Since gas prices are dropping...

[OWB]

Ok work with me here people. It's pretty obvious that gas prices are dropping because of the midterm elections coming up so here is an interesting question that I read somewhere else...

Are the oil companies reducing the price of gas to help Republicans get elected? If they are, would that be considered an illegal campaign contribution?

Talk amongst yourselves..

 

[CSpindizzy]

Strange how all this time prices kept going up and now suddenly when those polls showed irate voters things are changing....gas prices, immigration...what next?

 

[GAVol]

Are the oil companies reducing the price of gas to help Republicans get elected?

Yes . . . They have coordinated with the National Weather Service to cut down on natural disasters; oil sultans in the Middle East to maintain supply levels; the Israelis and various terror organizations to cool Middle East tensions; and speculators to hold down oil futures. The meeting was held in Karl Rove's basement.

 

[GAVol]

Strange how all this time prices kept going up and now suddenly when those polls showed irate voters things are changing....gas prices, immigration...what next?

Could the Democrats actually be blowing it? Two months ago, I thought we were looking at a narrow GOP majority in the Senate and a Democratic majority in the House, but now I'm not so sure. I know in my district a 527 has really turned up the heat on a vulnerable House Democrat.

 

[OWB]

Yes . . . They have coordinated with the National Weather Service to cut down on natural disasters; oil sultans in the Middle East to maintain supply levels; the Israelis and various terror organizations to cool Middle East tensions; and speculators to hold down oil futures. The meeting was held in Karl Rove's basement.

Weren't gas prices high before hurricane season? Before Israel and Hezbollah started going at it? Before everything else?

I can't really argue with you right now, but bookmark this post. The prices will be sky high again after the elections, especially if it works and the Republicans get re-elected.

I'd almost bet money on it.

 

[CSpindizzy]

Funny how gas was still above $70 before hurricane season and the Israel-Hezbollah situation. There is still a crisis in Nigeria, Chavez is still screaming, the Winter heating oil demand is coming, etc. I'm just not seeing where the current events are matching the oil prices.

 

[CSpindizzy]

Keep in mind most of these polls are national and not refelctive of independent races. Also note poll numbers bounce in favor of whoever is in the news on a positive level. Bush makes some speeches his numbers go up and then trail back down when other issues come up in the news.

I can say that Rove is definitely back in control of things. The revolts within the party have been quelled for the most part and things are actually moving on issues like immigration that were all but dead. You even see Bush now backpedalling and compromising on many issues to get something on the table as well. The Dems have sat back and let the revolts go on and are doing nothing themselves as a whole. They are relying on each candidate to fend for themselves which is a better thing since trying to pull a national strategy would backfire.

 

[GAVol]

From what I've been reading, the GOP is about to flex some serious financial muscle. They are outspending Democrats 4-1 in some races.

 

[OWB]

From what I've been reading, the GOP is about to flex some serious financial muscle. They are outspending Democrats 4-1 in some races.

I would be too if I had big oil in my back pocket.

 

[CSpindizzy]

Money in Congressional races doesn't amount to too much. The Dems poured overwhelming amounts of money into OH in 2004 and both sides have dumped huge amounts of money in small targeted races and it doesn't come out to much.

The money is going mostly to seats already held by the GOP to try and hold on to those seats. You can pour $10 million into a Congressional race while the other side spends $1 million and you get the same results. You can only flood so much TV ads, mailers, and phone calls before you become redundant and it adversely affects you.

 

[GAVol]

Do you know anything about this Economic Freedom Fund. Apparently it's a GOP leaning 527 and it's been calling my house 2-3 a week to tell me how much Rep. Jim Marshall sucks, (a fact I am well aware of).

 

[volinbham]

Okay, let me get this straight -- somehow the GOP convinced Big Oil to lower prices???

Please someone explain to me how. What are the economic levers that were used? Don't just say that oil and GOP are in bed together. Please detail how this is happening.

In countless other posts, several have laid out the economics behind oil prices yet that all gets ignored...

