Election week gas prices were year's low; started rising again immediately afterwards

[one...two...tree 2,762]

Barring an unexpected Southward turn in the final five weeks of 2006, Americans will have enjoyed the lowest average gas prices of the year during the week of the 2006 midterm elections. Two weeks before, the prices hit what was then an annual low, and in the week after the votes were cast the cost of a gallon of gas in the U.S. rose by more than three cents (last week they rose by another penny).

If you'll recall, average gas prices dropped by fifty cents, or 17 percent, between the end of August and the end of September -- when the primaries were done and the campaign season began in earnest. At the time, the White House said that any suggestion the drop was related to the midterms was a "conspiracy theory," prompting me to ask, not for the first time, exactly how stupid they think we are.

According to Trilby Lundberg, whose Lundberg Survey of gas prices showed a five-cent hike after the election, the recent price hike -- after three months of plummeting retail costs -- is a result of the market having "soaked up" a "mini-glut" of crude oil from August, causing a "normalization" of supply and demand.

What's the source of said "mini-glut"?

… the Saudis and other pro-US players in the Middle East play[ed] a delicate balancing game by promising their OPEC friends that they would cut production, but then failing to commit to the cuts and even raising production slightly instead.

Hmmm, where have we seen that kind of thing in the past?

During a meeting in the Oval Office, according to [bob] Woodward, Bush personally thanked Bandar because the Saudis had flooded the world oil market and kept prices down in the run-up to the 2004 general election.

That's Prince Bandar bin Sultan bin Abdul Aziz, also known as Bandar Bush for his long ties with the Bush family. You know, this guy:

Also, there's a story that came out just four days after I last wrote about this. I completely missed it -- buried as it was on page 9 of a Saturday New York Times business section -- but others thankfully caught it:

Politics and worries about oil supplies may have caused gasoline prices to go up at the pump earlier this year, but one big investment bank quietly helped their rapid drop in recent weeks, according to some economists, traders and analysts.

Goldman Sachs, which runs the largest commodity index, the G.S.C.I., said in early August that it was reducing the index's weighting in gasoline futures significantly. The announcement did not make big headlines, but it has reverberated through the markets in the weeks since and some other investors who had been betting that gasoline would rise followed suit on their weightings.

"They started unwinding their positions, and those other longs also rushed to the door at the same time," said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation. The August announcement by Goldman Sachs caught some traders by surprise.

To be precise, that was $6 billion worth of gas futures dumped on the market like a sack of potatoes, catching "traders by surprise."

Blogger Raymond Keller notes that Goldman's move came just weeks after its former Chairman and CEO became a Bushie:

President George W. Bush nominated Henry M. Paulson, Jr. to be the 74th Secretary of the Treasury on June 19, 2006. The United States Senate unanimously confirmed Paulson to the position on June 28, 2006 and he was sworn into office on July 10, 2006.

So what does Goldman do just weeks after Paulson is sworn in as Treasury Secretary?

It announces a subtle move that drives down gasoline prices, short-term.

And finally, this note at Blogging Stocks:

… there ought to be a relationship between the price charged at the pump and the cost of crude oil. I found that this relationship got a bit out of whack the [week of] the election. Specifically, on November 6th, the ratio of the price/barrel of gasoline at the pumps and price/barrel of crude oil fell to 167% -- significantly lower than the weekly average of 174% between August 21st and November 20th.

Between August 21 and September 25, the average ratio was 177.5 percent, more than ten percentage points higher than the week of November 6.

What really strikes me about this story is the degree to which the idea that gas prices could be manipulated for political purposes caused so much cognitive dissonance among so many otherwise intelligent people. We know that markets are constantly being manipulated for financial gain, we know that the big oil companies have colluded in the past and we know there was ample motive for doing so now. I think it's a testament to how deeply indoctrinated the American public, or at least American opinion makers, are into the mythology of the free market, supposedly pristine and uncalculating.

