GECON200-Topic #1: Isaac, China, the Presidency, and Gas Prices

Hurricane Isaac recently passed through the Gulf of Mexico, causing a number of oil rigs and refineries in the area to temporarily halt production. As a result, gas prices have risen approximately $0.11 per gallon in the last week alone, or between 2.5% and 3.0%. As we now know, Hurricane Isaac was not as devastating as Hurricane Katrina in 2005, but it still resulted in an increase in fuel prices.

A number of factors influence fuel prices in the United States, and gas prices vary greatly by state. However, gas prices also vary significantly by country. Venezeulan gas prices are subsidized by the government, while Norwegian gas is highly taxed, such that the cost to fill up a Chevy Suburban would be $4 in Venezuela, and about $400 in Norway. Even a country like China has significantly more expensive gasoline–around $4.90 per gallon–compared to the United States where gas is around $3.75 per gallon.

As gas prices have risen in the last few years in the U.S., many have sought to blame President Obama for the rise in gas prices. While the U.S. is the largest consumer of gas in the world, it may be the case that the President’s defenders have it correct that he doesn’t have much ability to control fuel prices.

Questions you might consider answering (Remember, you don’t have to answer all of these, and you can make up your own question.)

  • What do you believe will happen to fuel prices in the coming years? What happens when cars become more efficient? What happens to fuel consumption and car efficiency as gas prices rise?
  • Why do countries other than the U.S. have such high gas prices? Do countries like Norway simply want to avoid having cars on the road, or do they believe consumers should be consuming less gasoline? Or is it something else entirely?
  • What do you believe the President has to do with gas prices? Presidential candidate Mitt Romney has made some recent proposals to lower gas prices. Do you believe that his proposals would help lower gas prices if he were elected? What do you make of the goal of ‘energy independence’ of the United States?
  • What would be the tradeoff of enacting policies proposed by President Obama and Presidential candidate Mitt Romney. I haven’t laid these tradeoffs out above, but there should be plenty of reading available for their plans.
  • As China continues to grow, how much more fuel are they predicted to consume. Look for an answer that takes account of their increased efforts at fuel efficiency? What would happen in the U.S. if the President’s fuel efficiency goals are met? What are Presidential candidate Romney’s plans for fuel efficiency standards in the U.S. and how would that impact our projected use of fuel?

Note: If you don’t know what a term means, look it up in the book or online.


15 thoughts on “GECON200-Topic #1: Isaac, China, the Presidency, and Gas Prices”

  1. Why do countries other than the U.S. have such high gas prices? Do countries like Norway simply want to avoid having cars on the road, or do they believe consumers should be consuming less gasoline? Or is it something else entirely?

    Norway’s high gas prices (some of the highest in the world at nearly $10/gal) don’t stem from oil scarcity- the country is rich in oil and has a large oil and gas industry. These high prices can instead be attributed to high taxes Norway levies on gas companies’ profits, 78% of the end price in total. Yet, Norwegian citizens aren’t often heard complaining, or so the officials claim. The gas taxes levied by the Norwegian government are paid back to the people in forms including a universal health care and free college education. Based on the Human Development Index, Norway had the highest standard of living in 2009. Norwegian officials have other reasons for instituting steep taxes on oil besides getting funding. Norway as a whole is a very ecologically aware country; it is government policy to encourage responsible use of oil and gas as to reduce environmental harm and help.
    Some other countries with high gas prices, like Turkey and Italy, also heavily tax gas in order to bring more money into government control. China, on the other hand, has raised its gas prices with the goal of decrease driving and limiting the production of cars with poor mileage while encouraging public transportation and alternative fuels. This is done as precautionary measures for when gas prices will start to rise as oil reserves begin to run out.

  2. What are President Obama’s Plans for fuel efficiency given a second term in office, and what are Presidential candidate Romney’s Plans for fuel efficiency standards? What would happen in the U.S. if the President’s fuel efficiency goals are met?

