Gadfly is Marty Aussenberg, a columnist for the weekly Memphis Flyer. Marty is a former Securities and Exchange Commission enforcement attorney, currently in private law practice in Memphis, Tennessee. .
Many, including me have been predicting an “October Surprise” in advance of the upcoming mid-term elections. Bin Laden suddenly turning up, dead or alive, a terrorist attack somewhere in the U.S. (or the announcement of yet another bogus “cell” of terrorist wannabes, like the hapless group in Miami who couldn’t even afford to buy their own combat boots, much less blow anything up), or some other dramatic development that will help the Republicans, now apparently doomed to losing control of the House, turn that seemingly inexorable tide.
Continued below:
But while we’ve all been waiting for something earth-shattering in the way of poll-influencing, Republican-engineered news developments (other than the inevitable Rove slime attacks ), the GOP’s biggest booster (a/k/a, the oil industry), has been quietly coming to the aid of their most munificent benefactors. Unless you panicked when gas prices topped $3 per gallon, and traded your car in for one of these, you’ve probably noticed that gasoline prices have dropped dramatically, 42 cents in just the last three weeks, 11 cents of that in just the last week.
Sure, gasoline prices normally decline after Labor Day, but not this fast, and not this precipitously following the rather dramatic spike we saw post-Hurricane Katrina, when oil prices reached an all-time high, along with oil company profits (and oil company executives’ compensation). In fact, this is the steepest decline in gasoline prices in 10 years. And, wonder of wonders, isn’t it propitious that this is happening just in time for the mid-terms?
Now call me a cynic, but everything I’ve read and seen (that wasn’t propaganda bought and paid for by the oil companies) indicates that the oil industry has been manipulating the price of gasoline for years. I’m not alone in that belief. If they can manipulate them up, there’s no reason why they can’t manipulate them down as well, especially to avoid the threat that a Democrat-controlled House may be less receptive to their influence.
It should come as no surprise that polls show that a large majority of the American electorate blames the Republicans for the prices they’ve been paying at the pump, and consider this issue important in deciding how to vote in the upcoming elections. So, what better defense against that perception (and outcome at the ballot box) than a vigorous offense, orchestrated by the oil companies operating hand in glove with the GOP.
What makes the recent price fall all the more suspicious is that it comes on the heels of the announcement that BP, one of the top three oil giants, had “discovered” that its oil pipeline in Alaska’s Prudhoe Bay had sprung a leak due to the company’s failure to adequately maintain that pipeline. The predictions were that the shutdown, which provided a significant percentage of the US’s consumption, would seriously affect the price of oil, which it did, but only, as it turned out, in the short run. BP, obviously concerned about the outrage its “discovery” caused, apparently figured out a way to mitigate the loss of all that oil, though it hasn’t yet figured out a way to mitigate the interrogations or
investigations which have ensued as a result.
Don’t get me wrong: I’m as glad to be paying less at the pump as anyone, but what really chaps me is the ease with which the oil industry twists our gonads when it wants to, and then, when it suits them, releases the pressure with the same ease. All for the favor of an administration/political party that has been nothing if not the handmaiden of the oil industry. Just as annoying is how the oil companies successfully recruit the credulous media to persuade the public that the price of oil is strictly market driven, when we all know otherwise.
Just remember, when it comes to gasoline (and unlike gravity), what comes down inevitably goes up, so don’t be surprised if shortly after the November elections we see “market forces” at play again when the price at the pump goes soaring again, only this time it will either be because the Republicans have been safely re-ensconced in Congress, or because the Democrats have taken the House, and the oil companies want them to take the blame for the inevitable next episode of price gouging.
Cross-posted at The Memphis Flyer
In the last week or so we’ve seen a price drop of 20 cents or greater per litre. Which is a decrease of about 70 cents AUD (or around 50 cents USD) per gallon.
Which means we are currently paying only $3.57 USD per gallon of petrol.
Obviously this is just a side-effect of changes in US pricing, as Australia is just along for the ride where most global markets are concerned.
