Let me offer two theories about recent events. You tell me which you find more credible.
Theory A: The reason President Biden has been sounding so forceful and effective lately is that the Disney Corporation has secretly replaced the real Biden with an animatronic robot.
Theory B: Biden’s socialist economic policies are the reason U.S. gasoline prices have shot up so much lately.
If forced to choose, I’d go for theory A. It’s ridiculous, of course, but it’s not quite as easy to refute, not quite as cynical an insult to voters’ intelligence, as theory B. But theory B is, of course, what Republicans are running with.
There are three things you need to know about gasoline prices. First, the price of crude oil — the stuff that comes out of the ground — is set in a global market, not country by country. Second, fluctuations in the price of gasoline, which is refined from crude, overwhelmingly reflect fluctuations in that global price. Third, U.S. policy has little effect on world oil prices, and virtually none at all in the short run — say, the 14 months that Biden has been in office.
About crude prices: A number of countries export oil: Saudi Arabia and other Persian Gulf producers, Venezuela, Norway, various others and, in normal times, Russia. Where they ship the oil depends on the price they can get. This more or less levels prices around the world: Any country with above-average prices will attract extra shipments, driving prices down; any country with below-average prices will see imports fall off, driving prices up.
As usual in economics, there are some pesky details: Not all crude oil is the same, and refineries in any one country may not be adapted to use oil from all sources. But these things only matter at the margin. There are two widely cited prices of oil — West Texas Intermediate, which reflects prices in, duh, Texas, and Brent, which reflects prices in Europe. And they move almost perfectly in tandem:
You can see the big recent run-up in both prices. This crude run-up has been reflected, pretty much one-for-one, in gasoline prices at the pump — everywhere. It’s true that average prices for gasoline differ at lot among countries, because taxes on consumers are much higher in Europe than they are in the United States. But short-run fluctuations are driven by the price of crude and are similar everywhere. Here’s what has happened in the United States:
And here’s what has happened in Britain:
So for those blaming Biden for rising prices here, I regret to inform you that he is not the prime minister of Britain, or the German chancellor, or …
So rising gas prices in America, then, are part of a global story that has nothing to do with the policies of the current administration. Still, can’t the United States have some impact on that global story? We are, after all, the world’s largest oil producer, accounting for about 20 percent of world output in 2020. Can’t America do something to reduce global oil prices?
Yes, in principle. Not so much in practice.
U.S. oil production did increase a lot after 2010 — a trend that, as it happens, began under the Obama administration and continued for part of Donald Trump’s term:
But this had little to do with policy; it was all about new technology, specifically fracking. Oil production then slumped in 2020, not because of policy but because prices plunged during the pandemic. Now it’s coming back, again thanks to events rather than policy. It seems safe to say that nothing either Trump did or Biden did has had any appreciable effect on U.S. oil production, let alone U.S. gasoline prices.
Of course, that’s not what Republicans would have you believe. They want the public to give Trump credit for low prices in 2020, when demand for oil was low because Covid had the world economy on its back. They want voters to blame environmental concerns, which have blocked the Keystone XL pipeline and might block drilling on public land, for high prices at the pump right now — even though it will take years before these policy changes will have any effect, and that effect will be modest even then.
I suppose we shouldn’t be surprised. After all, we’re talking about a party that’s in denial about everything from climate change to vaccine effectiveness, so what’s a bit of economic nonsense thrown into the mix? But somehow I find myself shocked all the same. For you don’t need scientific understanding or even rudimentary statistical analysis to see that President Biden can’t possibly be responsible for high U.S. gasoline prices; all you need to do is spend five minutes looking at what’s happening in the rest of the world.
But will voters see through this latest Republican disinformation campaign? Will Democrats make an effective case for the truth? I wish I was more optimistic than I am.