Among the many gasoline-related conspiracy theories out there is the one that says national elections cause gasoline prices to fall. It’s true that prices do tend to decline in the run-up to Election Day — as they have, nationally, over the past two months. It’s also true that they do the same thing in years when we’re not voting. The effect, however, does appear to be greater in election years.
From 1991 to 2012, national gasoline prices fell by an average of 3.27 percent each year between July 4th weekend (when demand tends to peak) and the first week of November. During Presidential election years, prices fell by more than twice as much, 7.6 percent. Adding in Congressional election years (every even-numbered year) the average price decline is 5.35 percent. The smallest effect happens during odd-numbered years, when there are no candidates running for the House or the Senate, though five states do hold gubernatorial elections. In those years, prices declined by only 0.6 percent.
Now, those election-year results include the whopping 45 percent price decline that happened from July to November in 2008. Remember, the national average price for a gallon of gasoline hit an all-time high of $4.17 on the week of July 4, 2008. By the time the Election Day rolled around four months later, they’d fallen by almost two full dollars. Even still, when you strip out 2008, Presidential election-year gasoline prices fall by an average of 6.5 percent between July and November.
I gotta say, these results are more stark than I expected them to be. I’m still reticent to draw any conclusions. The sample size is way too small, and there are far too many external factors that determine gasoline prices to say that there is something significant going on. For lack of a better explanation, I’ll revert to the old standby: “correlation does not imply causation.”
Also, just because the average points in one direction, doesn’t mean it’s true every year. For example, in 2004, prices rose by 4 percent in the four months before the election. They also rose during the same months of 2002, 2003, and 2005. The driving factor there appears to be surging demand from China, which was approaching the height of its double-digit growth, rather then any strange U.S.-based election-year phenomenon.
As fun as it may be to think that some hidden political hand is manipulating gasoline prices in the run-up to elections, it’s just not true. Presidents have virtually no power to affect gasoline prices. Even releasing the Strategic Petroleum Reserve tends to be ineffective.
That’s not to say that incumbent presidents don’t benefit from cheaper fuel. National gasoline prices have fallen by 37 cents (9 percent) since peaking in mid-September (though they’re still 16 cents higher than they were on July 4th). Two months of falling prices have certainly played into the steady rise in consumer confidence we’ve seen recently, which in turn has likely helped President Obama’s re-election chances.
The biggest reason behind those falling prices is that speculators have been pulling out of the futures market. In mid-September, money managers held the equivalent of 542.6 million barrels of crude oil. As of October 30, they were holding just 405 million barrels. And remember, President Obama wants to limit speculators’ ability to place bets on oil prices.
Still, for all those conspiracy theorists who remain, here’s one more morsel: Tuesday’s election likely boils down to who wins Ohio, where prices have fallen by 55 cents since mid-September, one of the biggest declines in the country.
