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Oil prices manipulated for elections? Bush says yes.

Bob Woodward via Gristmill
From Woodward’s new book:

During a meeting in the Oval Office, according to Woodward, Bush personally thanked Bandar because the Saudis had flooded the world oil market and kept prices down in the run-up to the 2004 general election.

(5 Oct 2006)
Spotted by David Roberts of Gristmill

Conspiracy Theories Abound as Oil Prices Fluctuate

Steven Mufson, Washington Post
In mid-May with gasoline prices at $2.95 a gallon and rising, 15 percent of Americans listed high fuel prices as their top concern, outstripping terrorism. And much of the public seemed ready to vent its wrath on President Bush and the Republican-led Congress.

By early September, though, with the nationwide average at $2.73 a gallon and falling, only 5 percent of those polled said that the price of gas was the single most important issue, according to a Washington Post-ABC News poll. Since then, the price of gasoline has fallen even further, now down about 70 cents a gallon from its peak in August — with only a month before the elections.
(6 Oct 2006)
The article covers four political reasons why oil price may have fallen:

  1. Saudi favour to Bush. This is acknowledged as a political possibility, but the author also notes that Saudi production has been dropping in recent months.
  2. Goldman Sachs selling gasoline holdings, and reducing the gasoline portion of its commodities index. This is acknowledged to have had a very significant effect on U.S. gas prices. (See more below.) It’s not explained what influence this would have on global crude prices.
  3. Secretly tapping the Strategic Petroleum Reserve. This is just noted as a theory. No facts are given to support or disprove it.
  4. Big oil theory. It’s noted that big oil companies have political preferences but not discussed further.

Some related articles below. -AF

Bush’s approval rating and the price of gas

Left Business Observer
While spikes in energy prices, like that suffered by poor Jimmy Carter, can doom a presidency, no occupant of the White House has ever seen his popularity so closely tied to the price of gas. In fact, more than three-quarters of the variation in W’s approval rating since he took office in January 2001 can be explained by movements in the numbers diplayed on pumps nationwide.

Here are two charts that make this point. First is a simple history of the gas price (from the EIA — here’s the long-term history and here’s the update) plotted with Bush’s approval rating, according to Gallup (here’s the link, but you have to be a subscriber to get the data). The gas price is inverted, so that higher values are plotted below lower values, so as to match the trajectory of the approval rating. The last part of the gas line, the dashed segment, plots a projected value for October of $2.51, which is where it probably will be based on a NYMEX crude oil price of just under $64, which is where it was on the afternoon of September 14.

(14 Sept 2006)

Running on Empty

Rob Kirby, Financial Sense Online
As most of you folks who drive a car are more than aware, over the past six weeks we’ve all been on the receiving end of welcome reprieve in the price of gas at the pumps. In fact, a good many commodity prices have moderated somewhat over the course of the summer.

While I “welcome” cheaper gas just as much as the next guy, I also like to get my head around the reason[s] for precipitous price movements – particularly in prices of commodities that have such a profound influence in my life. After all, it’s often said that knowledge is empowering, isn’t it?

Well, if you happen to be a “Commodities Bull” – last week [Thursday, September 21, 2006] the Wall Street Journal ran an inauspicious article in “Section C” titled, Some Investors Lose Their Zest For Commodities. With the article being “buried” in Section C and the fact that the newsy bit received zero TV time – I wouldn’t be at all surprised if you all missed it.

…Goldman Sachs [on July 12] tweaked the composition of their “benchmark” Goldman Sachs Commodity Index [GSCI].
(27 Sept 2006)
Includes graphs and a deeper explanation of the relationship between the GSCI and gasoline price than that mentioned in the WaPo article. This explanation was also mentioned by the New York Times, which is extensively quoted by Peter Stojan in Gasoline Price Manipulation Before the Elections at

Gas Pump Politics

Nicholas Von Hoffman, The Nation via CBS News
Do the democrats lose 50,000 votes every time the price of gasoline drops a penny? We’ll have the answer to that question in a few weeks, but in the meantime cheaper gasoline raises some interesting questions.

The first of which is whether or not the Republicans have arranged to lower them to prevent what had seemed to be defeat in November. Certainly, the timing of the price drop might cause even the credulous to entertain a suspicion or two.

You may be sure that the Republicans are delighted to see gasoline fade from the list of voter irritations. You may also be sure that the Republicans would have arranged for prices at the pump to swoon if they could, but can they?

Not likely. To make the price of gasoline come down in Ohio, where the GOP is in big trouble, the prices have to drop everywhere. No special walled-off Ohio oil market, or even an American oil market, exists. If the price of oil is going to go down in Cincinnati, it is going to have to go down in Shanghai. Oil, as the economists say, is fungible.
(8 Oct 2006)