In 2004, Washington Post editor Bob Woodward reported that the Saudis had promised the Bush administration they would lower oil prices to help his re-election bid.
As many folks have noticed, gas prices have dropped in recent weeks. Is a pre-election conspiracy to prop up the GOP to blame?
George Orwel, author of the 2006 book “Black Gold: The New Frontier in Oil for Investors,” and an analyst with the industry news outfit Energy Intelligence, said he doesn’t believe so.
For one thing, Orwel said, OPEC representatives just met and didn’t change their production quota, currently 28 million barrels a day. That’s at least a million barrels a day shy of their maximum capacity, according to Orwel.
Instead, Orwel blamed a series of fortunate events for the lowering price of gas, including a mild hurricane season that favored Gulf of Mexico production; the end of summer, which brings a cyclical drop in the demand for gas; and predictions for a mild winter, which means a lesser demand for heating oil. “That means oil inventories can be used to make gasoline,” Orwel explained.
Meanwhile, oil-producing areas like Russia, Nigeria and Venezuela have stayed quiet, at least in the press, according to Orwel. Despite U.S. saber-rattling, “[industry] people know the United States won’t do anything soon, it’s stuck in Iraq,” he said.
As oil prices slump, big investors like hedge funds are shedding their oil futures, which they had bought in anticipation of a steadily-climbing oil market, pushing prices down. He added that Iraq is now putting more oil on the market, producing a post-war high of around 2.1 million barrels of oil a day, and exporting close to a quarter of that. “it’s actually doing a lot better.”
So maybe the GOP caught a rare break.
Update: Orwel just called to let me know that this, like most lucky breaks, is unlikely to last. “Prices today began to come up again,” he noted.
