Does the President Control Gas Prices?
Does the President Control Gas Prices?
Turns out that U.S. presidents have very little control over the price per gallon consumers pay at the pump.
May 03, 2023
(Editor's note: This blog was originally published on February 3, 2021, and updated on May 1, 2023, to reflect changes in the retail fueling market, including record gasoline prices.)
Let’s start with a basic assumption that we can all agree upon: Politicians and their political parties don’t want to be affiliated with high gas prices.
And that was fully on display in 2022 with record-high prices and a mid-term election.
Gas prices are the ultimate pocketbook issue that everyone talks about. Songs are written about them. You don’t see that about eggs, bread or milk. Or property taxes, for that matter. Quite simply voters hate high—or rising—gas prices. That’s probably the main reason that the federal gas tax hasn’t budged since 1993 when it was increased to 18.4 cents per gallon.
So given that every politician wants to take credit for keeping gas prices in check, or better, lowering them, and every one running against an incumbent wants to pin blame on the person in charge, it makes sense that politicians would do everything in their power to keep gas prices low. Especially presidents.
So why are they so bad at it?
Actually, it’s not that they’re bad at it. It’s that they have very little control over it. Yes, policies and legislation can certainly play a role, but gas prices are largely dictated by oil prices and oil prices are dependent upon supply and demand. Presidential control is not as simple as what those posts suggest on social media.
The year 2022 was a perfect example. It was a mid-term election year in which all 435 members of the U.S. House of Representatives are elected, as well as one-third of the Senate. Everything “hangs in the balance” and “the stakes couldn’t be higher,” exclaimed TV newscasters and commercials.
But let’s shift a few months earlier. After the Russian invasion of Ukraine in February, oil prices spiked as concerns mounted over supply, especially because Russia is the world’s third-largest oil producer.
At the time of the invasion, gas prices were about $3.60 a gallon. A week later, they were over $4. President Biden pulled out every tool at his disposal, announcing a record-breaking withdrawal from the Strategic Petroleum Reserve. Yet, oil and gas prices continued to climb higher, topping $5 nationally in mid-June.
The Administration claimed that its quick actions helped reduce gas prices by 40 cents over what they would have been, but that’s pure speculation, just like the Administration’s pronouncements that gas stations, which only average 10 cents per gallon in profit, somehow can significantly drop their prices.
A later withdrawal from the SPR in September barely moved the needle on prices. The releases, while record breaking, cumulatively represented about two days of world oil supply.
So, is it possible that presidents don’t have much control over prices—and they shouldn’t be praised for price drops or maligned for price increases? (And, for that matter, they shouldn’t malign the retailers who also are not the reason for rising prices.)
Let’s specifically focus on the spring transition to summer-blend fuel. For two decades, NACS has communicated the issues that affect prices because without an explanation, consumers and/or politicians tend to blame the convenience store as the place that's responsible for their pain. And convenience stores sell 80% of the gas purchased in the United States.
But it’s more complicated than that, and it begins around the coldest time of the year. The first week of February is generally the lowest point of the season, but the spring transition generally leads to a shortage of product (see “Changing Seasons, Changing Gas Prices”) when demand begins to increase. These supply-demand imbalances usually lead to price adjustments.
Since the final implementation of the Clean Air Act Amendments in 2000, the seasonal transition to summer-blend fuel has helped gasoline prices rise significantly before they reached their peak, with increases ranging from a low of 1 cent in 2020 (which needs some explanation) to a high of $1.56 per gallon in 2022. The average annual increase is 52.4 cents per gallon.
So, imagine you are running for president. Wouldn’t you want to make that number lower? There have been six presidential elections since 2000. And let’s assume that whether you are president and want to get reelected or help your party to keep the presidency, you’d push every lever at your disposal to minimize price increases. But prices have actually risen even more during these presidential election years: 49.9 vs. 48.5 cents per gallon through 2020. Yes, it’s not a big increase but you’d think that it would be a big decrease if presidents controlled gas prices, right?
