Many are predicting that 5.00-6.00 per gallon gasoline will hit consumers this summer. This will no doubt have an effect on the election this fall. At this time, however, I have been to several message boards and people are adamant that they will still vote for Obama this fall even if the price of gas climbs. But I do not believe this is sound reality. This is why.
At 3.25 per gallon, the average American pays $55 per week on gas. At 5.00, it is a 54% increase. If habits are not changed, that is $85 per week, which represents a $30 per week increase, or about a $120 per month increase. At 6.00 per gallon, the price nearly doubles...a 91% increase. This means that Americans with the same driving habits would pay $105 per week, which is $200 more on the monthly budget. This would be a back breaker to most family budgets.
In 2007-2008, a similar increase in fuel costs possibly was the catalyst of the mortgage crisis, as families struggled to meet the increased fuel costs, they were unable to meet other obligations and eventually many default on their mortgages.
But the impact would not stop at the average family budget. Businesses have to pay for increased fuel costs as well. They deal with these cost increases by passing some of the costs onto consumers, but that is unwise in a time when demand is reduced when families are cutting back to meet excess fuel costs. Smart businesses seek alternatives to higher prices. They will also close outlets and offshore work to other countries, like they have been doing for the last 5 years. This means more expensive products at the store and more layoffs. In other words, here we go again.
Many in both major parties will point out that we experienced the same under GWB, and we did. The question is, who wins the argument? Obama's people would say that his policies have not had the chance to really work. The Republicans will point to this as evidence that Obama's policies have failed, but will have to downplay the fact that we went through this 4 years ago. The GOP candidate will have to find ways to differentiate himself from the prior GOP administration. It could mean that a third-party candidate, like Ron Paul, if he chooses that route, would have a message that more people would listen to, no matter how unproven or unrealistic that message is? One could argue that this proves that the message of both major parties is wrong, and a new direction is clearly needed. Would that guarantee another four years of Obama?
More likely if the GOP nomination comes down to a brokered convention, a candidate like Ron Paul would certainly have a message that could sway more GOP delegate, and one of the four remaining candidates, the one who has yet to win a single state, could steal the nomination and possibly the election.
Obviously, we need a different direction. Price volatility means that the oil industry does not have the capacity to respond to fluctuations in supply and demand, and everything from the smallest oil refinery fire and larger can cause oil prices to spike. The second problem is that money spent on importing oil leaves the United State economy, and does not return in any form. It reduces the multiplier, so that any funds spent by anyone are gone and can't be spent by someone else.
People who are hopeful for a GOP victory in November may wish to point out the obstructionism by the other party during the prior administration. Nearly all proposals to expand American oil production were shot down by the opposition until the end of the term, once they were certain a new administration would roll them back. They may also wish to quote Robert Foster Bennett, who once said, "all governmental activity, including environmental protection, if funded by economic activity. Without a strong economy, the government does not have the funds to protect the environment." Consider the alternative.
Remember that with Ron Paul, if it is not specifically mentioned in the constitution, it is illegal...per the 10th amendment. The constitution does not give the Federal Government the power to oversee the environment, therefore, this power belongs to the states. The Keystone XL pipeline people may take this as good news and look forward to negotiating with the states that would welcome the economic boost.
We therefore need to be careful what we wish for. Higher gas prices may not be Obama's undoing unless they can be tied to a failed energy policy. That is not a slam dunk and may not get the desired results.
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