Will Gas Prices Predict the Next President?

WEST CHESTER, Pa. -- Low gasoline prices, a strong economy and higher approval rating for President Obama mean the 2016 presidential election is decidedly in the Democrats’ favor.
According to an analysis by Dan White, a senior economist at Moody’s Analytics, West Chester, Pa., higher house-price forecasts combined with low gasoline prices mean the incumbent Democrats are most likely to win the White House in November.

As opposed to other national election models, which are based on higher-frequency indicators, Moody’s Analytics bases its election model on two-year changes in economic data. This means that even though gasoline prices are moving upward, they are unlikely by themselves to tip the election in the Republicans’ favor by November, said White. In fact, remove gasoline prices from the model, and Republicans would be the likely victor. 

That gasoline prices hold such sway over the model’s outcome does make the projection more risky, White acknowledged. That’s because voters’ reactions to low gas prices may not be as favorable as in past elections, especially considering how low energy prices have fallen over the past one and a half years.

Moody’s is forecasting a $2.39-per-gallon average for Nov. 1, election day. In an interview with MarketWatch, White said chances are “remote” that gas prices would rise enough between now and then to start tipping the election in Trump’s favor in Moody’s model.
 

“It’s difficult to give an exact price given that prices would have to move in tandem with the approval rating, but generally they would have to be back near the $3-per-gallon range for the model to swing to a Republican outcome,” White said. However, this price point, last hit back in early November 2014, “isn’t outside the realm of feasible possibility.”

Another factor in Democrats’ favor: the president’s approval rating. President Obama’s rating recently rose above the 50% mark for the first time in nearly four years. Should it keep above this important point up to the election, it could surpass the two-year rise of President Ronald Reagan after the Cold War. But should it fall as gas prices rise, “Obama’s approval rating is the only model variable that could feasibly move far enough, quickly enough, to push the model outcome in Republicans’ favor by November,” said White.