Why is the Oil Price Falling?

Something strange is happening. Have you noticed it? The gas price is falling. The news that the price of crude oil dipped below $60 dollars has sparked a furious response as to why it is happening.

Some are arguing that the price of oil has dipped due to political pressure from the Bush Administration before the forthcoming US mid-term elections in November.

Those that believe this are bouyed by a recent Gallup poll in the US. In it 42 percent of respondents agreed with the statement that the Bush administration ”deliberately manipulated the price of gasoline so that it would decrease before this fall’s elections.” Fifty-three percent of those surveyed did not believe in this conspiracy theory, while 5 percent said they had no opinion.

Bush rigging the oil price for political reasons? It’s either a conspiracy or a sensational story. But one that is gaining momentum. Earlier this week Associated Press quoted the Gallup poll and then a response from a White House spokesperson Tony Snow who said: ”the one thing I have been amused by is the attempt by some people to say that the president has been rigging gas prices, which would give him the kind of magisterial clout unknown to any other human being.”

But others disagree. Tom Engelhardt, a fellow at the Nation Institute, writing on Tomdispatch.com argues:

“Such a conspiratorial train of thought is not exactly lacking in logic. After all, the President and Vice President arrived in office deeply tied to the energy business (which has been a major supporter of the Republican Party) and promptly Halliburtonized the military, then Iraq, and later New Orleans; the administration’s first National Security Advisor (now Secretary of State) Condoleezza Rice had already had a double-hulled oil tanker named in her honor by Chevron. The first American ambassador to Afghanistan after the fall of the Taliban, and the present ambassador (think: viceroy) of Baghdad, Zalmay Khalilzad, had been an advisor to Unocal, the energy company that negotiated unsuccessfully to put a natural-gas pipeline through the Taliban’s Afghanistan”.

Tom continues: “In addition, Dick Cheney, charged with setting the administration’s national energy policy, notoriously did so (while denying the fact) in secret meetings with Big Oil execs back in 2001. Officials from Exxon Mobil, Conoco, Shell, and BP America met with Cheney’s aides, while at least the chief executive of BP met with Cheney himself. Chevron was one of a number of energy companies that, according to the Government Accountability Office, “gave detailed energy policy recommendations” to the Vice President’s task force — while, of course, environmentalists of every stripe were left out in the cold”.

Michael Klare, author of Blood and Oil: The Dangers and Consequences of America’s Growing Dependency on Imported Petroleum, also asks “is this the result of some hidden conspiracy between the White House and Big Oil to help the Republican cause in the elections, as some are already suggesting?”

Klare says: “In my view, however, the most significant factor in the downturn in prices has simply been a sharp easing of the ‘fear factor’ — the worry that crude oil prices would rise to $100 or more a barrel due to spreading war in the Middle East, a Bush administration strike at Iranian nuclear facilities, and possible Katrina-scale hurricanes blowing through the Gulf of Mexico, severely damaging offshore oil rigs”.

He continues: “For all these reasons, immediate fears about a clash with Iran, a possible spreading of war to other oil regions in the Middle East, and Gulf of Mexico hurricanes have dissipated, and the price of crude has plummeted. On top of this, there appears to be a perceptible slowing of the world economy — precipitated, in part, by the rising prices of raw materials — leading to a drop in oil demand. The result? Retailers have abundant supplies of gasoline on hand and the laws of supply and demand dictate a decline in prices”.

But before you get used to low gas prices again, Klare says: “Once the election season is past, however, President Bush will have less incentive to muzzle his rhetoric on Iran and we may experience a sharp increase in Ahmadinejad-bashing. If no progress has been made by year’s end on the diplomatic front, expect an acceleration of the preparations for war already underway in the Persian Gulf area”.

War with Iran. The oil price would only go one way. Up.. up.. up.