History was made on the tenth of June when the United States crossed the gas price rubicon. The cost for a gallon of gas soared above $5 for consumers across the country, forcing the United States to take one more step towards a devastating financial recession. The rapid rise in gas prices is not only damaging American’s pocketbooks at the pump, but also weighing down their purchasing power for other items ranging from electronics to cosmetics. Unfortunately, the severity of this issue has been politicized and deflected, and rather than put an actionable plan in place to address the problem, lawmakers have instead opted to lie to the American people.
Inflation reached 8.6% in June, which was an unexpected increase for economists and politicians who hedged their bets that inflation peaked at 8.5% in March. As the stream of misinformation flows through legacy media, here are just a few of the lies being told to deflect blame from the current administration’s lack of effort to address the growing energy crisis.
From the White House: “Americans face rising prices at the pump because of Putin’s Price Hike.” Perhaps one of the biggest misleading claims coming from lawmakers and the current administration is that the gas price increase is a result of Putin’s unprovoked invasion of Ukraine. While the invasion had a significant global impact on the supply and demand of oil and other products, such as food, the fact of the matter is that the price of gasoline was on the rise well before Putin’s invasion. According to the U.S. Energy Information Administration gas prices were $2.42 when Biden took office (January 2021) and increased to $2.89 two months later. By the end of February 2022, less than a week into Russia’s invasion of Ukraine, the price of gas had risen to $3.61 — a 49% increase in 12 full months. Based on the available data it is clear that Russia’s invasion did not cause the price of gasoline to rise, rather it accelerated its inevitable rise. Remember, this was the administration that promised to make evidenced based decisions and encouraged the public to trust the science.
Let’s entertain the Biden administration’s assertion that the rise in gas prices is a direct causation of Russia’s invasion into Ukraine. Banning Russian oil and natural gas from being imported into the United States and Europe, as well as other parts of the world caused the available supply to dwindle. The obvious solution to filling that supply gap would be to ramp up production elsewhere to counter the sharp increase in price and thus avoid the notorious Putin Price Hike. Unfortunately, the Biden administration’s Department of Interior announced in May of 2022 that they were canceling several drilling leases on more than one-million acres of land in the United States, because there was a “lack of industry interest.” Perhaps that interest was diminished by the administration’s efforts to increase environmental regulations and royalties that must be paid to the government; not to mention the 80% reduction in available federal land for drilling.
While handcuffing the American energy industry, the Biden administration has continually lambasted oil companies for their greediness while parroting a popular exaggeration that oil companies determine the price of gasoline for consumers — even though only 1% of the nation’s gas stations are owned by major oil companies. This politically perilous rhetoric will likely cost Biden and his Democrat party their control of Congress come November. Determining the price of gasoline is not as basic as lawmakers would lead consumers to believe. For starters, gas prices are governed by the laws of supply and demand. Consumers are paying a price that is based on the future expectation of supply. So, as the expectation for future oil supply decreases, the price of gas is naturally going to increase. Additionally, there are several components that are baked into the price of gasoline including the price of the oil, the cost of refining that oil into gasoline, transportation costs, and federal, state, and local taxes. This would explain why a tax-heavy state like California has gas prices exceeding $6.40 per gallon, while a state like Georgia, which suspended their gas tax, has the lowest price per gallon of $4.43.
Economists share in this strategic sleight of hand to pass financial responsibility onto someone else and mislead investors about the direction of the economy. Responding to national gas prices inflation beyond $5 per gallon, a CNBC reporter cited an economist stating, “While consumers are feeling the pain, prices are not yet at a level that would tip the economy into a recession.” The article went on to surmise that gas prices alone would not be enough to start a recession; therefore, other economic components must be involved, neglecting that oil is used for much more than producing gasoline. Ultimately, this lip service continues to threaten the security of investors’ nest eggs, and the proof is in the bear market that Wall Street reentered on June 10th (the stock market first entered bear market territory in May 2022).
The heavy-handed price of the big lie about big oil influences every part of the United States economy, beyond consumers filling up at the pump, heating their homes or making investments. Most of what consumers purchase rely on products that were made using oil or natural gas. These include, but are not limited to toothbrushes, lipstick and other cosmetics, dentures, garden hoses, car parts, clothing, and electronics. Once again, the laws of supply and demand come into effect and as the Biden Price Hike continues, consumers will reduce their spending on goods and services and therein lies the road to recession.