Sunday, September 16, 2012

Will High Gasoline Prices Spoil Things for Obama? Will SPR be Used??


There are numerous commentators who are saying last week’s ‘open ended” QE initiative announced by Fed Chairman Ben Bernanke is a deliberate move on the part of the Fed to save the Presidency of Barrack Obama. I won’t jump into that political speculation directly, but I would like to point out that the Fed’s work may be all for naught in the coming months if the price of gasoline hammers consumers to the point of taking their frustrations out on the D.C. incumbents, including the President, on election day.

On September 13th, I commented on the ill timed rise in gasoline for the President:

 “Sorry to my Obama fan readers. But this needs to be said. The high price of gasoline is just the oil industry's way at settling some scores with Obama. How convenient that prices go UP before the election this time? Just bad timing, or planned? The higher prices shall be worth some near term pain, if it can get that guy out of the White House. No one forced the big O to waste so much money on green, or to act as he did with the XL pipeline, or to put the Middle East region in a state of greater tension because he favors the "brotherhood". I could go on and on. Sure, Brent has remained persistently high, but that's just one factor. The recent fizzled storm that shut in some Gulf production is a tiny factor and is over emphasized by the financial press. Sorry to politicize gasoline, but I see this move as more than just a coincidence in an election year. If these prices don't miraculously soon come down, this high profile pocketbook issue might very well tip the scales to Romney who needs all the help he can get.”

I made that comment on my blog. One subscriber even cancelled after I made the post! Lol. Yes it was on the partisan side – how dare I point out a few failures of our present leader.  

As it is turning out, perhaps it is not a conspiracy by ‘Big Oil’ against Mr. Obama, but one of the first unintended fruits of the world’s central banking policy of unlimited printing. Gasoline is up over a half dollar a gallon in the last two months, or since the European Central Bank moved to a stance of blind creation of reserves (printing).

Did someone forget that as the U.S. and Europe race to fiat currency oblivion that maybe commodities prices, such as gasoline, might just rise?? It makes me chuckle in a disparaging sort of way as these Central Bankers are such fools.

It may very well be that they forgot that in the daily grind for the average person (a majority of whom do not own houses), that the price to fill up a tank to enable the grind to continue might draw more negative scrutiny than the thought of mortgage rates coming down another ½ a point in the coming weeks? Are these policy makers a bunch of schlubs, or what?  One must always consider Unintended consequences and think outside of one’s reality. In the case of the Fed head, I would wonder the last time he actually filled his own car with gas? Or, if he recently has done such an average thing (which I am doubtful of unless he puts on a toupee, sunglasses and skinny jeans to go out incognito), pump price might not resonate in his mind since he could pay any price for gasoline as part of being of the elite class. 

In other words, they either never thought about what could be a brick wall to the QE tricks, or they forgot about the masses who would be hurt by high gasoline and what that could mean for the election outcome if there was pressure put on the Fed to act in September to help the president.  

Obama could very well lose the election come November if gasoline prices continue to trend higher.

The SPR Solution Non Solution

BUT, and this is a big BUT: The president has already talked about using the Strategic Petroleum Reserve (SPR) to attempt to force pump prices lower. This little saga could bring some further surprises, though an SPR gambit to lower gas prices might fail.  Here's why: 

The SPR is intended for real emergencies like a sudden cutoff of overseas of supplies, or to supply crude oil for national defense purposes. The SPR was not intended to be a solution to lower the price of fuel before an election. 

Given the state of the oil industry, a release from the SPR would bump into constrained refinery ability. The solution is not more oil to lower pump prices. Another four years has passed with little progress on the issue of national energy. While I am thinking that Romney would not necessarily make a greater difference over the next four years on the matter, I highly object in the short term for the potential that the SPR may be misused. 

I can already see it now. What was supposed to be an energy savings account (SPR) gets used to try to lower pump prices for the convenience of holding on to political power, setting a new precedent that would fritter the energy savings account away. 

The solution to getting whacked at the gas station would actually be to have a sane Fed, better foreign policy for a more peaceful world and a long term energy plan to reduce the need for oil from most countries that hate us to begin with! But that would be hard to do as the real solution lie in the real of serious structural reform and in today’s society it’s all about taking the easy way out with band aid repair that fail to cure the core problems. 

And when push comes to shove, the situation will boil down to an Administration's power grab and not something aimed directly help people reduce to cost to drive. They will sell it as help to us, but you should know better that it is really help for them. 

Nothing would surprise me anymore – even a vain attempt by the present Administration to use the SPR for political gain. If they do, they should be wary of unintended consequences. Stay tuned.

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