The price here has gone from 3.09 to 2.59 in the last 2 weeks.
When it was 3.09, I kept telling myself not to complain because it would make people want to vote out the dominant regime. Guess they knew that too.
And since the oil companies have been making record profits under this administration, I’m sure they can afford a 60-day price drop to ensure that it continues.
I strongly agree with your political premise here, and think this event was as predictable as the sun coming up tomorrow! That being said, I do not believe the entire America electorate is so stupid as to not figure this up and down fiasco scheme out. The damage to the GOP oil cartel may well have been done so keep your hopes up!
If Thomas Frank (“What’s the Matter With Kansas”) is to be believed a lot of Americans are willing to vote against their own economic interest to keep gays from marrying, hippies from burning flags, women from making their own health decisions, etc.
But there are some lines that can’t be crossed. Americans insist on cheap gas and cheap crap from Wal-Mart.
This obvious ploy is bound to get them some votes.
Bush’s poll ratings go up as the price of gas goes down.
Dems need to hit this issue hard. Yes prices can go down quickly before an election, but what does that really mean for the future. What goes up fast, then down fast, can go up fast again.
If the ingredients for such a drop don’t make sense, nevermind the quick timing involved, then manipulation is at work. The dems need to define energy prices as a national security issue, and define and pledge ACTIONS THAT WILL PROTECT AMERICANS FROM THE GREED OF A FEW OVER THE MANY in such a vitl area! This can be done in many ways and is a powerful, winning potential political strategy nowadays.
Is anyone in the Dem party listening or are they all part of the oil cartel anyway?? Makes one wonder.
that a good third of the dem party looks to the benefit of their contributers before looking to the benefit of their voters without giving it much thought. And as things stand, who can blame them? Money is the way to get elected in this country.
According to our local branch of Pravda, the gas prices are going down because the version they produce for winter driving is cheaper than the version they produce for summer driving (different additives).
HA HA HA HA HA HA HA HA HA HA HA!!!
However, it’s working. All the lemmings around me admit that they know it’s another gimmick because of the elections. But the lemmings don’t care now since their gas is cheaper for their Tahoe or Suburban or Navigator so there is no reason to be pissed off at the Republicans (yeah – like gas prices are the only thing these criminals have screwed up).
Stupid jerks. Hope they enjoy it when the gas produced for December is much more expensive than the gas for November because of special added Jesus birthday dust. And January is even more expensive because they have to change the year additive. And February contains more chocolate. And March has magic Leprechaun gold.
But 70 cent decrease cannot be explained other than sheer manipulation. Perhaps the weather is cooler now and… oh wait that won’t work!
Nothing to see here folks…all smoke, mirrors and manipulation. You’d think people would see through this kind of transparent activity, but I doubt it.
While they’re giving it back at the gas pump, Utilities are quietly queuing up for gas and electric rate increases already…hope it’s a warm winter.
We often, quite justly, criticize the Right for buying into conspiracy after conspiracy. But this is one that just won’t die — the “evil oil companies out pulling the strings” everywhere, acting as a single, illuminati-esque agency.
Oh, please.
1) “Oil companies” is an incredibly broad term.
Producers: Producers suffer when wars are waged in areas that they have a stake in. Other producers benefit from the increased oil prices. The biggest beneficiaries of high oil prices have been our national “enemies”, from Iran to Venezuela. PDVSA (the Venezuelan state oil company) has the most to gain; at old prices, Venezuelan reserves were nothing compared to what they are now. At current prices, Venezuelan reserves are bigger than Saudi reserves.
Refiners: Refiners profit and lose by eating the curve. That is, when crude prices rise, they start paying a higher price sooner than the consumer does at the pump. When prices fall, they gain money because the consumer keeps paying higher prices while they’re purchasing new crude cheaply. In short, they soften the rapid fluctuations of oil prices. War is harmful to refiners, as it increases the risk to their supplies.
Oil services: Oil services companies have the most to gain when oil demand is high and capacity is low. Companies like KBR are a good example of an oil services company. Oil services companies benefit greatly from war.
