A Few Simple Observations about Gas Prices

Some context.

So, here’s a chart of US gasoline prices per gallon over the last two years:

So, yes, gasoline prices are on the rise and there are reasons to be paying attention to inflation. I personally noticed a jump in local price in the last week or so.

However, a couple of observations for those in the panic business at the moment.

  1. I saw an FNC headline benchmarking the gas price as oppossed to “a year ago.” Well, a year ago we were were still dealing with a pre-vaccine world and with a global decline in fuel demand due to various social and policy choices (e.g., travel restrictions, localized lock-down, etc.) that curtailed travel. The price of oil is predicated on a global marketplace, and global demand was down a year ago. Ergo, prices were down.
  2. If you remove the pandemic from the equation, it is clear that the trend line since the 2015 dip was upward. We were heading in this direction regardless.
  3. Despite the politcal hay/panic some want to make of this, we aren’t even at the highest level in the last decade.

Longer-term data here via the US Energy Information Agency.

By the way, I fully realize that the perception is that it is the President’s fault if gas prices go up (or, conversely, credit for when it is down, as one colleague once explained to me that Trump was great because she could fill up her car for less than $35 or whatever the number was she cited). Indeed, this is a great example of politics being heavily influenced by perception.

FILED UNDER: US Politics
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is a Professor of Political Science and a College of Arts and Sciences Dean. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. James Joyner says:

    Well, according to a number of people on Facebook, gas was really cheap under Trump and it has skyrocketed under Biden. Presumably, because he hates America.

    9
  2. Sleeping Dog says:

    “The year ago” trope is tiresome even when it is not being used to score political points. If you want to measure trends, it needs to be over a much longer period, say 10 years and you need to adjust for inflation if it is a monetary trend you are tracking.

    6
  3. Daryl and his brother Darryl says:

    Gas prices are also high in Canada.
    Some of these Trumpies should explain to us how Biden has managed to do that???

    3
  4. JohnMcC says:

    We seem to be in the middle of a global energy crisis. China in blackouts. India with coal-powered plants down to a few days supply. Europe worrying about LNG this winter.

    Probably some impact on gasoline.

  5. @James Joyner: Well, that would explain a lot.

    @Sleeping Dog: 100%

  6. @Daryl and his brother Darryl: @JohnMcC: It’s as if the economy is global, or something.

    5
  7. Scott says:

    OTOH, I am completely conflicted on the price of oil. Both my son and daughter-in-law are engineers in the oil and gas business. When the price collapsed last year, they were both laid off and had to scramble. With the price rising, employment is much more secure and prospects brighter.

  8. Joe says:

    @Daryl and his brother Darryl: Biden did that the same way the US deep state during the Trump administration created a COVID hoax worldwide.

  9. OzarkHillbilly says:

    By the way, I fully realize that the perception is that it is the President’s fault if gas prices go up (or, conversely, credit for when it is down,

    Huh, as I recall Obama didn’t get any credit for the precipitous fall of gas prices back in 2014. As I recall, he got blamed for all the lost oil worker jobs going up in smoke and the many overextended oil companies that went bust during that time.

    I say this in the full knowledge that I have a memory like a steel sieve.

    10
  10. Kathy says:

    Remember last year oil reached a negative price? That’s because there was more oil available than the usual customers wanted. Paying customers to take your product, though, is unsustainable in the short term. So naturally production was scaled back.

    Oil extraction si complicated, and varies depending on the source. It’s not easy to shut down production, nor to re-start it. In addition the timing of the demand is plain impossible to estimate in a pandemic, with shifting restrictions and mores, and with shifting spikes in cases.

    So now there’s more demand for less oil. Oh, surprise! This raises the price.

    Well, ins’t that “free market principles”? Eventually an equilibrium of sorts will be reached, as far as a commodity as volatile as oil allows equilibrium.

    3
  11. Neil J Hudelson says:

    I graduated college right in the middle of the start of the Great Recession. I remember moving from the midwest to the east coast with gas prices increasing every state border I crossed, until it topped out at about $4.25 in North Carolina.

    $4.25 in 2008 dollars would be $5.41 a gallon today. A 40% decrease in gasoline price over 13 years ain’t bad.

    2
  12. Argon says:

    I remember in the early summer of 2020 that full tankers were left at sea and producers couldn’t find enough space to store their excess oil after demand fell off a cliff. Heck, frackers and many producing oil shut down because they couldn’t sell the oil. 2020 was a time of historic low prices as the economy and travel contracted.

    Many people don’t understand the nature of supply and demand or that the supply chains can take months to catch up to changes in demand.

    3
  13. @Argon:

    Many people don’t understand the nature of supply and demand or that the supply chains can take months to catch up to changes in demand.

    And, frustratingly, the folks who yell the loudest about the power of markets are the ones who seem not to understand supply and demand’s relationship to price.

