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The influence of politics on gas prices

The unsavory influence of politics on gas prices
By Charles Langley and Laura Impastato, UCAN Advocates

 

Editor's Note: This story originally appeared in the Sunday, December 16 edition of the North County Times.

For years, the oil industry has said that oil prices determine gas prices, but our research suggests that politics has more to do with the price of gasoline than supply and demand.

In October, UCAN published a fever chart showing the relationship between high gas prices and presidential job ratings. The chart shows a “mirror effect” since 2001. It shows a strong correlation between low job approval ratings for the Bush Administration and high gas prices. For example, when gas prices reached their zenith in May of this year ($3.45 a gallon in North County and $3.20 nationally), the President’s job approval ratings dropped to a record low of 29%.

In January 2006, UCAN predicted that gas prices would plummet just before the November 2006 elections. We repeated our predictions in August and September. The forecast raised quite a few eyebrows, because at the time, gas prices had just broken an all-time record in North County. It turns out we called it right. In North County, prices plunged almost a dollar a gallon from $3.26 on August 1, to a low of $2.36 a gallon just two days before the November 7 election. By noon on election Tuesday, gas prices took a sharp curve upward. The following week prices had increased 6¢ a gallon in North County at atime of year when prices normally decline. So how did we call it? Read on:


Saudi Arabia’s Political Promise

In 2004, Prince Bandar of Saudi Arabia, had promised the Bush Administration that it would over-produce oil to bring down U.S. fuel prices prior to major elections. Energy Secretary Samuel Bodman recently acknowledged the cozy relationship between Saudi Arabia and the Bush Administration when he said, “Buyers and sellers have a common interest in maintaining reasonable prices for oil.” This “common interest” is both political and financial. The Saudis understand that high oil prices make realistic alternatives to oil more affordable. Prior to the 2006 midterm elections, the Saudis made good on Prince Bandar’s promise, cutting oil prices by $15 a barrel. But this aggressive over-production by the Saudis doesn’t fully explain the pre-election price chopping.

To put things in perspective, when the price of oil drops by $15 a barrel, it translates into about 36¢ per gallon of gas. Yet eight weeks before the election, the price of gas dropped by nearly a dollar in California, The law of “supply and demand” can’t explain such enormous price cuts.
Political heat equals lower gas prices

Years ago, North County Times Editor, John van Doorn, noticed a direct correlation between the price of gasoline and the level of political protest. He coined the term “Heat to Price” to explain how prices would plunge whenever lawmakers called for industry reforms. UCAN’s research shows that the biggest cause for the price chopping is that California refineries have trimmed their margins. Right now, the political heat is set on high with full burners heating up the energy lobby thanks to new energy legislation passed by the House on December 6. The $21 billion package is an environmentalist’s dream, but a nightmare for Big Oil, U.S. Senate Republicans, and the White House. It mandates that automakers increase average fuel economy of their fleets to 35 miles per gallon, and slaps new taxes on oil companies to fund the development of alternative fuels. The new taxes offset massive tax breaks that were funded by previous oil-backed legislation.

President Bush has promised to veto the new energy plan, and it is expected that it will be filibustered by Republican lawmakers. In the meantime, U.S. oil companies have refrained from their usual gas gouging until the Senate has a chance to vote on the bill. To the oil companies and the Republicans, “energy independence” means keeping the U.S. hooked on highly polluting fossil fuels such as coal and oil. Recent revelations about presidential hopeful Rudy Giuliani show the intimate and incestuous relationship between the energy lobby and Republican interests. At this time, the oil in a gallon of North County gasoline costs about $1.94. with an average gallon selling for $3.28. Earlier this year, North County gas reached a record high of $3.45, but the oil in that gallon of record-breaking gasoline cost almost 50¢ per gallon less.  (story continues below graphic).

In other words, even though the price of oil has increased from $62 a barrel to $88, the price of gasoline is lower because refineries are making a little more than half as much money per gallon of gas. Obviously, the price of oil has not been driving the price of gasoline. If California refineries return to the same profit margins we saw on May 9th of this year, gasoline would currently run about $3.90 a gallon … which is what will probably happen as soon as the political heat is off.

Laura Impastato is an Editor and researcher for the UCAN Watchdog, Charles Langley manages UCAN’s gasoline project at www.ucan.org. UCAN is the Utility Consumers’ Action Network, a local non-profit consumer group.

Filed Under
Gas & Autos Gas Prices -

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Anonymous (Stop using Gasoline) Really is in a Fantasy

It's probably a bit cynical, but voters usually reelect the same ol' office holders because after even one term they know pretty much what they have, and the world didn't come to an end. Any new candidate is seen as an unknown, but likely to be just as corrupt. In not now, when they take office.

As for the great idea of carpooling, busing, biking, walk and any other low energy (only referring to the fossil fuels) form of transportation (how do you say "Segway?), they just don't conform to the Southern California lifestyle. We've taken generations to move to the suburbs, or far reaching points in our sprawling city, and it can't be undone in a heartbeat. Let's take a look at each of your alternatives. I'll use my own situation as a gauge to their effectiveness and desirability.

