Now that the US election is over, will gas prices skyrocket?

Hello all,

Nice to chat with you.

The price of gas in the US, by some stange inexplicable coincidence, dropped by $1 a gallon before the November election. At the time, energy policy could have been a hot topic issue for voters. In California, there was a proposition on the ballot that would tax oil companies for drilling off the coast and use the revenues to fund alternative energy research. (Currently, oil companies can drill for free off the coast in California)

I've noticed gas prices have been ratcheting up now that the election is over and would not be surprised to see them reach $4 a gallon by new year's day. It seems the oil companies dodged a bullet and were able to get heat off them by lowering prices before the election.

Your thoughts....

The Federal government can affect the short-term price of oil (and hence gasoline) a little bit by filling, not filling, or even releasing oil from the Strategic Petroleum Reserve. I believe they stopped filling it during the summer and fall in the runup to the election.

They can also influence the price to a smaller extent, based on their "inventory reports" that affect the markets, to the extent that traders believe the numbers. They can also try to reduce the "risk premium" built into the price based on geopolitical tensions, by making nice with the likes of Iran.

But long-term there's little they can do to truly keep the price down, since fossil fuels are a finite resource affected by increasing demand here and abroad, while something like 75%-80% of global oil reserves are in the hands of national oil companies of OPEC and Russia, not oil "majors" like Exxon, BP, etc.

Here is an article that talks about this issue, pro and con:
www.columbusdispatch.com.../2006/11/05/20061105-F1-01.html

I don't think it is much a government conspiracy as a conspiracy by the oild companies to appease the people a tiny bit, so pitchfork wielding masses do not come knocking on their door with ideas like the tax in California on oil drilling that would fund alternative fuel research or people voting in legislators that will build mass transit systems that will move America into the 19th century.

Don't know about everywhere else, but since the dems. won in November, gas here in VA has already gone from 1.94 to 2.16 in less than a month.

And no, I don't think it is a coincidence...

Originally posted by Nicorette
The Federal government can affect the short-term price of oil (and hence gasoline) a little bit by filling, not filling, or even releasing oil from the Strategic Petroleum Reserve.

It can in fact affect prices very severely by doing just that as it makes building private inventories far higher. The US government were filling the strategic reserve while prices were rising and it was not only costly filling it at the time but helped no end it the price rises.

I believe they stopped filling it during the summer and fall in the runup to the election.

Which makes sense as prices immediately drop ....

They can also influence the price to a smaller extent, based on their "inventory reports" that affect the markets, to the extent that traders believe the numbers. They can also try to reduce the "risk premium" built into the price based on geopolitical tensions, by making nice with the likes of Iran.

While you are correct i believe you are vastly underestimating the results of these actions when the oil market already lacks liquidity ( eheh) in terms of how long it takes to bring the excess manufacturing capacity online.

But long-term there's little they can do to truly keep the price down,

So the 8 dollar per barrel prices in the late 90's were just some kind of weird accident? Fact is governments could affect the price of oil as much as they affect the price of food and if they subsidies it ( by 40% as they do for the farming produce) instead of taxing it US consumers could probably be looking at at around at one or two dollars a gallon for the next fifty years.

since fossil fuels are a finite resource

Actually you would be surprised how much evidence there is to the contrary..

affected by increasing demand here and abroad, while something like 75%-80% of global oil reserves are in the hands of national oil companies of OPEC and Russia, not oil "majors" like Exxon, BP, etc.

Why is it a problem if it's in government hands as at least people might force their own governments to act in their interest but how do you do that with corporations who conspire , in unison, to hike prices?

Here is an article that talks about this issue, pro and con:
www.columbusdispatch.com.../2006/11/05/20061105-F1-01.html

If your forming a opinion based on those types of articles you will never be able to prove anything one way or another. Rather attempt to discover what those 'market fundamentals' ( ahaha) supposedly can or can't do than believe those who tell you markets are simply too complicated to be manipulated by say a entity that has a market value of 300 trillion dollars.

Stellar