Patterico's Pontifications

2/25/2012

Obama’s gas problem may not be high prices

Filed under: 2012 Election — Karl @ 10:00 am

[Posted by Karl]

Pres. Obama is playing defense on rising gasoline prices, but are they his real gasoline problem?  Political insiders overwhelmingly think so:

“Rising gas prices will always be a reminder of stagnant wages, and it makes an economic recovery harder to feel,” said one Democratic Insider. “Voter frustration rises along with gas prices, and tends to be taken out on the incumbent, so even in a recovering economy, this could be a problem for the president.”

“Gas prices could screw up the economic recovery big time, and President Obama will pay the price at the pump and in the voting booth,” said another.

Note there is a level of nuance in those observations, i.e., gas prices matter to the extent they confirm preexisting frustration with the economy or affect the larger economy, e.g., by fueling price inflation.  As Larry Sabato noted during last year’s gas price escalation, the statistical correlation between presidential approval rating and gas prices is strong but not overwhelming (for various reasons).  Moreover, correlation is not causation.  George W. Bush’s presidency is a good example of this correlation being largely caused by other factors, e.g., Bush’s post-9/11 approval spike and US deaths in Iraq.

Pres. Obama’s gasoline problem may not be rising prices.  Pres. Obama’s gasoline problem may be that gasoline consumption has fallen off a cliff.  As market commentator James Bianco (among others) notes:

Economic activity almost always requires travel.  Whether commuting to work, driving to a store, getting goods delivered, or taking a vacation, more miles driven and more gasoline used means higher economic activity.  This is not controversial, as we discussed a few years ago.

So, it comes as a surprise that these measures of broad-based economic activity (gasoline consumed and miles driven) are falling hard at a time when most economists are in agreement that the economy has been getting better in recent months.  If the economy is indeed getting better, it seems to be happening while we are driving less and consuming less gasoline.  For the American economy, this is really hard to do.  It has never happened before in the data shown above.  All other instances of declining miles and gasoline consumed occurred in or around a recession.

We would not suggest that these economic indicators trump all others and the economy is actually worsening.  But it is disconcerting that these measures of critically economic activities are heading lower in a hurry.

As with gas prices — and perhaps more so — what gas consumption tells us about the state of the economy is important.  As recently as this month, Pres. Obama attributed the growing price of oil to a strengthening economy which in turn means demand for oil increases.  But the International Energy Agency cut its forecast for global oil demand in 2012, which appears to be playing out here in the US.  Rising gas prices might not hurt Obama as much if the economy actually improves.  But falling gas consumption may suggest further economic malaise — in which case high gas prices may fuel a vicious cycle and continue to anger voters.

–Karl

83 Responses to “Obama’s gas problem may not be high prices”

  1. Ding!

    Karl (6f7ecd)

  2. If gas hits $5 and stays there until election day, The One is finished. Thank God. It would be worth $5 gas in the long run.

    In this election, the Republic as we knew it is at stake.

    There’s already talk on the left that if Obama is reelected something needs to be done about the 22nd Amendment. It restricts a POTUS to two terms. Like Hugo Chavez, some hope that Obama can become POTUS, more or less, for life.

    These are very scary times.

    VoteOutIncumbents (569c1b)

  3. Barry Obama
    Cult of Personality
    The Bell Tolls For Thee

    Colonel Haiku (ffdb2e)

  4. Bang on. IRS withholding is flat as a pancake despite GDP of 1.7%, miles driven by truckers down, BDI at record low, new home construction seeking a new bottom,…

    This isn’t a multi-dip recession, it’s a descending staircase of depression punctuated with landings at each ‘floor’.

    gary gulrud(MN#6, Anabaptist) (d88477)

  5. Obama lives very very close to where he works you see

    He’s a goddamn role model

    happyfeet (3c92a1)

  6. Obama lives very very close to where he works you see

    I didn’t know the golf courses were that close to the White House.

    It would be impressive if Obama actually did make some kind of statement about wasteful energy by not using Air Force One and the motorcades… at all. It’s not necessary in 2012.

