Gas prices peaked in early April at just under $4 a gallon. That
meant that for a few weeks gas prices were a major political issue. A series of ads
attacking the President were issued and Newt Gingrich announced a
proposal to get gas back to $2.50 a gallon. In response to the criticism
President Obama called for more regulation of oil speculators.
However recent declines in oil prices have caused gas to drop about 40 cents, about 10 percent off the April high. Some are predicting the trend will continue through the fall, with prices as low as $3 per gallon by Halloween. If so, then against all expectations, gas prices could turn out to be a rare bright spot in the economy for the Obama campaign.
On its own, a return to lower prices isn't an issue the Obama campaign can use, so much as
one less headwind they have to deal with. The real question is whether
the cut in prices could act to boost the sagging economy as consumers
take the money saved on gas and spend it elsewhere. Nigel Gault of IHS
Global Insight tells USA Today "You're talking about roughly $114
billion in extra consumer spending
But Neil Shah at the Wall Street Journal says falling prices have not
translated into additional consumer spending so far. In an interview
about the piece, Shah suggests consumers may be putting the additional
money toward savings because of uncertainty about the economy.
Backing up Shah's contention, new numbers
released by Nielsen show consumer confidence dropping five points to a
score of 87. Anything below 100 is considered a sign of consumer
pessimism. Also, a majority of consumers, 78 percent, believe the U.S.
is in a recession.
If there is a stimulative effect to lower gas prices it could take
several months before the effects show up jobs reports. Right now,
that's the metric Americans seem to be focused on as they approach this