Can the price of gasoline be affected by the amount of oil produced here in the United States? Experts say no; logic says no; free market economics say no.
Now, thanks to some work by the Associated Press, we can now say that the historical data also say no.
The AP went back and looked at domestic oil production numbers and the cost of unleaded gasoline since 1976, which is as far back as records go documenting the cost of unleaded gasoline. It then asked several top statisticians whether they could find any correlation between the two.
In other words, is there any evidence whatsoever that domestic oil production affects the price of gasoline?
A statistical analysis of 36 years of monthly, inflation-adjusted gasoline prices and U.S. domestic oil production by The Associated Press shows no statistical correlation between how much oil comes out of U.S. wells and the price at the pump.
For example, beginning in 1986, oil production in this country began a long, slow decline, eventually dropping by a third. “But starting in March 1986, inflation-adjusted gas prices fell below the $2-a-gallon mark and stayed there for most of the rest of the 1980s and 1990s,” the AP reports. “If the drill-now theory were correct, prices should have soared. Instead they went down by nearly a dollar.”
What about the opposite? What happens when domestic oil production jumps?
As the story points out, domestic oil production has risen by 15 percent in the past three years, which is a pretty rapid rise. Yet over those three years, with new domestically produced oil surging into the market, the price of unleaded has risen from $2.07 per gallon to $3.58. Again, no correlation between domestic drilling and gasoline prices. They are completely independent factors.
As one statistician put it to AP, when U.S. production goes up, the price of gas “is certainly not going down. The data does not suggest that whatsoever.”
I understand, of course, that mere facts and data will never be allowed to interfere with a politically useful whine. In fact, whenever I hear people complain that a government or president ought to fix such things, regardless of whether it’s feasible, I’m reminded of that scene in “It’s a Wonderful Life,” in which daughter Zuzu complains to Jimmy Stewart that the petals are falling off her flower.
Little Zuzu demands that Daddy fix it, Daddy pretends to do so and all is well again in her world. The naive little daughter falls contentedly back into her bed.
In real life, though, Daddy can’t fix everything. And I confess, I do find it humorous when people who claim to need no help from government then turn around and start acting like five-year-olds complaining that Daddy won’t fix gasoline prices for them.
– Jay Bookman