The best bit of economic news President Obama has gotten lately is that gas prices have been falling. A lot. Over the last six months, the cost of gasoline has plummeted down to $2.04 per gallon — the lowest since early 2009.
There's just one catch: For the most part, Obama can't plausibly take credit for any of this. The price of US gasoline is dropping right now because the price of crude oil is dropping all around the world. And the price of crude oil is dropping for reasons that have little to do with the president.
Why oil prices are falling. (Hint: It's not Obama.)
The recent global collapse in oil prices boils down to two basic factors: oil production had been surging lately in places like the US, Canada, and Russia, and global demand for oil is now falling.
First, the supply question: Oil prices spiked in the mid-2000s because global demand was rising in places like China, and conventional oil fields were struggling to keep pace. But then, as oil prices increased, companies suddenly found it profitable to use techniques like fracking and horizontal drilling to extract oil from shale formations in North Dakota and Texas. Since 2008, these companies have added about 4 million barrels per day of "tight oil" to the global market, a significant amount.
Obama didn't have a ton to do with this US oil boom. For the most part, these were private companies drilling on private land. Granted, the Energy Department did play a key role in developing fracking, particularly by helping to fund early horizontal drilling techniques and providing seismic mapping. But the key initiatives there date back to the 1970s, when the US first began investing in energy alternatives after the OPEC oil crisis.
Then there's the demand side: Over the last several months, oil consumption has been sagging worldwide. Europe is still struggling with the euro zone crisis. Chinese growth has been tapering off. Japan's economy is still weak. That's all pushing the price of oil way down. Obama can't exactly take credit for any of these developments, either (and probably wouldn't want to).
Finally, last November, Saudi Arabia — and, by extension, OPEC — announced that it wouldn't scale back its own crude production in order to prop up global prices. The Saudis are trying to maintain market share and are hoping that lower prices will scale back the US drilling boom. That announcement sent prices into further free-fall. Again, though, that wasn't really Obama's call.
So what can Obama take credit for?
The one thing Obama can legitimately claim credit for is tightening US fuel-economy standards, which has helped boost the fuel efficiency of new cars and trucks sold in the United States.
That move has helped restrain America's demand for gasoline, which has put a small bit of downward pressure on global oil prices. The standards have also likely helped consumers save some money at the pump — though the really huge savings this year will come from falling gas prices. (Which, again, are due to those global forces.)
Those fuel-economy standards are probably most important as a policy for curtailing America's future oil use. That way, if global oil prices ever spike again someday — as is entirely likely — the United States won't get hit quite as hard.
Somewhat relatedly, you could argue that Obama has taken advantage of the fracking boom to push new policies to address climate change. Over the past few years, the Environmental Protection Agency has been proposing new standards to reduce carbon-dioxide pollution from US power plants. As Michael Levi told me last fall, the EPA has been able to put out stricter rules because the fracking boom has also led to a glut of natural gas, which has been pushing dirtier coal plants out of business.
It's also worth noting that Obama's Energy Department has been funding a number of alternative-energy technologies — from electric cars to solar power plants — that are still in their early stages. These may turn out to be as significant as the government's early investments in fracking R&D back in the 1970s. If so, a future president could one day end up benefitting from hard-to-predict energy decisions made long, long ago.