Thursday, January 04, 2007

Manipulating Energy Prices for Election Purposes

As the November elections neared and gasoline prices dipped by as much as 70 cents per gallons, conspiracy theorists and other loons came out of the closet alleging that the Bush Administration and Republicans in the House and Senate engineered this decline to aid Republican election prospects. The Washington Post served as the conduit for much of the lunacy.

There are basically two avenues to their argument. One contends that Bush and oil executives are such great friends attending the same parties and sharing the same luxury boxes at the football games making it easy for President Bush to convince the oil "tyrants" to "help the cause.” The second alleges that the Bush family has a long-standing and friendly relationship with the Saudi Government. Thus the largest oil producing member of OPEC simply opened the oil spigots bringing the price down just before the elections.

Did U.S. oil companies assist the Bush Administration by increasing gasoline production just before the 2006 elections? The data do not support the histrionics of the anti-market fringe. The average refining capacity utilization for August, September and October before the elections of 2006 was approximately three percentage points below the average for the same three months from 1985 to 2006. In other words, President Bush needs to find out why the U.S. oil companies were attempting to undermine Republicans elections prospects in 2006.

Is there evidence that the Saudi’s increased exports to the U.S. before the 2006 elections? Data from the Energy Information Agency

contradict this assertion. For the three months preceding the 2006 elections, imports from Saudi Arabia rose by 2.9 percent in comparison to the same period for 2005. This compares to the average increase over the past seven election periods of 6.8 percent. In other words, the Saudi Government appears to have been more of supportive of incumbents in previous elections than in 2006. Interestingly the largest increases in Saudi imports came in 1994 with an upturn of 23.9 percent and in 2000 with an expansion of 12.8 percent. By examining the energy data, it appears that the Saudi Government may have been more supportive of Democrat office seekers. But that assertion would be an equally absurd stretch of creditability and the data.

In summary, oil and gasoline data fly in the face of those who contend that oil and gasoline prices can be manipulated by any party or organization---Republicans or Democrats, oil companies or OPEC.

Ernie Goss

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