Brent Baker credits Brian Williams for adding to the silly speculation about a link between the recent decline in gasoline prices and the upcoming mid-term elections.
USA Today dutifully reports a statistical relationship between gas prices and President Bush's popularity rating.
OK, one more time. I'll go slow.
1. Retail gasoline prices are driven by several 'macro' factors. What the President of the United States or his Big Oil friends want those prices to be is not one of those factors.
The biggest factor is the price of crude oil in the world market, a market that is dominated by OPEC, the oil cartel.
The second biggest factor is refining, as refiners change the mix of their production among gasoline, diesel fuel, kerosene, and other petroleum-based products. Those refining decisions, in turn, are affected by wholesale prices (refiners produce what will bring the highest price).
The third factor is consumer demand. In the fall, demand for gasoline drops, as consumers' summer travel is over. Plus, persistent high prices may have finally caused people to drive less, to save money. Demand for heating oil increases, as consumers in northern climes fill their tank for the winter heating season. So, the late September drop in gasoline prices is completely consistent with declining demand for gasoline.
2. Basic Economic Theory. Sorry, I probably didn't go slow enough on one point, which is this: the most basic element of microeconomic theory is that the price of a good is a function of the relationship of the supply of that good with the demand for it. If demand is constant, a greater supply means that prices will decline, as buyers have leverage against sellers and can price shop. A decreased supply means that prices increase. This is pretty intuitive.
A slightly more advanced concept is that suppliers adapt to the marketplace. When gas prices are high, refiners will produce more, thus lowering the price. Of course, that takes time, as producers may have existing contractual obligations to deliver alternative products, for somme period of time, or may have to make changes to their production process to switch to a more profitiable product.
3. The President Doesn't Have That Much Power. There are a lot of things the POTUS can do: declare war, hand out discretionary funds, establish relationships with foreign governments.
But there are a lot of things the President can't do jack squat about: he can't control the capital markets (though in times of turmoil he might give a rah-rah speech to calm everyone down), interest rates, gas prices, or oil prices.
He doesn't have that power, and his "big oil" buddies don't either. The whole thing is driven by huge, worldwide economic forces that are beyond EVERYONE's control (yes, even OPEC, to a great extent).
4. Everything You See Is Not a Conspiracy. Grow a brain, and realize that, in this big, crazy world we live in, every little happening or occurrence is NOT a big conspiracy. Sometimes we, as 'little people,' imagine that there are big, powerful people out there with lots of strings to pull and lots of things to control.
While there is such a thing as influence, and people DO manipulate governments and markets, those manipulations are on a tiny, micro level. They are things like getting your 3-acre lot re-zoned, or getting a $100,000 grant from corrupt Governor Blagojevich.
Huge, world-wide commodities markets are not manipulated by a guy who spends most of his day meeting with the Girl Scout troop from Cleveland who sold the most Girl Scout cookies.
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