Why Michele Bachman's $2 Gas Promise is a Bad Thing

Analysis

on August 18 2011 9:09 AM
Republican U.S. presidential candidate Bachmann speaks during the Iowa straw poll in Ames
Republican U.S. presidential candidate and Minnesota Congresswoman Michele Bachmann speaks during the Iowa straw poll in Ames, Iowa August 13, 2011. Reuters

Michele Bachmann promised supporters that if voters elect her as president, she will make sure gas prices are lower than $2 a gallon.

"Under President Bachmann, you will see gasoline come down below $2 a gallon again," the GOP hopeful told a crowd in South Carolina earlier this week. "That will happen."

That sounds great in premise -- who doesn't want cheaper gas?

But in actuality, gas at $2 a gallon might not be the best thing for the U.S. economy.

Bachmann told the crowd that gas cost only $1.79 per gallon when Barack Obama became president, and she blamed him for the big price jump at the pumps. (According to AAA, the national average for a gallon of gas as of Thursday was about $3.58 for a tank of regular.)

But there's a lot wrong with Bachmann's statement.

For one thing, that $1.79 figure was what gas cost when Obama was president-elect in December; he hadn't even been inaugurated yet.

Secondly, and most importantly, that cheap price for gas happened during one of the worst economic periods of this country. Sure, gas was cheap, but the housing bubble had burst and the stock market was beleagured.

"You have to be careful what you wish for, because the recipe for cheap prices these days is economic disaster," Tom Kloza, chief oil analyst at the Oil Price Information Service, told the Los Angeles Times. "If we go below $2 a gallon, it probably means there has been a lot of wealth loss and we are in a deflationary period."

Bachmann didn't go into great detail on how to cut gas prices, but she did mention increased oil development in Western states. The U.S. has limited oil development in recent years, but even if it did ramp up oil production, it likely wouldn't have a huge immediate impact on the price of oil.

The price of oil is tied to global oil prices -- not just on how much oil the U.S. can produce. So even if the nation could start tapping into its oil reserves, it's unlikely that it would have a major impact on the global price of oil.

Ultimately, Bachmann's statement that she will lower gas prices could appeal to consumers who feel their wallets are getting smaller and smaller after a trip to the gas station.

But if consumers were smart and looked into the price of gas a bit -- they'd realize it's much better to have gas prices between $3 and $4 --as they are around now -- than at the $1.79 per gallon it was in 2008.

Unless of course, everyone would like another economic recession in the U.S.

 

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