Tuesday, January 15, 2008

Can The President Lower Gasoline Prices?

It's an election year, as if you were not aware. So, it becomes even more important to understand the powers of the President. He has the power to declare war, but can he lower gas prices? Take a look at this article in the NYTimes.

What is the President attempting to do? And will it work?

26 comments:

john ferraro said...

I think the president's goal is to try and lower oil prices, but he is going about it the wrong way. The main reason for the high price of oil is the large and inelastic demand by consumers. The Saudi oil minister said it would only increase production when the markey justifies it. There is no reason for the Saudis to produce more oil if consumers fail to respond to rising oil prices and continue current consumption rates.

Geoff Czaplijski said...

Why would the Saudis produce more oil to lower prices, when American oil consumption has not decreased with high prices? The Saudis and other OPEC members are sitting comfortably with the current oil market, and they will probably care less about the American economy knowing that India and China are becoming huge oil consumers. If people want lower gas prices, everyone has to start using less to decrease demand, and not rely on Bush to talk down prices.

Ross Davidson said...

I doubt the Saudi's want to produce more oil. Even if they do and prices do fall a bit, i'd imagine that intake would increase atleast a little bit, putting us right back in this same position. I also found it odd that the article refers to the President as "Mr. Bush".

James said...

http://money.cnn.com/2008/01/16/markets/oil_eia/index.htm?postversion=2008011617

I'm curious about whether or not the presidents trip has anything to do with the increase in the oil supply this week. For the first time in eight weeks oil supply actually increased instead of falling. It seems that the president has some influence on oil prices in the short term, with market fluxuations due to speculation, perhaps not so much influence in the long term market.

Anonymous said...

it is interesting to think that markets will respond so quickly and yet as James points out - in the long run it probably does not matter.

MGraham said...

For president Bush to have an impact on negtiating an increase of production to bring down prices will need a global front. As has been mentioned the inelasticity of of oil, the increase in the economies and purchasing powers of India and China takes away any power we could have to negotiate.

Steven Olszanowski said...

This article upsets me somewhat. I want to know how many pennies per gallon of gas we will save by the Saudis increasing production. I am no economist, but I do not believe I'll be able to fill my tank up any easier if supply increases slightly. Bush mentions, "rising oil costs and gasoline prices were causing hardship for American families." Why not use the 100's of billions of dollars spent on Iraq each year to develop our own alternative fuels? Why not use some of the billions to relieve the hardship on American families by giving grants to students so families can afford to send them to college? If we used the trillion plus dollars spent on the war to develop hydrogen fuel cells and getting the infrastructure up and running, we'd be years ahead in the game and would not be in this position of heavy foreign oil dependence.

Ian Cronogue said...

Certainly one of the biggest concerns facing our country right now is the rising cost of oil prices. I agree that in the short term it maybe crucial to up production to ease some of the pressures on the lower and middle classes. However, it seems that the only time people in America open their eyes and support change is in times of chrsis. So maybe we need these high oil prices and strain on the economy to act as a catalyst for alternative energy funding.

Katie Rosengren said...

As previously stated before, even if the Saudis increase production consumption will remain the same which will not result in a long term solution for the US. If prices continue to rise consumption may decrease a little, but then prices will lower and consumers will buy back into it. It seems the only real solution is to look for alternatives, otherwise we'll continue to be at the mercy of the oil companies.

Anonymous said...

Steven's comment highlights the importance of thinking about opportunity costs. If you have a limited budget and you spend it one place, you can't spend it elsewhere.

brett cottrell said...

On the topic of developing alternative fuels, it is necessary to note that any new fuel source would take years to develop and get to the level of commercial consumption. We can't just say "make new fuel and we don't have to pay those prices." It's not that simple. As for spending in Iraq as opposed to elsewhere, I agree that it's a waste of money to an extent. However, the U.S. is somewhat committed to Iraq at this point and simply stripping Iraq funding isn't the answer either. The situation with fuel is pretty terrible, but I have yet to see some amazing solution that would change it all. The president certainly does not need to try to control prices. The last thing we need is for President Bush to have control over something else (but I suppose that could be personal opinion). As for the Saudis, Geoff pretty much nailed it. Why would they lower prices in a market where they can prosper? The U.S. wouldn't. It would take the world agreeing that we have an issue and agreeing to act in favor of cutting oil consumption in order to dramatically affect prices and the impending energy crisis, but I don't see people parking their Hummers either..

Ian Cronogue said...

While it may take years to develop alternative fuels and make them as commercially feasible as our current energies, if we continue to say that alternative fuels are too expensive and troublesome to implement we will find ourselves in a far worse situation then worrying about if President Bush can cut gas prices by a couple of dimes to ease tension in the short term.

