Right now, most experts agree that the most important driver of the price of oil–the world's most globalized commodity–is the threat of a major disruption in Iran. Those of us who are old enough may well recall that the cause of the energy crisis in 1979–and those long gas lines where Americans idled away as much as 150,000 gallons a day just waiting for an accommodating pump–was a "disruption" in Iran. That was bad enough, but, of course, times have changed since then. During the oil shortages of the 1970s, the US was — relatively speaking — much richer. We were not only the country that needed the most oil — we could also better afford to pay for it than anyone else. But today, dramatically escalating consumption in the East, particularly in China and India, means that there are people out there who need as much or more of it than we do. And in China, there is a quite substantial ability to pay for it. In fact, China provides massive subsidies to its state oil companies principally to improve their position in jockeying for reliable and reasonably-priced supply around the globe.
So if a butterfly can flap its wings in Tokyo and cause a hurricane in Brazil, what is the effect of millions of consumers having to flap open their wallets at the pump more? If, as the University of Chicago researchers and others have shown, consumers essentially "overreact" to the price of gas relative to its actual impact on their income, what is that cumulative downward drag going to do to the economy?
Bottom line, part one: the reason candidates of every stripe are promising Magical Mystery solutions to the problem of high gasoline prices is because those prices are political dynamite in an election year. If the price of regular increases by another dollar a gallon–hopefully improbable but certainly not impossible–all those credit cards that are used at all those gas pumps will be paying $60 a month more than they did in January of 2012. I can't do the numbers, but I'd bet that gas prices like that will put a lot of American consumers above their debt limit on a whole lot of credit cards. Moreover, prices like that would be a significant drag on an economy that is already exhibiting not enough momentum and too much friction. And, what would happen if there simply wasn't enough gasoline to go around? There is no one in American politics on either side of the aisle who wants to deal with a question like that before November of 2012, so you'll probably hear many more promises. But…
Bottom line, part two: there is no one in Washington — or for that matter in Beijing or Moscow or Riyadh — who can directly prevent a short-run catastrophe in the form of gasoline prices in Paris, Ohio that look a lot like gasoline prices in Paris, France. There is no amount of drilling, limitations on speculation, lengths of pipeline, or jawboning that can forestall a crisis if the major players — who are all in Tehran or Tel Aviv — do something that precipitates another "disruption" in Iranian oil production. All that anyone else can do is to attempt to influence, with either a carrot or a stick, what happens over there.