First, Carpooling! Often seen as an ideal situation to funnel personnel into the job site you have to consider the practicality of every individuals situation. At the end of the day, from my office, personnel scatter in every direction. And many are not headed home. In most situations the average workcenter is a dozen or so individuals with contact with a few dozen others. Unless the organization as a whole (and it better be big enough) provides a data service of locating personnel for a carpooling service there's little chance it could happen. And how about those privacy laws? We can't just go to HR and gather the information; we have to invite individuals to provide it for the sole purpose of carpooling. And since the majority of people overall work at "Small Businesses" it would take cooperation of neighbors, etc. to get enough possibles. When I lived in Houston, TX (working for Big Oil) there was a public carpool database to signup for. Where is one for San Diego County?

Next, you mentioned Busing! When you say to take a bus I will presume you mean with all the transfers and changes in form of transportation, e.g. Trolley. From my home it would take an extra 20 minutes to take a bus I'd have to "walk" to meet. And that's just to get to the trolley station where the cars are already packed. I'd have to stand for the entire ride being bounced about with pther people's armpits (doesn't everybody shower?) staring me in the face. Oh, it's annoying to see these teenagers sitting and listening to their Ipods and ignoring the obviously distressed senior citizens that need the comfort of a seat. Stop after stop and people are getting in the already crowded trolley car and it only begins to empty when I'm nearing my stop. I guess we're all going to the same place? Na Da! As you watch people debark you can see them scatter in all directions. Finally, my stop and I'm able to breath fresh air again. Out I go just to run to the next bus stop to take the next segment of the trip to, you guessed it, a location I must walk from to get to my office. Well, at least I'd get 3/4 of a mile of walking (often running) exercise before I even get to work. The whole trip lasts about 1 hour and 45 minutes. And when I have something to carry, don't get me started.

Oh, yes, Biking! Very good choice, in fair weather and DAYLIGHT! I've biked to work some days, like "Bike to Work Day," and I was terrified most of the way. I thought I'd be smashed against parked cars or just run off the road completely. Look out for intersections, they're a killer, literally! When it's raining, like this season, it's just not practical and when it's dark it's just not safe. And I've tried biking to the trolley and that's not good either. Oh! Just what are you going to wear. I couldn't wear normal business clothes riding that bike so how am I going to change? And I'd probably need a shower at that end also. My employer doesn't even provide a locker, let alone shower. Just the mandatory lavatory. Uh, oh! The time has gone up. Just the biking takes in excess of two hours. Add to that the shower and change time and you're talking some real time. But the exercise is good.

Let's talk about Walking now! I'm a fairly fast walker, and when in shape I average over 4.0 miles an hour. Since I couldn't take any of the direct roadways I'd be limited to surface streets and their signals timed just to stop ME at every corner. You see I've already worked some walking into busing so let's not get started here. Now, jogging, a related bi-ped method of self transportation is another, and faster story. That is, between stop lights! And safety? Do you run in the street or on the sidewalk. Do you mow down the walkers that have to be three and four abreast? I just couldn't run a marathon to work every day, and let's not forget that shower and changing. Or, how do we get the clothes to work to change. Carry while running? Oh, I know. Go in on a weekend when there's no traffic and bring the clothes in my CAR!

I've worked in a few modifications already, but let's look at ETC., ETC.! At a top-end speed of 12-mph the Segway is an I option I mentioned. You're completely exposed and it's much like biking or jogging. Do you go on the street or sidewalk? Stop for lights? Hmmmm? Doesn't work either! I did think of Motorcycles, but many people are scared of them, and many drivers in cars don't see them in traffic. Check the statistics. Can't motorpool very well either! And, while you might avoid needing a shower, you'll still need to change clothes once at work. You're still exposed to the weather which I've seen bikers in some of the heaviest storms from my nice cozy vehicle while motoring to work. No, that's just not for all of us.

Well, there's a few Etc's covered and I'm sure we could find more. I thought of taking a TAXI, but that's just getting someone else to burn the gas for you, and they have to return to where they originated to be ready for the next fare. While I hear it can be cheaper for some to take cabs rather than own a vehicle it doesn't work for a 20 mile trip to work.

So, let's see, I've taken considerable time to cover these limited options for alternate travel to work. And none work for me. And all so many publicly funded transportation measures have lately been for public transportation. Not one has been for providing the roadways and extra lanes that could ease the pain of our daily commute. Yes, it is painful, but it's better than all the other alternatives. Yes, public transportation works for some, but not all. Take a bus or trolley as see if those of the people you want to sit, no, stand with all the way to work. Better yet, let you trip start at the border to see how the trolley and buses are crowded before they even get started on their routes. And watch as the kids get off to attend our schools. Maybe it's the insulation from this element of our society that most are trying to avoid by taking their own vehicle and driving alone. But as long as there's parking and it saves us TIME we're going to keep on doing it. Al least until gasoline gets TOO high.

Stop using Gasoline

WOW...a politician who is not trustworthy or honest. How can this be? I thought they were working for the American people? Oh wait...what fantasy was I in.....

People, all you have to do as consumers is stop using the product. To simple? Not really. Carpool, take the bus, bike, walk, etc, etc.

When you look at politicians like this, all you have to do is look in the mirror. They are reflections of you! If you are not holding your elected representative accountable, then shame on you for not voting them out of office.

We have no one to blame but ourselves.

USA - The new Third World

The influence of politics on gas prices

What a sad commentary on gas prices that the oil industry has such negative power over what consumers pay at the pump.

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