- The Washington Times - Wednesday, October 4, 2006

The price of gasoline is on the march — a downward pro-consumer strut fueling a tank full of questions on the road to this November’s midterm elections. Pump prices have plummeted nearly daily since their summer peak, by over 70 cents per gallon on average during the past seven weeks, and by even more in places like the South and Midwest. This trend may help Republicans refuel their electoral engines, but it is causing liberals to top off some conspiracy theories as well.

GOP lawmakers are buoyed by the recent dip in energy costs. Falling prices are like a pre-election tax cut, keeping more money in consumers’ wallets. And beyond paying less per fill-up, gasoline marketing practices consistently promote these savings. As one of my colleagues noted this week, gas is one of the few commodities consumers see advertised on nearly every street corner. Price drops are reinforced every time someone drives past a service station.

But trends are even more important than the price of fuel on any particular trip to the pump. Two months ago, as demand and prices skyrocketed, gasoline costs seemed to know no limit — apparently immune from the adage: “what goes up, must come down.” Instead, a menacing message pummeled consumers: “this door only swings one way.” Energy is expensive and going higher — get used to it.

But no more. Now consumers are realizing the tangible benefits of lower prices in their pocketbooks as prices plunge.

Public attitudes reflect this decline. In July, consumer energy angst dominated public-opinion polls. In my own surveys, conducted for Dutko Worldwide Research, I found gas prices topping two important lists: voters’ greatest concerns about the economy and what issues citizens most wanted Congress to address. When asked to pick among the issues generating the greatest economic concern, gas prices came out number one. And when we queried voters about what issues Congress should address, energy and gas prices also took top billing. By September, as energy prices eased, concern about energy declined dramatically on both these questions.

From an electoral standpoint, however, the impact dropping gas prices have on the overall perception of the economy is even more critical. Over the past year, pessimistic views about the economy — despite good objective measures such as GDP growth, low unemployment and moderate inflation — consistently outpolled optimistic assessments by about a 2-1 margin. Yet in September, as energy prices eased, optimism about the economy surged more than any month in the last year and a half.

More evidence of the broad impact of rising (or falling) gasoline prices was also evident in some focus groups in which I was involved in August. “Gas affects everything,” one participant noted. He explained that it influenced the price of food and other important consumer goods. In other words, declining energy prices help salve a lot of concerns besides what consumers pay at the pump every week. Americans believe high gasoline costs affect everything from their groceries, to the clothes they wear, to what it costs to heat and cool their homes.

Some liberals, sensing the benefit for Republicans, try to portray the recent decline in prices as part of a conspiracy by Big Oil to manipulate pre-election gasoline costs to help their friends in the Republican Party secure re-election. Not surprisingly, this kind of speculation filled left-wing blogs over the past few weeks as gas prices fell. The specter of collusion was even raised earlier this month at an energy forum hosted by the Congressional Black Caucus, according to the Chicago Tribune. I am not sure what is more frightening — the limited acuity associated with that type of thinking or the possibility that lawmakers holding those views could have a significant role in energy policy if Democrats win the majority in Congress.

In reality, according to behavioral economic theories, falling prices will probably help Republicans, but maybe not with the magnitude some claim or the premeditation feared by others. This emerging field of study, which is often traced back to Nobel Prize winner Herbert Simon, suggests people value a loss about twice as much as a gain. In other words, rising prices may have hurt more than lower prices help.

Still, the consequences of lower gas prices will no doubt have some positive impact on the electoral fortunes of Republicans. And as for the conspiracy theorists that see a Dick Cheney/Big Oil conspiracy behind every pump, let’s just say they’re running on empty.

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