    For the upcoming presidential election this fall, both candidates have begun to display very different plans for fuel efficiency and use. While President Obama has recently proposed for the U.S. automotive companies to attain fuel efficiency of over 54 MPG in new cars by 2025, presidential candidate Romney has gone the other direction by staying away from defined efficiency regulations and displayed plans to take better advantage of natural resources within the country’s borders.
    Obama’s plans would most likely keep the international oil trade in the picture much in the same way that it is for the U.S. today. Dependence from the U.S. on foreign oil would not decrease, but consumption would most likely severely decline. Obama’s Plan would also allow car companies to continue to benefit in the market because of the recent desire by consumers to own more fuel efficient cars. Domestic car companies have reported that their production of more efficient cars in recent years has allowed their sales to increase dramatically since 2009. Because much of the technology to reach the President’s goal of 54 MPG by 2025 already exists, the seemingly high expectations are in fact attainable and would become cheaper to put into production cars as they become more readily available.
    Romney’s plan to “dig deeper”, in a sense, into our own supply of natural resources would promote “energy independence” but would fail to address the concern of dwindling oil reserves around the world. Romney also looks at his plan as a way for the United States to begin selling oil to other nations, instead of mostly relying on others. Romney’s goal seems as if it would just prolong any problems with supply or oil. However, it would most likely lead to a price per gallon that many would see as more beneficial.
    Whether or not we want to spend less on gasoline because of having to fill up our tanks less often, or spend less per gallon due to increased domestic supply is just one of the many issues we will all have to think about before voting this November.

    Marks, Paul. “Obama’s 2025 car fuel efficiency goals are already in reach.” Energies and Fuels. New Scientist., 5 September. 2012. Web. 6 September 2012.

    N.A. “Planform: Energy” N.D. Web. 6 September 2012.

    Leber, Rebecca. “Romney Opposes Fuel Efficiency Standards Actually Moving U.S. Toward Energy Independence.” Think Progress: Climate Progress. Think Progress. 28 August. 2012. Web. 6 September 2012.

  3. I believe the president has very little to do with gas prices. Oil, the primary raw material of gasoline, is on the global market which means that there are various factors affecting its price. Most recently, tensions in countries such as Iran and Syria have made oil prices rise. Romney has said he would lower gas prices by increasing drilling in the US but said himself that “no one can guarantee what the price of oil’s going to be”. While our dependence on imported oil is high and increasing our production of oil would lower prices, this alone would not be a substantial amount and we would still consume way more than we can produce effectively. There is a great deal of talk about energy independence and is a valiant goal to have but requires the combined efforts of all American citizens. Energy consumption can be reduced by one-sixth if Americans would do little things such as turning the lights off when the leave a room or drive a car with improved mileage. Things like this are being done; around campus alone I see many posters promoting the preservation of energy. It’s not an impossible goal but it will definitely take some time to get there.

  4. Does Obama or Romney have the power to affect gas prices? Obama plans to increase oil production, invest in alternative energy, and increase fuel efficiency standards. Currently, the president boasts the eight-year high of domestic oil production. However, the Congressional Research Service reports oil production on federal lands has decreased while it has increased on private land. This increase was in fact no result of Obama’s policies. The long term impact of his plans, however, may increase the fuel efficiency of cars and lessen our dependence on oil, because with alternative energy, the issue of gasoline prices may decrease substantially.
    The president criticizes Romney and fellow Republicans for continuing to subsidize oil companies. However, the low gas prices of Venezuela and Saudi Arabia, both of whom heavily subsidize the price of gasoline, are evidence of the effectiveness of these subsidies.
    Romney’s plan to combat rising gas prices is to heavily increase gas production on federal lands to supplement the increase in private oil production. But global gas prices rise and fall despite each country’s oil production. An increase may have little effect on the cost and is most problematic for environmentalists who worry about the impact of drilling.