One more time:

As for the pre-hurricane issues here are a few factors (which I will document for you) that impact the price: Anticipated summer demand drives up the futures price on oil. Add to that the anticipated hurricane premium. Oil prices typically drop after the summer driving season. Further, this spring and summer saw the transition of MTBE plus several other regulatory changes. Refinery capacity that was off-line in the Spring is coming back on. The number of summer blends tightens refining capacity.

Basically, supply fears have lessened (driving down the price of crude). In addition, refining costs have dropped due to absorbtion of regulatory change costs, loosening of refining capacity, and the annual transition from summer with it's high demand and increased number of blends.

 

[volinbham]

Are the oil companies reducing the price of gas to help Republicans get elected? If they are, would that be considered an illegal campaign contribution?

No evidence this is happening.

If this were a strategy, it would be difficult to keep quiet. Rather than worrying about legal/illegal campaign contributions, the companies would have a much bigger issue with the SEC and their shareholders. This would clearly be a violation of their fiduciary duty to the stockholders and most likely a serious SEC violation.

Gas prices have dropped 20 - 30%. Given the typical 10% profit margin at Big Oil, there is no way for them to absorb this subsidy.

 

[OWB]

Okay, let me get this straight -- somehow the GOP convinced Big Oil to lower prices???

Please someone explain to me how. What are the economic levers that were used? Don't just say that oil and GOP are in bed together. Please detail how this is happening.

In countless other posts, several have laid out the economics behind oil prices yet that all gets ignored...

One more time:

As for the pre-hurricane issues here are a few factors (which I will document for you) that impact the price: Anticipated summer demand drives up the futures price on oil. Add to that the anticipated hurricane premium. Oil prices typically drop after the summer driving season. Further, this spring and summer saw the transition of MTBE plus several other regulatory changes. Refinery capacity that was off-line in the Spring is coming back on. The number of summer blends tightens refining capacity.

Basically, supply fears have lessened (driving down the price of crude). In addition, refining costs have dropped due to absorbtion of regulatory change costs, loosening of refining capacity, and the annual transition from summer with it's high demand and increased number of blends.

No evidence this is happening.

If this were a strategy, it would be difficult to keep quiet. Rather than worrying about legal/illegal campaign contributions, the companies would have a much bigger issue with the SEC and their shareholders. This would clearly be a violation of their fiduciary duty to the stockholders and most likely a serious SEC violation.

Gas prices have dropped 20 - 30%. Given the typical 10% profit margin at Big Oil, there is no way for them to absorb this subsidy.

Sounds like more Republican propaganda to me. k:

 

[Lexvol]

Funny how gas was still above $70 before hurricane season and the Israel-Hezbollah situation. There is still a crisis in Nigeria, Chavez is still screaming, the Winter heating oil demand is coming, etc. I'm just not seeing where the current events are matching the oil prices.

I honestly never new that petroleum was tied to the price of heating oil, and I always thought it was a given that gas prices would spike in the summer months when more people were driving.

 

[CSpindizzy]

Do you know anything about this Economic Freedom Fund. Apparently it's a GOP leaning 527 and it's been calling my house 2-3 a week to tell me how much Rep. Jim Marshall sucks, (a fact I am well aware of).

Anyone can start a 527. Usually when campaigns have tapped out many donors someone will create a 527 to pick up more that hit their limits for the campaign.

Marshall sucks? I hear many Republicans saying he's not that bad. I don't have many contacts down there any more but the few I talk to say Marshall will probably win because he's been very toned down compared to the national Dems.

 

[volinbham]

Sounds like more Republican propaganda to me. k:

I see. Why let facts get in the way of a good theory.

Believing this is how the economy works (e.g. oil companies raise and lower the price of gas at will to achieve a presumed political agenda) is why it's dangerous to let democrats play with the economy :whistling:

 

[CSpindizzy]

Oil was $10 a barrel higher before the summer, before hurricane season, before Israel, etc. Again, claiming an end to certain things has eased the price does not follow logic and reason. There is just as much uncertainty out there now as there was 6-8 months ago.

 

[volinbham]

First, lets look at oil prices which make up for about 54-56% of the price a gallon of gas.

