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President Obama’s Energy Secretary, Steven Chu, infamously said, “We have to figure out how to boost the price of gasoline to the levels in Europe.” The statement was widely seen as a gaffe that hurt the President politically. Yet the data show that the Obama administration has had success doing precisely that, to the detriment of American citizens.
Many Americans correctly recall an era not too long ago when energy prices were seemingly orders of magnitude lower than they are today. Indeed, the numbers show this perception to be firmly anchored in reality.
When President Reagan took office, gasoline prices had reached $3.41 per gallon in today’s dollars. Prices remained at high levels partly as a result of the 1970s OPEC embargo and President Carter’s ineffectual handling of the situation. Reagan responded by removing price controls via executive order and cutting taxes.
By June 1984, real gas prices had declined dramatically to $2.64 per gallon. The decrease of $0.77 represented a 22.58 percent cut in real prices. Gas prices declined faster than the dollar depreciated due to inflation during President Reagan’s first term, such that even in nominal terms a gallon of gas cost less 41 months into Reagan’s presidency than at its beginning.
On the other hand, gas prices have risen sharply under President Obama even when adjusted for inflation. At the beginning of the Obama administration, a gallon of regular gasoline cost only $1.93 in today’s dollars. However, President Obama has pursued policies that have been counterproductive to achieving the goal of low energy prices. The current administration has pushed restrictions on drilling in the Arctic National Wildlife Refuge (ANWR), imposed a moratorium on deep-water drilling, and rejected the Keystone XL pipeline.
These policies have contributed to steadily rising gasoline prices throughout the Obama administration. Real prices have approached $4.00 per gallon in the spring of 2011 and again this past April; they remained at the historically high level of $3.54 in June.
Whether President Obama will change course and advocate policies that would boost domestic energy production and lead to lower gas prices has yet to be determined. The data show, however, that the course being followed by the current administration is likely to result in more pain at the pump for ordinary Americans.
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