Will we be paying more for gasoline at the end of the summer?
Informed [sic] political opinion has it that the Democrats will take a beating this November in the mid-term elections. With President Obama’s current approval rating only slightly above that of Tony Hayward amongst likely US voters, it is hard to argue against this view.
But keep in mind, it is only August. There is still a long way to go before November. With the attention span of the average American voter on par with a ping-pong ball, the Democrats are far from goners. After all, it is not as if the Republicans are incapable of snatching defeat from the jaws of victory… Mr. Gingrich please call your office.
Once we return from our holidays in September and focus on the elections, early indications suggest that Democratic strategists will try to saddle Bush with the extant economic and geopolitical malaise in an attempt to rekindle some of that 2008 magic. However, given recent Republican victories in Virginia, New Jersey and… gulp… Massachusetts (for Ted Kennedy’s “seat” of all offices) this is certainly a risky game plan.
Republican incompetence aside, the deck appears stacked against the Democrats. Not only do they have to overcome waning consumer confidence vis-à-vis persistently high unemployment, they might also have to battle Wall Street’s predilection for hard assets… especially oil.
To wit, yesterday (Tuesday) Nymex spot crude oil closed above $82 a barrel for the first time since May 04th. At this rate voters will be paying more for their gasoline at the end of the summer driving season than they were at the start.
That will not play well in Peoria… or anywhere else in the US. Voters will resent and likely hold the political party in power responsible (for right or for wrong) for a contrived premium in September to drive their kids to school (and to the polls).
Especially given that this “street tax” will have less to do with fundamentals (i.e. per capita crude oil stocks in the U.S. are at the highest highs since the early 1990s) and more to do with Wall Street’s penchant for selling dollars… and then using those proceeds to buy commodities.
Here at , we are in full agreement that it might not be fair, but if Goldman Sachs et al. finally convince their clients to bid oil to $95 this fall, than the Democrats will pay... with the exception of perhaps MF Global’s Chairman and CEO Jon Corzine.
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Stephen Schork is the Editor of and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.