    Dustin (401f3a)

  7. Maybe Obama should impose price controls on gasoline. That way we can have gas lines, too.

    Kevin M (bf8ad7)

  8. the high price of gas and lines at the station back in ’74 prompted me to sell my beloved ’68 Chevy Nova w/307 V8 & 4 speed and purchase my first new car… a 1974 Fiat X1/9.

    Good times…

    Colonel Haiku (09b2e1)

  9. Just to play advocatus diaboli, could increased telecommuting cause some of the drop in gas consumption? Anyone whose job allows them to telecommute at least part of the time would probably be considering it — I certainly am.

    Brother Bradley J. Fikes, C.O.R. (4267bd)

  10. colonel’s jumped on the
    telecommute angle like
    flies on a rib-roast

    Colonel Haiku (09b2e1)

  11. Anyone whose job allows them to telecommute at least part of the time would probably be considering it — I certainly am.

    Comment by Brother Bradley J. Fikes, C.O.R.

    I think this idea is very good, and organizations that are afraid it will result in disaster probably need to replace their human resources department and get people they have confidence in.

    I’m also a big fan of buses. I don’t like train based mass transit because it’s totally inflexible in a fast changing world. Lots of cheap bus routes are easy to implement and much less wasteful than $150 million rail projects.

    Things like nuclear power and smart mass transit would do so much more for the economy than the kinds of stimulus we actually got.

    Dustin (401f3a)

  12. President Obama wants us to become the Saudi Arabia of pond scum.

    November can’t come soon enough.

    daleyrocks (bf33e9)

  13. Gas price increases work EXACTLY the same as tax increases on consumers.

    You get the same amount of gas as always, but you have substantially less cash at the end of the month as a result.

    Remember in 2008 gas prices peaked in June, and began to decline significantly after Bush announced an end to the moratorium on off-shore drilling. The prospect of additional supply coming into the market drove the speculators betting on higher prices to the exits.

    shipwreckedcrew (2e6c61)

  14. Actually it’s not the gas price rise that will get O’bama removed from office. It’s the inevitable rise in food prices that rising gas prices cause. That is the thing that kills governments!

    Catseye (ae8723)

  15. Anyone whose job allows them to telecommute at least part of the time would probably be considering it — I certainly am.

    Comment by Brother Bradley J. Fikes, C.O.R.

    I remember one of my company’s VPs warning that he didn’t want the (at the time) new telecommuting policy to result in too much tele-tanning and tele-fishing…

    Colonel Haiku (09b2e1)

  16. Ogabe is such an ignoramus. Hundreds of square miles of desert need to have stainless tanks laid down and billions of gallons of water piped in for a fractional contribution to our energy needs.

    gary gulrud(MN#6, Anabaptist) (d88477)

  17. I want some of that algae so that my Prius will never have to be filled up at the station again!

    retire05 (2b66b7)

  18. I filled up at the local ARCO on the 18th;
    87-octane was $3.899/gl.
    Today, the same gas at the same station is $4.179!
    A year ago: $3.659/gl.

    I think I better call my broker and buy into Big Oil.

    AD-RtR/OS! (bb07cd)

  19. I think it was last Wednesday morning when I drove by an Arco station in Sacramento on the way to my office and premium (which I need for both my 350Z and my Fiat) was $4.039/gn. Same day, same station in the afternoon it was $4.119.

    Colonel Haiku (09b2e1)

  20. Obama learned his economics at Harvard Law School.

    Mike K (326cba)

  21. The apologist in chief will take credit for decrease in consumption.
    How many cords of korans will I need to get through the winter?

    sickofrinos (44de53)

  22. Dustin,

    I’m actually a fan of subways but not of light rail. Subways don’t compete for roadway — a commuter on a subway frees up a spot in traffic. Light rail and buses compete for roadway, and these days result in disappearing space for cars to provide “transit lanes.” One bus every 5 minutes with a reserved lane is a TERRIBLE use of the available throughput, and creates incredible resentment against mass transit.

    Also, I prefer subways for exactly the reason you like buses — they are inflexible and a casual rider can use them. Not so buses which have arcane routes that frequently change and only a regular user can keep up. Casual users always find themselves going to unexpected places, never knowing that the 720 bus route changed last month.

    But I’ve used subways in cities where I can’t speak the language: Tokyo, Paris, Berlin, or where I dare not drive (London), and never had a problem.

