A range of world actors and events share the blame for the run-up in prices.
If you, unlike Michigan Democratic senator Debbie Stabenow, have bought gasoline lately, there’s a good chance that you’ve seen a sticker on the gas pump with a picture of President Biden saying, “I did that.” Typically, those stickers are placed by customers, not gas station owners, and for that reason, I’m against them: they violate the owners’ property rights.
But I’m more interested here in the substantive question: did Joe Biden “do that”? My answer is “somewhat.” It wasn’t Biden alone. The Federal Reserve had some role, and the recovery from the pandemic had a large role. But the many actions Biden took before Vladimir Putin’s invasion of Ukraine and some of his actions afterwards have certainly caused the price of oil and gasoline to rise. Biden didn’t do all of “that.” Other governments have contributed to the problem, and various US government restrictions in the oil and gasoline markets have also contributed.
More important, many of Biden’s actions, unless reversed, will contribute to high oil and gasoline prices in the future. We shouldn’t be surprised. After all, he and his employees John Kerry, special presidential envoy for climate, and Jennifer Granholm, secretary of energy, explicitly want a diminished role for fossil fuels in the near future. If future oil production falls, then, for a given demand for oil, oil prices will rise.
We need to separate two categories of gasoline price increases: increases due to inflation and increases due to actions specific to the oil and gasoline markets.
Between January 2021, when Biden took office, and May 2022, the consumer price index (CPI), which is the usual measure of the inflation rate, rose by 11.7 percent. So, if gasoline prices had simply kept pace with the CPI, they would now be 11.7 percent higher than in January 2021. In January 2021, the average retail price of gasoline in the United States was $2.42. By the week of June 13, 2022, it had reached a whopping $5.11 per gallon. That’s up by $2.69. The 111 percent increase is, of course, much bigger than the increase in the CPI. Clearly, other factors besides inflation have caused gasoline prices to rise.
The major entity responsible for inflation is the Federal Reserve. In the 1960s, Milton Friedman famously stated that “inflation is always and everywhere a monetary phenomenon.” What he meant is that any persistent inflation that we have observed has been preceded by an increase in the money supply. That’s why a standard line that people have used is that inflation is due to too much money chasing too few goods.
There are several measures of the money supply. The one that monetary economists use most is M2, which includes M1 plus time deposits under $100,000 and shares in retail money market funds. M1, in turn, consists of currency and coins held by the non-bank public, checkable deposits, and savings deposits. In February 2020, just before the pandemic-induced lockdowns, M2 was $15.46 trillion. By April 2022, it had reached $21.73 trillion, an increase of 40.6 percent. Of course, we didn’t get close to a 40 percent inflation rate. The main reason is that Americans’ demand to hold money increased dramatically early in the pandemic. With fewer goods and services for people to buy, they (we) hoarded money. Now, with the pandemic largely behind us, our demand for money is slowly falling.
But why did the money supply increase so much? A major factor was the huge increases in pandemic-related federal government spending, during both the Trump and the Biden administrations. The CARES Act, which President Trump signed in March 2020, increased government spending by $2.2 trillion. To put that in perspective, total federal spending in FY 2019 was $4.45 trillion. And FY 2019 was not exactly a low-spending year, except in retrospect. Nor was Trump done. In late December 2020, he signed another spending bill that included $900 billion in further pandemic-related spending. Those spending increases weren’t enough for President Biden. In early March 2021, Biden signed a further $1.9 trillion pandemic-related spending bill.
All three of these spending measures massively increased the federal budget deficits for FY 2020, FY 2021, and FY 2022. That meant that the federal government had to borrow additional trillions of dollars. The Federal Reserve “monetized” a large part of that additional debt by buying federal government bonds that had first been sold to the public. According to Veronique de Rugy, of the $6 trillion in new federal debt issued during the pandemic, the Federal Reserve monetized $2.7 trillion, or 45 percent. That’s how the money supply increased.
So, if we’re going to blame the entities that caused inflation, they are, in order, the Federal Reserve, Donald Trump, and Joe Biden. On the plus side, we should give huge credit to Joe Manchin, the Democratic senator from West Virginia, for standing strong against Biden’s further huge spending increase, misleadingly labeled “Build Back Better.”
