The Election Year of Magical Thinking

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Chris Cillizza, on his great Washington Post blog "The Fix" (I'm a sucker for blogs that package actual journalism instead of bloviation) finds that lower gas prices are receiving a mixed reaction in the crucial Ohio River region, where, if Democrats are winning the House, they'll grab much of their new majority.

In the midst of the back and forth on gas prices comes a new poll from Gallup that shows large numbers of the American public skeptical about the timing of the cost cuts. Forty-two percent of the sample said that the Bush Administration had "deliberately manipulated the price of gasoline so that it would decrease before this fall's elections," while 53 percent said the price drop had nothing to do with the President.

Don't forget that state Rep. Mike Weaver (D), who is running against Rep. Ron Lewis (R) in Kentucky's 2nd district, told your Ramblers on day one that voters should question whether the price at the pump is being manipulated.

This seems to be an issue that Democrats will continue to use because it is resonating with the voters.

Why do voters believe that the Bush administration manipulates gas prices? Is this something the president will have to publicly shoot down, i.e. the draft rumors he maligned in the second 2004 presidential debate? The number of people who believe the federal government can manipulate international oil prices won't be persuaded by some sarcasm from Tony Snow.

NEXT: Marijuana Glasnost: I got high and nothing bad happened. Next time I'll try some stronger bud.

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  1. This is really depressing. Some nut job on a message board I frequent floated this theory last week and I chalked it up as about as fringe as you can get. But 42%!?!! Sheesh, this is a bummer.

  2. The federal government does manipulate gasoline prices via taxation. As do state governments.

  3. Am I the one who is confused about i.e. and e.g., or is it other people? I always think i.e., means “that is,” and “e.g.” means, “for example,” but people seem to use them interchangably.

  4. Because presidential candidates campaign on issues that they actually lack the authority, the power, or both to do anything about. Because the press often equates the larger entity with the individual–like with CEOs–because it provides better “narrative”. Because the press and many of us think that the most important actor in the free market is the president (huh???). Because we like to believe that someone is actually on top of things and that there’s a reason for all of this chaos called life. Because we have an idiot streak and will believe anything we read.

  5. A more believable conspiracy is that the oil companies are lowering the prices on their own because they want the right wing of the demoblican party to stay in power.

  6. Here’s i.e. and e.g. for you:

    • id est (that is)
    • exempli gratia (for example)

    You use i.e. for defining a statement and e.g. for providing examples of a statement. There’s usually a comma after each, too, though I think there are some exceptions to that.

  7. When your country socializes more and more things, it is probably rational to think gas prices are subject to socialsm, too.

  8. Und Mitch, und ze rest uv mein herran, zhey are not interchangeable!!!! Write “Romans go home” vun Milliarde Zeiten. Then self flagellate ze rest uv ze day.

  9. A more believable conspiracy is that the oil companies are lowering the prices on their own because they want the right wing of the demoblican party to stay in power.

    Thank you. That is precisely what is going on. All this “you people are idiots for saying the prez controls oil” is a smokescreen — of fucking COURSE “the president” doesn’t do it. Nor does “the administration.” They’re too busy convincing a different 42% that Saddam Hussein flew planes into the WTC then went home and built nuclear weapons that he was going to hand-carry to America by walking across the Atlantic Ocean.

    Plenty of people with vested interests in seeing the GOP retain its majority can, have, and do change oil prices to benefit candidates, and they do it BECAUSE the public has a better perception of incumbents whenever “things seem to be getting better.”

    The oil market has never been a free and open market and its prices can be floated up or down with relative ease as the mood requires.

    So what we have here is not an idiotic belief in the ominipotence of the president; what we have are junior varsity GOP activists paying bloggers $2 a pop to misrepresent what the criticism actually is, so that it can be marginalized.

  10. 2/3 of that 42% are Democrats.
    Is it ideology or just old-fashioned stupidity?

  11. If one wanted to cynically exploit the oil price issue without resorting to conspiracy theories,one might point out that the government leaves consumers at the mercy of market forces when it comes to necessities of life such as gas and heating oil. All you have to do is paint a picture of some elderly people in the northern states struggling to pay their heating bills while the Republican-led gov’t offers tax breaks to the rapacious oil companies.

    People like the free market so long as the supply-demand equation favors them.

  12. Ho-hum. The old “Big Oil is manipulating gas prices conspiracy theory.”

    Can’t anyone come up with a new conspiracy theory?

