If you’ve bought gasoline recently, like Michigan Democratic Senator Debbie Stabenow, there’s a good chance you’ve seen a sticker on the gas pump that says “I Made It” with a picture of President Biden. Typically, those stickers are placed by the customer, not the gas station owner, and for that reason, I’m against them: they violate the owner’s property rights.
But I’m more interested in the important question here: Did Joe Biden “make it”? My answer is “a little.” It’s not just Biden. The Federal Reserve had some role, and recovery from the pandemic played a large role. But many of the actions Biden took before Vladimir Putin’s invasion of Ukraine, and some of his actions since, have caused oil and gasoline prices to rise. Biden didn’t “do it.” Other governments have contributed to the problem, and the US government’s various restrictions on the oil and gasoline markets have also contributed.
These are David R. Henderson’s opening two paragraphs, “What caused gas prices to jump?” Defining IdeasJune 30 2022.
One factor is the reaction of Biden and many European governments to the oil market to Vladimir Putin’s invasion of Ukraine. They have helped keep Russian oil out of the market. The Russian government responded by selling oil to China and India, which it used to sell mainly to European customers. It could just be a game of musical chairs with the qualification that the number of chairs equals the number of players. In such a case, the overall impact on the world oil market would be small. But the coalition agreement seems to hold. Why should I say that? Because the prices Russia is charging to China and India are deeply discounted from world prices. If the contract is broken, the prices are equal. The EU and Biden have effectively divided the world oil market. Chinese and Indian consumers lower their demand curve for lower prices, buying more than they have, and we other consumers are bidding on the reduced supply. So, the EU and Biden definitely contributed to the high price of oil after the Russian invasion.
Interestingly, Biden admits that his and the EU’s actions have driven up oil prices. In a speech on June 22, 2022, Biden said:
We cut off Russian oil to the United States, and our partners in Europe did the same, knowing we would see higher gas prices.
Read the whole.
Update: Thanks to Jeff Hummel for reviewing my paragraphs about money and inflation, and to Ben Zeicher for giving me data on consumption in the year 2021. The Department of Energy’s Energy Information Administration is far behind and one that has International Energy Agency (IEA) data.