Most of the “big” companies have a mix of production, refining, and services, and as a whole, have thus done very well recently. Most of that profit has come from production. Of course, those with the most to gain, as previously mentioned, are the countries with the reserves, which tend to be hostile to the US.
2) Oil companies have very differing “personalities”.
Example: Exxon-Mobil lobbies heavily, favors republicans strongly, is the only major oil company that still denies global warming (and is an active campaigner against global warming science), has been involved in human rights violations, one after another, worldwide. Compare that to Royal Dutch Shell, who freely admits global warming and has done research on CO2 sequestration, invests large amounts in solar (and “exotic” oil production methods) in anticipation of long-term oil scarcity, spends little on lobbying, and whose former CEO was insturmental in stopping the Bush administration from seizing Iraq’s oil assets:
http://www.democracynow.org/article.pl?sid=05/03/21/1455245
To pretend that they’re all the same is rather silly. To pretend that there’s some sort of cabal of American oil companies is just stupid. There is an oil “cartel” out there, of course, but its name is OPEC. And, as the big “producers”, they’re the ones with the most to gain by high prices. OPEC is effectively neutered right now, however, as most OPEC nations are effectively tapped out. Which leads to the next issue…
3) Market volatility
I think everyone here already accepts that oil markets are highly stressed. If not, I suggest you read from almost any analyst of oil markets. China’s obscene quarterly growth lead to oil consumption that quickly passed up Japan, and shows no signs of stopping. At the same time, traditional fields are having trouble keeping up. Ghawar, the world’s largest oil field, is starting to use an obscene water cut. Nigerian oil keeps coming on and offline. Iraq is exporting on low levels (and importing gasoline).
Fragile markets inherently fluctuate severely — especially on predictions. Any actual, major loss of oil right now would roll the markets. As a consequence, companies buy up what they can when they think there might be a loss, then stop buying when they realize that danger is past. With the revised-down NOAA hurricane forecasts, especially this late in the year when most hurricanes tend to stay to the east, that’s a major stress reliever to the market. Of course, more Nigerian instability or Iranian sanctions could toast this situation.
4) The standard market curve
Every year, it’s a simple fact: oil prices are cheapest in January/February, and most expensive in June/July. The difference is typically about 50%. The biggest fall is usually in September and October; driving reduces, and refiners shut units down for maintenence. When you factor in the normal curve, this year is only a very slight deviation — the drop just came sooner. And why did it come sooner?
5) Crude prices
Crude prices, due to the aforementioned reasons, have dropped 17% in the last two months. The refiners have eaten the curve, delaying the fall in gasoline prices. As a consequence, refined gasoline prices have dropped. A summary of reasons for low prices:
Refining profits per barrel are down this week.
Summary: Shout conspiracy to the hilltops for all I care, but you’ll just make yourself look like the same kind of people who believe the moon landing was faked.
Addendum: We should like high oil prices. They help other nations like Venezuela stand up to the Bush administration, and make the world more hesitant to pose sanctions against Iran (or support an invasion of it). They encourage research into alternative fuel and energy sources. They bouy the biofuels industries. Why the heck here are people wishing oil prices were low? Have you thought about what low oil prices mean? More pollution, more waste. Our “cheap oil” was really a bizarre anomaly.
It’s very unusual, when you think about it, that a few years ago you could get a gallon of gasoline (pumped halfway around the world from literally miles beneath the surface by huge, expensive machines, shipped around the world, processed in uber-expensive equipment, shipped halfway around the world again, and only then distributed) for half the price of a gallon of milk (pumped from a cow that eats grass, of all things, bottled in uber-cheap plastic, and then distributed).
My two cents.
Oil is a vital commodity for our national existence and security right now. Government’s main job one is to protect national security. This new phenomenon of rapid, extreme mostly ups and some downs with oil prices does not seem due to anything but speculation and manipulation. With such a vital commodity, government should have long ago set up checks and balances to prevent and protect against such up and down speculation and manipulation. Such protections maybe are not needed in gold commodities, but yes in vital energy commodities. Can’t heat your house with gold.