The price of gasoline

Anyone who was in the middle of sipping a cup of coffee last June when Rep. Michele Bachmann said just signaling an intention to drill for oil could bring back the days of $2 a gallon gasoline, probably spit most of the java out. It was that crazy a prediction at a time when the average price for gasoline was over $4 a gallon and, apparently, heading higher.

This morning, one energy analyst predicted the rapidly falling price of crude oil would yield a further drop of 60 cents a gallon at the gas pump. With the low end of gas prices in Minnesota today around $2.57, you don’t have to be Paul Krugman to do the math correctly.

Voila! Two-dollar-a-gallon gasoline.

In politics, it doesn’t matter whether you’re right by accident or by design, you get to still say you were right. Politicians did nothing more than talk about drilling, and the price of gasoline is headed for $2 a gallon.

Of course, gas prices are falling because of a worldwide recession that’s put enough people out of work, shuttered enough factories, and cut the demand for oil. The law of supply and demand still works. The cure for high oil prices, as the saying went, is high oil prices. Never mind the consequences or the collateral damage.

The situation illustrates a different truism: Economic predictions are almost as worthless as a TV weather forecast.

  • Bob Moffitt

    Heh. Actually, I had the same thought recently about Rep. Bachmann’s $2 gas plan. I live in the 6th, BTW, where gas prices are cheaper than anywhere else in the state.

    However, people are still driving less, using alternative fuels and mass transit more. One thing they are NOT doing is buying new cars and trucks. Tough time to be in auto sales…

  • So with the falling fuel prices will the mainstream public, politicians and media forget about alt powered vehicles and energy sources?

    Odds are we see high gas prices back next spring. We’ll see if Mr. Obama (doesn’t look good for Mr. McCain’s agenda mattering by then) has remembered during this low gas price time what his New Energy Plan For America was all about.

  • tc

    To bad it doesn’t stay above $4/Gal. We should have a floor to gas prices with the difference going to a pool of grant money for home energy efficiency upgrades, light rail, buses, subways, battery development, and other future technologies we’re going to need in the near future. Alt energy stocks are crashing, projects are losing funding and we’re losing big projects to countries that are more supportive of alt energy development. There are billions of hedge fund dollars waiting to be committed to these projects if the playing field was leveled. To say that fossil fuel and highways roads and bridges aren’t subsidized is absolutely ridiculous. We fell for this in the 1970’s. If we had followed through in 70’s we’d be much nearer to energy independence by now and probably have avoided 3-4 wars since then and have 10Trillion in job creating infrastructure improvements completed instead of 15trillion in debt and hundreds of thousands of casualties around the globe. Americans are just like rats repeatedly pushing the cocaine button in the psychology experiments, no memories of the past (except what felt good 5 minutes ago), no thoughts of the future.

  • bsimon

    “To bad it doesn’t stay above $4/Gal. We should have a floor to gas prices with the difference going to a pool…”

    If I’m not mistaken Newt Gingrich made a similar proposal this summer. Whether it was him or someone else, its an idea worth considering.

  • JB – MPLS

    Tom Friedman (foreign affairs NYTimes Op-Ed Columnist) has been pressing for an increased gas tax since Oct 2003 in order to affect geo political change and bring us in line with the rest of the industrialized world.

    Then he called for a 4 dollar floor to the price of gas, proceeds applied to alternatives to oil for the purposes of energy dependence starting with this article in Mar 2005.

    He has continued to refine this argument, more and more to the “green” as time has gone on. I kind of doubt these are original ideas from him as his strength is journalism not policy trail blazing, someone else may have proposed it before.

  • Paul

    Bachman’s incoherent rants have nothing to do with the price of gas, nor talk of drilling. The world economy is slowing down, demand is down accordingly, and maybe, just maybe the oil companies realized that their prices were driving us towards alternatives faster than they’d like.

  • GregS

    Ms. Bachmann knew precisely what she was talkinga about. At the time, the price of oil was driven up by irrational exuberance, or in plain terms, a price bubble.

    Simply threatening to pop the bubble with increased supply was enough to do precisely that.

    Too bad Clinton/Greenspan did not have the incite of Ms. Bachmann and popped the NASDAQ and housing bubble before these things got out of hand and splattered the economy.

    Let me remind everyone that by the time George Bush took office, the NASDAQ had lost $5 Trillion in value.

    A much larger loss than we are suffering today.

  • Paul

    “Simply threatening to pop the bubble with increased supply was enough to do precisely that.”

    Yeah, threatening to tap into 3% of the worlds reserves ten years from now panicked the oil companies into lowering their prices. Listen, I’ve got this really nice bridge for sale in Cambodia, I’ll let you have for a steal!

  • GregS

    We have to wonder how you came by that bridge in Cambodia, Paul.

    Could it be that you are rather naive?

    Anyone who has watched the stock market over the last few month will have noticed dramatic fluctuations based on the thinnest of news.

    Anyone who has watched the commodities market over the last few month would know that they were radically over-priced and any threat of increased supply was enough to bring them crashing down.

    By the way, Paul, have you had that bridge inspected?