It is kind of amusing to me to see that everyone acknowledges that a lowering of gas prices is the equivalent of a “tax cut to increase spending”. At the same time nobody is making the association of when gas prices tend to go down and what the real reason may be. If you take a look at this CNN article…
they are pegging the trough in prices at around Thanksgiving right? That happens to be the start of the largest commercial holiday season when consumer spending is essential to economic growth. What a coincidence. Didn’t gas prices make a similar and unexplained decline during Nov/Dec. last year not long after Katrina supposedly greatly helped them increase? (Right, and how many refineries were really taken out by that?)
An interesting tint to this year is that prices seem to be beginning their expected decline right before midterm elections? Another coincidence? What about the fact that the current administration created the largest increase in oil dependence since the 60s by allowing everyone and his brother to write off gas guzzling SUVS essentially promoting them over all other automobiles. It kind of makes the gas prices seem more like a seeded economic buffer to a future expected decline in economic growth. If 2005 was the overall peak of the housing bubble and the home builders knew it by insider selling and the government knew it and promoted energy market manipulation then overall pricing metrics could have been planned. That allows the obvious bed-buddies (oil companies) to the administration to charge pretty much what they pleased while never crossing a hypothetical threshold of a gas price that would be fatal to the economy ($4 hypothetically). In return spending and growth is buffered while everyone’s big ticket ATM (home equity) and discretionary spending is starting to dry up. In order for folks to get to work from the distant burbs (the only place they could afford a home) they NEED to fill the guzzlers they bought causing gas to be 10% of all consumer spending for the last half year. At the same time the bed-buddies post the largest revenues for any corporations in the history of the world!
I’m not really anti-establishment but I do think if this theory is correct that I am very impressed with how it all works. Market manipulation, seeding ulta-mass-consumption, kicking back to the friends of the family (oil companies) and the overall perfect timing of all three could very well see the economy decline subtly and smoothly to next year before the expected BIG drop. That’s post essential commercial holiday and midterm election and some brilliant economics at work if it is the case.
There is a short quote in this CNN article by an analyst who says plainly…
“The levels that were in place were never justified to begin with,” said Mark Gilman, an analyst with The Benchmark Co. “This is a bit of a return to reality.”
Sounds like another market I’ve heard a lot about lately…