    That it takes 30 years to build a 15 mile subway in Los Angeles ought to be taken as an indictment of LA government, not of subways.

    Kevin M (bf8ad7)

  23. When Obama took office, gas was $1.80/gallon.

    Kevin M (bf8ad7)

  24. BTW, telecommuting only works for some; not everyone has the ability or temperament to isolate themselves at home and avoid distraction. It only works for some jobs and even then probably doesn’t work every day. Team efficiency goes way down at times since few people have comm gear that will allow full virtual access. In my experience this still has a way to go, and my field (electrical engineering) would seem to be a solid candidate.

    Kevin M (bf8ad7)

  25. When Obama took office, gas was $1.80/gallon.

    and the reason gas was $1.80/gallon was?

    Morningafter (56063e)

  26. I’m actually a fan of subways but not of light rail. Subways don’t compete for roadway — a commuter on a subway frees up a spot in traffic.

    50 commuters on a bus may compete with cars, but they relative freeing up is substantial.

    Not so buses which have arcane routes that frequently change and only a regular user can keep up.

    It’s not that bad. And these days, the internet makes keeping up with bus routes trivially easy.

    That it takes 30 years to build a 15 mile subway in Los Angeles ought to be taken as an indictment of LA government, not of subways.

    I disagree. Here in Austin, the rail system cost well over 100 million and does nothing the buses don’t do faster. It is incredibly difficult to build new rail, so they rely on already existing rail. Buses just seem to do the same thing, better (And faster).

    One bus every 5 minutes with a reserved lane is a TERRIBLE use of the available throughput, and creates incredible resentment against mass transit.

    Yeah, that sounds pretty ridiculous.

    Dustin (401f3a)

  27. But I’ve used subways in cities where I can’t speak the language: Tokyo, Paris, Berlin, or where I dare not drive (London), and never had a problem.

    Me too. The rail system in South Korea is excellent and I never had a problem using it.

    But throwing a few hundred buses at mass transit is a much more cost effective solution in the vast majority of American cities and towns. In dense populated areas, there probably already is a rail system, but that’s a luxury. In fact, it’s very much like the bus on its own lane of highway… a waste.

    In fact, you could easily pretend that rail line is the dedicated bus lane you had a problem with, and the bus is the train. Pretty wasteful. Better to use a large volume of buses and routes while building enough roads (though the buses would obviously tend to decrease traffic, in many towns that resist buses, the roads need major improvement).

    Rail looks a lot cooler, but it’s inflexible and simply too expensive to be practical.

    Dustin (401f3a)

  28. Besides which, as liberal Hollywood informs us, public buses are tools of discrimination,

    You actually expect me to get on a bus?

    You have no idea why they put them great big windows on the sides of buses, do you?

    Why?

    One reason only: to humiliate the people of color who are reduced to ridin’ on ‘em.

    I didn’t know that.

    You could fill the Staples Center with what you don’t know.

    Dana (4eca6e)

  29. The biggest problem Obama has with gas is that he’s full of it!

    Pamela (e235c7)

  30. I love riding the buses in Austin. They have wifi, they generally keep a good schedule, and though traffic slows them down some, I can just read or surf the internet. And for those who actually care what race people are, I am pretty sure it’s about the same mix as the general population.

    They put up a really swank train at my bus station. The ride is smoother, and it doesn’t get held up at traffic, but it’s slower anyway because you have to add connections to get to the train.

    I buy about one tank of gasoline a month.

    I’m sure there are situations where trains make more sense, but I think for transporting people around a city, buses are so much better. Ten years from now, when they need to add some more stops, it won’t take another 50 million dollar project. Ten years from now, when some of the routes are no longer used, it won’t represent a 50 million dollar waste. And that’s a very conservative figure. It’s far more when we’re talking about actually laying rails.

    I would much rather that money go into expanding highways, which can be shared by buses, trucks, cars, etc.

    There are a few places, like DC and NYC, where you don’t really need a car and the train is very convenient, but I think this is a luxury that is not feasible in most places.

