In early July I published a note discussing how expectations of an Obama win could knock $40 off the oil price. The note is below. One piece of the puzzle was put in place today with Obama mentioning that he might tap the Strategic Petroleum Reserve (SPR). He said as much in a speech he delivered on energy today in Michigan. Obama said "we should sell 70 million barrels of oil from our Strategic Petroleum Reserve for less expensive crude, which in the past has lowered gas prices within two weeks."Obama said many other things, such as investing in energy infrastructure, changes in the tax code to encourage energy conservation, and other ideas.
Additional impetus I believe for today's and the recent oil drop is coming from China's cutbacks on energy use amid efforts to cut pollution for the upcoming Olympic games. There were also likely bad longs betting on greater impact of the storm currently in the U.S. gulf than has thus far been the case.
Here is my the note I sent a number of weeks ago:
If Barrack Obama wins the presidency, the price of oil could fall $40 per barrel. The financial markets will discount the possibility before hand, at least partially. There are three ways in which this could happen: