Based on what happened in the leadup to the 2006 mid-terms, I would expect the price of oil to start falling in the next few months and keep on falling steadily until the 2nd of November. Saudi Arabia's recent decision to increase output was just the start. Wall Street will have to get heavily involved, Big Oil will have to absorb some losses (i.e. less-than-obscene profits) for a while, and big money-holders like Goldman Sachs and the Federal Reserve will all have to do their part. Otherwise McCain's GOP is f***ed for good.
It's only June, and we probably wont see prices at the local pump coming down till August or even September. The public have notoriously short memories: there's no point dropping prices yet unless you just need to relieve some short-term pressure.
This time, however, there is another big problem, and that is the price of food. And that is part of the commodities bubble, which includes oil. So the solution might be tricky for the Bush-McCain-Big-Business backroom boys.
Here's a simplistic view of the past 20 years: Reagan's trickle-down economics (duly pursued by Bush 41 and 43) fed increased wealth to the already wealthy, creating the I.T. bubble, followed by the housing bubble, and now the commodities bubble. It's all a question of where those with too much money park their spare cash. Those with money in commodities now wont take it out until the bubble bursts or a new one comes along.
So, from a McCain perspective at least, it would be a great time for a new bubble to come along. But what might that be? I don't know.
Green Energy /Alternative Fuels would be a good idea: it would resonate with the public, create a media and investor "buzz" and trigger that all-important "feelgood factor". But the McCain-Bush team have way too much already invested in oil, so it could be a non-starter.
Emerging Markets is already a buzz term for investors, and maybe it's got possibilities as a bubble phenomenon if it can be packaged and marketed in a way that Wall Street approves. But that's a very big IF. Sure, you can bribe dictators and law-makers, but still it's hard to find a whole country full of people you can really trust. And all those extra US dollars floating out of the system creates a new headache. This one's also probably a non-starter.
Another I.T. Bubble would be good fun for the media and pretty easy to engineer. All you need are a few new buzzwords and lots of stories highlighting startups with clever ideas which most people today have never heard off. Throw a few million at them and - voila! - you have a new social phenomenon as well as a new news meme. Again, however, the problem is that a lot of this new technology is coming from outside the USA. This one's also problematic.
Sunny Iraq could be a fantastic new world of opportunities for US investors, particularly if all the profits could be channeled straight back to Washington. Now that everybody is happy and violence is just a distant memory, it could be time to start the new gold rush in the USA's latest client state. If only big money investors were that stupid, and Iraq was that peaceful. A definite non-starter. Gee, what a pity.
Any other ideas?