Political Issue Weakens with Falling Prices of Gas

Back in first quarter of this year, politicians from the Republican party were convinced that the price of gasoline would be a victorious issue in politics by fall. Commentators on the GOP’s side forecasted the per gallon prices of gasoline to reach $5 and $6 by Memorial Day and Election Day respectively.

And President Barack Obama was blamed for the expensive prices of gas stating that it was an intentional policy to force Americans into shifting to alternate energy forms. They also mentioned the President’s supposed failure to approve key energy projects such as the Keystone XL pipeline.

According to House Speaker John Boehner, this is an issue that they welcome and they are quite sure that the current gasoline prices for the season will still move higher to reach record high prices ever.

As proven from history, the price of gasoline is a completely unreliable issue in politics. This year, gasoline prices started to increase in April and have dropped since then by over 50 cents to AAA’s current gasoline price average nationwide of $3.40 per gallon.

True enough, the falling prices of gas are considered as the reason for pulling the consumer price index lower as the standard measure of inflation by the government. Consumer costs actually declined during quarter two.

Every time politicians make gasoline prices a political issue in their campaigns, experts of the oil industry have to remind the public that a complex set of factors affect the price including world demand, refining capacity, geopolitical disturbances, ¬†underinvestment of oil monopolies that are owned by the state and, more recently, Iran’s threats to block the Hormuz Strait.

Moreover, the experts emphasize that new oil exploration and production activities usually take many years and even decades to start impacting gasoline prices.

Republicans, as good conservatives, are certainly aware of the famous bet of economist Julian Simon that in more than a decade, instead of running out of particular commodities, rising costs will instead grow the supply of the world. And the economist won the bet.

Similar to what has been frequently observed in the past, both the public and its representatives in Washington disregard the issue whenever gas prices fall to a more comfortable level.

By: Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

Facebook Twitter LinkedIn Google+ YouTube