    How about “McDonald’s is driving down gas prices so people can afford to drive to McD’s and get a coronary so the have to go to the HMOs that they control?” Should be good for at least a dozen web pages and a lecture by some nut professor which will be quoted in the mainstream media.

  13. A more believable conspiracy is that the oil companies are lowering the prices on their own…

    I think Eryk Boston nailed it. But since Bush and Cheney are pretty tight in that circle, does it really matter?

    People are suspicious based on the timing. I’ve been hearing it in lots of places for several days. Bush & Co are reaping what they’ve sown. Folks don’t trust them. Folks feel manipulated. Perception becomes reality.

    The administration has managed things pretty cynically for quite some time. As a result, folks are cynical.

    And thanks to Pro Libertate for the i.e./e.g. clarification.

  14. Of course an even wackier theory would be that the end of the summer travel season combined with the switch to winter gas formulas and a couple years of incentives to reduce usage have driven prices down. Of course you’d really have to be nuts to buy that one.

  15. Perhaps elections are in November because the price of oil falls almost every year in spring and fall.

    That said, I thought it is obvious that the Feds manipulate the price of oil. Isn’t that what the national petroleum reserve is intended for in the first place?

    Buy a little extra when the price sags, stop buying, or even sell, when the price is high. If done right, the Feds will actually make a little money in a basically honest fashion.

  16. Here’s a better conspiracy theory. Paulson, the election, the GSCI. Connect the dots people!!1!

    http://www.financialsense.com/Market/wrapup.htm

  17. madpad,

    It’s akin to wag-the-dog theories. Honestly, I think one of the biggest problems we have–and this may be a humanity-wide issue–is not understanding the fact that a seeming correlation doesn’t always mean a cause-and-effect situation.

    The reserve isn’t big enough to manipulate prices very much, and opening the reserves is a public activity. I’m thinking that maybe the end of summer demand, the lack of threatening storms this year, the appearance now that the U.S. isn’t really poised to invade Iran, etc., etc. might have more to do with gas prices than anything the president could do. Other than some crazy invasion or tax scheme (which would require Congress’ help, anyway), the president’s influence on oil prices is quite limited.

    I think people really have trouble as well understanding just how enormous the global marketplace is and how small even our ever-growing government is compared to it. Influence? Yes. Control. No way. Anyway, wasn’t Gore pretty heavily connected to Occidental (he divested for the 2000 campaign to avoid the environmentalist hellfire)? Did he use his connections to manipulate oil prices? Why not? Maybe because he couldn’t do anything beyond perhaps making a few short-term bumps in the price?

  18. When I first heard someone make this claim, I thought it was a Blame Bush for Everything Joke. Sadly, it’s not.

    Last year I bought gas at $1.73 a gallon on November 5th, and it was under $2 a gallon the entire month. This, despite gas going to above $3. We’ve still got a ways to go until we’ve reached last year’s November prices. Now what election were we having last November that led Bush to lower gas prices so much? Perhaps Bush was just off by a year…

  19. They believe it because (1) Bush is tightly connected to the oil industry and (2) they want there to be a secret cabal because it is less fearful than “vagaries of the market.”

  20. Not usually a conspiracy junkie, but I thought that the following explanation of how a large financial firm might cause short term price fluctuations by ‘rebalancing’ index components had at least some plausibility.

    http://www.financialsense.com/Market/wrapup.htm

  21. they want there to be a secret cabal because it is less fearful than “vagaries of the market.”

    See, if the world was run by a secret cabal, then according to the movies we could solve all of the world’s problems with the combined efforts of a guy who discovered something he wasn’t supposed to see, and an attractive young female journalist who’s determined to help him expose the truth to the world. There would be some car chases, a frame-up, a clever disguise, a daring mission inside the Cabal’s headquarters to obtain evidence, and then a dramatic public revelation that changes everything.

    If anybody wants to make that movie, contact my agent and we’ll negotiate my fee.

  22. P.L.

    I didn’t say I agreed with the consiracy theories (well…maybe a little). I just offered my take on why they were prevalent.

    As for your very keen observation, it’s kinda like Bush gathering public support for invading Iraq by turning a seeming corellation that Saddam and Al Qeada were both Arabic Bad Guys into a cause-and-effect situation that Saddam was getting ready to attack us.

  23. thoreau, babe, I like the concept. Innovative, new, exciting! I see it as The Matrix meets that Will Smith movie. Can we beef up the love interest? I need a Jolie-Pitt vehicle.

  24. If anybody wants to make that movie, contact my agent and we’ll negotiate my fee.

    Already been done. Haven’t you seen The Da Vinci Code?

