I'm sure the fact that the presidential election is over has nothing to do with this.
The International Energy Agency, which advises industrialized nations on energy policy, warned on Thursday that the supply shortfalls that pushed oil prices into triple-digit territory this year are far from resolved, and could lead to a new period of high prices.So the supply shortfalls that lead to higher prices are unresolved, but the price of oil kept dropping. I guess it's just a coincidence that this warning came two days after election day.
Oil has plummeted from its summer peak in recent weeks as the financial and economic slowdown reduced consumption. But many analysts believe oil could bounce back quickly once economic growth resumes. On Thursday, oil futures in New York settled at $60.77 a barrel, down $4.53, their lowest level in 19 months. Prices are now 58 percent below their peak of $145.29 a barrel in July.
Funny how the normal rules of the free and unfettered marketplace don't seem to apply when a Republican candidate needs a boost.
Something Washington Post journalist Bob Woodward said two years ago while prices were going higher sends chills: "They could go down very quickly. That's the Saudis' pledge." According to Woodward, Prince Bandar bin Sultan, Saudi Arabia's ambassador to the United States, "told President Bush that the Saudis would cut oil prices to ensure a strong economy for Election Day." This prediction has come to fruition.There's nothing arbitrary about it: People in positions of power and wealth tend to protect those positions, and oil companies are not about to sit back and let their profits hinge on an uncontrolled election. It's not an accident that the gas prices fell far and fast in the two months leading up to the election. The same thing happened ahead of the midterm elections in 2006.
U.S. oil company executives also possess the power to allow price drops for the election. They have enough room to play -- including last year's collective $100 billion in record profits and Exxon Mobil's own near record $10.6 billion profits this past quarter. Oil executives are full of fear over new leadership in a Congress that would investigate them.
An "improved" economy is a political boon to incumbent legislators. The Dow Jones high has appeared when gas prices on average dropped nearly 80 cents. It's as though the U.S. doesn't want to know why the prices are declining; we're just too happy about it to care.
The U.S. could again be frustrated when the Saudis and oil executives close the spigot after the upcoming elections. Maybe then we'll want to know why the gas prices arbitrarily fluctuate.
This chart, from the Energy Information Administration, tracks the price of gas from May 2006 to this month. There are only two significant price drops on the chart. The first one is from September to November 2006, when prices fell from more than $3 per gallon to about $2.20 per gallon. The other significant price drop was from September to November 2008 -- the run-up to this week's election -- when prices fell from more than $3.80 to $2.40.
Note what happened to gas prices after the '06 mid-terms: As soon as the winter ended, they went way up. From February to May 2007, the price of gas went up more than a dollar a gallon, and ended up higher than their highest point in the six months before the election (the oil companies making up for the discount). If that happens again, we're looking at more than $4.20 per gallon by the middle of next year.
So don't get used to these prices. If oil companies can keep them artifically low to boost candidates they prefer, they can keep them artificially high to screw the ones they don't. So if you need gas, get it while you can still afford it.