Conspiracy Theories Abound as Oil Prices Fluctuate

"Saudi production levels are keyed to moderating price increases, that's true," said Freeman, who was in Saudi Arabia during President George H.W. Bush's administration. At that time, Saudi Arabia opened its spigots to dampen prices as the United States prepared to free Kuwait. "But they don't really control them anymore," Freeman added. "[Saudi oil minister] Ali Naimi can't fine-tune prices for the purposes of influencing elections even if he wanted to." Freeman said that based on his conversations with Saudi leaders in 2004, "they would have been perfectly prepared to work with someone else if George Bush had been defeated."

The Goldman Touch

According to this theory, Treasury Secretary Henry M. Paulson Jr. has asked his former partners at Goldman Sachs to dump gasoline futures to drive down pump prices and boost GOP prospects in November.

Goldman runs the most important commodity index, which serves as the basis for about $60 billion in investment funds. And the firm has been selling gasoline holdings. "Goldman has been liquidating its gasoline position, and that's put a lot of pressure on prices," said Citigroup Inc. oil analyst Doug Leggate. "It's a very large part of why gasoline has fallen."

Whether the sales are part of a conspiracy is another question. Paulson has said he severed all ties to Goldman when he became Treasury secretary -- and there are Democrats at Goldman, too.

Goldman has issued three press releases about its sales. In June, it said that because of U.S. government regulations it would replace unleaded gasoline futures, which will be terminated, to futures in reformulated gasoline used in blending with ethanol. But then on Aug. 9, Goldman said it would reduce the gasoline portion of its index, sparking a steep one-day plunge in prices on the New York Mercantile Exchange. Goldman sources said yesterday that the proportion of gasoline in the index has been reduced by two-thirds.

Tapping the Reserve

Some Americans think the Bush administration is secretly selling stocks from the Strategic Petroleum Reserve, the 687.7 million barrel emergency stockpile stored in Louisiana salt caverns.

Normally, the federal government is slowly building the reserve. But in April, Bush said he would take the unusual step of suspending additions to the reserve in the face of soaring gasoline prices. From May to September, according to an Energy Department Web site, there was no net addition to -- or subtraction from -- the reserve.

The Big-Oil Theory

Are the big oil companies lowering prices to help the Republicans? "Politicians will fulminate about things, but it's the market that sets the price," said John Felmy, chief economist of the American Petroleum Institute.

But Public Citizen's Slocum argues that an indictment of BP PLC traders for allegedly trying to corner the propane market shows that oil giants can sway prices. Furthermore, he noted, big oil companies have political preferences. He said that 81 percent of the $63 million in political contributions made by major U.S. oil companies since 2001 have gone to Republicans.

But Slocum thinks the recent price drop isn't the result of a plot by big oil companies. Instead, he points to the flight of money invested by financial "speculators" in oil markets. "Do I think Karl Rove or George Bush is whispering in the ears of the oil companies? No. That's silly," Slocum said. "But some folks in the government sent strong signals to the speculators. Was that related to the elections? I don't know."