  25. JTD-

    The problem with that theory, or any similar theory, is that if we assume that GSCI is undervaluing oil-based assets for political reasons, other financial firms and speculators would be more than happy to buy these underpriced assets, thereby driving up the price of oil and its financial derivatives. Any conspiracy theory would have to involve not only big oil but a huge and varied group of financial firms and individual investors, all of whom would have to agree not to buy underpriced assets and derivatives. Likely? Absolutely not, as one cheater would stand to gain an ENORMOUS amount of money.

    But hey, if you buy that theory, I suggest stocking up on oil futures or refined gas. You’ll either get filthy rich, or you’ll lose your shirt and disprove your political conspiracy theories at the same time.

  26. If anybody wants to make that movie, contact my agent and we’ll negotiate my fee.

    Already saw it. The President’s Analyst. A classic.

  27. The number of people who believe the federal government can manipulate international oil prices won’t be persuaded by some sarcasm from Tony Snow.

    They won’t be persuaded by anything. Because they don’t get that the vast, vast majority of the oil market is controlled by state actors. Feel free to explain why the Middle Eastern nations of OPEC and Hugo Chavez of Venezuela would want the Republicans to stay in power. Didn’t Chavez just call Bush “el Diablo” like two days ago? Or was that some sort of crazy South American code for BFF?

  28. Timothy-

    I think people would rather believe that oil is controlled by a coalition of omnipotent American corporations and omnipotent American politicians.

    Finding out that foreign governments have more control over this crucial resource would be absolutely terrifying for a lot of people.

    To be honest, I’m still a little freaked out. Maybe I’d better come up with a movie based on it, to calm my nerves.

  29. Well, if I were America’s mortal enemy, I’d want the Repubs to continue in one-party rule.

  30. Finding out that foreign governments have more control over this crucial resource would be absolutely terrifying for a lot of people.

    Wasn’t there one already, you know, starring Paul Krugman? Oh wait, that was Fat George Clooney With A Beard, mixed them up for a second.

  31. The Oil Market is not a “free Market”

    Imagine you open a lemonade stand. Your selling price may be based upon several factors – demand & supply, competition, alternative products (soda), and what the public will pay. That is a free market. Now suppose you lobby your mayor to pass anti- competition “licensing” that restricts competitors from from selling lemonade, or you collude with others to prevent competition, or create a futures market for lemonade shares and then direct the speculators to trump up every troubling event and downplay any positive news. This and other facts eliminate the free market.

    What is to blame? 1. the futures market. Futures markets in Oil love fear and hate good news. Proof – somebody in the middle east blinks (no supply interruption, no real crisis) and the price soars. New oil reserves in the gulf and Experts will say minimal or no effect for years, if ever. Really?

    2. Government Regulation is also to blame. As hard as it may seem to believe, businesses are not run by free thinking capitalists. They are run by businessmen who watch the bottom line. (Ask Microsoft about its free market loving competitors) Many lobby Congress to punish competitors or limit competition. That line about no new refineries built in ten years – Do you really think if a billion dollar business needed more refineries, it wouldn’t get done… The business of America is Business. The answer is that the Oil Companies (and Governments) make billions on the status quo. They don’t need to increase supply if they meet demand and can charge more with supply fears.

    3. Storage Capacity – We are nearing storage capacity… Wonder why b/c everyone was waiting for oil to hit $100 Guess what though – the supply is still there – so no more can be stored. But, we can’t refine any more (at least not in the US and we limit imports) so the price will drop only so far.

    These interferences (among others) render the oil market anything less than a free market.

  32. “A more believable conspiracy is that the oil companies are lowering the prices on their own because they want the right wing of the demoblican party to stay in power.”

    How would that work? Oil and gas are about the purest markets around, every drop that is produced sells. Even if all the CEO’s AND the heads of the state oil companies got together and decided to do something illegal and control prices, they don’t have any realistic way to do that in the short term. The actually supply of oil or refined product is controlled buy hundred’s of thousands of engineers, geologists, roughnecks, ect, trying to produce as much as they can. It would be fairly obvious if a CEO sent out a memo asking his people to make less oil, and the stockholders would be pretty pissed.

  33. joe, well, it’s a market, anyhow. Not many markets in this world are entirely free of government influence/interference, and oil is probably even more entangled than other commodities. Still, the U.S. government could never be said to control that market.

