Power Line has an interesting bit about the possibility of an oil price crash in the coming months. The price of oil has fallen on the world markets, and the price of refined gasoline has also crashed. I was shocked to see gas at less than $2.20/gal here at the Southern Command — and there are some predicting that the price of gasoline could fall below $2/gallon.
Economically, that isn’t surprising. A year of gas shocks will have some effect on consumption, even given the relatively inelastic nature of gasoline usage. The spike in gasoline prices was do more to transitory world events than any real shortage of oil — new discoveries off the Gulf Coast have boosted US crude oil stock estimates by a significant margin. The hurricane season was a dud, which didn’t create any disruptions in supply.
Politically, this is some good news for the GOP. The latest Rasmussen poll of Presidential approval has Bush back up to 47% — and there’s a clear trend line in the numbers that correlates quite nicely with the fall in gas prices. The cost of gas is the most visible economic indicator there is for the average person, and if gas prices fall, that’s generally seen as being healthy for the economy.
I’ve always speculated that oil was in a bubble and we’d see a price crash before prices returned to an equilibrium level. Indeed, that does appear to be happening. That’s good news for the GOP’s political fortunes, but more important it’s also good news for the American consumer after a year of increasingly high prices at the pump.