Gasoline prices are going up right now and consumers are upset. Blame is being thrown around. Soon, angry villagers will be storming the White House.
Of course, the cost of everything is going up, virtually every month lately. Food, housing, vehicles… you name it, it’s costing more. The phenomena is called “inflation” and it occurs when there’s a lot of money in the economy chasing limited resources. As the saying goes, “That which is scarce is dear.”
Gasoline prices ebb and flow. They’ve always done so in the U.S.: lowest in the Winter and then higher in the Summer when folks take vacations and put a lot of miles on their cars. More demand for fuel equals higher prices that Big Oil can demand. The energy companies are, after all, in the game for profit, and the more the better. It’s called “capitalism” and is why C.E.O.’s are rewarded so handsomely when shareholder values goes up.
As far as I know, the Federal government is not in the oil production business, so it really doesn’t set gasoline prices. However, the United States is one of the largest petroleum producing countries in the world; in fact, we export oil to other countries. When I say “we”, I mean the Big Oil multi-national corporations that produce energy on American soil.
All of the petroleum produced in the world constitutes an energy commodity which has value. This value is determined by how much petroleum is available for consumption and that amount is dependent upon how much energy extraction is going on at any given time.
Ergo, the price of oil can be, and often is, manipulated by multi-national oil producers working together in a business relationship called a “cartel”. Oil drilling can be accelerated or slowed down. During the pandemic, the slowdown in the world economy resulted in less demand for petroleum. Oil production was intentionally slowed and prices dropped dramatically.
No Federal officeholder was responsible for that.
Spot shortages, resulting in higher prices for oil, can occur when the petroleum supply chain is disrupted. The current war in Ukraine, and world pressure against Russia (a major energy exporter), is an example of such a disruption. At the current time, it is more of a fear of disruption than the real thing, but that uncertainty affects the petroleum “market” just the same. Buyers who are afraid of future supply shortages are willing to pay more now for assured deliveries.
President Joe Biden doesn’t control this global petroleum market any more than Donald Trump did when he was President. America doesn’t own the world, doesn’t control the cartels, and doesn’t direct the multi-national corporations, either.
The Federal government does control a “strategic reserve” of oil that has been saved for national emergencies. A President can release some of that petroleum into the market to resolve short-term shortages in supply. This is sometimes what antsy politicians suggest to get consumers off their backs about high prices. It’s a short-term band aid that really accomplishes nothing except deplete the strategic reserve, which is a critical asset in time of war.
Our country already produces enough oil for our own needs; we really don’t need any more.
The Federal Reserve is planning to slowly increase the cost of borrowing money to correct the inflation problem. The impact on prices of everything should slowly decline, as there will be fewer dollars chasing those limited resources.
A major stock market correction would speed all of this up, although something like that could throw a lot of people out of jobs. Prices would go down as both production and available money would decline. We are about ten years overdue for a stock market crash.
Such an event is not inconceivable if the current war between Russia and Ukraine broadens to include more European countries. If N.A.T.O. becomes involved, hence the U.S., the global economy would go into the tank. China, the other superpower, would probably not sit idly by while this happened: it would either take sides or use the confused state of affairs to do some land-grabbing of its own.
Accordingly, the stock market has been jittery in recent weeks.
I think the last thing we need to be concerned with right now is the pump price of gasoline. Anyone who uses this metric to judge how well (or poorly) the government is doing is a fool. Have these same idiots been tracking the price increases at Disney World lately? There’s a lot of “payback” out there: leisure industries who couldn’t make a dime in the pandemic are catching up, big time. Shareholders are like hungry dogs: they need to be fed.
It’s capitalism at work, and red-blooded Americans are supposed to love capitalism, free enterprise, and all that.
Yeah, but it sucks to pay more for gas.
