Gas prices. Again.

So, had a nice conversation on the phone with a friend who is an energy policy expert.  Naturally, he scoffed at the idea of developing further domestic resources having a substantial impact on the price of gasoline.  Even if we instantly developed all we have, it’s still a pretty limited percentage of the global oil supply– which is the key to oil prices and thus gasoline prices.  Anyway, got off the phone and found this great gas prices Q&A by Kevin Drum.  A sample:

Q: So what’s the relationship?

A: The University of California-San Diego’s James Hamilton, your go-to guy for the effect of oil prices on the economy, says his rule of thumb is that a $1 increase in the price of crude produces a 2½-cent increase in the price of gasoline. Lately, gasoline prices have been linked most closely to the price of Brent crude, and since the beginning of the year Brent has gone up from $107 to $123, a $16 increase. By
Hamilton’s rule, this should have produced an increase of 40 cents in the price of gasoline.

Q: Hey, that’s almost exactly right! So there’s nothing more to it than oil prices?

A: Pretty much. There are a few miscellaneous other factors, like refinery shutdowns and the change from winter to summer formulations, but they don’t amount to much.

Q: Fine. But why have oil prices gone up?

A: In the long run, the answer is just supply and demand. Oil production has plateaued over the past few years because everyone in the world is pumping full out, and there’s very little spare production capacity left.

And today, reader Mike B sent me the link to this nice WP Fact Checker piece about Keystone pipeline and gasoline prices.  The key bits:

We spoke to other oil experts and received a mixed verdict on whether Keystone XL would make much of a difference on gasoline prices. “All else equal, more supply does put downward pressure on price,” said Jim Burkhard, managing director of global oil for IHS Cambridge Energy Research Associates, who has testified before Congress in support of the Keystone XL pipeline. But he hesitated to predict the impact.

Blake Eskew, senior vice president at the oil consulting firm Purvin & Gertz, Inc., said that Keystone “has the potential to affect prices somewhat, but it’s a fairly small impact.” He said it might be worth “a few cents” at the pump.

We also find it interesting that TransCanada, in its fact sheet on the Keystone XL pipeline, makes no claims that it will reduce gasoline prices—only that it will not increase prices. “The price of international oil prices has no impact on the operation of our pipeline and we do not profit from changing market changes,” TransCanada said. “Prices are set on a global level.”  [emphasis mine]

The Keystone Pipeline seems pretty necessary.  And it’s going to happen.  We just need to do it an environmentally smarter way than the initial plan, that’s all.  But let’s be clear, that or all the “drill baby drill” you want, just is not going to have much affect on what we pay at the pump.

Photo of the day

Big Picture has a cool set based on the theme of “reflections.”  This was my favorite:

A tree and fence is reflected through leaves floating on a pond on Feb. 2 at Sunset Park in Salina, Kansas. The Salina area has been experiencing above normal temperatures, but the weather should turn cooler for the weekend. (Tom Dorsey/Associated Press/Salina Journal) #


Not exactly the same type, but it did remind of me one of the favorite photos I took last year– my nephew Sean at the Smithsonian Natural History Museum:

Forecasting November

Very nice piece in TNR by Ruy Teixeira that analyzes what recent polls and various political science forecasting models portend for November.  Short version, if  the economy continues on its current path, things are looking very good for Obama.  I found this bit about the latest polling to be especially interesting:

Indeed, the closer you look at the numbers, the more reassuring the news: Obama, it seems, is well on his way to reconstructing the very coalition that elected him in 2008.

Consider these results from a recent Pew Center poll. In this poll, Obama is 8 points ahead of Romney, close to his victory margin in 2008 (7 points). But what is especially fascinating in this poll is its internals—how Obama is faring with key subgroups of voters. Start with minorities. Obama gets 93 percent of the black vote (he got 95 percent in 2008) and 79 percent of minorities overall (he got 80 percent in 2008). (The poll does not provide data on Hispanics, but the two most recent national polls of Hispanics give him 67 percent of these voters, identical to his 2008 performance.)

He also gets 44 percent of the white vote, compared to 43 percent in 2008. Moreover, if you break the white vote down by working class and college-educated, his performance is even more impressive. Among white college-educated voters he ties Romney 49-49, compared to the 4 point deficit he ran against John McCain, and loses white working voters by only 41-55, compared to his 18 point deficit against McCain.

These demographics are excellent news for Obama.

After summing up the generally positive Obama forecast of various Political Science prediction models, he concludes:

None of these forecasts indicate that Obama is a lock to win in November. Plenty can go wrong between now and then, particularly with the economy. But the factors underlying these forecasts suggest that the recent re-emergence of Obama’s coalition is no fluke. If current trends continue, there’s a good chance that election day 2012 will look a lot like the one from 2008.

I have a hard time believing that Obama is actually going to win by as large a margin in 2012 than he did in 2008, but the fact that these generally quite accurate prediction models are suggesting results along those lines certainly augurs well for the Obama campaign.  And, of course, this is all quite contingent on the economic recovery not suffering a notable slow-down.

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