Gas Prices (again)

Mrs. Greenbacks asked me an interesting question this morning, “Do you think the recent drop in gas prices has anything to do with the election this year?”  The short answer is – No.  It is probably a dream of every President to be able to control gas prices in an election year, but the simple truth is that they do not have that ability.  The oil market is a worldwide phenomena driven by consumption, much of it coming from emerging economies.  I explained some of the reasons in an earlier post – What goes up.  The only thing POTUS can do to ease pain at the pump is to open the Strategic Petroleum Reserve, but even that wouldn’t make much difference.  As of 6/8/12 the SPR had approximately 695 million bbls in the quiver – about 36.5 days worth at current usage rates.  Even if President Obama ordered a full drawdown of the SPR we could only withdraw 4 mil bbls per day for up to 90 days when the rate would slow.  However, tapping into the SPR to ease high gas prices defeats the purpose of the reserve in the first place.  Energy efficient cars and smarter cities would have a much bigger impact on the price of gas.  However, as less consumption forces the price of oil to go down, we must not fall into the trap where we increase usage again.

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