  5. Mitt Romney’s energy plan fully supports deregulation for oil companies, exploration on federally protected lands and eliminating all dependence for foreign oil, echoing the typical mantra of “Drill, baby, drill”. This contrasts with Barack Obama’s alternative energy agenda, which is dispensing billions of dollars into solar, wind and battery initiatives aimed at cutting dependence on foreign oil and changing how Americans depend on energy.
    Many of the regulations on fossil fuels are used to address the numerous externalities involved such as air pollution and climate change, making it more expensive to produce fossil fuels. With Obama focusing more on renewable energy and Romney concentrating on “Drill, baby, drill”, the tradeoff of enacting these policies ultimately boils down to Obama’s long-term solution to the energy crisis versus the short-term, deregulated solution of Romney’s plan.
    Following Romney’s plan would result in more dependence on oil and fossil fuels in general. Exploiting our resources can increase the oil supply on a short-term basis, therefore lowering gas prices and boosting the economy. However, fossil fuels are limited resources and in the long run America will have to find new sources while also destroying the environment. Obama’s plan does not guarantee immediate results, and the price of research for green energy is very expensive, the tradeoff of future clean energy for an economic boost is possibly too great in this already delicate economy. America would be much better off with the economic boost of lower gas prices provided by increased domestic production of oil while continuing to focus on the future with Obama’s clean energy plan.

  6. Isn’t it always that case that today we need a hero, but the next someone to blame? Despite the state of the economy, it seems there is always one person to suffuse with fault, the president. Now that gas prices are “unbearably high” for Americans (although other countries are forced to pay way more for a gallon of gas), we turn to the president as the source of our problem.
    Romney attempts to diminish Obama’s image by arguing that Obama did not follow through with his policies and as a result America must suffer and pay higher gas prices. However, he hypocritically retracts this statement by saying, “Well, no one can guarantee what the price of oil is going to be…” If the price of oil is unpredictable, than how can the president be blamed for such inconsistent factors? The Wall Street Journal defends Obama by saying, “U.S. gasoline prices, like prices throughout the advanced economies, are determined by global market forces. It is hard to see how Mr. Obama’s policies can be blamed.”
    As the facts stand, Obama is not to blame for the increase in gas prices. When Obama took office, the recession was taking a toll on America and the demand for gas was very low. Now that the economy is healing, the demand for gas is rising. Therefore, the prices for gas are increasing too.

  7. The US Energy Information Administration (EIA) believes that despite the oil price scare in the beginning of the 2012 year, gas prices should continue to lower throughout the coming months and well into 2013. The predicted average gas price for consumers will be $3.28. The EIA came up with this number by factoring in better fuel efficiency and a lowered consumer demand for gas. The EIA didn’t take into consideration the possible affect of more offshore drilling and for good reason. I believe that offshore drilling of oil will not have a big affect on the oil price. Many Americans believe that if we look into drilling in the Arctic National Wildlife Refuge and off the coast of California that the US can become independent from the rest of the world. However that is just not true. There is too much oil being imported from other countries for there to be that big of an effect on the US. In 2009 the US produced 7 percent of the world’s oil. The predicted effect of offshore drilling will raise that by another percent, still leaving the US with minor role in the global market of oil. While offshore drilling in continental US and in Alaska might help raise some oil independence, what the US needs most of is petroleum to help lower the price of oil. I believe that the American public should be happy with the price of oil and that the US policymakers should not look into offshore drilling.

  8. What do you believe will happen to fuel prices in the coming years? What happens when cars become more efficient? What happens to fuel consumption and car efficiency as gas prices rise?

    Initially I believe that oil prices will continue to rise, but in the next few years we may see a drop-off from current prices in unrefined oil, yet gas prices may stay the same. Because of the increasing rate of gas prices worldwide, companies like BP have been increasing production efforts, including a new fracking system. The reason this may not immediately affect countries other than the United States is because the new process has yet spread to the rest of the world. Developed nations are also finding eco-friendly alternatives to their high amounts of consumption, so less gas is needed in these areas of the world. Due to the efforts to reduce the price climb, state governments have to change their policies to adjust to the change in revenue. Many states, including New York and Connecticut, are having to raise the amount of taxes put on gas to make up for the lack of gas now being bought. Taxes from gas have often been used to pay for infrastructures, like road repairs. With less gas being sold, their income has dropped, and they are in need to find an alternative way to keep up. Most states average 18 cents per gallon going towards taxes, but the above mentioned states have 45 cents per gallon going to the state. So even if the price per barrel of oil drops within the next few years, the product the average American uses will most likely continue to rise or plateau at current rates.

