Every other Tuesday, the team behind Civics 101 joins NHPR’s All Things Considered to talk about how our democratic institutions actually work.
Gas prices continue to rise across the country and here in New Hampshire as the U.S. and Israel's war with Iran continues.
NHPR’s Michelle Liu spoke with Civics 101 host Nick Capodice about why that’s happened and how much control the president has on the price of gas.
Transcript
Nick, you all at Civics 101 did an episode called "The President and the Price of Gas" a few years ago.
We did back in 2022. It remains one of our most downloaded episodes.
And today you wanted to revisit the topic, right?
I did, yeah, because I filled my tank up today and it was a full dollar more a gallon than it was a few weeks ago, and I wanted to understand the reasons why.
Okay, so to start, what handles does the president have when it comes to what we pay at the pump?
Well, the answer is very few handles, actually. The price of gas is utterly dependent on the price of crude oil per barrel. In fact, over 90% of the cost of gas is based on the price of oil, and the price of oil is a worldwide phenomenon. People in Ghana, Switzerland, New Zealand, they are buying oil just like we are and they are refining it into gasoline. So that is something entirely out of the president's hands.
Now, one thing a president can do is tap what we call the Strategic Petroleum Reserve, which has about 400 million barrels of oil, and which President Trump has announced he is tapping. He is going to take out 172 million barrels in the months to come. So that can bring prices down for a sort of brief time period and not bring them down a whole lot.
The last thing a president can do involves taxes. They can waive federal, not state, taxes on gasoline. That would take off about 18 cents per gallon, but that money has got to be replaced from somewhere else. So, Michelle, these are the small levers a president can do to reduce the price of gas. But that said, there is a thing a president can do to increase the price of gas, and that leads us to today.
I think I have a pretty good idea of what that is, but let's hear it.
Well, the president can get involved in a conflict in the Middle East. To understand this better, I spoke with Robert Rapier. He has written about the energy market in Forbes for decades, and he told me there are what he calls nuclear scenarios about the cost of oil.
The first one, which hasn't happened, is that Saudi Arabia gets involved in a conflict, and all of their oil producing facilities are damaged and unusable. That would be a disaster for the price of gas. Now the second is what has just happened. Iran closes the Strait of Hormuz. Iran just did this in response to bombing directed by President Trump, along with the support of Israel.
How much oil goes through the Strait of Hormuz and is there any way around it?
About 20% of the world's oil goes through there, and there is literally no way around it. It's just land to the north of it. It is the only maritime path from the Persian Gulf. And that Gulf borders Kuwait, Saudi Arabia, Iraq, Qatar, the United Arab Emirates, and ultimately Iran. And this is why, Michelle, former presidents have been rather cautious to create conflict in Iran.
Now, listeners, you can just look at publicly available maritime traffic websites and you'll see ships going all over the place – oil tankers, container ships, you name it. You will see nothing coming out of the Persian Gulf right now.
This has had an immediate effect. In late February, oil was at $60 a barrel and now it is $94 a barrel, and that number is going to just keep going up. And I also want to mention it's not just oil going through the Strait of Hormuz. Container ships go through there too. And all these tankers and all these container ships, they're supposed to be somewhere else right now. So the supply chain is greatly disrupted.
So what happens next? How does this end?
We have no idea. My guest told me that he didn't see an end to conflict outside of boots on the ground war in Iran. Or there is another option – the United States completely reevaluates our gasoline usage when it hits $10 bucks a gallon.
