As we saw last year when crude oil reached meteoric highs and gasoline at the pump was selling at $4+ per gallon, the price of gasoline does have political implications. The default position seems to be to blame the government when gasoline is going higher. So, in all likelihood, if the price of gasoline continues to climb it will be negative for the Democrats and their approval rating.
Based on the most recent data from the Department of Energy ("DOE"), gasoline is selling at $2.24 per gallon at the retail level on average across the United States. Gasoline closed out 2008 at $1.61 per gallon by the same measure from the DOE, so is up 39.3% on the year. Roughly a year ago gasoline was selling at $3.72 per gallon, so on a year-over-year basis, the consumer is still faring much better, but this year-to-date increase is a sequential shock to be sure.
It seems likely that the political rhetoric will heat up with gasoline up so much year-to-date. Especially as we enter the summer driving season, which should lead to higher prices on a relative basis as summer driving creates incremental demand. As a future client asked us yesterday, at what price does gasoline / oil become a political issue?
Obviously, there is no science to the answer. We follow opinion polls very closely and have been looking for something on the margin that would indicate that the Democrats are losing steam. In the Presidential realm, the Democratic President seems to be retaining his Teflon status and popularity as ever before (according to Rasmussen, Obama's total approval rating is 57% and his approval rating is +7). Interestingly, congressional polls seem to be telling a different story.
As outlined in the chart below, which was put together by Christian Drake from our Healthcare Team, for the first time in almost five years Republicans are leading congressional polls. According to pollster Rasmussen:
"This is the third week in a row - and just the fourth time in more than five years of Rasmussen polling - that the GOP has held such a lead."
This shift in congressional support is at least coincident with the dramatic rise we have seen in gasoline prices, if not correlated. Regardless, we would expect that political rhetoric to only heat up if gasoline continues its rise in price, which will only hurt the popularity of the incumbent party. We would also submit that we are getting close to the price where gasoline will matter politically.
Daryl G. Jones