Biden’s Vast Oil Conspiracy The President takes to Twitter to show what he doesn’t know about the retail gasoline market.
President Biden is adopting Donald Trump’s habit of venting his political frustrations on Twitter. “Oil prices are decreasing, gas prices should too,” Mr. Biden tweeted Wednesday. “Oil and gas companies shouldn’t pad their profits at the expense of hardworking Americans.” Sorry, Mr. President. There’s no vast industry conspiracy to raise gasoline prices.
Gas prices almost always rise faster than they fall, as the Federal Reserve Bank of St. Louis explained in a 2014 report. “When oil prices rise after being steady for some time—gasoline prices shoot up quickly,” the Fed paper explained. “In contrast, when oil prices fall after being steady for some time, gasoline prices retreat slowly.”
Individual retailers set gas prices based on what they expect their future fuel deliveries to cost. But they have no clue right now due to all of the global uncertainty. Oil prices have plunged this past week in part because the United Arab Emirates said it would urge OPEC to pump more. But the cartel might not.
Markets also forecast that China’s lockdowns, if they continue, will dampen global growth and fuel demand this year. But they may not. Ukrainian President Volodymyr Zelensky also raised hopes on Tuesday that peace talks with Russia were beginning to “sound more realistic.” But the war could go on for weeks. Who knows what crude prices will be a week or even a few days from now.
By the way, the vast majority of the nation’s 150,000 gas retailers are mom-and-pop operations. Fewer than 5% are owned by refiners. Profit margins are only about 10 to 15 cents a gallon even when prices shoot up. These small businesses aren’t padding their profits. They’re trying to hedge against big losses if oil prices spike.
Markets are complicated, we know. But maybe Mr. Biden could try to understand how they work, for a change.
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