    Dustin (401f3a)

  31. You know it’s like the ‘hound of the baskervilles’, consumption has gone down, because economic activity
    has stalled, no matter how you try to put Humpty Dumpty back together again, that’s the reality.

    narciso (87e966)

  32. It looks like the miles driven, while falling, is not falling as fast as gas consumption. The explanation would seem to be cars have gotten more fuel efficient. How do they know many miles people are driving?

    Gerald A (cc0aaa)

  33. I buy about one tank of gasoline a month.

    I buy 3-4 a week.

    JD (448fa8)

  34. I buy 3-4 a week.

    Comment by JD —

    Jeez.

    I’ve never been at that level, even when I had a gas guzzler. Driving is fun, and I’m sure you agree if you’re doing so much, but it’s gotta hurt seeing the gas prices skyrocket.

    Dustin (401f3a)

  35. I don’t do it for fun, it is for work. I have a huge territory.

    JD (448fa8)

  36. Yeah, of course. You would have to be pretty whacked out to drive 1,000 miles a week for sheer enjoyment.

    I hope you like driving, anyway.

    Dustin (401f3a)

  37. They’re obsessed” By Jim Messina, Obama 2012 Campaign Manager

    In just about 24 hours, Mitt Romney is headed to a hotel ballroom to give a speech sponsored by Americans for Prosperity, a front group founded and funded by the Koch brothers.

    Those are the same Koch brothers whose business model is to make millions by jacking up prices at the pump, and who bankrolled Tea Party extremism, and committed $200 million to try to destroy President Obama before Election Day.

    Yeah. It’s not Obama; it’s the fault of those evil Koch brothers.

    Neo (fb3bb4)

  38. I had a C-20 4×4 350 ci and got 12 mpg, semis get 4 mpg(diesel), these 8 mpg SUVs are the humongo Hummer’s, numerically not worth mentioning.

    Meanwhile if you’ve a Ducati you’re buying aircraft fuel for less than a buck premium, my old CX500 with 10:1 compression cannot burn Ethanol in any form.

    The only part of the economy that is doing well is handgun manufacturers.

    gary gulrud(MN#6, Anabaptist) (d88477)

  39. 30. In MN all the bus traffic is government workers. Buses are mostly empty, totally empty, except for these few hours.

    The only time one ever sees full busses is during the State Fair at open and close.

    Light rail operation is 80% subsidized. Mostly rich who have 9 to 5 jobs in finance or law. Bus connections to outlying suburbs for high tech jobs would take additional hours one way. Not remotely feasible for working stiffs.

    gary gulrud(MN#6, Anabaptist) (d88477)

  40. The real reason Ogabe and McBain are sunk:

    http://www.zerohedge.com/news/guest-post-small-business-america-burdened-crushed-doomed

    New graduates are 50% unemployed, drowning in debt. McBain promises SS can be saved with tweaks, the tax regime can be incrementally improved, manage the decline.

    Brain dead. Red state Amerikkka will not support either. Turnout will not approach 50% in Nov.

    gary gulrud(MN#6, Anabaptist) (d88477)

  41. 40– were screwed. nice comment section!!

    sickofrinos (44de53)

  42. Brain dead. Red state Amerikkka will not support either. Turnout will not approach 50% in Nov.

    Unlike the turnout at gun-shops, and gun-shows, across America.
    Ammo manufacturers are already reporting that what they had assumed was going to be required for annual sales is already insufficient,
    as buyers for wholesalers and retailers are wiping-out inventories in warehouses – and it’s only February!

    AD-RtR/OS! (7d4e01)

  43. Arizona Gov. Jan Brewer just endorsed Mitt Romney on MTP.

    Colonel Haiku (66be0b)

  44. This is like the Dewey campaign in ’48, this time we’ll get it right’

    narciso (87e966)

  45. ABO!

    Colonel Haiku (66be0b)

  46. I think you have that wrong, chief, more like OMR.

    narciso (87e966)

  47. I put my trust in my fellow Republican voters, narciso.

    Colonel Haiku (66be0b)

  48. When Obama took office, gas was $1.80/gallon.

    and the reason gas was $1.80/gallon was?

    Comment by Morningafter — 2/25/2012 @ 6:47 pm

    Because the economy was for s*it. Much like it is now, except that commodity prices are through the roof in the middle of a recession. A neat trick, taking real talent not seen since 1979.

