Thursday, September 14, 2006

As goes gas, so goes the election? 

Weirdness -- my colleague and reader Steve Frank sent me this post on the connection of Bush's approval ratings to gas prices just as I was about to look for them myself. I was thinking this last night watching a news report that Bush's numbers were rising. Seems like only yesterday (well, OK, four months ago) we were talking about how much the increase in oil prices are creating problems in his poll numbers.

I think this blogger is correct when he says that oil prices might proxy for Katrina and Iraq. But that means, if true, the gas prices we observer are being moved mostly by risk premia for world events. If those were to subside, how low could gas go? $1.15? Could be, if it turns out the oil price was a bubble caused by destablizing speculation. Tell you what, though: If the price of gas was halved to $1.15, Bush's popularity would not double.