“Senior White House aides are exploring new ideas to respond to high gas prices,” informs The Washington Post, “desperate to show that the administration is trying to address voter frustration about rising costs at the pump.”
Not “desperate” to lower gas prices, mind you — which have hit $5 a gallon, a double-digit increase from last month — but to “address” the resulting “voter frustration” from high prices.
After all, there’s an election in November. Suddenly, this crisis could affect important people in Washington!
“Biden officials are taking a second look at whether the federal government could send rebate cards out to millions of American drivers to help them pay at gas stations,” The Post reports. This generous brainstorm was previously rejected because “shortages in the U.S. chip industry would make it hard to produce enough rebate cards.”
America 2022 isn’t even technologically capable of giving money away.
Administration experts also worried “the idea could backfire by further pushing up prices by adding to consumer demand.” Oh, didn’t Congress repeal the laws of supply and demand?
Someone “familiar with internal administration discussions” offered that the administration was looking at “telling governors to lower or waive their gas taxes.”
“Other proposals floated by policy experts include suspending the Jones Act,” notes The Post story, “which would reduce shipping costs and make it cheaper to get gasoline from the Gulf Coast to the Eastern Seaboard.”
That act should have been repealed years ago.
“They’re fighting about narrative rather than fighting about substance,” offered an unnamed outside economic adviser, “because realistically, what are they going to do?”
They could open up energy markets, of course — approve gas pipelines rather than blocking them, perhaps.
Could? Should? Yes. Will?
Not Biden!
This is Common Sense. I’m Paul Jacob.
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16 replies on “It’s a Gas, Gas, Gas”
That’s the right description; all they want the puppets to hear is “THEIR NARRATIVE” and has nothing to do with the substance of actually doing anything about a problem. Let the surfs suffer and let them eat cake!
It’s not just gas/diesel! When the price of these items increases, the prices of everything transported (and almost everything is) also necessarily increases.
Exactly! The world needs inexpensive, reliable energy,. Even people who don’t drive a car need it because that is how the products they purchase arrive on store shelves and/or are delivered to their homes.
Please explain how the U.S. can lower gas prices, other than short term gimmicks. The oil companies don’t want lower prices. The shake companies don’t want to increase output. The Saudis—who knows. Shale company executives used to be paid on output. When the Saudis flooded the market many went bankrupt. The executives are now paid on profits. They are happy with high prices since they are making high profits. Those that could affect prices—on the margin—have no incentive to do so. Get ready for even higher prices because demand is higher than ever!
Pam, I’m not sure that anyone should reply to you, as you have a history of evaporating after your arguments are exploded. But…
What most producers desire is to be paid enormous sums for their commodities. What most consumers desires is to be paid enormous sums to take these commodities.
Generally speaking, neither of these desires is met. Consumers are decreasingly willing to buy as unit prices increases; producers are decreasingly willing to sell as unit prices go down. Producers do as well as they might when they sell at a level such that marginal costs of production barely don’t exceed marginal revenues. Consumers do as well as possible when the marginal benefit of their purchases is barely not below the costs (including time and taxes).
The US can cause more supply to come to market, and thus lower prices, by reducing costs of production which have been imposed by the government itself. Paul has repeatedly referred to exactly those costs.
You don’t have a clue. Extra oil produced in the U.S. will have no effect on prices. The oil companies aren’t interested in more production. And you can’t force them to produce more. They LOVE the high price! Money, Money, Money! If oil prices declined here (only) there would be an increase in exports to where the prices are higher. Again, Money, Money, Money!
Pam, insisting that I don’t have a clue and then your reiteraring an argument whose failure I just explained is a waste of time.
Oil producers loved money when prices were high and oil producers loved money when prices were low. Their greed doesn’r explain high prices because, as I explained, prices are determined by the combined effects of the marginal cost and marginal benefits of producers and of consumers. If the US did not artificially increase the costs, the equilibrium would be lower.
Joe Biden whacked back domestic production, and thereby whacked-back the global production. On at least one occasion, he even tacitly admitted that higher prices are a consequence of his policies designed to move America to lower consumption of petroleum.
The Narrative of the political left keeps shamelessly changing, just like the narrative of a psychopath or of a sociopath.
Let’s see who is stupid. I have an all-electric vehicle (EV). I drove about 150 miles today. Tonight I am charging my EV. So far it has cost me $4.36 to add 96 miles of range to my vehicle. In other words, I don’t use any oil (gasoline) when I drive my vehicle. It will take a few more hours to charge the EV to 90% capacity. Tomorrow I will get the equivalent of 100 miles per gallon. Did you ride your bicycle today?
