Inverse Relationship: Gas Prices & GOP Success

In July, State of Sunshine posted about record gas prices in Florida, when the statewide average topped $3 per gallon. At the time, we reflected that high gas prices would have an advserse effect on Republican candidates, primarily because they haven’t really done anything to help keep them down.

Well, gas prices have since come down considerably (as reported in many MSM sources like the Trib and the Times). In the Tampa Bay area it has fallen to $2.46 per gallon. So, the question becomes – with this help Republicans? Only to the extent that it removes one issue from the Democrat arsenal, leaving insurance and property taxes as major “pocketbook” issues.

Still, this won’t stop the liberals from trying to politicize gas prices.

Over at Discourse.net, University of Miami Law Professor Michael Froomkin has noticed the drop and posted a conspiracy theory from Nieman Watchdog:

Q. Did George W. Bush’s buddies in the oil industry contrive to lower gasoline prices to help him (and themselves) in the fall elections?

I looked for guidance from three people knowledgeable about oil markets and put this more-neutral question to each: Is there possibly a link between the drop in gas prices in this country and the coming election?

One said flatly no, it’s just due to lower demand now than during the driving season.

Another said he was puzzled by the drop because people he trusts tell him it is not due to, or cannot be explained by, a comparable drop in crude oil prices.

The third had a similar reaction, noting that, in the past, when the price of crude oil dropped, the price of gasoline took much longer to come down. He said that price of gas customarily declines with the end of the driving season, “but not as sharply as it has in the last few weeks and certainly never went down faster than the price of crude, as it has.”

Well, let us say that this is very, very short sighted.

Let’s look at what has happened since oil peaked above $78 per barrel:

  • Hezbollah and Israel signed a cease fire that has held.
  • The UN deadline for Iran passed without sanctions being imposed
  • The peak of the hurricane season passed with no major storms threating the gulf coast.
  • The driving season ended, and stockpiles have been building.
  • Major investment funds have been getting out of all commodities and into stocks and bonds, so the Dow is now almost at record highs and oil, gas, natural gas, precious metals, and more have fallen off.
  • The US economy is slowing down, evidenced by two straight pauses by the Federal Reserve Board.

Now, if we all remember our lessons of supply and demand, lower demand means lower prices. Since the driving season ended and the economy is slowing, demand is lower.

Next, speculation about the hurricane season coupled with fear of turmoil in the Middle East were part of the ramping up of oil prices earlier this year. Since it appears that El Nino has returned, lessening Atlantic hurricanes, and diplomacy is holding the line in the Middle East, the speculation has come out of the oil market.

So, while many people will want to say that politics has to be the reason gas prices are dropping – they just don’t understan the complex realities of commodoties trading or the law of supply and demand.

Finally, the State of Sunshine is glad to see the prices come down. Any time we can keep money in our pockets, it’s a good thing.

About Jim Johnson

Editor and publisher of The State of Sunshine.
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2 Responses to Inverse Relationship: Gas Prices & GOP Success

  1. Gases prices are going up long term. Regardless of which party is in power. The demand coming from China and India is increasing. Factor in those economies growing. (I read a study predicting China will have the world’s largest GDP by 2037.) That makes things harder for America.

  2. Beerwulf says:

    True dat, Michael. Two things would help (or would have helped):

    1. Revamp our city and suburbian planning to make it possible to get around without using a car.

    2. Re-engineer our vehicles to run properly on things like biofuels (ethanol and biodiesel). To help with this, make it completely legal to grow hemp in this country and kick the anti-cannabis idiots to the curb to bother someone else.

    We have to have cars to get around, and it’s too hot to ride bikes in the summer for most of us (and too rainy as well). So the thing that makes the most sense is to start making our own fuel. That has the added benefit of letting us tell Saudi Arabia, Iran, and Iraq to pound sand (so to speak).

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