The Oil Market
But the major cause of gasoline price increases, as the earlier data show, has not been inflation. The other causes are specific to the oil and gasoline markets.
Start with oil. The biggest factor in the increase in gasoline prices since January 2021 is the increase in the price of oil. Between January 2021 and May 2022, the price of West Texas Intermediate oil (a standard measure of prices) increased from $52.00 per barrel to $109.55, an increase of 111 percent. There are 42 gallons per barrel of oil. The $57.55 increase in the price of oil, the major input in gasoline, accounts for $1.37, or over half, of the $2.69 increase in the price of gasoline.
Before we turn to other factors that account for the gasoline price increase, let’s first consider who or what is responsible for the increase in the world price of oil. The major factor is the increase in worldwide demand as we make our way out of the economic collapse of 2020. We can’t have data on demand because demand is always a schedule: it gives the amount demanded at each price and all we observe at a point in time is the price and the quantity consumed. But here’s how we know that demand increased. Between the first quarter of 2021 and the fourth quarter of 2021, worldwide consumption rose from 93.9 million barrels per day (mbd) to 99.2 mbd. When both the consumption of oil and the price of oil rise, that necessarily means that demand increased.
Besides increases in demand, what factors have led to higher oil prices, especially in the past few months?
One factor is Biden’s and many European governments’ response in the oil market to Vladimir Putin’s invasion of Ukraine. They have colluded to keep Russian oil off the market. The Russian government has responded by selling oil to China and India that it would have sold mainly to European consumers. This could be just a game of musical chairs, with the qualification that the number of chairs equals the number of players. In such a case, the overall effect on the world oil market would be small. But the collusive agreement seems to be holding up. Why do I say that? Because the prices that Russia is charging China and India are deeply discounted from world prices. If the collusion had broken down, the prices would be close to equal. The EU and Biden have effectively segmented the world oil market. Chinese and Indian consumers move down their demand curve at the lower prices they pay, buying more than they would have, and we other consumers are bidding over a diminished supply. So, the EU and Biden have definitely contributed to the higher price of oil since the Russian invasion.
Interestingly, Biden admits that his and the EU’s actions have increased oil prices. In a June 22, 2022, speech, Biden stated:
We cut off Russian oil into the United States, and our partners in Europe did the same, knowing that we would see higher gas prices.
Longer term, Biden will contribute to higher oil prices regardless of what happens with Russia and Ukraine. The reason is that he has signaled in many ways his hostility to US production of oil and natural gas. The American Energy Alliance has listed “100 Ways Biden and the Democrats Have Made It Harder to Produce Oil and Gas.” As with most such lists, some of the items seem minor. But the shocking thing is how many appear to be substantial. They include an executive order imposing a moratorium on new oil and gas leases on government lands and a proposed rule by the Securities and Exchange Commission that would require public companies to disclose their greenhouse gas emissions. No oil company decision maker could miss the overall negative tenor of the list. I recommend a quick perusal of the list of 100.
Interestingly, one of Biden’s cabinet members recently admitted her hostility to long-term production of oil and natural gas. In a June 15 interview with CNN’s John Berman, Energy Secretary Jennifer Granholm admitted that she and Biden want oil companies to produce more oil this year but not produce more in five to ten years. The video is priceless. You can tell by the look on Berman’s face and by his tone that he is skeptical that oil companies can be motivated to bear a lot of startup costs just to produce more oil for only a year or two.
But you don’t have to go with tone or facial expression. Berman laid out the problem beautifully:
But that’s the problem for these companies. These companies are saying, you know, “you’re asking me to do more now, invest more now, when in fact five or ten years from now we don’t think that demand will be there, and the administration doesn’t even necessarily want it to be there.”
You might think that because oil prices are determined in a world market, US government actions that discourage domestic US production don’t matter much. But that’s not true. Because oil demand worldwide is fairly inelastic, small changes in supply can cause large changes in price.
