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Many Americans suspect gas price decline is political market rigging

Section: Daily Dispatches

Americans Skeptical of Gas Price Drop

By Brad Foss
Associated Press
Monday, September 25, 2006

http://biz.yahoo.com/ap/060925/gas_prices.html?.v=1

WASHINGTON -- There is no mystery or manipulation behind the recent fall in gasoline prices, analysts say. Try telling that to many U.S. motorists.

Almost half of all Americans believe the November elections have more influence than market forces. For them, the plunge at the pump is about politics, not economics.

Retired farmer Jim Mohr of Lexington, Ill., rattled off a tankful of reasons why pump prices may be falling, including the end of the summer travel season and the fact that no major hurricanes have disrupted Gulf of Mexico output.

"But I think the big important reason is Republicans want to get elected," Mohr, 66, said while filling up for $2.17 a gallon. "They think getting the prices down is going to help get some more incumbents re-elected."

According to a new Gallup poll, 42 percent of respondents agreed with the statement that the Bush administration "deliberately manipulated the price of gasoline so that it would decrease before this fall's elections." Fifty-three percent of those surveyed did not believe in this conspiracy theory, while 5 percent said they had no opinion.

Almost two-thirds of those who suspect President Bush intervened to bring down energy prices before Election Day are registered Democrats, according to Gallup.

White House spokesman Tony Snow addressed the issue Monday, telling reporters that "the one thing I have been amused by is the attempt by some people to say that the president has been rigging gas prices, which would give him the kind of magisterial clout unknown to any other human being."

"It also raises the question, if we're dropping gas prices now, why on earth did we raise them to $3.50 before?" Snow said.

The excitement -- and suspicion -- among U.S. motorists follows a post-summer decline in gasoline prices that even veteran analysts and gas station owners concede has been steeper than usual.

The retail price of gasoline has plunged by 50 cents, or 17 percent, over the past month to average $2.38 a gallon nationwide, according to Energy Department statistics. That is 42.5 cents lower than a year ago, when the energy industry was still reeling from the aftermath of hurricanes Katrina and Rita, which damaged petroleum platforms, pipelines and refineries across the Gulf Coast.

Industry officials said the competition among gas station owners to sell the cheapest fuel on the block is fierce.

"They want to gain market share," said John Eichberger, director of motor fuels at the National Association of Convenience Stores.

Jay Ricker, president of Ricker Oil Co. in Anderson, Ind., which owns about 30 gas stations and supplies fuel to 30 more, said he's thrilled to see pump prices sinking as fast as they are.

With prices falling, more customers are buying mid-grade and premium gasoline, Ricker said, and they're spending more cash inside his convenience stores, where profit margins are higher.

"I'd much rather sell them a donut or a fountain drink," said Ricker, whose stations are selling regular unleaded for a few pennies above $2.

Fimat USA oil analyst Antoine Halff said there is no doubt that "the downturn in prices is welcome news from an electoral standpoint for the ruling party." But he scoffed at the notion that the U.S. president had the power to muscle around a global market.

The plunge in prices, Halff said, is the result of growing domestic inventories of fuel, slowing economic growth and toned-down rhetoric between Iran and the United States, which has been critical of Tehran's uranium enrichment program.

The selloff has been magnified, Halff said, by the recent retreat from the market by many speculative investors who got burned by the late-summer volatility. Just last week, a prominent hedge fund told investors that it lost some $6 billion due to bad bets on natural gas prices.

That said, "the sky is not falling," said Halff, who believes oil prices will likely head higher again this winter and average more than $65 a barrel throughout 2007.

At the start of summer, oil analysts were worried about rising demand, the threat of hurricanes and the nuclear standoff between the West and Iran, OPEC's second-largest producer. As a result, crude-oil futures soared to more than $78 a barrel in mid-July.

But by summer's end, these fears had largely dissipated. On Monday, November crude futures settled at $61.45 a barrel.

"We have lots of gasoline supply," said Joanne Shore, an Energy Department analyst. Data maintaned by her agency show U.S. inventories of gasoline at 207.6 million barrels, 6 percent more than last year and slightly above the five-year average for this time of year.

Asked if it was possible that oil companies would reduce their prices in order to help Republicans, Shore responded: "What company in their right mind would step forward to kill their profit?"

At a suburban Miami Mobil station, where regular was selling for $2.66 a gallon, no one was buying in to the conspiracy theory.

"The decrease of gas prices is simply due to a seasonal adjustment of price," said Javier Gudayal, a 48-year-old civil attorney. "And that the Bush administration does not have the power to manipulate."

But in Los Angeles, which has some of the highest gasoline prices in the country, motorists wouldn't rule out the possibility of a government eager to sway the electorate.

Twenty-eight-year-old attorney Amnon Siegel sensed more than serendipity at work.

"I'm sure there's some sort of string-pulling going on," Siegel said, referring to the government.

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