Capital Commerce: The gathering gloom over gas prices
The economy is moving along at a brisk clip–somewhere between 3 percent and 4 percent–while generating nearly 200,000 new jobs a month. Sounds pretty solid. But those government numbers aren't very encouraging when gas prices are so high that you almost feel the need to check your available line of credit before paying at the pump.
"The economic data is pretty good, but there has been a bit of malaise showing up in the surveys," says Tim VandenBerg, senior policy analyst at Washington Analysis, a research firm that advises institutional investors. "Gas prices feed into the perception that you're not as well off as you might otherwise be. They're the key metric people are using. And the high prices are overhanging the stock market."
So far this year, the S&P 500 is right around break-even, despite good economic news. Yet frustrated investors don't appear to blame the Bush administration. In fact, there are few signs that the public, according to VandenBerg, thinks the government can do anything about gas prices, suggesting widespread acceptance that it is simply global supply and demand–and perhaps a big dose of speculative trading–that has been pushing oil higher. That suggests little political upside for the opposition–especially since "the Democrats really don't have any solutions either," VandenBerg adds.
He guesses that even if gas prices stay high or–gulp–go higher, the issue will end up being a wash for the 2006 midterm elections. Yet won't voters' preoccupation with gas prices make it that much harder for Bush to push through the top item in his second-term domestic agenda–Social Security reform? Not really, VandenBerg concludes, "since that issue is already effectively dead."