  9. I believe that fuel prices will continue to fluctuate and, if analysts are correct, the prices will not exceed $5.00 per gallon. This does not take into account the possibility of increasing taxes on gasoline. Neither candidate is going to outright say that they are planning on raising taxes on gas, but; it could happen if they want more revenue for alternatives. Also, and Virginia is seeing this now, taxes could be increased to help pay for road maintenance or there may be more toll roads placed on major interstates.
    As cars become more efficient, drivers will generally drive more than they would if cars were not efficient. Drivers have a mentality that they can drive more because they will not have to fill up as often thus not spending as much money. Prices will, likely, go down because people will not have to fill up on gas as much which will lower the consumption. However, people will be more likely to drive inefficient cars as prices decrease which will likely lead to the fluctuations in prices.
    As gas prices rise, fuel efficiency will begin to be a major topic and should increase. Also, fuel consumption in the US will decrease as prices get higher. This will lead to a fluctuation in the prices because there is more supply and less demand. This will cause prices to decrease and people will begin driving their inefficient cars again. It will be a vicious cycle that doesn’t look like it will end.

  10. Due to China’s continuously increasing economy, transportation is becoming more of a demand. The quantity of vehicles in the country “may rise to 260 million by 2020,” which means more oil is necessary to run these vehicles. With this increased demand for fuel, not only will China’s gas prices get more expensive, but this will decrease the amount of fuel available for other countries, which will raise the prices for everyone; analysts stated that “China contributed to the spike in price” due to increased oil demand. Previously China’s concentration was producing mass levels of cars, and now they are moving “toward making more fuel- efficient ones” and promoting these over those of less efficiency. To further promote saving fuel, consumers are eligible to receive money if they “consume 6.3 liters of gas or less per 100 kilometers.” Another method is to raise taxes on fuel and less- efficient cars. Subsequent to this information, it can be assumed that if taxes are higher than less people will be able to afford driving, thus encouraging more people to carpool or seek public transportation. By having more people seek other methods of transportation, this will lower the demand for fuel, which will increase the supply of fuel available. With more fuel available, the cost should decrease gradually, or at least keep it stable enough to not disrupt the national flow of fuel.

  11. Although gas prices are currently rising in the United States, I believe that in upcoming years gas prices will begin to decrease as manufacturers begin to use alternative energy and cars become more fuel efficient. It seems a fact of life that gas prices will continue to fluctuate year to year, but I believe that as we become more dependent on alternative energy sources and consume less fuel, gas prices will continue to decrease. The Obama Administration has put an emphasis on manufacturing more fuel efficient vehicles, and they have recently proposed legislation that will increase the standard fuel efficiency to 54.5 MPG in all cars by 2025. This program is expected to save drivers over $1.7 trillion at gas stations in the upcoming years, which can be invested into developing more advanced technologies for the future. Auto manufacturers currently have the task of producing vehicles with 35.5 MPG by 2016, and with increasing the MPG to 54.5 by 2025, it seems inevitable that Americans will soon be consuming less gas and ultimately lowering gas prices in the United States. As the Obama Administration’s plan to produce more fuel efficient vehicles takes action within the coming years, I predict that gas prices and fuel consumption are likely to decrease.

