Lower pump prices fuel political conspiracy theories

Many Americans think the recent drop is tied to the Bush administration and GOP election hopes.
By Elizabeth Douglass

LA Times
Nov. 07, 2006

Filling the tank of his Honda Accord, Daniel Carmolinga eyed the blinking numbers on the gasoline pump with a mixture of relief and suspicion relief that the total was significantly lower than it would have been a few months ago, but suspicion that Tuesday's election might have something to do with it.

"It seems that always right before election time, prices go down. It may not be a coincidence," Carmolinga said on a recent Friday as he paid $2.47 a gallon at a Shell station in Long Beach. In mid-July, the car dealership employee would have paid nearly $1 more per gallon.

Compton resident Tanaya Jordan has doubts too. Jordan is a security guard who patrols in her own car and foots the gasoline bill.

"I think it may be political, and a lot of people are catching on," she said of the unusually steep drop in pump prices. Still, added Jordan, "it's not going down fast enough for me."

The Bush administration, many oil analysts and the industry's primary trade group have dismissed the public skepticism as conspiracy theory run amok.

"These accusations are just silly," said John Felmy, chief economist for the American Petroleum Institute. The cost of gas fell, he said, because "those things that caused the price to rise reversed."

But like the two California motorists, a notable percentage of Americans believe that the recent plunge in gasoline prices has more to do with November voting than with the price of oil and other market forces, two recent polls found.

Last month, a Gallup Poll of 1,000 adults found that although a majority of those surveyed rejected the suggestion that gasoline prices were being manipulated by the Bush administration for election purposes, 42% mostly Democrats believed that the president was doing just that.

"It is not unusual for people to think there are conspiracies," said Gallup Poll Editor in Chief Frank Newport, whose past polls have asked about the Kennedy assassination and whether astronauts really walked on the moon. "But we did know from previous work that Americans perceived that the administration did have, could have, some impact on the price of gas in both directions."

In early October, a Washington Post-ABC News poll also got a significant response, and not just from Democrats and liberals. The survey asked more than 1,200 Americans why they thought gasoline prices had fallen, and 3 in 10 cited "upcoming election/political reasons" or "Bush/Republican efforts to affect the election." They included 16% of the Republicans polled and 26% of white evangelical Protestants.

Newport said the surveys were partly a reflection of the country's deep distrust of oil companies. The industry, which has never scored well in Gallup's annual survey of American attitudes toward different types of businesses, took a dive in the latest rankings, he said.

"It's not just dead last, it's way dead last and it fell precipitously," Newport said of the oil industry's place in the survey Gallup released in August. "A lot of Americans are willing to believe that the big oil companies can control the price of gasoline at their will."

Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, is one of the believers.

"The public doesn't know the details, but they instinctively understand that the sudden swing in gas prices is connected to the election," said Court, whose Santa Monica group is a frequent oil industry critic. "Gas prices just don't go down that far as fast as they did. It's totally aberrant behavior for the industry."

Per-gallon prices in Southern California fell at a record rate averaging a penny a day from mid-August to mid-October, according to the Automobile Club of Southern California, and has continued to decline since. The U.S. average price, which rose slightly in recent days, fell at a similar pace.

And so the questions persist, from the White House briefing room to the campaign trail.

White House spokesman Tony Snow told reporters in late September that he was amused by "the attempt by some people to say that the president has been rigging gas prices." That kind of power, he said, "would give him the kind of magisterial clout unknown to any other human being."

If the president could control gasoline prices, Snow said, "why on Earth did we raise them to $3.50 before?"

During a recent campaign stop in Indiana, a reporter asked Vice President Dick Cheney to comment on the declining cost of fuel so close to an election.

"We don't control gasoline prices," Cheney said, according to a transcript of the exchange. "There may be people out there who think we do, but we don't. The balance between supply and demand has moved in a direction that's led to a significant reduction in the price of crude oil, and that in turn has led to a reduction in the price of gasoline."

Few would dispute the notion that oil and politics are intertwined. Wars, campaign contributions, land-use decisions, environmental regulations and foreign policy are part of the landscape that connects the two.

"Oil has always been a political thing," said Philip K. Verleger Jr., an oil economist who worked in the Treasury Department during the Carter administration. "It's been the stuff of all sorts of novels and true stories."

But proving that the sharp decline in gasoline prices since midsummer is, or isn't, related to the November election is quite another matter.

"A lot of the data you would want to look at to see if something is going on right now isn't available yet," said Peter K. Ashton, president of Innovation & Information Consultants Inc., who has worked on gasoline-price investigations in California and other states. "And to prove a link to politics and to the election and all of that is extremely difficult. But that doesn't mean people shouldn't be suspicious."

One theory starts with the notion that lower gasoline prices improve the outlook for the president and incumbent GOP candidates facing midterm elections by eliminating energy as a hot-button issue with voters.

How would they pull off a fuel-price drop? Bush's stance on Iran and other foreign policy matters can certainly move oil markets, and so can decisions affecting the oil levels in the nation's Strategic Petroleum Reserve. And there is the Bush family's close relationship with the royal family of Saudi Arabia, the world's largest oil producer and the most powerful member of the Organization of the Petroleum Exporting Countries.

Skeptics also focus on the oil companies, a group that has strong ties to the White House and donates heavily to Republicans. The companies also make daily decisions that can influence markets and pump prices, including adjustments involving inventories, production, imports, exports, trading and wholesale pricing.

"I do think big decisions are being made in the industry with an eye on the November election," said Tyson Slocum, director of the energy program at consumer group Public Citizen. "A lot of it might be the self-interest of oil companies. But what is that self-interest? It's that 'We like the current leadership.' "

Another theory holds that nontraditional energy futures investors those who are looking for profits rather than a barrel of oil intentionally throttled back their activity on the New York Mercantile Exchange. The presumption is that they did so to send prices for oil and gasoline tumbling so congressional control wouldn't shift to Democrats, some of whom favor reining in hedge funds and other speculators that have made energy markets more volatile.

Goldman Sachs Group Inc., which runs a widely tracked commodities index, reinforced suspicions in August by sharply cutting the gasoline portion of the index, causing the fuel's futures prices to plunge. Bush's Treasury secretary, Henry M. Paulson Jr., was chief executive at Goldman Sachs before taking his current post.

Those suspicions are fueled in part by analysts and others who say energy markets are no longer a strict reflection of market fundamentals such as supply and demand. Instead, prices often move dramatically on less tangible factors, such as perception, fear and greed, analysts say.

New York Global Securities analyst Philip Miller wrote recently that the last three major oil price drops coincided with Senate hearings on energy prices "and expectations surrounding the upcoming U.S. midterm elections." Once the election is over, his report said, "the price of oil will rise to a point that tests the will of the new Congress."

For some, it doesn't really matter why prices have fallen.

Said Danyel Johnson, who stopped to pump gas recently at a Long Beach Chevron: "I'm super excited that I spent $35 and filled it all the way up."













All original InformationLiberation articles CC 4.0



About Us - Disclaimer - Privacy Policy