It is not entirely unreasonable to blame the high price of gas on the election of Joe Biden as President.
What’s not true, however, is the contention that his administration in any way is working to slow oil drilling or pipelines. The cancellation of Keystone XL, widely (and falsely) trumpeted as a win for the environment, didn’t change prices at the pump even a little.
I’ve said it before and I’ll say it again: The production cost of a barrel of oil is exactly what it was when this crisis began. It costs not one single dime more to produce a gallon of gasoline than it did in January. The cost of refining it into gasoline is a flat one gallon in four; the cost of transporting it to the pump is about the same, because it’s based on fuel costs. Taxes are the same 15%; gas station owners make about a 3% profit per gallon, and that hasn’t changed. The only single factor that has changed is the price of crude oil on the commodities market — period.
Commodities traders look at the global oil market and they see the potential to make money. There’s a war on, after all; there are disruptions in supply; production cannot increase overnight, and demand isn’t decreasing. Simple economics tells us the price will go up, and so it does. It’s the law of supply and demand, right?
Except it’s not. Speculation isn’t driven by supply and demand, but by perceived supply and demand. The difference may seem minor, but it’s not.
The worldwide supply of available oil has decreased by, perhaps, one quarter of a percent due to the present conflict. The USA produces twelve million barrels per day; Ukraine thirty thousand. Russian oil fields are still pumping, and China is buying every drop. If it were all down to supply and demand, the price of a barrel should be exactly what it was last year. The present spike is due almost entirely to rampant speculation in a volatile and panicked market.
It’s not about oil companies or a canceled pipeline; it’s not Germany shutting down its nuclear power plants, inept foreign policy, or some war halfway around the world. And it’s certainly not about reduced American oil production; 2022 is on track to be a record year. Hell, the Biden Administration is rubber-stamping oil leases left and right. (He’s pro-union, and that doesn’t mean pro-environment.)
The present price spike is driven by Wall Street commodities speculators, greedy hedge fund operators, and your own 401K. The way you can tell is, it’s going back down even though Ukrainian (and Russian) oil facilities are being bombed on a daily basis.
So, considering all this, why (you may ask) would we still blame poor Uncle Joe for the high price at the pump? There are two reasons, neither of which is really his doing.
The first is uncertainty due to his advanced age. If he dies, Harris will succeed to the Oval, and she’ll be running for re-election from day one — which means, among other things, blatant pandering to the environmentalist lobby. It’s small wonder that domestic oil companies are slow to put drilling rigs into the field.
The second is the Ukraine war. Say what you like about the presidency of Donald Trump, but it had one benefit: Vladimir Putin was fully aware that Trump was crazy enough to start World War Three if he felt like it. It’s no coincidence that his invasion of Georgia came at the tail end of a weak Bush presidency, and the annexation of the Crimea occurred under the Obama Administration. Biden is perceived as weak; personally, he’s seen as slow-witted, lacking in foreign policy expertise, and has a paper-thin majority in Congress that neatly reflects the strong partisan divide in the country. Given this, Russian aggression in the face of a pro-NATO Ukraine was entirely predictable.
Uncertainty prevents flexibility; war drives a perception of scarcity that’s not reflected in the real world. Record high prices are an inevitable result of a Biden presidency.
Kinda makes you wish you’d invested in gasoline futures, doesn’t it? Or, for the more socially conscious, maybe you’d prefer a system that wasn’t quite so volatile and easily gamed for the personal profit of a very few speculators.
If what you just read pisses you off, that’s not because it’s wrong. People are wrong every day and it doesn’t get to you. If you’re upset by this article, it’s because deep down you know it’s true.
No, The Not Fake News did not “get the memo” to “fall in line or else”; we’d find it hard to believe that anything else would be, financially, worse than this. We’re not shills of the public narrative; we don’t take marching orders from major media, and Big Oil has no idea we even exist. We’re independent, and because we don’t get payoffs or even ad money, we’re poor but reliable.
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