in much of California.

In exercise play from 1984 until my departure from Uncle Sugar in October 1999 I must have handed out that opinion 500 times, especially for exercises taking place in the "Tank"!

And of course the SPR is not supposed to be used to impact gasoline prices but assuming releases are for other reasons can have that impact.

My guess is that few Governor's are familiar with that 1984 opinion or have their AG's track their emergency energy powers. Looking like up to a $2.00 per galleon differential in some states by Memorial Day. And whatever this President believes, I have opined on my blogs that if unemployment remains in excess of 8% and gasoline at the pump averages $4.25 or over by October 1st he is by by in 2013. Too bad as he seems to at least have some self control. A characteristic sadly lacking in some other candidates. He should console himself with the fact that most second terms are problematic at best.

[r whitman]

A factor in the current increase of the price of oil was the imposition of financial sanctions on Iran in December. This led to threats by Iran to close the straits of Hormuz. These sanctions were mandated by congress in the recent Defense Dept appropriations bill.

The President could have not taken any action until August, at which time he would have to apply the sanctions or waive them, pretty much politically impossible. Instead he went ahead in Dec.

Indirectly, the President had some control over the price of oil, but the political choices were not pleasant.

[jonst]

Charlie wrote: "Small improvements in MPG ratings can do that." Yeah, and so can dismantlement of the middle class

[steve g]

Read some time ago the big banks commodities
trading arms either will not or cannot go short
on futures contracts once the current contracts
expire. Thus they roll them over to long
positions only. A commodities trader was quoted
as saying this was heaven because now it was
a no-brainer on which position to take. Maybe
someone else has info on this.

[Paul Deavereaux]

Thank Phil Gramm and his lovely wife Wendy for most of this...

1999 Gramm-Leach-Bliley Financial Services Modernization Act, which repealed the Depression-era Glass-Steagall Act

2000 Commodity Futures Modernization Act.

Your corporate-government in action.

[mbrenner]

Erratic movements in the market prices of oil (and agricultural commodities, too, for that matter)have been shown to be due to aggressive speculation by banks, hedge funds etc who see it as just another casino. There are laws and regulations that can be employed to curb these activities. The Obama administration, like its two predecessors, has made little effort to crack down. After all, it takes a fortune in campaign donations to disseminate the message that "America is back."

[Paul Escobar]

I believe the markup at gas stations may be something one can investigate.

Should gouging be discovered, there's always the option of creating a national gas-station chain (someone else mentioned nationalizing Venezuela's [already nationalized] CITGO operation).

That could perhaps ensure folks are paying an actual market price.

[Lars]

The president can threaten to release some oil from SPR and that would increase the risk of being long the oil market. The speculators would find themselves out on a very long limb.

However, I learned a long time ago that when everybody has a specific opinion about a market, they are usually wrong.

[Kevin_B]

Think Big. Subsidize gasoline above an arbitrary marker, let's say $2 or $3 dollars a gallon. The Federal government pays for the cost of gasoline above this mark, to the tune of a few hundred billion dollars a year tacked onto the Federal Budget.

If the American people expect you to set the cost of gasoline then do so.

The American economy is dependent upon affordable gas prices, and high gas prices serve as a choke hold on the economy. Subsidizing gas would socialize the harm of high gas prices while allowing the economy to breathe and grow. It would also delay the harm, and dilute it in the benefits of a stronger economy. It would be a form of indirect deficit financed stimulus. Krugman et al point out that America has access to long term low interest debt and this would be an avenue to pump that into the economy.

It flies in the face of modern day free market economics and would be much reviled by those types of which Obama is himself party to, and would be pretty much impossible to pass in the current congress, but it could be something to campaign on. High Risk/Reward. Appeal to populism. Everyone uses gas in America. Give Americans affordable and stable gas prices.

[Stephanie]

Romney knows better but it's an election year and because of the slight uptick in the economic outlook he's looking for other lines of attack (and not finding many).

[Jose]

Balance the Budget and prices will drop by about $1.00.

Have a Trade Surplus and prices will drop by another $1.00.

Dual deficits and a falling dollar, create inflation to oil producers which are simply passed on to the consumers.

Remember, Vultures only feed on the weak and dieing.

[Jim_R]

The complexities of oil markets and "speculation" appear to be beyond the comprehension of most of we mere mortals. http://www.nakedcapitalism.com/2012/03/chris-cook-the-ghost-of-enron-past-explains-oil-market-manipulation.html. there are many external events involved in oil prices like Iran and emerging markets but speculation or market manipulation may be the larger effect especially when there appears to be such a surplus that we are actually exporting oil products while domestic prices continue to rise.

[Walrus]

1. Oil is a commodity and trades at world prices. If you try and regulate the price lower, supply will simply dry up as the oil and/or gasoline will be sold overseas.

Mess with subsidies or export restrictions and you are asking for a world of taxpayer financial hurt. Translation: your government can't afford to do it. It also begs the question about commitment to free market capitalism.

2. Mess with oil company profitability by (1) and they will stop drilling in America and go explore where they can sell what they find for more.

3. The ultimate problem for America is the marginal productivity of each barrel of oil burned.

- In China and India a gasoline powered pump allows a farmer to double his irrigated area and hence his crop. A diesel generator provides extra power for a factory to double production. As a result India and China can and will pay much more for oil than America, because the marginal productivity in burning oil in America is effectively zero - you burn oil to go to a shopping mall and consume. To put that another way: You don't "make" as much as the Chinese and Indians do out of each barrel of oil that you burn.

4. I had this discussion with some power boat owners in another place in 2002. I suggested fuel economy in transport was important. I was howled down.

My response was simple: Either make your vehicles fuel efficient now, or the free market will do it for you later, guess which way hurts more? The market is now doing exactly what I expected - with or without speculation, prices will continue to increase unless demand falls.

By the way, I pay the equivalent of US$5.70 per gallon and I couldn't care less because my town car is a 1600cc Mercedes and my truck is a Toyota turbo diesel.

To put that another way, America excels in so many things. Why doesn't America produce the most fuel efficient cars in the world?

[charlie]

This is spot on.

There are limits on US jurisdiction on this; but certainly within the US you could create a far more transparent market. International cooperation would solve perhaps half the problem.

The iranians have a great scam going. Pretend to go nuke, double the price of oil, rinse and repeat. Or maybe it isn't the Iranians....

[charlie]

Nope.

Middle class people can afford $4 gas. or $5, Or even $10. They have jobs.

If you can't afford gas, you're not middle class.

[Tim Vincent]

No President has ever had "control" over gas prices.
Yet,candidate Obama (and his media chorus) laid that on Bush in 2008.
Now, Obama (and his media chorus) are claiming that he ("the greatest") has nothing to do with gas prices.

What goes around comes around.

[Will Reks]

Tim, you know nothing. Gas prices fell significantly in 2008. Why? Because we had an economic crisis and demand for oil and gas fell.

Think before hitting the keys on the keyboard. You're stuck in the Democrat/Republican bubble.
_____

There are a few reasons why gas prices are going up. One is that the refineries use a different mix before summer which increases the price. Adding to that is as the economy improves demand will increase as will the price. China and India demand more and more oil as the purchasing power of their citizens increase. Also, we have disruptions such as talk of war with Iran and other events in the ME.