Pam, as many have noted, use of an electrically powered vehicle is indirect use of whatever fuels electrical generation. Electrical vehicles are thus largely powered by oil and by coal.
What is also often mentioned is that production of electrical vehicles involves much more use of petroleum and coal than does production of ordinary gasoline-burning vehicles. Those who pay for electrical vehicles buy about eight years worth of fossil fuels up front.
As is less often mentioned, electrical transmission capacity in residential neighborhoods is almost never sufficient for their various gasoline-powered vehicles to be replaced by equivalent electrical vehicles. Basically, enormous quantities of resources would have to be expended to make electric vehicles more generally practical. We can expect that the state would instead compel everyone to use mass transit or to share rental vehicles.
As for me, when I drive, I drive a hybrid vehicle with high fuel efficiency, and I don’t have to pay a time-cost of more than a few minutes to add a few hundred miles to my range. But I seldom need to drive and didn’t to-day.
“telling governors to lower or waive their gas taxes.”
We tried that in Virginia but the dems in the state senate said no.
“To recap, just before the Covid-19 pandemic, U.S. oil production hit an all-time high of about 13 million barrels per day (BPD). As the pandemic unfolded, demand for oil collapsed, and production followed. By May 2020, oil production had dropped by more than 3 million BPD to 9.7 million BPD.
When the pandemic crushed oil demand in 2020, some oil companies went out of business. Some small stripper wells — which account for a respectable amount of U.S. oil production — were permanently capped because of the bleak outlook. Some workers left the oil industry. As people went back to work, demand began to bounce back, but production lagged due to the aforementioned issues.”
“When the pandemic crushed oil demand in 2020, some oil companies went out of business. Some small stripper wells — which accounts for a respectable amount of U.S. oil production — were permanently capped given the bleak outlook. Some workers left the oil industry.”
Just like the airline industry when there are layoff and production cuts, it isn’t easy to resume production.
And the oil companies have no incentive to pump more oil, even if it were possible.
Still clueless!!!
Oil companies were hurt when prices were low. In fact oil prices went negative at one point. You can’t make much money when you are willing to give oil away.
“Following the production collapse of 2020, the U.S. has been playing catch up as demand recovered. Rising oil prices — in response to insufficient supplies — are the predominant reason for the surge in gasoline prices.
In the last three months of the Trump Administration, oil prices rose by 32% as demand bounced back. From a monthly average of $39.40/bbl in October 2020 (source), the price of West Texas Intermediate (WTI) averaged $52.00/bbl in January 2021 — Trump’s last month in office.
In the first three months of the Biden Administration, the average monthly price of WTI rose by another 19% to $61.72/bbl. In the three months after that, prices rose another 17% to $72.49/bbl. Prices then bounced between $70/bbl and $80/bbl until January 2022. More on that below.
Many people attributed the entire price rise to President Biden, but in reality it began before Biden took office. Further, it was neither primarily President Trump nor President Biden’s fault — and these price surges were taking place all over the world.“
You remain clueless!
No, Pam, I remain an economist.
And, let’s recall what I said at the end of my previous comment: “The Narrative of the political left keeps shamelessly changing, just like the narrative of a psychopath or of a sociopath.” And now observe that, in a matter of mere hours, you have gone from using greed as the explanation for high petroleum prices to blaming huge shifts in demand as the markets went into Fauch-down and then bounced-back when the Fauch-downs were relaxed. You’re so used to changing your Narrative that you couldn’t resist doing so when your invocation of greed failed in the face of the obvious point that “oil producers loved money when prices were low”.
But we haven’t been arguing over whether price rises were fully explain by the things that Biden has done to decrease supply. We’ve been arguing over whether the US could act to increase supply and thereby lower prices. And the answer, again, is unequivocally yes. Biden could lower prices by reversing the actions that his Administration has taken to reduce supply. Indeed, he could press Congress to reverse many years of policy, and thereby still further allow supply to be increased.
The oil companies couldn’t give oil away!!!
“Markets
Commodities
Oil prices went negative a year ago: Here’s what traders have learned since
Last Updated: April 19, 2021 at 5:19 p.m. ET
First Published: April 19, 2021 at 4:23 p.m. ET
By Myra P. Saefong
It’s been a year since U.S. benchmark West Texas Intermediate crude futures made history by trading and settling in negative territory, and while prices have recovered to trade above pre-COVID 19 levels, that day won’t be soon forgotten.
