Debate Desk
Does the President Set the Price of Gas at the Pump for American Drivers?
Crude oil is priced on a world market; presidents influence it at the margins through policy on supply and permits, but they do not set it.
The claim
When gas prices rise, the party out of power blames the president and the party in power points to world events. Some Americans think a president can lower prices at will, by opening a valve or by pressing oil companies, and that high prices prove that he does not care.
The answer in three points
- The price of gasoline is the sum of several parts: the cost of crude oil, refining, distribution and marketing, and taxes. The largest part is crude oil, which is priced on a world market by supply and demand, including decisions by OPEC and its partners and the state of the global economy.
- A president influences the supply of oil over time, through leasing, permits, pipelines and regulations. Those decisions affect the confidence of investors who decide whether to drill, and they act with delays of months or years. They are not a lever to pull on a given Tuesday.
- Short-term tools are limited. Releases from the Strategic Petroleum Reserve can add supply for a time, and conservatives disagree on whether that reserve should be used for price relief or kept for emergencies. Neither tool changes the world market for long.
Over the long run, policies that increase supply, from drilling to refining to pipelines, are the most reliable way to restrain prices.
The numbers
- The Energy Information Administration reports that crude oil is the largest single component of the retail price of gasoline, typically more than half.
- The federal gasoline tax has been 18.4 cents per gallon since 1993, according to the Federal Highway Administration.
- The Strategic Petroleum Reserve was established by the Energy Policy and Conservation Act of 1975, following the 1973 oil embargo, according to the Department of Energy.
What they will say next
"Then policy makes no difference." It does over time. A president who speeds permits and pipelines and signals support for production affects the supply that comes years later, and a president who restricts them has the opposite effect.
"Record production under recent presidents shows it is the market." Production grew mostly because of private technology, such as horizontal drilling, and on private and state land, so it does not show that policy does not matter. It does show that policy can help or hinder.
"Oil companies set prices." A company in a competitive market takes the market price, and the national price tracks the world price closely. Profit swings follow it.
"Use the reserve to bring prices down." A release adds a modest amount to a vast global market and refills later at a cost. It is a tool for real emergencies.
Voters should judge presidents on the long-run direction of energy policy and not on the sign at the corner station.
"Presidents release oil from the reserve for political reasons." Critics of both parties have said so. That is a reason to use the reserve for real supply emergencies and to be wary of using it to manage election-year prices.