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Home Publications Blogs Beat the Press Oil Prices ARE Determined in the World Market #3456: It is Not Just Something that President Obama Says

Oil Prices ARE Determined in the World Market #3456: It is Not Just Something that President Obama Says

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Thursday, 08 March 2012 05:40

A NYT article on President Obama's proposals for increasing the tax credits for buying cars powered by alternative fuels concluded by quoting President Obama's statements that gas prices are determined by the world market and will be little affected by increased U.S. production of oil. This is also something that happens to be true.

U.S. oil production is around 9 percent of world production. Even very large increases in U.S. production would have only a minimal effect on world oil prices, and therefore a minimal effect on the price of gas in the United States. The NYT should tell readers this and not leave it as a he said/she said proposition on which reasonable people can differ. It isn't.

It would also be helpful if the NYT put the numbers in this piece in some context. For example, the $1 billion that President Obama proposed to spend to help cities build infrastructure for vehicles powered by alternative fuels would be equal to approximately 0.03 percent of federal spending if it were done in a single year, which seems unlikely. (The article is not clear on the time-frame of the spending proposals it mentions.)

Such context is important since many readers may not realize that these proposals will have very little consequence for the budget or the deficit.

[Addendum: The Washington Post commits the same sins.]

Comments (5)Add Comment
Gasoline prices, linked internationally, and house prices
written by AndrewDover, March 08, 2012 8:24
US and european gasoline prices are dependent.

http://www.energy.senate.gov/public/index.cfm/files/serve?File_id=ab84303a-1f3a-4371-b79a-b2dfbec373df

p.s. U.S. gasoline prices did rise substantially (over 50%) as the housing bubble reached its peak around 2006.
speculation on oil matters
written by Doyle Saylor, March 08, 2012 8:54
Mike Witney had a piece in http://www.counterpunch.org/20...ce-of-gas/

Counter punch strongly suggests speculation is a major component of the oil price rise. As in financial capital controls 30 plus % of the market.
What Context?
written by james, March 08, 2012 3:05
Putting things in context will NEVER happen as they don't promote their agenda.

We need to cut social and safety net program bc there could be welfare fraud like overpaying $500 to a single mom with kids.

Meanwhile, Pfizer & Bristol Myers (front page article in USA Today's 3/6/2012) detailed a history of significant and recurring fines to the pharma. Mind you we are not talking about many years for them to have a repeating crimes but only since 2003.

So, since 2003, Pfizer agreed to pay over $2 billion for defrauding Medicare and Medicaid. Others also paid fines totaling more than $1 billion each.

Yet, the drug companies couldn't be kicked out of the program bc they have a monopoly due to government-granted pattent.

So, few hundreds become poster child for Fox while these high-impact frauds got zero coverage on major TVs.
They forget to mention ...
written by OJCsr, March 08, 2012 5:27
... that nationalization of the fuel industry is needed if prices are to down. It works in Venezuela and the elsewhere, and can work here. Perhaps implementing and integrating a national petroleum entity would be difficult politically and economically, but we have years to solve such problems while the hardware is being built.

Joe
...
written by S. D. Jeffries, March 08, 2012 8:43
The only cure for high fuel prices is conservation. The best way to deal with oil companies is to starve the beasts.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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