As the price of oil goes up and one weekly job report follows another, the pressure on President Obama can only mount. To see in which direction the voter will swing on Election Day keep a lookout for the price of a barrel of oil
What a barrel of oil will cost in November is going to have a huge impact on the US presidential polls. On the price of crude depends the price of gas (petrol) in petrol pumps across America and that is a pocket book issue that will sway voters come November. After being in the 80s for the last few weeks, price of oil has been inching up steadily of late (rising five days in a row) and the price of Nynex crude is now in the high 90s. The price of gas is inching up too in America and last heard it was $3.50 a gallon in Colorado.
What is a little curious about the price of oil rising at this time is actually that the world economy is slowing and despite that the price of oil is rising. This obviously indicates a speculative element to the price but no one is able to do much with oil speculation. The other reason that the price of oil is rising is the fact that a considerable amount of Iranian oil is out of the market because of American sanctions and though the Saudis are pumping away furiously, the market can sense the tightening of supply. The other aspect is the fact of the possible turmoil in the Middle East with the situation in Syria having become destabilized. Whereas Syria is not an oil exporter, it is right in the heart of the oil producing countries of the Middle East and has potential of turning the Middle East into a tinderbox. That does not augur well for the price of oil. Also there is the issue of a pre-emptive strike against Iran by the Israelis that hits the news every couple of weeks which causes disruption in the oil market. If there were indeed an Israeli strike on Iran with or without the co-operation of the US it would really set the cat among the pigeons and the price of a barrel of oil could spike to $150 to $200, if only for a temporary period and then President Obama can kiss his re-election chances good bye. The fact of the matter is that in the short-term President Obama does not have control over the price of oil and therein lies the danger for him.
But it is likely to become a big election issue as the prices rise because of new developments in America in the last four years. One is the Keystone Pipeline to be built from Alberta, Canada to Texas carrying oil from Canadian oil sands to Texas for refining. This oil is not as ecologically friendly as the Middle Eastern oil and releases more greenhouse gases. But there are simply huge reserves in Canada which could potentially change the oil scenario for America and the world as it is nearly unlimited. Trans Canada, a Canadian company, wants to refine the oil in Texas after carrying it through America in what is known as the Keystone Pipeline. The oil will be carried from Alberta to Texas by way of a pipeline which criss-crosses America. Building the pipeline will be a challenge as it carries a not so environmentally friendly substance—oil—and it requires both the Federal and state permissions. Wikepedia puts it like this “The Keystone Pipeline System is a pipeline system to transport synthetic crude oil and diluted bitumen (dibit) from the Athabasca oil sands region in north eastern Alberta, Canada to multiple destinations in the United States, which includes refineries in Illinois, the Cushing oil distribution hub in Oklahoma, and proposed connections to refineries along the Gulf Coast of Texas. It consists of the operational ‘Keystone Pipeline’ and ‘Keystone-Cushing Extension’, and two proposed pipeline expansion segments, referred to as Keystone XL Pipeline and the Gulf Coast Project. After the keystone XL pipeline segments are completed, American crude oil would enter the XL pipeline at Baker, Montana and Cushing, Oklahoma.”
Because of the environmental concerns President Obama has only approved the southern half of the pipeline and has asked Trans Canada to resubmit the plans for the northern half of the pipeline which among other things passes through the state of Nebraska. He has also postponed the time for approval of pipeline to 2013. The plan of the pipeline through Nebraska is being contested by citizens groups and environmentalist groups alike and is a hot button issue in the keenly contested Senate race in the state. It is believed that if the pipeline were approved the building of the pipeline would create several thousand jobs though they might be temporary rather than permanent. The reason that they would be temporary is that once the pipeline is built and ready to go it will be controlled by a station in Canada. The lure of jobs however temporary they be has got the Republicans rooting for the pipeline. Mitt Romney has said that if he were to become president he would approve the Keystone Pipeline on his first day in office.
Environmental groups who support President Obama have said that if the president approves the Keystone Pipeline as it stands then they will stop funding the Obama campaign. To add another wrinkle to the entire issue, Trans Canada has said that if the American approvals do not come they will carry the oil to China. All this puts President Obama between a rock and a hard place. The ambivalence on the part of President Obama is bound to be exploited by the Republicans. It has been an avowed foreign policy goal of both the Republican and Democratic Party to reduce the dependence on Middle Eastern oil and the Keystone Pipeline is one way of doing it. As the price of oil goes up and one weekly job report follows another, the pressure on President Obama can only mount.
A related issue is shale gas which can be produced through the process of fracking, which is a process by which oil or gas is extracted from cracks in the surface or earth, and this has become possible only in the last four years as technology has advanced. There are environmental concerns about this, too, particularly water pollution. President Obama and the Democrats are less enthusiastic about this than Mitt Romney and the Republicans. But this too has potential to ease if not solve the energy problems of the United States. Then of course is the cosy relationship between the oil and gas industry and the Republican Party. All this makes for an interesting and volatile decision-making process regarding energy policy.
To see in which direction the voter will swing in the swing states on Election Day keep a lookout for the price of a barrel of oil.
(Harsh Desai has done his BA in Political Science from St Xavier's College & Elphinstone College, Bombay and has done his Master's in Law from Columbia University in the city of New York. He is a practicing advocate at the Bombay High Court.)
