The truth always comes out, sooner or later. In May, Joe Biden praised high gasoline prices as part of an “incredible transition.” At the time, the price of a gallon of gas reached $6 in California. Now, more of Biden’s innermost thoughts are seeping out, and they’re pointing to endless pain at the pump for Americans.
As reported in Bloomberg, Biden actually said that said Americans will have to stomach high gas prices “as long as it takes” in response to a question about how long high gasoline prices might persist. He also said he’ll ask allies in the Persian Gulf region to boost oil production when he meets with them during a trip to Saudi Arabia next month – apparently, begging is the only strategy Biden knows now.
He tried scolding U.S. oil drillers last month, saying that Exxon “made more money than God this year.” In a previous article, I already listed Biden’s ultra-restrictive, anti-drilling regulatory policies.
Granted, Biden did order the release of 180 million barrels of oil from the Strategic Petroleum Reserve, though that’s a drop in the proverbial bucket. Biden’s administration claimed that this action would cause prices at the pump to “come down fairly significantly.” At the time, the average price of gasoline was $4.225 per gallon, and of course it’s higher than that today.
All of this has only given Biden’s opponents more verbal ammunition. As Texas Republican congressional candidate Wesley Hunt put it, “It’s a ‘transition,’ all right. A transition into poverty. This is socialism.”
Suffice it to say that Biden isn’t doing the Democrats any favors. Americans cited inflation as their primary concern heading into November midterms, and energy prices comprise a large part of the current 8.6% annualized U.S. inflation rate.
Energy price index chart. Courtesy: YCharts.com
Shockingly, energy prices rose 3.9% just in the month of May, bringing the annual gain to 34.6%. Fuel oil, if you can believe it, posted a 16.9% month-over-month gain and a 106.7% year-over-year gain.
This raises a major problem for the Federal Reserve, which can raise interest rates until they’re blue in the face but this won’t make oil and natural gas prices cheaper. I mentioned natural gas, a by-product of oil drilling, as much of the electricity that runs through your house likely comes from natural gas.
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In other words, the American middle class is getting a double-whammy of high prices at the pump and skyrocketing electric bills. The only way to avoid Biden’s “tax on everybody” would be to get off the grid completely – but that might not even work, as soaring fertilizer prices are making it more expensive to grow your own food nowadays.
The Fed can do a lot of things, but it can’t flip a switch and make energy prices magically go down. Oil and natural gas prices only go down when one of two things happens: the supply increases, or the demand decreases. Biden’s regulatory actions have already ensured failure for the supply side of the equation.
As for the demand side, July 4th weekend is proof positive that Americans have no intention of cutting down on travel. The airlines can’t even find enough qualified pilots to fly their planes in order to meet the demand. The roadways are jam-packed with cars and trucks. There’s enough pent-up travel demand to last for the rest of the year and then some.
Meanwhile, leaders in Europe are begging their citizens to ration their energy use – a strategy that might have worked during World War II, but modern life and business in the 2020s depends on energy use. Imagine trying to tell today’s technology-dependent businesses to use less electricity – good luck with that.
Ultimately, the only way the Fed could possibly crimp the demand for fuel would be to induce a recession – or more precisely, stagflation – as people undoubtedly won’t travel as much if they’re dirt-poor. Is it cynical, or just realistic, to think that the central bankers are more than happy to grind the U.S. economy to a halt?
In Federal Reserve Chairman Jerome Powell’s own words, “We’re strongly committed to using our tools to get inflation to come down. The way to do that is to slow down growth… Is there a risk that would go too far? Certainly, there’s a risk.” It’s a startling admission, and no less appalling than Biden’s “as long as it takes.”
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