    Also, I doubt many here think that corporations don’t enjoy using laws and regulations to limit competition and aren’t free market purists (except when it suits them to be). I miss the 90s, when Microsoft and other I.T. companies were defiantly avoiding Washington (MS didn’t have a lobbyist in DC until the DOJ forced them to get all Washingtony).

  34. Bill Clinton is taking orders from Bj?rne, the Japanese are in control of the Triliberal Commission, and it’s actually Wall Street that controls the Templars, not the other way around (it’s a common mistake).

  35. Pro Liberate,

    read the comment that was posted immediately after mine. “Purest markets” please. No, the Government may not directly limit price. The limitations I have described as well as others allow for price manipulation. The Execs could limit prices for a short time…which is all that is necessary where the attention span of the public now calls gas at $2.35 cheap. Yeah, I guess it is a “market”

    A month or two ago before the slide – I saw a few articles about bush approval ratings and the price of gas. Then abot two weeks later – the prices slide – not just 10-15 cents but 40-60 cents. Just Coincidence?

    Look, I favor free markets and liberty. But is it really beyond the realm of possibility?

    Joe

  36. I didn’t say I agreed with the consiracy theories (well…maybe a little). I just offered my take on why they were prevalent.

    My take on why these conspiracy theories are so prevalent:

    People are stupid.

    I believe that covers all the available data points.

    1. the futures market. Futures markets in Oil love fear and hate good news.

    The ignorance of commodities markets displayed in this comment is truly staggering. You don’t even know where to begin, but trust me, joe, the people playing the oil futures market have one and only one bias – making money.

    No market can consistently overreact to bad news or underreact to good news, because doing so creates huge profit opportunities that traders will not pass up. As soon as they see a bias like you allege, they play the other side of it, and in a very short time the bias is corrected for.

  37. People are stupid.

    R.C. Deans wins this round of Super Jeopardy!

  38. Well, joe, you’re certainly correct in saying that the US and international oil markets can be alot freer.

    But it’s precisely this type of faux populist oil-company bashing that gets the government involved in the first place — the politicians figure they can get votes out of it, so they pass all sorts of punitive laws and taxes on Big Oil to make the common folk believe they’re “looking out for them” and “on their side”.

    That line about no new refineries built in ten years – Do you really think if a billion dollar business needed more refineries, it wouldn’t get done… The business of America is Business.

    If building a new refinery were as cheap and easy as building a new Wal-Mart, then there would be refinieries in every city. But alas, it’s not.

    A refinery is a multi-billion dollar investment, one that has to operate for many years to be profitable. Thanks to local, state and federal clean air regulations, coupled with local manifestations of the NIMBY syndrome, it’s simply not profitable for anyone to build a new refinery with gas prices at the levels they are now. So gas prices have to get alot worse before they’ll get better.

  39. joe,

    You make a fair point that oil is extremely influenced by non-market actors and actions. Nonetheless, unless these actors and actions change the rules so often that all predictability is lost, it’s hard to say that the supply, demand, and price of oil does not constitute a free market.

    In fact, of your three factors to blame, only the second is not a market phenomenon. Futures markets are extremely free. If you really believe they overreact to bad news and underreact to good news, you should make a fortune on them. I, on the other hand, believe that most of the money in futures is controlled by people who are interersted enough to figure out what is really going on and not by people who respond to TV commercials saying, “The price of heating oil has gone up every winter for the past ten years. Put your money in it now!”

    As for storing oil, as well as building or retiring storage tanks, that also fits perfectly within free market phenomena. I expect if you looked closely at it, the storage of oil is quite rational and economically efficient, and not guided by hands with other motives.

  40. I’d assume people believe it because Bush and Cheney have historical ties to the oil business, have spent a lot of time on oil-related issues (ANWR and the Iraq war — whatever Bush’s actual reasons for Iraq were, oil was on the list. It’d be on anyone’s list when making decisions about Iraq), and generally seem rather tight with the oil industry.

    It’s the appearance of the thing that’s leading to the rumors and theories. It doesn’t help that the Texas oil business is famously of the “scratch my back, I’ll scratch yours” variety.

    I’d worry more about the usual six-month lag time on economic issues. Americans will still be pissy about the 3 dollar a gallon June prices when they go to vote, not the two dollars a gallon they just paid to fill up.

  41. Chris S. –

    Did not say that I bought into the theory, but I thought that it some potential, unlike most.

