That what seems to be ailing Dubya, as his poll numbers continue to tank. I don't think it's Iraq; here's an interesting graph that shows a correlation between his poll numbers and gas prices. Most people vote their pocketbook first and foremost; foreign policy has an effect and social issues can come into play, but more often than not, Carville's incantation of "It's the economy, stupid" carries the day.
However, it seems to be more accurate to say "It's my economy" rather than "It's the economy." The macro economy seems to be perking along rather nicely, showing relatively low unemployment and decent economic growth with core inflation under control. Those things are abstract but positive; it's the tangible things that people see and worry about; layoffs at big firms like GM and Ford and gas prices that look like those European nightmare priced we've been told about.
Thus, all the good macroeconomic statistics don't mean much if they're counteracted by on-the-ground stories that people relate to. It's not GDP that people are Joe Sixpack is worried about, it's the GDGP, the Gosh Darn Gas Price (well, there are variants to the first two words). When a $50 gas card doesn't cover a fill-up, people take out their frustrations on the president, even if he can't do much about it.
We've got a nervous oil market with a number of supply worries. There's violence in Nigeria's oil regions, a trash-talking Hugo Chavez looking to nationalize Venezuela's oil industry, as well as the headline grabbing issues in Iran and Iraq. There are no good policy prescriptions that will make any of those four go away any time soon, although today's news that PM Jaafari will step aside and let his party pick a new Shia Pet will make progress in Iraq a bit easier.
In addition, there are global demand issues that are still there even if we settle our supply issues. Prosperity in formerly-carless areas like China means a higher demand for oil that compounds the supply issues. There's not much Washington can do to slow the global demand for oil short of signing on to some Kyoto-on-steroids, which ain't gonna happen any time soon.
There are policy prescriptions that would lower demand for oil, like higher CAFE standards and higher gas taxes, but neither would make enough of a dent on world demand to change prices much. Higher CAFE standards would mean that newer vehicles would be more fuel efficient, but the existing gas hogs would still be on the road, making only a modest short-term dent in oil demand. Given the inelastic demand for gas, higher taxes would have a very small effect on demand in the short term.
Nor would more market-friendly proposals, like opening up ANWR or actually bulling through the NIMBYs and building a new oil refinery, make much of a short-term dent on supply. ANWR would be a better part of a decade away from coming on-line and new oil refineries would help solve acute problems where a refinery goes down and no excess capacity exists, but it wouldn't solve the chronic issue of high oil prices.
Thus, we're largely stuck with the status quo until one or more of the problems solves itself. The problems in Nigeria and Venezuela aren't going away, Iraq is slowly getting better and Iran will likely get worse before it gets better.
That's the bad news; we're stuck with >$2.50/gallon gas for a while. People's natural reaction is to take it out on the guy in the White House whether he deserves it or not.
The good news is that I can't see Democrats making much inroads on the issue. Their demand-management solutions would tend to hit consumers in the pocketbook and their supply-based solutions would likely be ineffective. Would the oil markets be more content with a diplomacy-only approach to the Iranian nuclear issue? Possibly, but they might be worried about appeasing a militant Iran who'd be able to blackmail its neighbors in the years to come if not confronted now.
When you get to where-do-we-go-from-here questions, the Democrats don't have much of an advantage on oil prices; their solutions are long term and don't help bring down the price at the pump today. To be truthful, the Republicans solutions aren't much if any better; at least they tend not to raise taxes on an everyday item.
Thus, a smart Republican can say something like "Yes, gas prices suck, but what's Mr. Democrat going to do to make a real difference." Conversely, a smart Democrat can focus on the fact that high gas prices suck and go light on the policy prescriptions; some SUV-bashing rhetoric on CAFE standards sells in many quarters.
Bush isn't up for reelection; it might cost a Republican congressional candidate points, but if they can change the issue on how to address the problem, they should make out OK, as should the Republicans presidential candidate in 2008.
Good article here! Washington should think about hiring you......except then they'd hate what you wrote::GRIN::
Posted by: T_Stormcrowe | April 26, 2006 at 07:25 AM