When I was seven, my parents gave my younger brother Tom and me a cookie each. I quickly devoured mine, but Tom was more interested in going outside to play. It was late, but I promised Tom that if he gave me his cookie we could play. He agreed, and while I ate his cookie, Tom asked my parents for permission to go outside. They said no. My brother — the tattle-tale — told my parents what had happened, and I had to sit in the corner for an hour.
Even though he was only five, that day Tom learned even his older brother could not control everything. Today, tweets with the hashtag “#250gas” suggest a similar lesson has escaped in our 18-and-older voting population: There are things that even the president of the United States cannot control.
As students filled up cars with expensive gas to go wherever undergraduates go for spring break, presidential candidate Newt Gingrich asserted that if he were president, gas prices would plummet. “There is no reason we can’t get gasoline down to $2 and $2.50 a gallon,” Gingrich said during a speech on Feb. 20 in Tulsa, Arizona. His 2008 book is titled “Drill Here, Drill Now, Pay Less: A Handbook for Slashing Gas Prices and Solving Our Energy Crisis.”
Gingrich’s argument for more drilling appeals to the law of supply and demand, which tells us that, all else constant, if the supply of a commodity such as oil increases, its price will fall. Increased drilling would increase the supply of oil and thus lower the price of gasoline.
His argument, however, ignores the word “demand” in the law of supply and demand, which also tells us that, all else constant, if a commodity’s demand increases, its price will increase. Since oil is sold on the world market, “Drill Here, Drill Now, Play Less” and #250gas could only work if American oil production increased enough to counter increasing world demand.
The accompanying graph shows U.S. oil production since 1940. Note the decrease since the mid-1980s that has resulted from drying wells in Texas and the small increase since 2008 as the result of new technologies and drilling opportunities in places such as North Dakota. Today, the United States produces about 5.5 million barrels of oil per day.
Let us assume that Gingrich were elected in November and suppose that in eight short years his policies somehow caused the United States’ oil output to double, adding an additional 5.5 million barrels per day. Would this be enough to counteract rising world demand and lower our gas prices to $2.50?
To answer this question we need look at only one country. The U.S. Energy Information Administration predicts China, which currently uses 9.1 million barrels per day, will in 2020 use 12.7 million barrels per day — an increase of 3.6 million barrels per day. So China by itself could consume all of the additional oil that we assumed the United States would produce under the Gingrich administration.
In addition, the assumption that the United States could double oil production in eight years is unrealistic. The latest increase since 2009 in U.S. oil production comes largely out of North Dakota, and at its current oil production level, doubling U.S. production would require more than twelve North Dakotas.
All of this suggests that while increased drilling may reduce the price Americans would otherwise pay at the pump, demand outstripping supply will cause gas prices to trend upward, regardless of a president’s oil policy.
Back in the 1980s, as I took my brother’s cookie, I knew I could not possibly follow through on my promise. But I was seven, and I really wanted his cookie.
Today, a 68-year-old politician is promising American voters $2.50 gas, something he knows he cannot deliver.
But he really wants your votes.
Matthew Zabka can be reached at mzbka@umich.edu. Follow him on twitter at @MatthewZabka.