Why are gas prices falling?

Question

I don't want to think it's possible but I can't help but think it has to do with the upcoming election. This seems so far-fetched to me yet I can't think of anything else. Someone please help me understand why a gallon of gasoline is now about a buck cheaper than it was after Katrina and about 60 cents cheaper than a month ago.

I don't think it could be just supply demand and usual price drop after labor day arguments just because of how huge the drop is but if you can make a strong case for these ideas be my guest.

I'm so torn on this! After reading the answers I still don't feel certain. Both sides of the argument seem completely reasonable. Discovering oil 4.5 miles under the bed of an ocean doesn't seem like something that would have an instantaneous impact on supply, sorry. There's almost no way that's correct.

Who else is wrong? Republicans are often accused of being in bed with oil companies and based on what I've read, it's probably true. But to think that they allow the gas price to fly up is horrible. Too greedy. They speak of evil and that would be evil. Republicans can't be evil. That would mean voters are evil as well. I don't remember the price dropping like this last year. Not to this extent. Why would supply go up or demand down more this year than last year? Studies showed that we haven't adapted our driving habits at all! And the economy in China isn't slowing. I just don't see how or why supply or demand has changed differently from last year.

Well it seems our problem is that we have no evidence, only our own speculation. Maybe what we should do is make a government agency that checks this kind of thing. You know to prevent monopolies and illegal gentlmens agreements.

I want to establish that after reading these arguments I doubt supply and demand arguments even more than I did before. If you can predict the sways in demand so adeptly, why don't oil companies do the same? If it happens every year, they could make a lot of money by just not pumping quite so much. I know for a fact that OPEC has a bit of control on prices with its production levels. Why would they want to make less money in early fall every 2 years?

I enjoy the incompetent bush argument but I never blamed bush. This citgo venezuela thing is interesting, can anyone back him up? (answer 22 or 23)

Answer 1

How about oil refineries coming back on line. Supply is up and demand is down. It is near the end of the Hurricane season. Investors are selling their profits on futures and the prices are falling.

Answer 2

Citgo is owned and controlled by the Venezuelan government. Their president hates George W Bush. Why do you suppose he would go along with a secret US government plan to lower gas prices before the election. He would be on TV everywhere spilling the beans.
I think you need to decide which that you believe. George W Bush is a moron who can't do anything right, or George W Bush is a genius who is able to control oil prices at will.

The real reason is supply and demand. This time around, the citizens were able to lower their gas usage enough to affect inventories. When inventories get high due to slowing sales, the price comes down. It is the rule of the marketplace and happens a lot more than you might think on commodity items. It has nothing to do with George W Bush and his genius team of cronies who are controlling the election with gas prices.

Answer 3

There are two theories.

The first one is that it was projected to be another year of active hurricane season, which thus far has not caused wide spread damage. Hence, prices are falling.

The 2nd theory, is that the major oil companies are trying to help their Republican friends, many of whom are behind the 8 ball in these up coming elections, by lowering prices to create the illusion that the economy is better than it actually is and that relief is on it's way. It is in effect, an indirect campaign contribution. I have been posting for some time in my answers for people to watch for lower gas prices as we head in to the mid term elections.

**post script Devon, Chevron and a 3rd company, as partners, hit a huge well, the well is named the "jacks # 2". This well is projected to produce 1.5 million barrels of oil a year. The reserves from which it was found is estimated to be 44% larger than the Alaskan reserves.

However, it is also estimated that it will be at least 5 years before the first drop of this oil reaches market. They are going to have to lay 70 miles of pipeline on the floor of the Gulf of
Mexico. Moreover, it will probabliy take a year or better just to get the required permits. Hence, this discovery has no effect on current fuel prices, moreover, since the United States yearly increase in fuel concumpition is at 300,000 bbl per year we will actually be at a breakeven point to our current demand.

Answer 4

Part of it is that summer travel is over, winter heating oil usage is not up yet and won't be till end of nov and first of Dec ( yep after the election) so it is just a natural change that almost always happen every year.

Prices go up when there is demand, and down when there is not as much demand

Answer 5

It is exactly because of the elections, soon it will be back up to I'd say an average $2.75. Then of course by next summer we will see the prices going up even higher and setting new records. Somebody remember this, I predict that the price of one gallon of gas in July 2007 will be......drum roll...........$3.90 per gallon. Just wait and see, I predicted $2.60 for this summer last Apr 2005, and I was way off but I was way low. For those of you with the supply demand theory, the gas usage this summer did not exceed the usage last summer. If it was supply and demand the prices would have not gone any higher than they did last year. Face it we just need to quit this dependence on foreign oil and start using alternative fuels. Check out what Honda is now offering up in the way of hydrogen energy. Not only will they power your car, but your house as well. Talk about two birds with one stone, no more dependence on foreign oil and no more dependence on filthy coal plants.

To makingapost: There are people called lobbyists, they are the direct connection between the politicians and the big oil companies. Go to congress.org for campaign donations by lobbyists and who they represent. As far as repubs taking credit, wait until we get closer to Nov 7.

Answer 6

Supply and demand, major driving season in the US is over (traditionally slows down after Labor Day because Summer is "over"), tentative peace in Mid-East (regional stability), US announcement of new oil field under the Gulf, Alaskan oil pipeline problems not as bad as BP announced...do I need to keep going?

Edit: I wanted to try to keep this from being political, but have any of the anti-Republicans that keep saying the oil companies want the Republicans to stay in office ACTUALLY HEARD A REPUBLICAN TAKE CREDIT FOR THE LOW GAS PRICES? NO? THEN STOP IMPLYING THAT'S THE REASON!!! Sorry, had to get that off my chest. Please continue.

Answer 7

I would have to ask you; How do you suppose these oil controlling politicians do it? Do they send a memo out telling what prices to set? Does it go thru various state and local gov'ts? Are Mayors involved? Does a police chief show up at the local speedway and tell the manager what she can charge?

No offense... BUT get real Economics mainly, situations of all kinds - the Alaskan Pipeline damage not as bad as first believed, US refineries coming back on line, etc, etc, etc.

Answer 8

Didn't this happen last election too? Besides they always play this game.. jack up the price to a rediculus price then reduce it just a little.. then you think wow gas is down! But you are still paying way more then you where before the prices went up in the first place.

Answer 9

You're absolutely right! I'm glad that some people can still think for themselves in this country. Have you also noticed that stock prices are rising? Keep the sheep happy and they'll do whatever you want. My advice: wait 'til after the election, then buy oil stocks and short the S&P 500.

Answer 10

Supply>Demand.