As noted above, the increased price of oil between January 2021 and May 2022 accounts for $1.37 of the $2.69 increase in the price of gasoline. What about the remaining $1.32 of the increase? The problem is that the increased demand for gasoline is pushing against a very inelastic refining supply. Here’s how Debnil Chowdhury and Susan D. Bell put it in “Restart or remain shuttered—why rationalized US refineries will not come to the rescue” (IHS Markit, June 24), after noting the amount of refinery capacity that has been sidelined by storms or other incidents:
General market sentiment, our medium-term outlook included, is that the current high-margin environment [for refineries] will be fleeting. Recouping recommissioning costs will be difficult unless these strong margins are sustained beyond 2023. Refiners are unlikely to invest hundreds of millions of dollars in recommissioning costs for only one or two years of strong returns.
Getting permission to build a refinery in the United States is not easy. While the US Energy Information Administration lists thirteen US refineries that have been built since 1978, none of these has the capacity to refine more than 84,000 barrels per day. Compare that to the Marathon Oil refinery in Garyville, Louisiana, built in 1976, which has the capacity to refine 578,000 barrels per day. Oil company executives would have to think long and hard before applying for permission to build a new refinery or putting serious resources into expanding a refinery. You can bet that all of them heard, loud and clear, Granholm’s statement about not wanting so much oil in five or ten years.
As I noted earlier, I’m not a fan of violating the property rights of gasoline station owners and so I would never put an uninvited sticker on a gasoline pump. But if I were to do so, the sticker would have a picture of Joe Biden saying, “I did some of that, and I’ll do more.”
Biden's Energy Department said move would 'support American consumers' and combat 'Putin's price hike'
The Biden administration sold roughly one million barrels from the Strategic Petroleum Reserve to a Chinese state-controlled gas giant that continues to purchase Russian oil, a move the Energy Department said would “support American consumers” and combat “Putin’s price hike.”
Biden’s Energy Department in April announced the sale of 950,000 Strategic Petroleum Reserve barrels to Unipec, the trading arm of the China Petrochemical Corporation. That company, which is commonly known as Sinopec, is wholly owned by the Chinese government. The Biden administration claimed the move would “address the pain Americans are feeling at the pump” and “help lower energy costs.” More than five million barrels of oil released from the U.S. emergency reserves, however, were sent overseas last month, according to a Wednesday Reuters report. At least one shipment of American crude went to China, the report said.
The Biden administration also claimed the Unipec sale would “support American consumers and the global economy in response to Vladimir Putin’s war of choice against Ukraine” and combat “Putin’s price hike.” But as the war rages on, Unipec has continued to purchase Russian oil. In May, for example, the company “significantly increased the number of hired tankers to ship a key crude from eastern Russia,” Bloomberg reported. That decision came roughly one month after Unipec said it would purchase “no more Russian oil going forward” once “shipments that have arrived in March and due to arrive in April” were fulfilled.
The White House did not return a request for comment. Its decision to sell barrels from the country’s Strategic Petroleum Reserve to a Chinese conglomerate comes as the American public increasingly sours on Biden’s energy policies. According to a January Gallup poll, roughly three in four Americans are not satisfied with the federal government’s national energy policy, the highest level in roughly two decades.
Power the Future founder Daniel Turner admonished Biden for selling “raw materials to the Communist Chinese for them to use as they want.”
“We were assured Biden was releasing this oil to America so it could be refined for gasoline to drive down prices at the pump. So right off the bat, they’re just lying to the American people,” Turner told the Washington Free Beacon. “What they’re saying they did and what they did are not remotely related.”
Turner also said the decision highlights the Biden family’s “relationship with China.” Biden’s son, Hunter Biden, is tied to Sinopec. In 2015, a private equity firm he cofounded bought a $1.7 billion stake in Sinopec Marketing. Sinopec went on to enter negotiations to purchase Gazprom in March, one month after the Biden administration sanctioned the Russian gas giant.
