Price at the Pump Tied to Partisan Political Stripes
Price at the Pump Tied To Partisan Political Stripes
Americans head to the polls shortly to elect their President and the issue of pain at the pump is certainly a hot-button to get voters out and make their ballot count. Easy as that may sound – myriad reasons are to blame for the price rise, regional price variance and potential demand destruction and economic impact of high fuel prices on the consumer and industry.
AJ Sull, Chief Investment Officer of Pacifica Partners Inc. Capital Management of Surrey, BC wrote, “History has shown us that US presidential election cycles too often become fixated on a single issue or phrase that defines the election. In the 1980 election it was Reagan’s “Are you better off than you were four years ago?” and in 1992 the Clinton campaign was able to define the election around the phrase “It’s the economy stupid.” Sull, notes, “While the price of gasoline is a serious economic issue that has the potential to slowdown the budding recovery, the solutions and rhetoric are not matching the importance of this issue.”
View from the Consumer:
A recent Gallup poll reveals 85 percent of U.S. adults believe President Barack Obama and Congress “should take immediate actions to try to control the rising price of gas."
View from the Mega-Consumer
July 18, 2012: Navy Secretary Ray Mabus insisted plans for a "green fleet" that uses biofuels will move forward despite efforts by Republicans in Congress to stop it. The Navy hosted a refueling demonstration of its “Great Green Fleet” aircraft carrier strike group off the coast of Hawaii. The fleet used a 50-50 mix of petroleum and advanced biofuels made from cooking oil and algae. Mabus said Thursday that continued Navy biofuels use will create markets that help drive prices down. He added that having an alternative fuel source will keep Navy costs down because it will be less affected by oil market volatility.
View from the Industry:
Recent operational results are succinctly summarized by Jonathan Fahey and Chris Kahn, AP Energy Writers, “American refiners (refiners buy oil and cook it into gasoline) fared better in the second quarter. They were able to buy cheaper oil, while gasoline prices rose in some parts of the country”, and costs fell because they used low-priced natural gas to power some equipment.” Profits varied depending on where refineries bought their oil, and where they sold gasoline and other fuels. Those with access to oil from the interior of the U.S. and Canada had a big advantage. Oil production is booming in the middle of the country. But there isn't enough pipeline capacity to move the oil out, so supplies have reached their highest levels ever and prices have dipped. Benchmark West Texas Intermediate crude sets the price for much of the oil produced in the interior of the U.S. It was more than $15 per barrel cheaper than Brent crude, which sets the price for crude produced offshore. Canadian crudes were even cheaper. Refiners with big operations on the East coast bore the cost of buying more of the expensive, Brent-based crudes. Refineries that sold their gasoline and diesel to the West Coast likely generated higher profits than others. Gasoline prices there rose by about 14 cents per gallon in the second quarter, compared with the same part of 2011, because of gasoline shortages. The national average fell by 8.4 cents per gallon in that same period. AJ Sull, of Pacifica Partners’ adds, “OPEC is doing its best to keep production up – despite the popularly held belief that OPEC is responsible for oil prices being at current levels”.
Gas station operators nationwide are reporting a sharp increase in the number of gas-and-dash, runners. Contrary to popular belief, service stations make ultra-thin margins on fuel and gas theft impacts the service station owner, not big-oil companies.
View from Academia:
“Gasoline prices continue to rise. Sad, silly, foolish people continue to beat their fists ineffectually against shadows. Fuel prices have been rising faster than inflation in Canada for some time. The rate that I've observed is about 3 cents per year (adjusting for inflation) since 1998. Every dollar invested into more and more difficult to extract carbon fuel reservoirs is a dollar that cannot be invested into something else. By continuing to channel ever increasing fractions of our economic output into something that ultimately is just not sustainable we waste opportunities in the present to make things better in the future.” Edward Wiebe, Research Associate, University of Victoria.
View from the Investor:
Most retirees plan their retirement years and factor their recreation and travel around their fixed expenses. Their personal budgets may be facing a crunch as many likely have their savings in bank guaranteed investment certificates (GICs) or credit union term deposits earning less than inflation, so gas prices rising faster than inflation is double-whammy.
View from the Conservation Campaign
The oil industry and its allies are renewing their calls for more drilling, more pipelines, and continued taxpayers subsidies. Refineries that are inefficient are being shuttered; others undergo massive modernization where appropriate. Modern new-construction refineries find ever-more rigorous opposition from NIMBY. The National Resource Defense Council offers a business-friendly solution, “Drivers can start saving money immediately by trading in their gas guzzlers for today’s gas sippers.” This is also becoming a political platform as a stop-gap in the opinion between the two main political messages.
View from the Political Circuit:
Catchy phrases & buzzwords, easy to vocalize and certain to resonate on the campaign trail cycle through (or planted into) the media on a daily basis;
· Team Romney: The Republican Study (RSC) Committee introduced the Consumer Relief for Pain at the Pump Act, which would lead to more energy and lower prices with a more stable marketplace for gasoline for decades to come.
· Team Obama: Calling anew on Congress to end tax subsidies ($4 Billion) for the oil and gas industry, saying the nation needs to develop alternative sources of energy in the face of rising gasoline prices. "They can either place their bets on a fossil fuel from the last century or they can place their bets on America's future," Obama said.
The political messages you hear often contain well-woven political campaign trail hyperbole. Mr. Sull refreshingly states in a non-partisan way, “The reasons for high gasoline prices are complex and cannot be solved with slogans in 30 second television ads or bumper stickers. Both parties owe the voters some straight talk so that real solutions can be evaluated and implemented.”
Biography: R. Brent Lang, CIM, FCSI, is active in the field of finance and philanthropy. He obtained the CIM (Chartered Investment Manager), FCSI (Fellow of the Canadian Securities Institute) and Branch Manager's designations. He has invested over 19 years in financial services, compliance, and philanthropy.
This work is licensed under a Creative Commons Attribution 3.0 License.