The current occupant of the Oval Office President Barack Obama is claiming credit for $2 dollar gasoline yet again, this time at a rally in Philadelphia Monday.
Experts generally agree that today’s relatively cheap gas prices are due to inexpensive oil and cheap natural gas-fired electricity provided by fracking and horizontal drilling. The Obama administration repeatedly takes legal action against the practice of fracking, but conversely then claims credit for cheaper gasoline at the pump. Obama previously took credit for $2 dollar gas in his 2015 State Of The Union.
Energy prices dropped 41 percent over the course of 2015 due to hydraulic fracturing, or “fracking,” according to the Energy Information Administration (EIA). The average American currently pays $2.18 per gallon of gasoline, according to a report by the American Automobile Association (AAA). Average gas prices dropped below $2-a-gallon in January and gas prices are 18 cents per gallon less than at the same time last year.
Federal government energy analysts predict that the national average gas price will remain below $2.00 a gallon for the year — the lowest projection since 2004. Just last year, consumers paid an average gasoline price of $2.40 per gallon.
“For the first time since 2004, U.S. drivers are expected to pay an average of less than $2-a-gallon for regular grade gasoline this year,” Adam Sieminski, the administrator of the EIA, said a statement in February. “Lower crude oil prices, which have fallen more than 70 [percent] since the summer of 2014, are the main driver of cheaper gasoline prices … [c]ontinuing increases in global oil inventories are expected to keep oil prices under $40 a barrel through August.”
U.S. consumers spent $370 billion on gasoline in 2014, equivalent to a 28 percent price drop in gasoline and a full $102 billion in savings for American motorists. The average American household likely saved $700 to $750 at the pump in 2015 according to analysis by the EIA.
Most analysts agree that the relatively low gas prices are also enormously beneficial to American households, which tend to use cash not spent on gasoline to save more or pay down debt or on tangible goods, such as eating out at restaurants.
Cheap gasoline, however, disproportionately helps poorer families and other lower-income groups. The poor tend to spend a higher proportion of their incomes on “basic needs” like gasoline, so that any increase in prices hit them the hardest.
When the price of gasoline increases, the cost of producing goods and services that use gasoline as a component increases as well. Any good which is transported to market uses gasoline and causes an increase in price, meaning that rising gas prices effectively increase the price of almost everything.
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