Upward trend would be maintained as long as the Nifty does not close below any previous day’s low
The market settled over 1% higher on upbeat corporate news and global support. On Friday we had mentioned that lower low and a close below 5,342 may see Nifty slip to the level of 5,250. The index did not go anywhere near 5,342 and hit an intraday high of 5,425 which is the highest since 16 March 2012. The benchmark also managed to make a higher low. We may now see an upward trend if the benchmark sustains itself above the previous day’s low. One warning for the bulls was that the National Stock Exchange (NSE) saw a lower volume of 50.76 crore shares.
The Indian market, which opened after an extended weekend, saw a marginally higher opening on positive corporate news. On the global front, US markets closed flat with a negative bias as the European Central Bank was silent about the shape of the initiative being worked out to solve the debt crisis. Markets in Asia were also sideways on the back of the ECB stand.
Back home, the Nifty opened three points up at 5,369 and the Sensex rose 14 points to start off at 17,705. The opening figures on both benchmarks were also their intraday lows.
Among corporates, Maruti Suzuki was trading higher on reports that the company will resume production at its Manesar plant, which was shut for over a month following a labour dispute. Software major Infosys was buoyant as a US court dismissed an employee’s claims and ruled in the company’s favour.
The indices maintained their gains in subsequent trade on support from IT, auto, oil & gas and power sectors. The market moved further northwards in noon trade following a positive opening of the key European indices.
The benchmarks hit their highs in the last half hour with the Nifty crossing its psychological level of 5,400 to touch 5,425 and the Sensex within kissing distance of 17,900—at 17,898.
The market closed slightly off the highs on corporate cues and global support. The Nifty gained 55 points (1.02%) to 5,421 and the Sensex settled at 17,884, up 193 points (1.09%).
The advance-decline ratio on the NSE was in favour of the gainers at 928:742.
Among the broader indices, the BSE Mid-cap index gained 0.24% and the BSE Small-cap index advanced 0.52%.
Except the BSE Healthcare index (down 0.03%), all other sectoral gauged settled higher. The top gainers were BSE IT (up 1.76%); BSE Power (up 1.66%); BSE TECk (up 1.32%); BSE Realty (up 1.22%) and BSE Auto (up 1.19%).
The Sensex was led by Sterlite Industries (up 4.46%); NTPC (up 3.12%); HDFC (up 2.92%); GAIL India (up 2.58%) and Tata Power (up 2.52%). The key losers were Hindalco Industries (down 1.45%); Bharti Airtel (down 1.32%); Dr Reddy’s Laboratories, Tata Steel (down 0.66% each) and Hero MotoCorp (down 0.59%).
The top two A Group gainers on the BSE were—Hindustan Zinc (up 6.69%) and United Spirits (up 6.54%).
The top two A Group losers on the BSE were—Canara Bank (down 3.80%) and Adani Ports (down 2.95%).
The top two B Group gainers on the BSE were—Jenson & Nicholson India (up 20%) and Autoline Industries (up 19.99%).
The top two B Group losers on the BSE were—Plethico Pharmaceuticals (down 20%) and Omkar Overseas (down 14.44%).
The top gainers on the Nifty were Sterlite Ind (up 4.82%); DLF (up 3.83%); Sesa Goa (up 3.71%); NTPC and Ambuja Cements (up 3.36% each). The main losers on the index were Bharti Airtel (down 1.54%); Cairn India (down 1.17%); Punjab National Bank (down 1.01%); Hindalco Ind (down 0.79%) and Tata Steel (down 0.71%).
Most markets in Asia closed mixed as the ECB has not yet revealed the measures it would undertake to resolve ongoing debt crisis plaguing the continent. Trading volume was slightly thinner than usual, as markets in Indonesia and Malaysia were closed for public holidays.
The Shanghai Composite gained 0.54%; the Straits Times rose 0.12% and Taiwan Weighted surged 1.01%. Among the losers, the Hang Seng lost 0.02%; the Nikkei 225 and the Seoul Composite declined 0.16% each.
At the time of writing, the key European indices were up between 0.34% and 0.64% and the US stock futures were in the positive, an indication of a green opening of the US markets.
Back home, institutional investors—both foreign and domestic—were net buyers in the equities segment on Friday. While foreign institutional investors pooled in Rs308.22 crore, domestic institutional investors pumped in Rs40.19 crore.
Vedanta group firm Sesa Goa today said it has commissioned the third blast furnace at its pig iron plant at Goa, taking its total production capacity to 0.625 million tonne per annum. With the commissioning, Sesa’s pig iron plant becomes the largest producer of low phosphorous pig iron in India with an installed capacity of 0.625 MTPA, which is up from the earlier capacity of 0.250 MTPA. The stock jumped 3.71% to settle at Rs194.05 on the NSE.
Pharma major Wockhardt today said it has received final approval from the US health regulator to market generic Felodipine tablets used for treating hypertension in the United States. The company has received final approval from the United States Food and Drug Administration (USFDA) for marketing Felodipine extended release tablets in the strengths of 2.5 mg, 5 mg and 10 mg, Wockhardt said in a statement. The stock tanked 3% to close at Rs1,260.10 on the NSE.
Cellular operator Videocon said on Tuesday that it is targeting to double mobile subscribers’ base to three million in one year in Punjab. Finding Punjab as the most potential market in the country, Videocon plans to deepen its market by targeting youth segment in the age group of 15—35 years which constitutes 40% of state’s population. The stock fell 0.74% to close at Rs175.10 on the NSE.
The MNS leader blamed outsiders for the 11th August violence saying Maharashtrians were not responsible for it. Raj Thackeray also demanded immediate ouster of the state home minister RR Patil and Mumbai police chief Arup Patnaik