George Allen and his campaign for U.S. Senate put out an awful lot of stupid statements, so many that if I responded to every single one, it would be approaching a full-time job in and of itself. Also, fortunately, the Kaine campaign’s been doing a good job of debunking most of Allen’s falsehoods and errors, so I haven’t really had to. Today, though, Allen’s campaign put out the following tweet that entered into my “wheelhouse,” so to speak (note: I worked at the U.S. Energy Information Administration for 17 years as an economist), so I decided to take a few minutes to address this.
What’s wrong with this statement? Let us count the ways. (Note: And no, I’m not “surprised” – nobody with 10 brain cells or more would be! – that Allen would make an idiotic comment, but I think there’s value in the following analysis)
1. First, of course, is the absurd notion that the price of gasoline the day a president assumes office, and then another random day, has any particular relevance to much of anything. Or, for that matter, that the president is responsible for those prices, certainly in the short term, on a week-to-week or month-to-month basis. I’d love to hear George Allen’s explanation of how that’s the case, but I’m absolutely confident that we’d ever get anything approaching coherence from him on that one. Following Allen’s “reasoning” (using the word very loosely), though, the price of gasoline peaked at $4.165 per gallon in early July 2008, when George W. Bush was president. Just prior to the financial system meltdown of autumn 2008, gasoline still cost about $3.70 per gallon. So why did gasoline prices fall so sharply by the end of 2008/early 2009? Because of the global financial and economic meltdown that occurred on the watch of George W. Bush, Dick Cheney, etc.. Perhaps George Allen slept through the Econ 101 lecture on “supply and demand,” but when demand implodes (due to an economic meltdown, for instance), while supply remains roughly constant, prices will also implode. That’s what happened in late 2008. Allen’s point, apparently, is that we should have stayed in economic meltdown mode forever, just so that gasoline prices could remain low. Imbecile.
2. Upon assuming office, the Obama administration, along with other governments, scrambled to stabilize the global financial system and start to turn things around. Today, the results of those efforts are clear, with a soaring stock market (NASDAQ the highest in 11 years, the Dow at its highest point since May 2008), 23 straight months of private sector job growth in the U.S. (including last month’s impressive +250k private sector job growth stat), the auto industry roaring back to life, etc, etc. Not surprisingly, due to all these positive economic factors, world oil demand (and perceptions of future demand growth) firmed up and started growing again. And the price of crude oil also rebounded, along with petroleum product prices (like gasoline), exactly as anyone with half a brain – or a sliver of knowledge about economics, energy markets, etc. – would expect. But not George Allen, apparently. Duhhhhhh.
3. Meanwhile, just as a side note, higher oil prices, along with technological and policy factors, have contributed heavily to a boom in U.S. crude oil production, from about 5.1 million barrels per day (bbl/d) at the end of 2008, to 5.8 million bbl/d in November 2011 (and rising fast). Of course, George Allen ignores this. Allen also ignores the fact that oil companies are raking in enormous profits. You’d think that George Allen would be celebrating this, corporate tool that he is, along with the healthy functioning of energy markets (capitalist that he claims to be), but instead Allen prefers taking cheap shots based on cherry-picked numbers and abysmal economic ignorance (and/or demagoguery). That’s George Allen for you, though – no surprise there at all.
4. I could go on for hours with this, but I’ll just make one final point here and call it a day. I crunched the numbers, and it turns out that although gasoline prices are higher now than the day President Obama took office (again, not that this is a bad thing, as Allen implies – in fact it’s simply a sign of a strong economic recovery under President Obama!), per capita, inflation-adjusted expenditures on gasoline today were actually lower in 2011 than they were in 2008 (President Bush’s last year in office). Why’s that? Simple: because, due to the Bush Recession, along with improved vehicle fuel economy, U.S. gasoline consumption fell between 2008 and 2011, from about 8.99 million bbl/d to 8.75 million bbl/d. The population also increased by 9 million from 2008 to 2011, while gasoline prices increased only marginally (from $3.31 per gallon in 2008 to $3.58 per gallon in 2011), resulting in the slight drop in per capita expenditures on gasoline, from about $37.11 per person (in constant $2011) in 2008 to about $36.48 per person (ditto) in 2011. I’ll look forward to George Allen’s next tweet celebrating this fact. Heh.
4a. Meanwhile, since we’re talking energy, natural gas prices have plummeted since 2008 (when they were at $9.18 per mcf at the “city gate”) to just $5.76 per mcf during the first 10 months of 2011 (EIA data for November and December are not available yet). As a result, U.S. per capita expenditures on natural gas have also plummeted, and today are around 40% lower than they were in 2008. I’m sure George Allen will give President Obama credit for that, as well as for the boom in natural gas production, since he took office. Right George? Suuuure.
Bottom line: Instead of saying or proposing anything productive, instead George Allen once again reverts to his usual behavior, taking cheap shots based on ignorance, demagoguery, a selective (not to mention warped) reading of reality, etc. In this case, gasoline prices were low when Barack Obama took office because of an economic meltdown that occurred on the previous, Republican administration’s watch, a result to a large extent of policies put in place from 2001 through 2006, when a certain George Allen was a member of the U.S. Senate, voting in near-lockstep to put in place the policies that helped get us into the mess we found ourselves in by January 2009. Perhaps Allen would care to comment on that matter? Nope, didn’t think so. 😉