    Kevin M (bf8ad7)

  49. and the economy was for sh*t as a result of the housing bubble, which was the result of Democrat malfeasance and pressure put on lending institutions to offer mortgages to millions of people who did not have the credit history – let alone resources – to make good on their contractual obligations.

    Others can expand on this, but I need more coffee.

    Colonel Haiku (66be0b)

  50. When Obama was sworn into office, gas was $1.80/gl…

    From my records of 2009:
    1st purchase of gas that year was Feb 3, at the local ARCO….
    $2.019/gl!

    An extra 20-cents for the privilege of living in Paradise.

    AD-RtR/OS! (7d4e01)

  51. Interesting read, daley.

    Colonel Haiku (66be0b)

  52. daleyrocks- Old Noemie is a team player.

    sickofrinos (44de53)

  53. Gov. Jerry Brown, upon being asked by David Gregory on MTP to comment on the high gas prices and continuing to rise, what should be done, said,

    “We’ve been there before, I’ve been there. When I was governor before we had gas lines and the prices shot up and the price shot down.

    We took steps: fool fuel efficiency, mandating electric cars, and now President Obama adopted the California regulations and we have to go beyond that and you have to support mass transit, unlike the Republican Congressional bill that guts mass transit.

    We have to get real here. The instability in the ME is driving up that price and if the Republicans get their way stimulating a war in the ME will go to $2…uh… rather go *up* $2 a gallon, so we have a real problem here that we’re not going to solve in the short term, but long term fuel efficient cars, electric cars, Cali will have a million of them in the next 8 years and land use policies that minimize reliance on fossil fuels.”

    It’s so interesting to see the politicians who prattle on about the long-term, especially when it pertains to drilling (it will be at least 10 years before we’d reap any results, etc) and thus do nothing (which is of course a cover for their no-drill policies in general), however, when it comes to light rail in California, that’s a different story. It is presented to voters with a sense of urgent necessity, even though it won’t be up and serving riders until at least 2020.

    It’s not hard to connect the dots, but it’s certainly disheartening to residents of this once golden state.

    Dana (4eca6e)

  54. “daleyrocks- Old Noemie is a team player.”

    sickofrinos – IOW we’re screwed. Terrific comment.

    daleyrocks (bf33e9)

  55. Except, ME, gas is now a Dollar/gl over what the inflation adjusted number in the article is – in just the last month+.

    AD-RtR/OS! (7d4e01)

  56. Haiku/kevinM

    What was the price of gas at the start of GW’s term?

    Morningafter (e9a166)

  57. FUNGIBLE BEEYOTCHES !!!!!!

    JD (318f81)

  58. 58-
    My records show Jan ’04 as $1.60/gl…
    Don’t have anything saved from before that.

    AD-RtR/OS! (7d4e01)

  59. here’s where you can look up historical gas prices

    they appear to have gone up under Obama

    just when our pathetic and weak obama-raped economy could least afford it

    happyfeet (3c92a1)

  60. Well, in 1979 gas was .86 a gallon (acording to http://www.1970sflashback.com/1979/Economy.asp.) Using the BLS CPI calculator (http://www.bls.gov/data/inflation_calculator.htm ) that price today (2012)should translate to $2.69/gallon if buying power were the same. I am not cherry picking – I chose that date because I like that year for private reasons.

    felipe (2ec14c)

  61. I plugged in the 1979 median household income of $16,461 into the CPI calculator and got a 2012 figure of $51,393. FWIW. I would like to plug in the minimum wage for 1979, but it was not listed for that year.

    felipe (2ec14c)

  62. Except, ME, gas is now a Dollar/gl over what the inflation adjusted number in the article is – in just the last month+.

    No doubt about that.

    But how much of the increase in price is due to the scarcity of oil, and how much is due to the devaluation of the dollar? LewRockwell.Com has some great articles suggesting that it is mostly the latter. Here is an article from 2006 explaining the concept. According to this site, the price of gold is $1775.40/oz.