Biden campaigned heavily against the oil and gas industry in 2020, promising to “end fossil fuel.” He went on to cancel the Keystone XL pipeline and implement a moratorium on new gas leases on federal land during his first month in office. Biden’s energy secretary, meanwhile, is working with left-wing activists who want to eliminate fossil fuels, and in late October, House Oversight and Reform Committee Democrats pushed top oil executives to produce less gas due to climate change.
Gas prices have since soared to record highs. In mid June, the national average for a gallon of gas surpassed $5 for the first time ever. Still, the White House has assured Americans that they need to pay high gas prices to support the “liberal world order.”
“What do you say to those families that say, ‘Listen, we can’t afford to pay $4.85 a gallon for months, if not years?'” CNN anchor Victor Blackwell asked Biden economic adviser Brian Deese in late June. “This is about the future of the liberal world order and we have to stand firm,” Deese responded.
Democrats denounce fuel tax suspension
On the campaign trail in 2008, Obama said of the tax suspension, “We’re arguing over a gimmick that would save you half a tank of gas over the course of the entire summer so that everyone in Washington can pat themselves on the back and say they did something. Well, let me tell you, this isn’t an idea designed to get you through the summer, it’s designed to get them through an election.”
House Speaker Nancy Pelosi (D., Calif.) in April said gas tax holidays are “good PR,” but shared the concern that there is “no guarantee that the reduction in the federal tax would be passed on to the consumer.”
Rep. Peter DeFazio, (D., Ore.), the chairman of the House Transportation and Infrastructure Committee, agreed.
“Suspending the 18.4 cents per gallon federal gas tax is not going to give consumers significant relief—if any at all,” DeFazio said in February, adding that the move may have negative effects. “Suspending the tax will blow a $26 billion hole in the highway trust fund this year and cause further delay in rebuilding our decrepit infrastructure and the tens of thousands of jobs that investment would have provided.”
Sen. Joe Manchin (D., W.Va.) also foresees road blocks for infrastructure projects. He said the suspension “just doesn’t make sense,” adding, “People want their bridges and their roads, and we have an infrastructure bill we just passed this summer, and they want to take that all away.”
The Free Beacon reported Monday that Biden is the least popular president in more than a century. Democrats are on the fence about his viability for a second term and bracing for a tumultuous midterm season.
Whether or not Marie Antoinette said rioting French peasants upset about the shortage of bread to feed their families should “eat cake” instead is not important. The idea that she did has been passed down, generation to generation, as the perfect illustration of how the isolated elites in a society can become hopelessly out of touch.
This is not just a problem for the rich but also for the powerful, who use their positions to grant themselves perks that alleviate the need for them to worry about the kinds of things that keep the rest of us at night.
Like whether we’re going to have enough gas in the car to get to work in the morning.
Since coming into office, the Biden Administration has been at war with the American energy sector. Following the President’s lead, they believe climate change is an existential threat to the continued well-being of mankind that can only be thwarted if Americans are forced to go green.
That’s what’s really behind the sudden, continuing rise in the price of gasoline. It’s not, as President Joe Biden continues to assert, a transitory thing caused by Vladimir Putin’s invasion of Ukraine. It is the result of calculated policy decisions intended to roll back the energy independence that became a reality by the end of the Trump Administration.
There’s nothing wrong with green energy per se. Indeed, the United States would realize considerable benefit from the ability to rely on fuel coming from renewable sources like wind and solar and to be more efficient in the generation and use of power from fossil fuels so that less of it is wasted
All that can be achieved by market forces a lot faster and cheaper than by government mandates. The Biden Administration has chosen – regardless of the consequences – to force this upon us all, meaning that some people are now, in a period of inflation unseen for at least 40 years, to face the very real choice between putting gas in the car and food on the table.
Too many Democrats regard that as a good thing. They don’t blame the government for the problem. They blame the energy sector, which it criticizes for earning record profits because the price at the pump is up thanks to the shrinkage Biden and his cohorts have forced on the industry. The cancelation of new pipelines and oil and gas leases on federal lands are two among a handful of reasons domestic energy producers cannot respond to the increase in demand by increasing the supply to keep prices stable.
