How Gas Prices, the Value of the Dollar and Midterm Elections are Related
When you drive over to the polling place today, be sure to fill up your tank on the way home. Because if you didn’t notice, gas prices are pretty low. But after years of rising costs why is oil suddenly so cheap? Prices are down, the value of the dollar is up. Will this impact voting today?
Why are Gas Prices Low?
First, the shale boom. Oil production inside the U.S. (therefore not tied to Middle East and their craziness) is up. Fracking, which so many Democrats have voiced strong aversion to, has given us the chance to break away from foreign oil. Imported oil has fallen from 60% to 30%.
But what about the Middle East? ISIS has been putting more oil into the global market as well, forcing the price lower. Remember, scarcity + demand = rising cost. Right now, between the U.S. and the Syria/Iraq/blackmarket oil, there is no international shortage. Further decline will happen today in reaction to an unexpected price cut from Saudi Arabia. While this sounds great for Americans-at-the-pump, it might be negative for the economy overall.
Why is the Dollar so Strong?
A strong dollar means that compared to other currencies, the U.S. has a greater value on ours. The independence from foreign oil is definitely impacting the worth of the dollar, but it is not the only factor at play. Unfortunately for our Europeans cousins, the value of the dollar is partially at their expense. Compared to other economies, America is fairing quite well even though many of us still feel the aftershocks of the recession. Europe is struggling against deflation, Russian stock has taken a nose dive after their international policy moves and many emerging markets (China and India still hold this title) just haven’t reached America’s scale.
What this Means in the 2014 Election
Probably not that much, in all honestly. Americans at the polls today are angry, and gas prices aren’t their biggest concern (its all about the jobs and previous gridlock). The value of the dollar probably won’t bring out people to the polls but the results of the election will definitely impact the economic growth in the U.S. In fact, studies show that a win for Republicans could have a very positive impact on the dollar. And historically, the dollar has done the best with a Democratic President facing an undivided (House & Senate majority) Congress.
Some pundits have suggested that President Obama is purposefully keeping gas prices low to win votes at election time. The same accusations floated around when Bush was President (nearly half of American believed the President manipulated oil prices in 2006). Chemical engineer and writer Robert Rapier wrote about this conspiracy heading into the 2008 election:
There really isn’t a strong pattern of gas price behavior (other than a stair-step up year after year); people just notice it more in an election year. In addition, because prices rise and fall over the course of any year, you can always point to a price drop in an election year to support possible biases. But if you use objective analyses (e.g., start and stop the price check on the same date every year) the non-pattern becomes obvious.
You can read his objective data on the subject yourself, and his follow-up for this election here. Forbes also concludes that the President can rarely make short term changes to oil prices. And when prices were high in 2013, Reason made the same point.
While there are definitely connections between oil, the dollar and your vote, each of these variables are impacted by multiple other factors. For now, it looks like gas prices will stay down, production will remain up, the dollar will stay strong—and Republicans will win. So what do you think? Is the number at the pump impacting your vote today?