    10
  14. Scott F. says:

    Despite the politcal hay/panic some want to make of this…

    What else is the opposition party and its punditry to do? Offer alternative solutions mindful of data and pragmatic in a context realistic to the modern world? Well, that’s just silly!

    7
  15. EddieInCA says:

    Today I filled up my SUV. 4.99 per gallon in Northridge at a Chevron station.

    Current gas prices (and my choice of vehicles) is what is driving my purchase of an electric car. Was sold on the Bolt, then they started blowing up.
    Was sold on the Tesla, but I can’t get past my desire to NOT become part of the Tesla cult.

    Now leaving towards the KIA Niro EV.

    All due to gas prices. With the recent spike, I’m spending $600 per month on gas – and that’s just commuting back and forth to work. No long trips for fun. The savings in gas will pay for the electric car. Still keeping the gas guzzler for those long trips to Idaho and Tahoe, but will be driving the electric car 90% of the time.

    5
  16. Andy says:

    Sure, if you isolate gas prices, I think you’re right. And the EIA predicts that gas prices will decrease slightly this winter.

    But the economy is really weird right now and gas prices are only a single data point.

    I do remember the inflation of the 1970’s (even though I was a kid) and this feels very different. I can’t remember any time in my life when the economy has been this weird. And that does worry me a bit. This doesn’t have a historical pattern, which suggests something different is going on. Maybe it is entirely due to the pandemic and will will automatically return to normal once it abates. That’s a happy assumption that I’d like to believe, but the skeptic in me is wary of that assumption.

    5
  17. Andy says:

    @EddieInCA:

    If my wife and I still had a commute, we’d likely go electric, even though it would require an expensive panel upgrade. Electric seems ideal for commuting vehicles.

    1
  18. keef says:

    “If you remove the pandemic from the equation, it is clear that the trend line since the 2015 dip was upward. We were heading in this direction regardless.”

    Bullsh…….

    The price crested at $2.80 in Q3 2018. They were headed down from there until Jan 2020, at which time they were $2.40 before crashing to $1.70 at the height of the lockdown.

    Pick either $2.40 or $2.80 and compare to $3.25. That’s up 35% or 16%, respectively.

    The comments about supply and demand are high school-like. Oil is a global commodity and supply and demand are always ebbing and flowing. Just like corn, soybeans or lumber. There is no “correct” price. The key is to tie trends or levels to events or policies. The trough during the pandemic is one such event. Joe Biden’s energy policies are another. There is zero evidence in the world of real data analysis that gas prices at $2.35 were “headed there, regardless.” Zero. And for those who want to believe that this is just a robust economy, ask yourselves exactly what policies Biden will pursue to address supply. Open a pipeline? Or switch oil to any number of goods you could choose. Perhaps everyone here is “high class” and unaware of supply problems……

    Indeed, this is a great example of political commentary being heavily influenced by raw partisan excuse making.

    3
  19. al Ameda says:

    Gas prices are up to about $4.75 per ‘regular’ gallon up here north of San Francisco.

    Frankly, I drive a Prius hybrid, and on average I get 54 mpg, and a fill up every 2 to 3 weeks costs mea bout $40. Hate to say it but I just don’t care – oil is a globally traded commodity subject wide swings and variability in prices. Not much I can do about it unless I am into pissing and moaning constantly.

    4
  20. @keef:

    Bullsh…….

    I think you are demonstrating a lack of ability to read a graph. I am not being snarky, but stating a fact.

    Perhaps you don’t understand what a trend is? Again, I am not being sarcastic.

    The comments about supply and demand are high school-like. Oil is a global commodity and supply and demand are always ebbing and flowing. Just like corn, soybeans or lumber. There is no “correct” price. The key is to tie trends or levels to events or policies.

    Again, I don’t think you understand the basic concepts here.

    And who said anything about a correct price?

    There is zero evidence in the world of real data analysis that gas prices at $2.35 were “headed there, regardless.”

    To clarify: given prevailing conditions, the likelihood was that gas prices would continue to trend upward and that the dip last year, in particular, caused an unusual, largely unique, dip in prices.

    So, to conceded your point to a degree, nothing is an inevitability. But, the basic conditions for a rise in price given the trend and historical pattern suggest that, yes, we were headed roughly where we are.

    And if you are going to blame things primarily on policy, was it Trump’s fault that gas prices started rising in 2020?

    13
  21. @keef: Quiz question: based on the chart at this link, how would you characterize the general trend in gas prices, not adjusted for inflation, since the early 1990s? What specific trend is clear since especially 2002 (i.e., roughly a 2 decade period)?

    5
  22. @Andy:

    But the economy is really weird right now and gas prices are only a single data point.

    I agree with this, BTW. The pandemic has created (and is still creating) a host of dynamics (especially in the labor market) that I do not think we understand.

    The gas price thing, however, strikes me as one of the more normal issues: global demand is the main driver (not that there aren’t other variables in play).