The energy markets are behaving as the President wants, given his belief, he can prioritize his strategy to increase the use of energy made from renewables and the need to bring down the price of gasoline.
White House Press Secretary Karine Jean-Pierre seemed badly ignorant of economic reality when she insisted during a recent press briefing that there was nothing inherently problematic with pursuing both objectives at the same time.
“What we’re trying to deal with right now is how do we lower costs for American families,” she said. “One of the things that we are seeing currently right now with oil refiners is they are using this moment,” she continued, “to actually make a profit.”
She can get away with shifting blame for a while but what does she suggest as an alternative? Does she think the energy sector should sell gasoline and other fuels at a loss? That’s a recipe for economic catastrophe, as would be the kind of nationalization of the sector that exists in so many other countries.
The problem is that Biden and Jean-Pierre and so many others are out of touch with what’s going on. The people aren’t rioting for gas yet, but it may just be a matter of time.
Consider the comments of Michigan Sen. Debbie Stabenow, who recently described a drive she made from her home state to Washington in an electric vehicle.
“After waiting for a long time to have enough chips in this country to finally get my electric vehicle,” the state’s senior elected Democrat said during a June 7 meeting of the Senate Finance Committee. “I got it and drove it from Michigan to here last weekend and went by every gas station and it didn’t matter how high it was.”
Stabenow doesn’t have to choose between putting food on her table and putting gas in her car. Rather than being grateful and understanding she’s insulated from reality because she enjoys elected privilege, she claims she’s mystified by the expressions of concern coming from the American people because they are routinely paying more than $100 for a full tank of gas. Wonderful.
An elected official, whose annual salary is just shy of $200,000, is driving a car that cost more than most Americans make in a year that the taxpayers probably pay for her to use, thinks high gas prices aren’t a problem because she doesn’t have to pay them anymore. That’s the kind of leadership that causes politicians to lose their heads.
Hypocrisy Watch: Democrats hope they’ve found an issue that will re-energize the fading “Blue Wave” with the recent spike in gas prices. Never mind that the increase is temporary. Or that Democrats have for years tried to force gas prices up — permanently — through various tax hikes.
According to the federal Energy Information Administration, average pump prices for regular gasoline hit $2.923 a gallon this week. That’s up 55 cents compared with the same week last year, and the highest prices have been since November 2014.
Sen. Minority Leader Charles Schumer and other Democrats plan to use this price spike to Continue reading
By My Way News•
Oregon is about to embark on a first-in-the-nation program that aims to charge car owners not for the fuel they use, but for the miles they drive.
The program is meant to help the state raise more revenue to pay for road and bridge projects at a time when money generated from gasoline taxes are declining across the country, in part, because of greater fuel efficiency and the increasing popularity of fuel-efficient, hybrid and electric cars.
Starting July 1, up to 5,000 volunteers in Oregon can sign up to drive with devices that collect data on how much they have driven and where. The volunteers will agree to pay 1.5 cents for each mile traveled on public roads within Oregon, instead of the tax now added when filling up at the pump.
Some electric and hybrid car owners, however, say the new tax would be unfair to them and would discourage purchasing of green vehicles.
“This program targets hybrid and electric vehicles, so it’s discriminatory,” said Patrick Connor, a Beaverton resident who has been driving an electric car since 2007.
State officials say it is only fair for owners of green vehicles to be charged for maintaining roads, just as owners of gasoline-powered vehicles do.
“We know in the future, our ability to pay for maintenance and repair… will be severely impacted if we continue to rely on the gas tax,” said Shelley Snow with the Oregon Department of Transportation.
Other states are also looking at pay-per-mile as an alternative to dwindling fuel tax revenues.
Last year, California created a committee to study alternatives to the gas tax and design a pilot program; Washington state set money aside to further develop a similar program; and an Indiana bill directs the state to study alternatives and a test project.
While growing in popularity, electric vehicles and hybrids are still in the minority on American roads, even in a state as green-minded as Oregon. Of 3.3 million passenger cars registered in Oregon at the end of 2014, about 68,000 were hybrid, 3,500 electric and 620 plug-in hybrid. A decade ago, only 8,000 hybrids were registered.
