Gasoline prices are now following the adage that what goes up must come down. On September 15, gasoline suppliers switched from the summer mix to the lower-cost winter mix. But the impact may not be too dramatic because gasoline prices had already fallen 37 cents a gallon from their August peak of $3.02 a gallon.
The drop is good news for Republicans, because it could reduce voter anxiety. "I've always felt the economy is a determinate issue, if not the determinate issue in campaigns,"' President Bush said at his September 15 news conference. "We've had a little history of that in our family," he added, referring to his father's losing the White House in 1992.
Polls indicate that voters have become less upset by gasoline prices. In the July NBC News/Wall Street Journal poll, 41 percent of registered voters said that gas prices and energy costs were the most important economic issue facing the country. That number dropped to 26 percent in this month's poll.
The ABC News poll asked voters to select which issue from a list of seven will be most important in their vote for Congress this year. In August, 15 percent said gas prices, which ranked third-behind only the economy and the war in Iraq. This month, only 5 percent chose gas prices, dropping it to sixth place and putting it behind the economy (22 percent), Iraq (21 percent), terrorism (16 percent), health care (13 percent), and immigration (11 percent).
What's pushing gas prices down? The oil market is driven by speculation, and the conditions that caused investors to bid up the price of oil this summer are changing. Industry sources cite rising fuel inventories, slowing demand, diminishing concern about this year's hurricane season, easing tensions in the Middle East and Africa, and the end of the summer driving season. Natural-gas futures dropped 10 percent last week to a two-year low after the federal government reported record supplies. The result should be lower fuel bills as the heating season begins this fall.
Tyson Slocum, an oil-industry critic and the director of Public Citizen's energy program, says he thinks that the government has been an important force behind the increasingly bearish oil market. Speculators are feeling pressure. Slocum points to a Senate committee report issued in June on the status of energy-trading markets.
"This bipartisan commission, headed by Republican Norm Coleman and Democrat Carl Levin, concluded that we needed stronger regulations over energy traders and more transparency in those markets, because the role of speculators had greatly increased," Slocum said. He also cited a Wall Street Journal series "that publicly aired for the first time pending civil and criminal investigations into manipulation of crude oil and gasoline energy-trading markets." In Slocum's view, "that sent a signal to the speculators that they'd better pull back a little bit, and I think that's what we're seeing."
Energy consultant Philip Verleger, who warned several years ago that oil prices would soar, now argues that prices may be poised for a dramatic plunge. "Literally, you don't know where the floor is," he told McClatchy Newspapers. "In a market like this, if things start falling ... prices could take you back to 1999 levels."
Others think that the current drop might last only a couple of months, just long enough to get through the November elections. In Slocum's view, that could be exactly what oil companies want. "Eighty-one percent of their campaign contributions go to members of the Republican Party," Slocum observed. "I cannot say for sure if they are influencing prices to assure that outcome. But I think it is more than just a coincidence that we're seeing an easing of prices at a time running up to a very important election."
The political impact is not yet clear, but there is already evidence that the decline in gasoline prices is having an effect on economic attitudes. The RBC Cash Index, based on polling by Ipsos, reports that consumer confidence rose to a seven-month high this month. Consumers' assessments of current economic conditions show a particularly marked improvement, rising from an index of 92.1 in August to 118.8 in September. That is the highest reading since Ipsos began taking measurements in 2002.