What about from a legacy perspective? Can presidents say that they reduced gas prices over their term in office? Nope. Every president since 2000 has left office with gas prices higher than they took office (using EIA numbers):
- Bill Clinton left office with gas prices 39 cents higher ($1.06 on Jan. 25, 1993; $1.47 on Jan. 22, 2001).
- George W. Bush also left office with gas prices 39 cents higher ($1.47 on Jan. 22, 2001; $1.84 on Jan. 26, 2009).
- Barack Obama left office with gas prices 49 cents higher ($1.84 on Jan. 26, 2009; $2.33 on Jan. 23, 2017)
- Donald Trump was a relative success story, with prices climbing a mere 6 cents during his time in office ($2.33 on Jan. 23, 2017; $2.39 on Jan. 25, 2021).
There were some extenuating supply and demand circumstances related to the past four years. Because of the massive drop in fuel consumption related to the pandemic that has only partly come back, gasoline demand dropped 5.7% comparing President Trump’s first week in office to his last. Again, it comes down to supply and demand.
One more point worth raising about Presidents and prices: Extremely low prices aren’t a bragging point. It usually means something really bad happened to the economy, because extremely low gas prices are almost always associated with a severe and sudden drop in demand that only happens when the economy crashes.
More than 40 years ago, a character on "Saturday Night Live" named Father Guido Sarducci, proposed a Five Minute University. His concept: In five minutes, he could teach you what the average college student retained five years after graduation. He only wanted 20 bucks for this distillation of great knowledge. His course on Economics was boiled down to 3 words: “Supply and demand.”
If you have kids in college, like I do, you can probably save a bunch of money sending them to the Five Minute University. And if you have a bunch of relatives sharing posts with crazy thoughts about gas prices, send them this. Either way, repeat these two words: supply and demand.
Oh, and if you want to see the math, here it is:
|Year||Date||Price||Peak Date||Price||Increase||% increase|
|2023||Feb. 6||$3.444||April 24||$3.656||21.2¢||6.2%|
|2022||Feb. 7||$3.444||June 13||$5.006||156.2¢||45.4%|
|2021||Feb. 1||$2.409||March 22||$2.865||45.6¢||18.9%|
|2020||Feb. 3||$2.455||Feb. 24*||$2.466||1.1¢||0.4%|
|2019||Feb. 4||$2.254||May 6||$2.897||64.3¢||28.5%|
|2018||Feb. 5||$2.637||May 28||$2.962||32.5¢||12.3%|
|2017||Feb. 6||$2.293||April 24||$2.449||15.6¢||6.8%|
|2016||Feb. 1||$1.822||June 13||$2.399||57.7¢||31.7%|
|2015||Feb. 2||$2.068||June 15||$2.835||76.7¢||37.1%|
|2014||Feb. 3||$3.293||April 28||$3.713||42.0¢||12.8%|
|2013||Feb. 4||$3.538||Feb. 25||$3.784||24.6¢||7%|
|2012||Feb. 6||$3.482||April 2||$3.941||45.9¢||13.2%|
|2011||Feb. 7||$3.132||May 9||$3.965||83.3¢||26.6%|
|2010||Feb. 1||$2.661||May 10||$2.905||24.4¢||9.2%|
|2009||Feb. 2||$1.892||June 22||$2.691||79.9¢||42.2%|
|2008||Feb. 4||$2.978||July 7||$4.114||$1.136||37.8%|
|2007||Feb. 5||$2.191||May 21||$3.218||$1.027||46.9%|
|2006||Feb. 6||$2.342||May 15||$2.947||60.5¢||25.8%|
|2005||Feb. 7||$1.909||April 11||$2.280||37.1¢||19.4%|
|2004||Feb. 2||$1.616||May 24||$2.064||44.8¢||27.7%|
|2003||Feb. 3||$1.527||March 17||$1.728||20.1¢||13.2%|
|2002||Feb. 4||$1.116||April 8||$1.413||29.7¢||26.6%|
|2001||Feb. 5||$1.443||May 14||$1.713||27.0¢||18.7%|
|2000||Feb. 7||$1.325||June 19||$1.681||35.6¢||26.9%|