Planning a road trip with your buddies this summer? Better make sure they're good for gas money. On Monday the government announced that the average price of gas had risen to $1.94 a gallon, and prices are expected to top $2 a gallon by June.
Your trip is not the only thing jeopardized by these prices: In an election year, they're hardly an incumbent president's best friend.
The basic factors driving up gas prices are simple. The war in Iraq, recent attacks on oil pipelines in Iraq and Saudi Arabia, and political instability in the oil-rich Middle East have raised fears of a future oil shortage. The Organization of Petroleum Exporting Countries (OPEC) — a cartel of oil-producing Arab states — exacerbated these concerns by reducing its oil output quota in March. Meanwhile, demand for oil is growing rapidly, driven by the expanding economies of countries like China as well as the popularity of gas-guzzling sport-utility vehicles in the U.S.
Predicting the impact of high gas prices on the presidential election is more complicated. Both camps are trying to get voters to associate the other guy with high gas prices. The Bush campaign is reminding voters that a decade ago, when gas was selling for around $1 a gallon, John Kerry briefly expressed support for a 50-cent-per-gallon increase in the gas tax. Ads attacking Kerry's "wacky" idea have run in many states, and Bush's Web site features a "Kerry Gas Tax Calculator," showing how much more gas would cost if that tax were made law.
In recent stump speeches, John Kerry is trying to lead voters to associate Bush with high gas prices each time they go to the pump. "Right now, there are people all over this country who are literally going through their purses and their pocketbooks — looking behind the sofa, under the cushions — to find the pennies and the extra money to be able to pay the additional costs of gasoline," Kerry recently declared.
White House press secretary Scott McClellan told reporters Wednesday that President Bush "remains concerned about rising gas prices," but it's safe to say the situation is more serious than that. A Gallup poll released Thursday (May 13) reported that nearly 7 in 10 Americans say the cost of gasoline represents a crisis or major problem for the country, slightly less than half say that the higher gas prices have caused financial hardship for their households, and a majority believes higher gas prices this summer will lead to hardship for them.
The problem is compounded by the fact that rising gas prices affect many aspects of the economy. A grocery store in, say, Atlanta will have to pay more to have apples trucked in. If grocers pay more for their apples, that cost is passed along to the consumer — and if you're paying more to fill up your car, you'll have less money for the more expensive apples and other optional expenses.
So what can Bush actually do to lower gas prices? For one, he can pressure oil-exporting countries to produce more crude oil, which will lead to lower prices. This discussion may have already taken place. On Monday Saudi Arabia proposed that OPEC boost its crude oil production by about 6 percent.
Bush could also use the pressure of high prices to argue for passage of an energy bill — currently stalled in Congress — that would include a variety of tax credits for domestic oil production, provisions for additional research into alternative sources of energy (such as hydrogen-fueled cars) and energy conservation measures. This, however, would take too long to help his re-election bid.
Whatever the president does, it's unlikely that gas prices will drop much this summer. So take what little consolation you can from the fact that gas in the United States is still cheap compared with earlier eras and other countries. If gas prices were as high today as they were in the late 1970s, we would be paying about $6 a gallon (once prices are adjusted for inflation). Gas in the United States is also a bargain compared with many other industrialized nations. In Britain, France or Germany, for example, gas often runs more than $5 a gallon because of taxes that approach 75 percent of the total price. This has led many Europeans to modify their lifestyles — they drive a little less, ride bikes or use public transportation a little more, and buy more fuel-efficient cars.
If gas prices keep climbing, should Americans consider doing the same? That argument is not likely to win anybody a re-election. When was the last time you saw a candidate proclaim, "Bikes, trains and economy cars for all Americans"?