Nieman Watchdog, The closer the election, the lower the price of gas,
Gil Cranberg says this correlation should galvanize the press. He wants to know, among other things, whether prices are dropping in countries that don’t have upcoming elections.
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.”
The latter two respondents, independently, referred me to Peter K. Ashton, a long-time consultant on petroleum issues who has testified on gasoline pricing before the U.S. Senate Permanent Subcommittee on Investigations. Ashton’s response to the same question:
“As an economist, I cannot speculate on the politics that may be involved, but my recent research suggests that the recent drop cannot be explained by the drop in crude prices or the change in inventories alone. From an economic standpoint, therefore, it certainly raises questions in my mind as to whether the high prices we saw this summer were in any way justified by market fundamentals. I do not believe that they were. To the extent that prices are now declining more than market fundamentals might dictate suggests to me that a decision has been made to reduce prices back to levels that might be considered more in line with the forces of supply and demand. Whether that is a politically motivated decision is up to others to decide, not me! Nevertheless, it is clear to me that the prices we witnessed this summer could not be justified by the market.”