The price is set by traders. They react to current events but are primarily focused on future events. In other words, hurricane season is factored in long before hurricance season arrives. World political events that are destabilizing are part of the fear/uncertainty factor. Once they are built into the price, they fluctuate based on new events hypothesized impact on future supply/demand.

But the recent record-high prices have fueled a boom in exploration. And as that boom begins to yield more oil, the industry will gain a greater ability to ramp up production in one place in order to make up for any shortfall elsewhere.
This should reduce the impact of a supply disruption in, say, Iran or Nigeria, and ease what experts refer to as the security premium that's currently built into oil prices.
"That [premium] is in the neighborhood of $25 dollars a barrel," said James Williams, an energy economist at the consultancy WTRG Economics. "That number would go away, or most of it would go away, if we had more spare production capacity."

Political events are simply data points. In this case, more data points pointed to weakening pressure on demand than on tightening pressure on demand.

According to the Energy Information Administration, a few years ago the world had a spare production capacity of around 5 million barrels a day. That meant if something happened to Iran's oil exports, which ran at about 2.7 million barrels per day in 2005, other oil producing countries could ramp up production and cover the shortfall.
New production possibilities
But thanks to surging demand in the last few years, the world's spare production capacity has dwindled to only around 1.5 million barrels. That makes traders very nervous when the international geopolitical scene heats up the way it has recently.

However, increased production potential has eased those fears.

"By 2008 or 2009 you're going to have a lot more spare capacity in Saudi Arabia than there is now," said Adam Sieminski, chief energy economist at Deutsche Bank, noting that there would be around 2 million extra barrels per day of high-quality crude.

Pumping the fear factor out of oil - Aug. 18, 2006

 

[volinbham]

Oil was $10 a barrel higher before the summer, before hurricane season, before Israel, etc. Again, claiming an end to certain things has eased the price does not follow logic and reason. There is just as much uncertainty out there now as there was 6-8 months ago.

Okay, ignoring the information I posted and will continue to post --- show me the alternative explanation.

Why are oil prices dropping?

 

[CSpindizzy]

Again, I will refer you to current events that have occurred in the past year. Tell me how there is any different lull in activity than say 8 months ago. Oil levels are at the same point they were then. Just as you say political events drive prices what is so far fetched about the elections having an effect as well? If a future potential threat can drive prices up or down why can't the elections of a party very unfriendly to Big Oil have an affect as well?

 

[volinbham]

Again, I will refer you to current events that have occurred in the past year. Tell me how there is any different lull in activity than say 8 months ago. Oil levels are at the same point they were then. Just as you say political events drive prices what is so far fetched about the elections having an effect as well? If a future potential threat can drive prices up or down why can't the elections of a party very unfriendly to Big Oil have an affect as well?

Two issues here:

Big Oil (as in Exxon and the others) doesn't control oil prices. They represent a small fraction of the oil supply. The price is dictated by the oil producers then the traders. So OWB's original premise that somehow this was a manipulated event by Big Oil to help election is wrong since Big Oil doesn't set the price of oil. It is the traders. There is no evidence (show me otherwise) that upcoming mid-term elections have ever been a driver of oil prices.

Second, the factors that traders use to set prices are quite complex and deep just as with the general stock exchange. Just because you feel the world is just as uncertain as it was before doesn't mean that's the way they see it. They are focused on the key drivers of supply and demand plus arbitrage opportunities. Is it possible that they factor in upcoming elections? Anything is possible but again there has never been any suggestion I've seen that traders factor that information in in any meaningful way.

 

[CSpindizzy]

Big Oil as grouped is not considered oil producers? Traders have no incentives or ties to 'Big Oil'?

 

[OWB]

$2.00 before the midterm elections, $5.00 by next summer. Mark it down, heck, put it in your sig.

 

[volinbham]

Big Oil as grouped is not considered oil producers? Traders have no incentives or ties to 'Big Oil'?

Traders have no incentives to anyone other than $$$$$$$.


If we group oil producers as Big Oil then we have to say that Iran/Venezuela/Saudi Arabia, etc. are infavor of republicans and maintaing W's power???? Yeah right.