Adam M. Rountree said...

If the Saudis arent careful, the high price of oil could have a negative effect on our economy, and with the billions of US currency theyre sitting on could devalue more then pumping a few more barrels of oil?

Drew Moxon said...
This comment has been removed by the author.
Drew Moxon said...

I don't think the negative effect of the Saudis pumping less oil is going to have that much effect on our currency value. The best way to get value back into the U.S. dollar would be to bring more production back into the U.S. As far as oil goes, I think that it's a wash in this case. President Bush's visits and agreements aren't going to truly help this issue from our prospective (as a consumer). As previously pointed out, researching other fuel alternatives is always a good method, but it's hard to get people to see the long-run picture on that issue (and therefore hard to get the money to do so). I'll throw my two cents for the energy issue, however, and support plug-in cars.
http://www.teslamotors.com/
With the support of relatively cleaner energy solutions such as geothermal, wind, hydroelectric, ect. cars such as these could become a viable alternative to normal gasoline vehicles.

Logan Clark said...

I agree with many of you in saying that the Saudis are not going to increase production of oil because of our inelastic demand, because this is not where we should focus most of our attention and money. This problem of high gas prices is basically of the short-term, and like the previous post states, we need to be focusing our time and money on alternative energy sources. We are so worried about gas prices going up X amount of cents when way larger problems will arise in the future if we don't act now.

David Johnson said...

We do need to research alternative sources of energy however the stranglehold of the large oil companies is not only on our wallets but also around our government. As long as the energy companies are making record profits as they have recently, their political and lobbying power is just going to increase hindering the ability to get funding and subsidies for the programs needed to advance into future methods of transportation and energy.

fish said...

Since the Saudis have enough oil to last a few hundred years, it makes perfect sense that they'd like to keep the price of oil (reasonably) low. If price gets too high we will work harder and faster to find an alternative fuel. That would be bad news for SA.

Amann630 said...

I dont think the saudis mind keeping the price of gas high. They realize that people are looking for alternative fuel and also that there has been tons of success in implementing an alternate. As long as gas stays as inelastic as it is the prices will get worse. Also with the recent developments in India and China there will be a greater need for gasoline than there already is.

Jonathan Forte said...

I think by President Bush lowering or attempting to lower oil prices it has a small beneficial short term affect, with long term consequences. By lowering oil prices it keeps the American consumer at peace with oil. Rising oil prices will push more and more Americans away from oil dependancy and hopefully in turn push our government away from oil and more towards energy independance in the form of renewable energy.

Jonathan Ziemba said...

I recently watched a video on the history and future of oil. It turns out that we have already passed our peek use of oil because we can't find anymore. We are essentially running out and soon we will be forced to find alternate sources of fuel. Yes, the President is trying to lower oil prices but they will rise inevitably as the supply goes down. The Saudis are making the right choice by limiting their use

Lynnise said...

cecilia raynor
I don't feel Mr. Bush has the ability to lower gasoline prices, simply because the United States is not the only country that thrives on its usage. As long as consumers are continuing to pay the higher prices why would you lower the prices. The Saudis are making their money, without the risk of going into a recession such as the U.S. China, India and the U.S. together would have to decrease their oil consumption collectively I believe before the prices will begin to drop.

chris mobley said...

Instead of relying on oil so much from foreign sources along with already strained political relationships. I also find it disturbing that after "Mr. Bush" visited, oil prices actually increased instead of decreased. Right now the Saudi's are the largest producers of oil and the high price is due to the inelastic demand of the rest of the world, mainly us...even though China is becoming a larger and larger consumer of oil.

lauren fields said...

lowering oil prices is merely a bandaid. it helps to soothe the tempers of Americans angry that theyre losing more and more of their resources at the pump. it will happen eventually. we will run out of it. weve always known that. we should deal with it head on and artificially raise the prices (not lower them) to force ourselves into alternative self-sufficiency.

Anonymous said...

I agree with Geoff - why in the world would the Saudis try to produce more oil if it would lower prices and if Americans haven't really decreased consumption due to the high prices. The Saudi's alone do not really have all the say on the market for oil- and if they do increase production for a little while it's not going to help out in the long run.

-Rachel Bisesi

Anonymous said...

I agree with Geoff - why in the world would the Saudis try to produce more oil if it would lower prices and if Americans haven't really decreased consumption due to the high prices. The Saudi's alone do not really have all the say on the market for oil- and if they do increase production for a little while it's not going to help out in the long run.

-Rachel Bisesi