As I've written before, the administration didn't need to cut a formal deal in some smoky back room to make prices bottom out immediately before the midterms. It was just a question of influential actors seeing where their interests lie and -- acting rationally as rational actors do -- trying to advance them.

And even if it didn't work out all that well this year, we should keep an eye out for more of the same in in the future, especially if something should, er, happen -- say to Iran -- that results in high gas prices going into mid-2008.

Joshua Holland is a staff writer at Alternet and a regular contributor to The Gadflyer.

[~Jess~ 0]

are you or anyone else suprised?........really......

[one...two...tree 2,762]

are you or anyone else suprised?........really......

Not me. I noticed the prices went up immediately after the elections. What surprised me is that it didn't seem to be newsworthy even though it had been before.

[Mr. Big Dog 10,747]

Just as I thought back in October.

Simply amazing! When the price goes up it's Bush's fault because he is in the pocket of big oil. When the price goes down it's Bush getting pay-back from big oil. So by your reasoning there is no circumstance that isn't a Bush engineered trick. Don't you see how silly and paranoid you sound?

Have you actually bothered reading the piece?

Just as Enron and others could manipulate, if not directly control, California prices by closing power plants at will, so can oil companies reduce refining profit margins (which were gigantic) to keep their friends in power. That's easier to control than futures where other players are in the market, and it's something retailers pass on to drivers. This is not conspiracy, but self-preservation.

Where does it say it's Bush's fault? Have the oil companies not raked in disproportionately high profits while all of us - including you - were getting shafted at the pump and any other place where gas prices matter? Did Enron not wrongfully manipulate energy prices? I thought a court of law had established some time ago that it did. Those greedy thugs that head the Enrons, Oil Corporations and whathaveyou would like to have a few more years of re-distribution of wealth from the bottom to the top. And Bush and Co. are the one's that will make it happen. I mean, a $5,000,000,000.00 return (tax breaks) on a roughly $40,000,000.00 investment (GOP campaign contributions) sounds pretty decent to me. That is how the cookie crumbles in D.C. And that is why the profit margins are a bit thinner these days making your gas and mine a bit cheaper.

But don't worry: It's already been announced that the gas prices will be heading north again come winter - as in after the elections. Yes, there will be more demand in the winter, but there will also be an adjustment to the profit margins. You can bank on that. The oil companies sure do.

[~Jess~ 0]

its alll too tooo tooo typical!

[almaty 19]

america....sigh

[Carol&Marc 0]

Bush secretly raises gas prices all by himself? Ignorance is bliss. Remember everyone, PROFIT is evil.

Edited November 24, 2006 by Carol&Marc

[kaydee457 13]

Bush secretly raises gas prices all by himself? Ignorance is bliss. Remember everyone, PROFIT is evil.

Ah, the conspiracies abound....Evil Bush manipulates and controls everything in this country?

[one...two...tree 2,762]

Bush secretly raises gas prices all by himself? Ignorance is bliss. Remember everyone, PROFIT is evil.

Care to refute specifically what was said in the article? Or do you prefer to dish out your daily dose of empty rhetoric?

[Hilarious Clinton 452]

yeah yeah we get it. Buy that hybrid yet?

[one...two...tree 2,762]

yeah yeah we get it. Buy that hybrid yet?

Have you bought a science text book yet?

[I'm Gone 60]

People travel more Thanksgiving through New Years, just supply and demand.

[peejay 327]

It is comforting to know that the Saudis can still amp up production to manipulate the price and World Peak Oil is not upon us...yet. Given the choice of $5/gallon gasoline or no gasoline...I think the choice is obvious. If you can't stand the heat...get out of the kitchen. In other words...buy a bicycle or a Prius or take a bus to work.

The moral of this story ultimately is...when we import 60% of our U.S. oil consumption...tough luck.

[garya505 2]

The fact that people actually believe this ####### tells me there is no hope for them.

[cmartyn 0]

Me and my buddy at work are praying for 10 buck gas. That way there will be room on the roads so it doesnt take an hourto go 12 miles. Id gladly pay 10 if they fixed the roads lol.