  12. Although Americans focus on the price at the pump, the energy crisis is far more transparent. The Republican Party, Senator Romney, proposes that fewer regulations should be placed on large oil companies (1). This platform, theoretically, would allow oil companies to expand, thus, allowing them to generate more revenue and create more jobs. While this has some merit, Romney has neglected the environmental factors are that created when production and consumption of oil are increased. Although the Republican Party supported initiatives to lower carbon emissions in 2008, they now question the integrity of the data (2). This nearsighted mindset could be costly for future generations. Conversely, Obama’s environmental policy is more innovative, but there is more uncertainty.
    President Obama’s platform is based on clean energy such as solar and wind energy. If developed in the United States, this could produce jobs, and decrease our need for foreign oil. Depending on the success of clean energy, gas prices would plummet due to decreased demand. His plan sounds plausible, but it also has its own concerns. Currently, clean energy is not efficient; solar panels convert 14 percent of the energy collected into usable energy, which makes the payoff negligible (3). Although Obama has invested over a billion dollars into clean energy, 535 million dollars went to companies that went bankrupt (2). Even though Obama’s energy plan has the greatest potential, careful consideration must be taken in order to ensure a successful and affordable solution for future generations.


  13. As others have pointed out, gas prices are set at a Global market which is not affected by any individual country’s oil production. This shows that any politician’s policy of “Drill, baby drill” will not lower gas prices, and in fact is a waste of money. According to a chart published by the EIA the average cost for the US to produce oil is greater than the average cost for foreign countries to produce oil. This illustrates that opportunity cost for producing oil is higher in the US than it is in other countries, which shows it would be more economically beneficial to import oil rather than produce it.
    The bottom line is not where we get oil, but that the world is running out of oil, which means supply is continually decreasing while demand is continually increasing causing an increase in gas prices that cannot be avoided or controlled by any one person or policy. Of course this doesn’t stop politicians from making empty promises to us. As Obama points out “every time prices start to go up – especially in an election year – politicians dust off their three-point plans for $2 gas”. Romney himself seems very wishy-washy about his ability to lower gas prices in the CBS news article when he states “no one can guarantee what the price of oil is going to be”. He also refuses to set a certain price that he promises to lower gas prices to. Obama’s plan to put money into finding alternative energy sources may not be helping us in the short term with gas prices, but it will help us in the long run.

  14. What do you believe will happen to fuel prices in the coming years? What happens when cars become more efficient? What happens to fuel consumption and car efficiency as gas prices rise?

    Fuel prices will continue to rise in the future, like the last 16 years, not only in America but throughout the world. Price increases in America are due to rises in crude oil prices throughout the world, refining costs, and catastrophic natural disasters. Rises in crude oil are due to demand for more in the global market with India and China spearheading the way with increases in oil consumption. Yet, even when large quantities of crude oil are available, it tends to be heavy, sour crude oil that refineries in America cannot handle and would have to be altered (cost) to accommodate. Natural disasters, hard to predict or prevent, can potentially alter prices to record setting highs (Katrina). A portion of the oil dilemma the government can fix is to encourage fuel efficiency. Pressure from the federal and state governments can “push” consumers to buy more efficient cars while simultaneously forcing producers to have new, efficient gas standards. As gas prices arise, more focus will be put on the efficiency of fuel consumption in cars. If consumers take control now and let the suppliers know we value fuel-efficiency then one day Americans won’t have to visit the pump every week.

  15. Many United States citizens easily blame the president for the rising oil and fuel prices due to his actions over the issue. The reality is that there are many reasons that directly affect Obama’s plans. Critics say that since Obama is slowing off shore drilling he is the direct problem to the rising prices, and that if he would allow more drilling, prices would drop. This does not take into account the downsides of drilling. For example, in North Dakota where 152 million barrels were produced in 2011, many problems came with the oil production. North Dakota sees poor living conditions for the oil workers, heavy traffic in big drilling cities, and law enforcement agencies struggling to keep up with the growing demands. Obama also issued an 18-page document issuing guidelines for oilrigs in 2010, hoping to keep them in line with regulations. The fact of the matter is that Obama, even with his policies, has not fully contributed to the rise of oil and fuel prices. The rise in price is mainly due to how the international oil price fluctuates in itself. The only true factor to our fluctuations is how much the US buys globally and the internationally recognized price set.

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