Oil takes back seat to economy in U.S. election

WASHINGTON (Reuters) - Despite record-high oil prices near $90 a barrel, energy issues will likely take a back seat in the 2008 U.S. presidential election to more pressing pocketbook concerns like plummeting home values, experts say.

Even before oil prices neared their inflation-adjusted peak of $101.70 per barrel hit in April 1980, a year after the Iranian revolution, most presidential candidates had weaved themes like U.S. energy independence into their stump speeches.

But even if U.S. gasoline prices hit yet-unseen levels above $3.50 per gallon, energy is unlikely to rise to a forefront issue in the campaign for the November 2008 election, analysts say.

"For a lot of Americans, paying $4 for gasoline is going to be painful but what they're going to look at is their major asset -- their house," said David Kirsch, a manager at PFC Energy, a Washington consultancy.

With a raft of top-tier issues like the war in Iraq, health care and home prices clamoring for voters' attention, energy could get lost in the shuffle, barring a catastrophic supply disruption, experts said.

According to U.S. government data, the average gasoline price is $2.76 a gallon, near a 6-month low and far from its record of $3.22 hit in May. Prices could rise as soaring crude oil costs filter through the supply chain to consumers.

Politicians, especially incumbents, keep a close eye on gasoline prices and "the conventional wisdom is that high gasoline prices will always kill an incumbent regardless of anything else," said Jerry Taylor of the Cato Institute.

CRISIS? WHAT CRISIS?

But experts point out that U.S. consumers so far have taken high pump prices in stride.

"There is little reason to think that a nice round number is all of a sudden going to induce hysteria and bike-riding -- $3, $4 or $5," Taylor said.

Taylor pointed to a study by researchers at the University of California, Berkeley in September 2006 that showed consumers from 2001-2006 were only one-third as likely to change their driving habits in the face of high pump prices as they were during the last oil shocks of 1975-1980.

"Consumers are responding modestly to these prices and that will continue to be the case," he said.

For now, refiners are absorbing the pain of high crude oil prices, which have sparked a collapse in profit margins for converting crude oil into gasoline, said Paul Sankey, a research analyst at Deutsche Bank.

"How that divergence reconciles -- either with higher gasoline prices or lower crude prices -- will be key to the importance of oil to the election," Sankey said.

REMARKABLY RESILIENT

Though oil prices are high, Energy Secretary Sam Bodman recently said the U.S. economy has been "remarkably resilient" to high energy prices so far.

At least one of the eight Republican presidential candidates, Fred Thompson, is highlighting the links between oil prices and economic pain.

"Most economic downturns over the last 25 years have been preceded by a spike in oil prices," Thompson said on October 9 at a Republican debate hosted by the CNBC television network. "There's probably plenty of oil out there for the indefinite future. But price is an issue."

Many candidates are getting sophisticated energy policy briefings but "they come out of those meetings and give the same old soundbites," PFC's Kirsch said.

"I don't think anybody is going to really distinguish themselves on energy policy on the campaign trail," he said.

Boosting the efficiency of U.S. automobiles could rise to the level because "it is literally the only measure that Democrats or Republicans can point to answer the fundamental question of 'What have you done for me at the pump?'" said Phil Clapp, president of the U.S. National Environmental Trust.

The Senate this summer approved the first substantive boost in fuel standards in about 30 years, which must be reconciled with a disparate bill passed by the House of Representatives.