From USAToday:
Rep. Michele Bachmann is promising to get the price of gasoline back below $2 a gallon if she is elected president. ...
"The day that the president became president gasoline was $1.79 a gallon. Look at what it is today," says on tape at an event in Greenville, S.C., as chronicled by Politico. "Under President Bachmann, you will see gasoline come down below $2 a gallon again. That will happen."She doesn't say how she'll make it happen, but she's a big proponent of more domestic oil drilling.
First of all, gas prices below $1.79/gallon were only a blip in 2008. Here are the monthly data from the Energy Information Administration:
This blip was likely caused by low income induced low demand. Gas prices began rising in the 2000s with middle east wars and increasing demand associated with the housing boom.
Regardless of the facts, I can think of three ways to get gas prices down to $2/gallon: a price ceiling, reducing demand and increasing supply. Not all of these are unambiguously good.
A price ceiling would achieve the goal well but a nasty side effect is the shortages it would create.
Demand can be reduced in a number of ways: reducing global income, reducing the price of substitutes and changing tastes and preferences. Income can be reduced through worldwide recessions or high tax rates. Substitutes for gasoline include alternative fuels. Subsidies for ethanol and others might help, but the unintended consequences boggle the mind (e.g, corn prices). Changing tastes and preferences would involve changing attitudes about driving (i.e., Drive Less!) and encouraging public transportation and bicycles. These are good ideas, but the existing location of U.S. housing stock makes it unlikely to have much effect.
Unfortunately, increasing current U.S. supply won't affect prices much. New supply can be increased in a couple of ways: exploration and discovery of new sources (i.e., drilling deeper and farther out) and new technology. However, high prices and government funded research are the best ways to encourage these activities. Encouraging high prices in the short run to lead to low prices in the long run would be odd policy. Increases in research spending on fossil fuels would increase the deficit, unless we raise tax rates to fund it.
Also, most all of these things would need to occur world-wide since the oil market is global.
I hope these suggestions are not too unhelpful.