    3
  23. Mister Bluster says:

    @keef:..Joe Biden’s energy policies are another.

    So you admit that Joe Biden is the legitimately elected President USA and that the election was not stolen from your apparently former liege lord the defeated Donald Trump.

    8
  24. Michael Cain says:

    @Kathy:

    Remember last year oil reached a negative price?

    Up the road a few dozen miles from me is the delivery hub for an obscure grade of oil that trades for negative prices every few years: Wyoming Asphalt Sour. As best I can tell, every time there’s a recession and the Colorado Front Range urban corridor cuts back on road resurfacing, the WAS price spikes negative for a while.

    1
  25. Jen says:

    Ugh, fixation on gasoline prices, one of my least-favorite political sounding boards.

    There are SO many variables including summer formulations, refinery capacity, overall demand, pipeline issues (remember the Colonial Pipeline shutdown due to ransomware?), and more…and yet people boil it down to who’s in office.

    After living abroad, I just count myself lucky that our gas prices are reasonable in comparison to pretty much all of Europe. Every time we visit the UK, we drive, and it’s not at all uncommon for us to pay ~$9/gallon.

    3
  26. @Jen:

    yet people boil it down to who’s in office.

    Amusingly, the only example I can think of where who the president is directly affected gas prices (making them low) was in Venezuela under Chavez–who basically dictated the price. Perhaps that is what keef is asking for?

    4
  27. Jc says:

    It’s OPEC. Their production decisions and supply and demand.

  28. JohnSF says:

    Current UK price roughly £1.38/L = $7.18/gallon (if my maths is correct)
    Of this about 60% is tax.

  29. Jen says:

    @JohnSF: I do a very rough conversion, which gets me to $7.60/gallon, but that’s because I’m not being precise with either the Sterling to dollars conversion, nor the liters to gallon conversion, so yours is likely right.

    The ~$9 a gallon was back when the dollars to sterling rate was not nearly so friendly!

  30. Daryl and his brother Darryl says:

    @keef:
    High school? I think thou dost project.

    Joe Biden’s energy policies are another.

    Laughable, when compared to OPEC trying to make up for the losses of the pandemic.
    Didn’t you claim to be the worlds greatest businessman, or some such nonsense?

    1
  31. Just nutha ignint cracker says:

    @Daryl and his brother Darryl: Gas prices are high in Canada because you live in a socialist hell hole. Our gas prices are going up because Biden in turning the US into a socialist hell hole. It all fits together perfectly.

    3
  32. Just nutha ignint cracker says:

    @Kathy: I can’t speak for Mexico, but in the US, we only believe in the free market to the extent that it lowers our costs and raises our bottom line. (See: Oil Depletion Allowances.)

    4
  33. Kathy says:

    @Just nutha ignint cracker:

    I call it the Manny Rubin Principle*. In this case it means if the free market isn’t lowering costs and raising the bottom line, then it’s not really free. It’s distorted somehow by the government.

    *Stated: The Exception Is The Rule.

  34. JohnSF says:

    Just be thankful your gas is not our natural gas.
    Market spot price May 10p/therm; now 257.5/therm.
    Going to make domestic heating rather pricey when current contracts expire.
    Nine supply companies have gone bust so far, out of a total of around 60 IIRC.
    A lot of industrial users are directly exposed to current market price, unlike domestic contracts, and are suffering.
    Some intensive users (ceramics, fertilisers notably, that I’m aware of, so far) are cutting back production due to the costs.

    2
  35. Just nutha ignint cracker says:

    @EddieInCA: “Today I filled up my SUV. 4.99 per gallon in Northridge at a Chevron station.”

    Thanks! Now feel better about filling up my much smaller Spark tank for less at a Shell Station in Tualatin, OR, on Sunday. And I’ll feel less bad that our gas prices here are bound to go up more. Context is everything.

    1
  36. OzarkHillbilly says:

    @Steven L. Taylor: Again, I don’t think you understand the basic concepts here.

    I say again Steven, he doesn’t have a clue. He is a basement dweller pretending to be a MOTU.

    3
  37. charon says:

    It’s a global market and the stuff is close to totally fungible, so prices track globally.

    (Gasoline price tracks crude oil price).

    The price is heavily influence by OPEC and Russia, the swing exporters and their economic strategizing. The ability of American politicians to influence the price of crude oil is close to nil.

    1
  38. charon says:

    @charon:

    BTW, the recent period of low prices derived from OPEC getting angry at Russia resulting in a price war between them.

  39. Lounsbury says:

    @Steven L. Taylor: Yes this is very true. People love markets when such markets pricing goes in their favour. When not, then the various and sundry bogeymen of Big This or Big That and rather intellectually incoherent calls for interventions by their favoured level of Gov or political party…

    It is a reminder that we remain irrational over-large chimpanzees with the default analytical subconscious arranged for that.

    2