Daniel Gross doesn’t have much of a reputation as a friend of the Bush administration. So it’s refreshing to see Gross debunking the latest anti-Bush conspiracy. You know, the one where Goldman Sachs and the Bush administration have pushed down the price of gasoline in order to save the GOP congressional majority in the midterm elections. This never made much sense to anyone who understands the markets in oil and gasoline pricing, much less anyone who has spent any time talking to Goldman bankers about politics. (Hint: Goldman is not a rightwing hothouse.)
Anyway, here’s Gross’s takedown of the great gasoline conspiracy.
So, was this engineered by Henry Paulson and Goldman Sachs? It's doubtful, although Goldman hasn't done much to dispel questions. The bank hasn't offered a good reason as to why it decided to reduce the overall weighting of gasoline in the index this summer. Still, the company is hardly a Republican redoubt. There are likely as many Kerry supporters as Bush supporters in the firm's upper ranks. And if Goldman was trying to manipulate the market for political reasons, it certainly picked an awfully transparent way of doing it. It publicly announced the contours of the changes in advance and gave investors and traders time to plot strategies surrounding the move.
More broadly, though, commodity markets have shown themselves to be beyond the control of presidents, the Saudis, or even Henry Paulson and Goldman Sachs. The world is an increasingly connected, complicated, and volatile place, which makes the prices for commodities that fuel the global economy dependent on a growing range of factors. At root, gasoline is getting cheaper largely because the thing you need to make it—crude oil—has been getting cheaper. And Goldman actually slightly increased the weighting of crude oil in the overall index this summer.
Closer to home, there was plenty of activity in August and September—beyond Goldman's index maneuvers—that helped push market and retail prices of energy lower. They include: a growing sense that the U.S. economy, the largest user of oil on the planet, has been slowing rapidly and might be headed toward a recession; a shift in the mix of the U.S. car fleet away from trucks and SUVs and toward smaller vehicles; a potential big find in the Gulf of Mexico; a growing boomlet in ethanol and alternative energy; a bust of a hurricane season; and the blowup of a gigantic hedge fund with huge positions in natural gas.
So, the recent fall in energy prices is almost certainly not a Bush conspiracy, just a bit of electoral good luck.
It’s also kind of a strange conspiracy for the left to be raising. If voters discovered that the Republicans were engineering a reduction in gas prices, do you think that they would turn against the GOP? Not likely. They’d probably say, “Hey! Those guys are finally doing something that helps me out. If they can reduce the price of gas, they’ve got my vote.” So the more popular the conspiracy theory gets, the more popular the Republicans will be.
The Oil Conspiracy [Slate]