“Last year proved that we hadn’t seen it all in the oil world,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy, in emailed commentary on Monday. “Many failed to see the gravity of what was coming,” including oil producers, the Organization of the Petroleum Exporting Countries and their allies, governments and analysts.
On April 20, 2020, the front-month May 2020 WTI crude contract dropped 306%, or $55.90, for the session, to settle at negative $37.63 a barrel on the New York Mercantile Exchange.
The one-day plunge was the largest based on records going back to 1983, and the settlement was the lowest on record, according to Dow Jones Market Data, marking the first and only time a contract closed with a negative value.
Read: Why oil prices crashed into negative territory — 4 things investors need to know
Seeing prices turning negative, in part due to a “storage risk,” which Rystad Energy and others had previously highlighted, “meant the discovery of a new market condition,” said Tonhaugen. “It was an ‘oil Everest, but in reverse’. Oil prices not only hit rock bottom, but they also broke the rock.”
“Oil prices not only hit rock bottom, but they also broke the rock.”
— Bjornar Tonhaugen, Rystad Energy
Negative prices were a result of “the market itself postponing an action plan, thinking that the problem will go away on its own,” he said.
Producers did not want to halt production, hoping that the low prices wouldn’t last long and OPEC+ could not immediately agree on policy, said Tonhaugen. At the same time, “oil storage was filling up quickly, forcing oil tankers to become floating storage.”
“When that bubble was about to break, panic took over and traders who couldn’t take on and store any more product they wouldn’t be able to sell,” he said. They “tried to offload their excess commitments, but nobody wanted to buy.:
Overall, the negative prices were the result of the market “not being experienced and prepared for what was coming,” since pandemics don’t usually happen more than once per generation or less, said Tonhaugen. But a pandemic could happen again, he said, and if oil demand “goes to the red again, now oil producers, OPEC and governments have the experience to deal with it.” “
The oil companies couldn’t give oil away.
“Markets
Commodities
Oil prices went negative a year ago: Here’s what traders have learned since
Last Updated: April 19, 2021 at 5:19 p.m. ET
First Published: April 19, 2021 at 4:23 p.m. ET
By Myra P. Saefong
It’s been a year since U.S. benchmark West Texas Intermediate crude futures made history by trading and settling in negative territory, and while prices have recovered to trade above pre-COVID 19 levels, that day won’t be soon forgotten.
“Last year proved that we hadn’t seen it all in the oil world,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy, in emailed commentary on Monday. “Many failed to see the gravity of what was coming,” including oil producers, the Organization of the Petroleum Exporting Countries and their allies, governments and analysts.
On April 20, 2020, the front-month May 2020 WTI crude contract dropped 306%, or $55.90, for the session, to settle at negative $37.63 a barrel on the New York Mercantile Exchange.
The one-day plunge was the largest based on records going back to 1983, and the settlement was the lowest on record, according to Dow Jones Market Data, marking the first and only time a contract closed with a negative value.
Read: Why oil prices crashed into negative territory — 4 things investors need to know
Seeing prices turning negative, in part due to a “storage risk,” which Rystad Energy and others had previously highlighted, “meant the discovery of a new market condition,” said Tonhaugen. “It was an ‘oil Everest, but in reverse’. Oil prices not only hit rock bottom, but they also broke the rock.”
“Oil prices not only hit rock bottom, but they also broke the rock.”
— Bjornar Tonhaugen, Rystad Energy
Negative prices were a result of “the market itself postponing an action plan, thinking that the problem will go away on its own,” he said.
Producers did not want to halt production, hoping that the low prices wouldn’t last long and OPEC+ could not immediately agree on policy, said Tonhaugen. At the same time, “oil storage was filling up quickly, forcing oil tankers to become floating storage.”
“When that bubble was about to break, panic took over and traders who couldn’t take on and store any more product they wouldn’t be able to sell,” he said. They “tried to offload their excess commitments, but nobody wanted to buy.:
Overall, the negative prices were the result of the market “not being experienced and prepared for what was coming,” since pandemics don’t usually happen more than once per generation or less, said Tonhaugen. But a pandemic could happen again, he said, and if oil demand “goes to the red again, now oil producers, OPEC and governments have the experience to deal with it.”
Again, Pam, that lurching change in your Narrative doesn’t refute the points that Paul has made; Biden can act to reduce the price of oil by reversing those of his actions that have reduced supply. And he can act to reduce it still further by pressing Congress to undo earlier actions that reduce supply.