Marginal Utility

by Tom Bozzo

Mark Thoma finds Krugman explaining Bush's popularity bounce in terms of moderating gasoline prices.

Economist's View: It's The Price Of Gas, Stupid!:

Paul Krugman: The latest polls do show some improvement in peoples' perception of the economy, although it's still strongly negative. But there's no mystery there: it's all about gasoline prices. It turns out that there's a stunningly close relationship between short-term movements in Bush's approval rating and changes in the price of gasoline. You can see it for yourself at an interesting web site, Professor Pollkatz's Pool of Polls. (The site is very anti-Bush but provides interesting data analysis whatever your politics.) In fact, given the fall in gas prices back to pre-Katrina levels, the surprising thing is how little of a boost Bush and his economic performance ratings have received.

This does not bode well for Bush's popularity as more heating bills arrive. My recently arrived bill from Madison Gas and Electric features a fuel price 51% higher than last year ($1.23/therm vs. $0.82/therm), partly offset by a decline in the distribution price per therm (which I don't expect will recur), for a net 36% increase year over year. This graph shows the basic trend, though not the extent of the fall carnage. Don't expect any significant relief this heating season.


The gas price surge increased the gas bill $44 year/year — $48 for fuel alone. Even controlling for the weather, the hit is still around $40, or a bit more than a tank of gas for one of the cars, which basically takes away the gasoline price retreat from the post-Katrina peak. That slide doesn't seem likely to continue any further, as oil prices stick around $60 and our OPEC pals decide they might actually like to see prices firm up in that vicinity. (Local gasoline prices just ticked up about a nickel from the recent relative lows.)

On the plus side, we generated more than 0.1 meganegawatt-hour of electricity through a program of compact fluorescent installations and policing the use of incandescent lighting. That will, unfortunately, be offset by the addition of some spot electric heat to keep the family room from freezing. It would be Really Nice if dimmable energy-saving bulbs were readily available, in which case we could pretty well offset the electric space heater. I also look forward to MGE reducing its wind power surcharge to reflect what I'd have to assume to be a decreasing differential between its gas-fired and wind generation costs.