    $4.25/gal translates to about 0.002393 Au oz./gal. If expressed in the dollar values in Reisman’s article, at $20/Au oz., then gas is less than five cents a gallon. That is less than what it was in 2006. (In 2006, it was 0.005 Au oz./gal. )

    Michael Ejercito (64388b)

  63. My education and training background are in environmental issues, so I recently purchased a VOLT and I really love it.

    SCOPE

    Scope (c35c66)

  64. Central banks have printed $7 Trillion since 2008 flooding banker’s coffers. None is getting loaned out, all is being ‘invested’ primarily in commodities.

    The BDI is at record lows. All that Brent-priced oil is going to sit in tankers in the Indian Ocean while Iran, Syria and their neighbors go up in smoke.

    gary gulrud(MN#6, Anabaptist) (d88477)

  65. 66. Last sane refugee, turn out the lights. Calpers is a $Trillion$ underwater. Eat your young.

    gary gulrud(MN#6, Anabaptist) (d88477)

  66. 66- Unions suck!! and so do 3 out of 4 republicans.

    sickofrinos (44de53)

  67. Actually, you should blame the big oil companies for rising prices, since they have made gasoline our number one export—instead of keeping it in this country and bringing prices down.

    http://www.cps-news.com/2012/01/02/fuel-is-our-number-one-export-so-how-will-drill-baby-drill-bring-down-the-price-of-domestic-gasoline/

    tadcf (ead2bd)

  68. Actually, you should blame the big oil companies for rising prices, since they have made gasoline our number one export—instead of keeping it in this country and bringing prices down.

    and why would they keep gasoline here, if foreigners are willing to pay more for it?

    Michael Ejercito (64388b)

  69. The last folks we should blame for America’s problems are those who actually export stuff from America. Dead Last.

    Dustin (401f3a)

  70. tadcf, fuel is our number one export because we don’t manufacture anything here anymore! And what little amount of products we do make here tends — for the most part — to stay here.

    Icy (cbf9f2)

  71. Did you guys expect “tadcf” actually understood that? It is simply regurgitating a talking point. Fungible!

    JD (448fa8)

  72. I’m a-thinkin’ that if we’re gonna be convertin’ pond scum into fuel we should start with Waters, Pelosi, Schumer, Wasserman-Schultz, Feinstein, Boxer, Reid, Waxman . . .

    Icy (cbf9f2)

  73. fungibles are little bite sizes mushrooms that make me see the world through the eyes of a liberal

    Dustin (401f3a)

  74. daleyrocks- Old Noemie is a team player.

    Comment by sickofrinos — 2/26/2012 @ 8:47 am

    What she said in a nutshell is first, the idea that there is this thing called “the Republican establishment” deciding who the nominee is is a figment of people’s imagination. She points out the one actual historical case of that was Reagan backing Bush over Kemp in 2008. And second, the idea that Republicans only win with true conservatives is not supported by history, with Reagan being the exception to the rule. The other winners, starting with Eisenhower, were perceived as moderates and would probably be called RINO’s today by some people.

    Saying McCain lost because of his moderate image is delusional IMO which she also agrees with.

    Gerald A (cc0aaa)

  75. 1988

    Icy (cbf9f2)

  76. Bush did run on a conservative platform in 88 but it helped a lot that Dukakis was an unattractive opponent and did not try to disguise his liberalism. Plus the economy was good – the main reason Clinton got reelected. The specific circumstances and opponent matter, another point Emery makes. Goldwater ran as a pure conservative and got crushed in the most one-sided election in history.

    Gerald A (cc0aaa)

  77. Yes, but the Kennedy assasination the previous fall,
    and the economic boom, from the 58-59 recession, played a big part in that, would Rockefeller really
    have fared better in that contest.

    narciso (87e966)

  78. 1988 was interesting. Why did the guy who won in 1988 lose in 1992? The main reason is he didn’t seem so conservative in 1992 as he did when he was the coat tails of a Goldwater type.

    But the main reason was the economy.

    Dustin (401f3a)

  79. And yes, I’m joking.

    Dustin (401f3a)

  80. would Rockefeller really have fared better in that contest.

    Since the race was a blowout of historic proportions, I would think the answer almost has to be yes. That doesn’t mean he would have won, but he wouldn’t have taken all those Republican congressional seats down with him.

    Gerald A (cc0aaa)


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