Gas prices, economics and politics
Gallup tells us that economic confidence has slumped sharply in the past two week due mainly to the spike in gas prices driven by the unrest in the Middle East and North Africa.
Funny how that works, no? Gas prices go up, economic confidence goes down. And the rest of that goes “economic confidence goes down, incumbents suffer”.
So you’d think smart politicians would want to ensure that they’ve done everything they could to ensure gasoline prices remain as low as possible.
You’d think. But that’s not exactly what has happened here, is it? We’re now in the 10th month of a drilling moratorium imposed by this administration, so there’s really no immediate or impending increases in production domestically that could help ease this, is there?
The slump in confidence is likely tied to gas prices, which have risen sharply amid growing political instability in the Middle East, most notably in Libya. The U.S. Department of Energy reported an increase in gas prices from an average $3.14 per gallon nationwide during the week ending Feb. 14 to $3.38 this past week. In addition, news media focus on the challenges governments are having in passing budgets may also affect Americans’ perceptions of the economy.
Gallup’s Economic Confidence Index comprises two measures — one assessing consumers’ views of current economic conditions and another measuring their perceptions of whether the economy is getting better or worse. Both components are more negative than they were two weeks ago, but most of the change has come from increasingly pessimistic expectations about the economy’s direction.
The pessimism is being driven by the understanding that we haven’t the means to effect the problem nor have we done anything in the interim to improve our ability to effect the problem. In other words, we’re more at the mercy of foreign oil now than we were when this administration took office.
Secretary Salazar has been on a vendetta against oil, using the unusual but certainly horrific accident on the Deep Horizon platform, to effectively shut down a critical portion of the domestic oil industry. It has cost thousands of jobs and billions of dollars (not only to the industry but to the government in the form of royalties and taxes). Rigs which were scheduled to be deployed in the Gulf before the moratorium are now deploying elsewhere. It costs millions for companies when oil drilling rigs sit idle. So they’re off to do what – exploit foreign oil fields. And they most likely won’t be back in Gulf waters anytime soon.
The point, of course, is the entire energy situation in the US is being badly mishandled by the incumbent administration. And while they sit and fiddle, we become less and less able to effect world pricing for oil because our capability has been hamstrung by a government and bureaucracy that is basically antagonistic to fossil fuels.
That’s a risk, especially in these economic times. If the economy is still in this sort of shape, pessimism still holds the majority in consumer confidence and gas prices hang around the $3.50 range, even some of the so-called front runners in the GOP at this point might be able to squeak out a win. And it would most likely, as Charlie Cook predicts anyway, mean a tough election for Congressional Democrats in both houses.
Gasoline isn’t going to go down anytime soon as the unrest continues to roil the ME and N Africa. And if something happens in Saudi Arabia, all bets are off. But it is interesting to see how quickly the price of one commodity – albeit a critical commodity – can turn sunshine to gloom with the public. It is something to watch going forward.