< Misconceptions about Gas Prices and the Presidency


Friday, April 06, 2012

We’ve been hearing a lot about gas prices lately, and what we’ve been hearing about especially is how threatening those prices are to Barack Obama’s chances for reelection. Mitt Romney has hit the President hard on the issue.
BRET BAIER:  Do you believe President Obama is to blame for high gas prices?
MITT ROMNEY:  Well, there - there's no question. But when he ran for office, he said he wanted to see gasoline price go up.
BOB GARFIELD:  And the press has made clear that the electorate is influenced by prices at the pump.
JOHN FUGELSANG:  Mitt Romney may be not able to beat the President, but five bucks a gallon of gas sure could.
BOB GARFIELD:  What reporter Adam Davidson wondered was if the conventional wisdom is true. In a piece for New York Times Magazine, Davidson explained that gas prices have less effect on Americans’ economic behavior than politicians and the press would have us believe.
ADAM DAVIDSON:  When prices go up, people don’t seem to change their behavior all that much, in the short term. The average American spends around 40 dollars on gas a week. About 8 of that is spent on their commute to work, about 13 of it is spent on recreational stuff – going to restaurants, driving around. The rest is spent on what you could call required errands, you know, taking your kids to school or soccer practice.

And so, you would think that if gas prices really were this painful awful thing, that when the prices went up, people would cut down on that 13 dollars a week in discretionary driving. And you just don’t see that, which makes me doubt that it’s gonna have such a huge effect on the election.
BOB GARFIELD:  When the prices of other commodities go up -- you mentioned in your piece corn and copper – we don’t actually have to go to the cash register and pay for the copper and corn. With gasoline, we are standin’ there watchin’ those dials spin and getting to 50, 60, 70 dollars. And it just feels worse.
ADAM DAVIDSON:  Something that really strikes me about commodity prices is just how buffered we, in America, are from them. The typical African or many people in South America or throughout Asia, they buy food as a commodity. They don’t buy – you know, some packaged food product. They buy a big sack of rice or they buy a big sack of corn. And they are very aware day by day, hour by hour how those prices swing up and down based on global market conditions. We don’t do that. Most of the things we buy are – we’re not buying the commodity.

Just like – you know, there’s been huge upswings in copper and magnesium and all sorts of weird minerals that nobody has ever heard of –
BOB GARFIELD:  There’s no Romney commercial that says the magnesium prices are skyrocketing and the President has sat on his hands.
ADAM DAVIDSON:  Right, it would make about as much economic sense to say, why isn’t the President [LAUGHS] doing something about copper prices, magnesium prices. [LAUGHING] The way gas prices are determined has very, very little to do with anything the President can do day to day. That’s such an obvious glaring fact, but it seems like something that we, business and financial journalists, [LAUGHS] could really hammer home a little more intensely.
BOB GARFIELD:  Well, maybe it would help if the press had a better grasp on supply and demand. There seems to be an assumption that if America reduces its dependency on foreign oil by drilling in the Gulf of Mexico or piping in oil and gas from Canada, it would lower prices because we are less dependent on foreign oil.
ADAM DAVIDSON:  It’s not that simple at all. We’ve had a huge experiment in this exact issue. We used to import around 60 percent of our crude oil from overseas, and now we import around 45 percent. So we’re dramatically more energy independent. And the price of gasoline has gone up.

Gasoline is a very dynamic market. You need to think an awful lot about China and India and the overall macro economy of the world – refining capacity. Anytime anyone identifies one cause for gas prices, you know that they’re either lying or selling you something, or they just don’t understand the market at all.
BOB GARFIELD:  You know, we’ve just had a conversation about the President appearing at the American Society of News Editors wagging a scolding finger about how they cover politics. Maybe it would be better if you appeared at the American Society of News Editors and wagged a finger about what a lousy job they do explaining the very basics of economics, especially in this gas price issue.
ADAM DAVIDSON:  I think there are statements that are just such outliers, they don’t need to be respected. Why don’t we start every story by saying, “Mitt Romney said something that is completely untrue and unsupported by any evidence. In response, President Obama said something that was – true or not true – [LAUGHS] and is or isn’t supported by evidence.

I do wish that there was more of an effort at the deep explaining. Every consumer of the media needs to understand where the global economy is going if they’re gonna decide what kind of job they’re gonna have, where they’re gonna live, what kind of house they’re gonna buy, what kind of car they’re gonna buy, what their kids should major in college, and what this financial crisis revealed. And it’s just as true now, in energy, is – we journalists, as a profession, are not prepared. And we need to be prepared.

I can understand why we weren’t but enough already! [LAUGHS] This is one of our big, big jobs.
BOB GARFIELD:  Adam, thank you.
ADAM DAVIDSON:  Thank you, Bob.
BOB GARFIELD:  Adam Davidson is a reporter for Planet Money on NPR. He wrote a piece about gas prices for The New York Times Magazine.


Adam Davidson

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