Gas prices to plummet? - FolsomBookmark & SharePlaceropolis.com Favorites Fark Digg Del.icio.us MySpace Facebook Google Live More ... To: From: Note: Your Local News: Women's Fund donates thousands Search: Stories Photos All Advanced Search AuburnFolsomRosevilleRocklinEl Dorado HillsColfaxLincolnLoomisGranite Bay Weather Forecast Sponsored By: Folsom Parkshore Self Storage News Local Sports Education Business Election 08 Obituaries Crime Logs Living Home & Garden People Health & Fitness Faith Food & Wine Milestones Motoring Arts & Entertainment Columnists Opinion Editorials Letters to the Editor Submit a Letter Staff Blogs *NEW* Our Photos Our Videos *NEW* Special Sections Things to do FAQ How To Videos Coupons Contact us Editorial Staff Subscriber Services Online Advertising Submit a News Tip Submit an Announcement Submit a Sport Score 7/31/08 | 24 views | Analysis Gas prices to plummet? Current situation matches election year 2006 By Roger Phelps Some evidence and some experts suggest gas prices will drop to around $3.30 a gallon by November, election month, because of an interplay among a Republican election ploy, an aversion to killing a golden-egg goose and a drift toward tighter market regulation. Interim-election year 2006 provides a model. In August 2006, prices rose to $3.03 a gallon, a record high at the time. Voters had had the previous two years to read about scandals in the U.S. Congress, and were three months from an opportunity to shake out some perceived poor legislators. In California, U.S. Rep. John Doolittle faced a competent challenger amid corruption allegations, and polls during summer 2006 predicted voters, with Prop. 87, would tax oil companies to fund clean-energy research. Oil companies spent millions beginning in summer 2006 to warn voters a Prop. 87 victory would force pump prices up. Concurrently, consumers worried and angry at high gas prices began to relax as, for some reason, pump prices began to fall. By late October 2006, prices were down a full 27 percent, to $2.20 a gallon. On the About.com Web site, U.S. politics guide Kathy Gill calculated what had happened. Writing on Oct. 10, 2006, Gill said, "If we round down to 50 percent the share of the pump price attributed to crude (it makes the math easier), then crude prices would have had to decline 54 percent (2x27) to effect a 27-percent change at the pump. All other things being equal, of course. "What has happened to the price of crude since August 2006? Did it decrease 50 percent? No." According to the U.S. Department of Energy on Oct. 13, 2006, crude dropped only 23 percent between August and late October 2006. "Only about half of the decline in US gasoline prices (between August and October 2006) can be explained by crude oil prices," Gill wrote "Is the other half the fact that mid-term elections are around the corner?" Reuters news service reported during August 2006 that U.S. consumer confidence -- and retail sales -- were up, in no small part because of falling gasoline prices. "Happy consumers less likely to throw the incumbents out? What do you think?" Gill wrote. Despite the manipulative ploy, if there was one, the 2006 election did wind up throwing incumbents out and gave the Democratic party a thin control of Congress. Either out of revenge and lesson-teaching or not, immediately, gas prices spiked upward, and essentially have been rising ever since -- until this July, as election campaigns hit the, well, gas. To effect substantial change, an administration needs firm control of both legislative houses. Proponents of the status quo would tend to fear an increase in Democrat control of Congress. This summer, between July 3 and July 28, crude-oil prices fell 13 percent and pump prices fell 8 percent, which corresponds fairly well to the formula used by Gill. That means that so far, a 2006-style election-season manipulation hasn't shown itself. Folsom-based gasoline businessman Herman Aulakh, a sharp critic of any "supply-and-demand" explanation for high fuel prices, said if prices do drop along 2006 lines it would be difficult to pin that on an election ploy. "There's so many factors, but if prices do go down everybody's going to say it was the election," Aulakh said. The key for glimpsing such a ploy would seem to be whether an only moderate crude-oil barrel price drop is accompanied by a sharp pump-price drop Secondly, assuming for the sake of analysis an artificial "market" created by speculation and manipulation, a reason manipulators would back off around now, causing a pump-price drop, is that manipulators might be on the verge of killing the goose that lays golden eggs for them -- the U.S. economy in its loosely regulated current form. "Airlines are on the brink of financial disaster and – some would say – about to implode," said James C. May, president of Air Transport Association of America, Inc. June 17 before a U.S. Senate committee. "High fuel prices are the sole reason. This nation’s economy is inextricably linked to the viability of its air transportation system. If the airlines continue to spiral downward, so will the economy. The airlines won’t be around much longer if the status quo wins the day." May is clear -- no airlines, no economy, no golden eggs. He quoted John Hofmeister, president of Shell Oil Co. as saying, "The proper range for oil prices should be somewhere between $35 and $65 a barrel.” If that's true, then with oil now at $125 a barrel, even amid a projected steep fall in pump prices a sizable margin would exist for everyone to continue to take reasonable profits -- everyone who is directly connected to "wet" possession of oil, taking "wet delivery" of the stuff. Those who take paper delivery only of oil-futures contracts would shift trading to other commodities. Already, a tie is being noted between what May calls "the status quo" and what is called "consumer confidence" in the economy, a big election issue. The terms effectively translate to falling gas prices instilling voter confidence in the politico-economic status quo. Confidence in the status quo would cut into voters' desire to vote "change." Pollsters are already noting this. "One of the first things the falling gasoline price does is potentially help consumer confidence," said Dennis Jacobe, chief economist at the Gallup Organization in Washington. "Even though prices are still high, if they are going in the right direction, that helps a little bit." A third factor suggesting a continuing price drop is work, whether belated or not, on the part of regulators. According to U.S. Sen. Jeff Bingaman, D-New Mexico, the federal Commodity Futures Trading Commission in the past underestimated the role of speculators. The CFTC lumped in what are called "swap" dealers with oil-contracts buyers such as oil companies and airlines, who are likely to take wet delivery of oil. Data from the CFTC in June showed that traders who could be counted as "speculators" held nearly 70 percent of all outstanding West Texas Intermediate oil contracts - the U.S. benchmark, according to Bingaman, chairman of the Senate Energy Committee. Also in June, however, Reuters reported that the CFTC now is taking a closer look at big U.S. investment banks like Goldman Sachs and whether "swap" deals the banks offer could allow some traders to evade crude oil position limits. Scrutiny tends to damp down any improper activity, and that is another factor that could help drop pump prices. When one thinks about it, no one is saying prices won't continue to drop except OPEC sheiks and the U.S. Energy Information Agency?, which despite its sister agency CFTC's investigation of traders' manipulation, still is saying "supply and demand" is behind gas pricing. Keywords gasoline, price, election Not registered? Click here Share this Post a comment You must be logged in to post a comment. click here to log in. Sign me up! Learn more Log in PLACERopolis Close Sign in: E-mail address: Password: Forget your password? Sign up! Learn more about Placeropolis Pix Blogs Vids Stories Users Yes, it is a pet bee! 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