I have not blogged in a long time because school started and I have been very busy. As I sat reading various blogs today my wife called. She was grocery shopping and stopped to put gas in the car. Gas was $2.42 a gallon. We live in New Jersey and I know our prices are lower than most. Earlier in the summer I paid $3.00 a gallon. The price of gas has been falling like a stone. WHY? More below.
I first started noticing the drop in gas prices in mid-August. I know, as most Americans do, that gas prices are usually the highest in the summer because we all go on driving vacations and little trips to the beach and the like. We use more gas. More demand-higher prices. Yet as August was in full bloom the price was dropping. Looking at the news today, the AAA and others say that the end of the driving season caused the lower prices. If so, why was the price dropping at the height of driving season? Other sources say that relative calm in the Middle East has caused world prices to fall. Still others say that the lack of hurricanes also helped. But I do not buy any of it. I remember just after Katrina when prices spiked we were told then that the cause was a lack of refining capacity. Some refineries in the Gulf were shut down do to the storms (Katrina and Rita) and until they were back on line prices would be high. News reports at the time worried over how capacity could be increased. Refining capacity has not increased. Well time went on, prices slipped slighty, then rose slighty, the dipped, etc. When summer began prices rose, they topped the post Katrina prices, normal in summer. The big explanation was that there was it cost so much to put ethanol in the mix. It went down in late June but was back up for the 4th of the July holiday, again normal. Then came the August dip. Why? Dispite Lebanon, BP's maintenance problem, and peak driving season the prices started down and the explanations make little sense.
Yes, the world crude price is down. Is demand worldwide down? I don't think so. This is just speculation, but it seems that the prices at the pump have dropped faster that the world price. And again this is just my personal observation, the price of regular has gone down faster higher grades of fuel. I am suggesting that maybe cheap oil is a political move by the oil companies in an attempt to save the friendliest Congress and President they have ever seen.
James Carville said, "It's the economy, stupid," and he was right. Most Americans vote their pocketbooks. The war on terror and the destruction of the Constitution are not what most people are going to vote on. Not directly. They will vote for those who can give them the best promises that their future will be brighter than it is now. True fear of terror after 9/11 was a powerful factor in getting and keeping the Republicans in power. Remember, at the time few people believed that the economic future was bleak. The Republicans convinced people that terrorism was more likely to destroy their future than was a recession. Move to this year and things are looking bad economically. Inflation is a problem. Though the Fed proclaimed inflation not a threat by looking at the core inflation rate, common people look at the real inflation rate and most of that is food and energy costs (Which the highly trumped core inflation rate does not measure specifically because it is so volatile!) and they are worried. The housing market slowed. Predictions are for a slower growth in the economy. This year terrorism was not as scary as the economy. High fuel prices, not Osama Bin Laden, are a bigger threat to the average American's future now. This year Democrats are seen as more capable of running the economy and surprise the war on Iraq and possibly terrorism. The republican fortunes might well depend on how people feel when they look in the bank accounts.
If you are conservative-loving Big Oil what do you do? You slash oil prices and make the economic prospects look better. Big Oil has already made its big profits for the year and can make more after 11/7. So they can slash their prices now take pressure off the budgets of the voters and allow the Republicans to concentrate more on terror. The prices started to come down just about the same time the terror fervor started. Oil and energy have become a non-issue in this election. Yet the minute this election is over we will all be talking about the spiraling price of gas once again. We need to make this obvious now. We need to somehow remind people that it is energy and inflation that is the big enemy of average Americans, not nameless, faceless terrorists. It is the economy, people.