April 16, 2012
That would have been a reasonable headline for a Washington Post article that told readers that Republicans hope to make the price of gas a major issue in the election. The article says that they hope to blame the rise in the price of gas on President Obama’s restrictions on drilling and the construction of the Keystone pipeline.
The Republicans will only have a chance in succeeding in this effort if the media help them deceive voters. The price of oil, and therefore the price of gas, is determined in the world market. Even under the most extreme assumption (e.g. oil companies get to expropriate private property to drill everywhere, with no environmental regulations) it is unlikely that we could increase the world supply of oil by more than 1 percent.
This could lower the price of oil by 2-3 percent. That means that, other things equal, a drill everywhere policy might reduce the price of gas by 7-8 cents a gallon. If voters knew this simple fact, it is unlikely that the Republican strategy to make gas prices a political issue would have much chance of success.
It is also worth noting that domestic production of oil and gas has increased substantially under President Obama. The main impact of the Keystone pipeline (which would not have yet been operational in any case) would be to equalize gas prices across the country. It would lead to lower gas prices on the East Coast, but higher prices in the Midwest. It is not clear that voters in the Midwest would be upset if they realized that delaying the pipeline has helped keep down the price they pay for gas.
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