    Note that this would only have to be a short term imbalance, say of a few months, to have an impact. Part of the attraction of this method is that it would not need as many players as you suggest to get started. Once the basket of items that make up the key index, in this case the GSCI, is rebalanced, it produces as domino effect of selling within other indexes or portfolios that track the primary index. The selling pressure brings the price down temporarily. Would it not be a typical arbitrage situation that rebalances itself in the long run? A 50-100% fluctuation in commodity prices is not that uncommon, and can be precipitated by a number of things.

  42. Son of a!,

    You’ll notice that this week the Orbital Mind Control Lasers have added a violent alignment to old Bill.

    Next round, the Democrats plan on making him a Messiah.

  43. One thing about manipulating the price of oil–letting it go sky high if it could’ve been prevented seems a little, well, dumb. If I were at all inclined to blame the Administration for the increase, then I would not be placated by a relatively small dip. Now if we were back in the buck-a-gallon range, that might be a different story.

    Actually, the Administration may be a little to blame for the mishandling of the Iraq occupation and the saber-rattling vis-?-vis Iran. I’m not sure the real blame doesn’t principally lie on the not-so-nice guys in the sandier regions, but I suppose if the oil markets had been overwhelmingly impressed with our responses, they’d have reflected that with lower prices. Uncertainty is usually bad in any commodities market. Bad for the consumer, anyway.

  44. But 42%!?!! Sheesh, this is a bummer.

    Well over 42% of the public doesn’t believe in the theory of evolution. Get used to populist disappointments. As I said once before in another thread: The more you know of your fellow man, the less you trust him to vote.

  45. See, if the world was run by a secret cabal, then according to the movies we could solve all of the world’s problems

    Speaking for myself, I sure hope the world is run by a secret cabal, because the alternative is that the world actually is being run by the tardlets that’re on my tv now, and that’s just too much to accept.

  46. Some slight tweeking to the storyline,
    See, if Russia was run by an oil baron, then according to the movies we could solve all of the world’s problems with the combined efforts of a guy who discovered something he wasn’t supposed to see, and an attractive young female scientist who’s determined to help him expose the truth to the world. There would be some car chases, a frame-up, a bunch of clever disguises, a daring mission inside the oil baron’s headquarters to obtain evidence, and then a dramatic public revelation that changes everything.

    If anybody wants to make that movie, contact my agent and we’ll negotiate my fee.

    Sorry babe, Val Kilmer did this one a few years back.

  47. Pro Liberate,

    read the comment that was posted immediately after mine. “Purest markets” please. No, the Government may not directly limit price. The limitations I have described as well as others allow for price manipulation. The Execs could limit prices for a short time…which is all that is necessary where the attention span of the public now calls gas at $2.35 cheap. Yeah, I guess it is a “market”

    A month or two ago before the slide – I saw a few articles about bush approval ratings and the price of gas. Then abot two weeks later – the prices slide – not just 10-15 cents but 40-60 cents. Just Coincidence?

    Look, I favor free markets and liberty. But is it really beyond the realm of possibility?

    Joe

  48. While I tend to think that oil isn’t exactly a “pure” market, I do think the ability to manipulate the price past a few days is small. Anything significant that the White House might do would be visible, too, I think. I suppose we might secretly strong arm, say, the Saudis to radically increase production, but if we really had that option, why not use it to keep the price down in the first place? Remember, Bush could’ve done a whole lot more with a popular mandate than with any support from the oil industry. Maybe invade Canada or something 🙂

  49. “Look, I favor free markets and liberty. But is it really beyond the realm of possibility?” – joe

    Ok, fun is fun but enough’s enough. Who ARE you, and what have you done with the REAL joe?

  50. rob – look at this joe’s email address when you mouse over his name…it is not our regular joe. Our regular joe has the surname of ‘Boyle’.

  51. A more believable conspiracy is that the oil companies are lowering the prices on their own because they want the right wing of the demoblican party to stay in power.

    Look at the price of light sweet crude over the last month. The price goes beyond big oil. It’s international in scope.

  52. Of course an even wackier theory would be that the end of the summer travel season combined with the switch to winter gas formulas and a couple years of incentives to reduce usage have driven prices down. Of course you’d really have to be nuts to buy that one.

    Coupled with SUV sales in the shitter, coupled with BP getting the pipeline back to capacity, coupled with the news of a megastrike in the gulf, coupled with the weakest hurricane season in memory, coupled with those rigs and refineries being online all summer and fall, coupled with a number of small hits all along mediterrean africa, coupled with Sakhalin production finally coming back to some semblance of a schedule…..

    But nah, it’s not that. Exxon wants a republican congress.

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