From the October 01, 2012 issue of Futures Magazine • Subscribe!

Energy’s countdown to the election

Others, however, are more fully engaged in looking at the elections already. “Politics and oil — it doesn’t get any better than this,” says Phil Flynn, senior energy analyst at Price Futures Group. “Politics bleed oil and there’s no other issue that irritates the average voter as much as gasoline prices.”

Flynn says the major factor in the oil market now is the expectation of bailouts in Europe and the euro. “But what may be good for Europe is not necessarily good for President Obama, because when the central banks start stimulating the economy it comes at a price, [that price is] rising oil and gasoline prices,” he says. “If this trend continues into the election, President Obama will get the blame.”

Flynn and other analysts say Obama’s extended delay of the Keystone XL pipeline from Canada is one element of his record that will attract blame. “The Republican platform is in favor of more domestic oil and gas production, and as far as infrastructure, we have the hotly debated Keystone pipeline that Governor Mitt Romney is in favor of,” says Mike Zarembski, manager of futures trading for optionsXpress. 

Chirichella adds that a Romney victory would be expected to provide a positive boost for accelerating the movement of oil from Canada and more U.S. drilling both inshore and offshore. The U.S. oil outlook also will be affected by the outcome of the ongoing federal “fiscal cliff” debate, he adds. If that is not resolved smoothly, the U.S. economy “could move back into a recession and thus have a negative impact on oil consumption,” he notes.

“Keystone is one issue, but that’s not the only place where the President is vulnerable,” adds Flynn, who suggests that the primary other place Obama is vulnerable is his policies on green energy. Flynn is critical of the Obama administration’s spending on alternative fuel sources (see “Energy subsidies for all”). He says it has “failed to deliver, while there seems to be a resistance” to growing fuel supplies from new sources such as hydraulic fracturing, natural gas production and directional drilling. The numbers on alternatives have improved as have traditional sources, but they have failed to keep the cost down (see “Tallying supplies”).

 

Flynn also acknowledges that Romney so far has provided few details of his own proposals to take advantage of such technology advancements. “I don’t think he’s framing the debate well, and he’s at a disadvantage because he is not an energy guy,” Flynn says. 

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