However, fuel-economy for gas-powered vehicles has been increasing as technology is developed that addresses public concerns about greenhouse gas emissions and dependence on foreign oil.
Oregon is the only state to actually test-drive the pay-per-mile idea.
The gas tax provides just under half of the money in Oregon’s highway fund, and the majority of the money in the federal Highway Trust Fund, of which Oregon receives a portion.
Oregon’s share of the fuel tax over the past two decades has been mostly flat and in some years declined, state data show. In 2009, the Legislature raised the tax from 24 cents to 30 cents per gallon, but that’s not enough to avert shortfalls, state officials said, because construction costs increase with inflation.
Oregon previously held two rounds of small-scale tests involving GPS devices to track mileage.
The current program, called OreGo, will be the largest yet and will be open to all car types. Of these, no more than 1,500 participating vehicles can get less than 17 miles per gallon, and no more than 1,500 must get at least 17 miles per gallon and less than 22 miles per gallon.
Volunteers will still be paying the fuel tax if they stop for gas. But at the end of the month, depending on the type of car they drive, they will receive either a credit or a bill for the difference in gas taxes paid at the pump.
Private vendors will provide drivers with small digital devices to track miles; other services will also be offered. Volunteers can opt out of the program at any time, and they’ll get a refund for miles driven on private property and out of state.
After the American Civil Liberties Union of Oregon raised concerns about privacy and government surveillance, the state built protections into the program, said ACLU’s interim executive director Jann Carson.
Drivers will be able to install an odometer device without GPS tracking.
For those who use the GPS, the state and private vendors will destroy records of location and daily metered use after 30 days. The program also limits how the data can be aggregated and shared. Law enforcement, for example, won’t be able to access the information unless a judge says it’s needed.
“This is the government collecting massive amounts of data and we want to ensure the government doesn’t keep and use that data for other purposes,” Carson said.
The OreGo program is projected to cost $8.4 million to implement and is aimed to gauge public acceptance of the idea of charging motorists per mile of road they travel. It will be up to the Legislature to decide whether to adopt a mandatory road usage charge.
One of the biggest concerns will be whether a program like OreGo could actually discourage people from buying electric or hybrid vehicles.
Drive Oregon, an advocacy group for the electric-vehicle industry, supports the program because every driver should pay for road repairs, executive director Jeff Allen said. Still, he said, “The last thing we need to do right now is to make buying electric cars more expensive or inconvenient.”
by Marita Noon • Breitbart News Network
Prices at the pump have gone up nearly 40 cents a gallon from the January low—60 cents in California. They will continue to rise while the price of crude oil remains low. Based on explanations, the jump was expected. Every year, at this time, refineries shut down to make adjustments from the “winter blend” to the “summer blend.” It is “refinery maintenance season.”
However this year, the increase is exacerbated. Continue reading
Gas prices are significantly higher and likely to go higher still, which could make this the most expensive summer at the pump in five years.
The average price is now $3.67, and Tom Kloza, chief oil analyst for GasBuddy.com, predicts there’s at least a 50% chance gas could top the $3.79 a gallon high for the year reached in February.
The rise in crude oil prices is one of the major factors in the recent gas price run-up, since oil prices end up being passed onto consumers. And while retail gas prices have risen quickly, they haven’t kept pace with wholesale prices on the commodities markets — meaning it’s virtually certain you’ll pay more at the pump, and soon.
Here’s a breakdown of what’s driving the recent gas spike, and what drivers should be worried about later this summer: Continue reading
California’s record gasoline prices and long service station lines are a warning to all of us about what green energy can do to our pocketbooks.
On Monday, California gasoline cost $4.67 per gallon, compared with the $3.81 U.S. average. California’s environmental standards are the most stringent in the country, and Californians are paying the price.
The price spike started with an August fire in Chevron’s Richmond refinery. Then, two other refineries, operated by Tesoro and Exxon Mobil, went down for maintenance. Because California requires different blends of gasoline from other states, and pipelines across the Rockies are limited, gasoline can’t be shipped in from elsewhere. Continue reading