The Arab Spring … "drove up gas prices."
Barack Obama on Thursday, October 6th, 2011 in a press conference at the White House
Barack Obama says Arab Spring sent gas prices higher
During an Oct. 6, 2011, press conference, President Barack Obama defended his handling of the economy.
"With respect to the state of the economy," Obama said, "there is no doubt that growth has slowed. I think people were much more optimistic at the beginning of this year. But the combination of a Japanese tsunami, the Arab Spring, which drove up gas prices, and most prominently (economic turmoil in) Europe, I think, has gotten businesses and consumers very nervous. And we did not help here in Washington with the debt ceiling debacle that took place, a bit of game-playing that was completely unnecessary, completely unprecedented in terms of how we dealt with our responsibilities here in Washington."
We’ll take a look at one portion of his comment -- that the Arab Spring, the grass-roots democratic movement that swept the Middle East and North Africa in early 2011, "drove up gas prices." We found that he's correct that the Arab Spring did have an impact on oil prices but that it was just one of many factors.
We began by looking at weekly price data for both crude oil and gasoline collected by the Energy Information Administration, the federal government’s repository of energy statistics.
During the first week of January 2011, a barrel of crude oil on the world market cost $91.04. By mid February, when Egypt’s Hosni Mubarak was ousted from power, the price had risen to $96.25, an increase of just under 6 percent.
And how about gasoline prices? During the first week of January 2011, a gallon of gasoline in the U.S. cost $3.12. By mid February, the price had risen to $3.19 -- an increase of only about 2 percent. But the increase did come, just a little later than it did for crude oil. By the first week of April, the price had risen to $3.74, making the total increase for the year almost 20 percent.
"The president is right in part," said John B. Townsend II, the manager of public and government affairs at AAA-Mid Atlantic. "Though it started in the dead of winter, the spreading upheaval in North Africa and the Middle East drove up pump prices."
However, many of the experts we spoke to also cautioned against oversimplification.
One caveat they raised is that the world oil market is complex and it’s hard to single out one factor as the reason for a price increase.
"While reduced supply in general does put upward pressure on prices, there are so many influences on price at the pump that pointing to one factor -- the Arab Spring -- is a gross oversimplification," said Eric Wohlschlegel, a spokesman for the American Petroleum Institute.
Asked what the biggest factors in rising prices were, John Felmy, chief economist for the American Petroleum Institute, the oil companies' trade group, joked that "there are three of them: China, China and China." Along with a number of other developing nations, China is growing so fast that its demand for oil is pushing up prices even though the U.S. and other western nations are seeing economic stagnation.
In fact, the timing of the price rises suggest that the Arab Spring may have had a modest effect within a much longer period of generally rising prices, rather than a sudden, jarring spike during the apex of the protests.
For a full year before the Arab Spring arrived, the price of oil had already been rising steadily. From January 2010 to January 2011, the price of a barrel of crude rose from $75.55 to $91.04, or a full 20 percent increase.
Gasoline prices, too, were already on a long-term upward trajectory. In January 2010, a gallon cost $2.72. A year later it was at $3.12 -- an increase of 15 percent.
While Felmy agreed that the Arab Spring played a role, he added that the oil markets "saw a pretty consistent rise from September of 2010 through early February."
It’s also worth noting that the price increase, in retrospect, likely stemmed more from speculative worries than actual ones.
In a news release issued around the time of the protests, AAA cited fear of a possible "chain reaction of unrest in North Africa and the Middle East could disrupt oil production in the region and cause oil-rich regimes to teeter, totter or topple."
Ultimately, such fears didn’t come to pass. Most of the countries hit by major popular protests are minor players in the world oil market. In 2010, Egypt ranked 29th in the world in oil production, Syria ranked 34th, Yemen ranked 38th and Tunisia ranked 53rd, according to the CIA World Factbook.
The one exception is Libya, which ranked 18th in the world. And experts say that Libya is pretty much the only tangible -- as opposed to speculative -- reason the markets moved as they did.
"The Arab Spring did result in higher gasoline prices, for one specific reason: It took almost all of Libya’s 1.6 million barrels per day of supply off the market," said John Kingston, the director of news for Platts, a publisher that specializes in coverage of energy markets. "That is a significant amount of oil, and it is oil of the highest quality -- low sulfur, and with a very good yield of transportation fuels like diesel and gasoline."
Kingston suggested that Obama might have been more accurate had he said that prices rose due to the Libyan uprising specifically. "It’s hard to argue that what went on in Tunisia or Syria" made much of a difference, he said. "But Libya resulted in an actual loss of crude output."
Obama is right that the Arab Spring was a factor in the increase in gasoline prices. But it's important to note that prices were rising before the democratic movements began. And experts say that while there was some impact on prices, the overall increase is the result of many factors. We rate Obama's claim Half True.