U.S. Gasoline Prices Depend on Global Oil Markets — Not “Independence”

Alan ReynoldsI still have a  1979 bookmark that says, “INFLATION IS A PAIN IN THE GAS.”Funny but wrong. U.S. gasoline prices follow gyrations in world oil markets, which depend on global (not domestic) supply and demand.What actually happened in 1978 –80, an important German study from Bruegel reminds us, was the Iranian revolution and the Iran ‐​Iraq War: “The 1978 Iranian revolution decreased global supply by 4 percent and led to a price increase of 57 percent. The 1980 Iran‐​Iraq war decreased global supply by 4 percent and led to a price increase of 45 percent.”What happened to world oil markets in 2020 was a  global pandemic, with falling oil and gas prices followed by a sizable loss of oil and gas production capacity in the U.S. and elsewhere. What happened in 2021 was mostly the phasing‐​out of governmental lockdown schemes which allowed production, commerce, and transportation to bounce back fa ster than oil and gas production could. China, however, has lately reverted to primitive lockdown schemes, which might lower world demand for oil and everything else by shrinking the Chinese economy. What happened to crude oil and gasoline prices in 2022 wasthe Russian invasion of Ukraine, though partisans falsely deny the link between war and oil markets and insteadblame President Biden for U.S. gasoline prices – which, as in 1979, are considered synonymous with “inflation.”Recently, the oil futures market has been rattled by proposed EU s...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs