As you probably know, gas prices -- which peaked in August with a national average just over $3 -- are falling. Some optimists think the national average could drop below $2 by the end of the year.
This autumn also happens to mark the U.S. mid-term congressional elections.
Hmm ... [strokes chin, adjusts tinfoil hat] ... is something fishy going on here? Is Big Oil colluding with Big GOP to dampen voter discontent and preserve a Republican majority?
Well, no. Not by lowering gas prices, anyway. And if they tried it, it probably wouldn't work.
As Jerome a Paris explains over on dKos, the recent downturn in prices is fairly predictable based on market forces. Margins are too thin, and taxes too fixed, for any particular player to have the power to manipulate prices in the short term. Once upon a time OPEC could have done it by flooding the market with crude, but they don't have sufficient reserves to pull that kind of trick any more.
Anyway, as Brendan Nyhan points out, the strength of correlation between gas prices and the ruling party's approval rating is vastly overstated anyway.
I'm afraid if Republicans want to game the mid-terms, they're going to have to do it the old-fashioned way: by starting a war.
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meander Posted 4:45 am
24 Sep 2006
[...]
Deep-pocketed speculators helped fuel the steep rise in oil and natural gas prices as they pumped money into the markets for those commodities. Now they're pulling some of their money out, causing prices to plummet.
[...]
But a crucial role in the market is played by big investors who never have the slightest intention of taking tanker cars full of oil or gas. These are high rollers, such as investment banks and hedge funds, that buy contracts for future delivery of commodities as bets on the direction prices are moving.
The movement of all that speculative cash isn't the only reason energy commodities are tumbling. But analysts say the behavior of big market speculators has amplified and speeded up the drop.
[...]
The Nieman Watchdog website (a project of the Nieman Foundation for Journalism at Harvard) has had some good coverage of oil prices lately: on politics and on speculators.
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