Checkbook Economics, Household Expenses Rise $961 Per Month, $11,532/yr, While Incomes Remain Flat

Checkbook Economics, Household Expenses Rise $961 Per Month, $11,532/yr, While Incomes Remain Flat

With most financial media being intentionally obtuse with the Biden economic impact upon Main Street, it is refreshing to see analysis that cuts to the heart of the matter.  HatTip to ZeroHedge who provides a link to a great article outlining reality for blue and white-collar working families.

The folks at NerdWallet have taken the inflation date from the Bureau of Labor and Statistics (BLS) and applied the math to real life.  The result is a good encapsulation of checkbook economics and how the Biden economy is painful for the working class.

In total, Joe Biden’s energy policy driven inflation has added $961/month to preexisting expenses.  That’s $11,532 a year just to retain the status quo standard of living.

(NerdWallet) – […] In all of 2020, American households spent $61,300, on average. This number includes everything we spend our money on: housing, food, entertainment, clothing, transportation and everything else. In 2022, it stands to reach $72,900, a difference of more than $11,500 if consumers want to maintain the same standard of living. Keep in mind, this is an average, a number that represents an approximation across all Americans, but one that’s exact to a very few. Those who earn (and therefore spend) more will see more dramatic dollar increases. Those who earn less may see less dramatic dollar jumps, but the impact of these rising prices could be more significantly felt. (read more)

If the average household spent $61,300 and inflation is adding $11,500 to the expense, that means we now have to spend 18.7% more just to maintain the current standard of living.  That average is in line with what we are seeing in the real world.

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Protest Crowd Storms Presidential Palace in Sri Lanka as Fuel and Food Shortages Create Desperation, Prime Minister Resigns, President Tries to Hang on

Protest Crowd Storms Presidential Palace in Sri Lanka as Fuel and Food Shortages Create Desperation, Prime Minister Resigns, President Tries to Hang on

It was not long ago when we noted the absence of food will change things.   While Dutch farmers are fighting the government and trying to keep producing food, in Sri Lanka the shortages of food and fuel have reached a boiling point.  Angry citizens have taken control of the presidential palace, set fire to the Prime Minister’s house, and overwhelmed government offices.

Fearing for his life, “Sri Lankan Prime Minister Ranil Wickremesinghe said he would resign after just two months in office after protesters stormed and occupied the president’s residence and office amid public anger over the country’s deepening sovereign-debt crisis.” (WSJ link)

The U.S. State Department and the ambassador to Sri Lanka, Julie Chung, are asking for protestors to remain peaceful as if their hunger is ‘transitory’.  However, videos from the country highlight the futility of platitudes amid tens of thousands of angry citizens who are desperate.  It is a hot mess that’s likely to surface in other nations quickly.

(Via WSJ) – Braving tear gas and water cannons in the capital, Colombo, protesters—many waving the national flag and wearing helmets—also entered the president’s office on Saturday, in one of the largest antigovernment demonstrations in the country this year.

Television news footage showed large crowds overrunning security barricades before breaching the official residence of President Rajapaksa. Some were later seen taking a dip in the compound’s swimming pool. Videos purportedly filmed by protesters and shared widely on social media showed scores of men rifling through drawers, sitting in chairs and lounging on a four-poster bed inside a bedroom of the residence. One man was shown doing bicep curls in a gym. (more)

The crisis had been building for weeks as the protesting crowds had continued to get larger.

As noted by the Wall Street Journal report, “responding to calls by protest organizers to congregate in Colombo for mass demonstrations this weekend, Sri Lankans from far and wide improvised around acute fuel shortages by piling into semitrailer trucks, trains and overcrowded buses to reach the capital. Some walked miles to join the demonstrations.”

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This next video shows how large the crowd was just before they stormed the buildings.

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There is no way to stop a crowd of this size.  I’m not sure how many people are in/around that compound, but it looks like hundreds of thousands.

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Monmouth Poll Compiles Top 22 Priorities of American People, Ukraine v Russia Does Not Appear on List

Monmouth Poll Compiles Top 22 Priorities of American People, Ukraine v Russia Does Not Appear on List

Monmouth University conducted another political poll of U.S respondents [SEE Survey HERE].  In addition to the plummeting approval of Joe Biden, the worst yet approval at 36% according to the survey, the respondents were asked to list their top concerns (Question #7).

The responses were recorded but did not come from a list presented by Monmouth.  They just compiled the results.  As stated, “what is the biggest concern facing your family right now?”  The results show the top priorities of Americans and the disconnect between the priorities of congress and the American people are stark.

(Source, Question #7)

Nowhere on the expressed concerns did anyone identify supporting Ukraine or the Russia -v- Ukraine conflict, as a priority; yet, Ukraine has taken up almost all of the legislative effort from congress.  The total taxpayer-funded congressional spending is nearing $100 billion.

The top priorities are what we would expect to see, economic issues.  Inflation, Gas Prices, the Economy and the ability to pay everyday bills (groceries) are the priorities of the American people.  All of these issues are directly caused by Joe Biden and the policy of his administration.  Climate change, the #1 focus of the administration, is not even in the top ten.  We are in an abusive relationship with our own government.

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Biden Plan to Cap Russian Oil Prices Could Seriously Backfire, Which Means It’s Likely to Happen

Biden Plan to Cap Russian Oil Prices Could Seriously Backfire, Which Means It’s Likely to Happen

The G7 plan to create another economic sanction against Russia by capping the price anyone could pay for Russian oil has a serious downside.  If Russia slows down the export of oil, global oil prices will jump dramatically.   That policy outcome would mean a massive increase in the price of gasoline for U.S. consumers.

Because the consequences are horrible, that’s precisely the reason Joe Biden might push to have the Russian price cap.  Every policy Joe Biden has historically supported, has been the exact opposite of what should have been done.  Biden has a profound and innate ability to screw up anything.

[Bloomberg] – Global oil prices could reach a “stratospheric” $380 a barrel if US and European penalties prompt Russia to inflict retaliatory crude-output cuts, JPMorgan Chase & Co. analysts warned.

The Group of Seven nations are hammering out a complicated mechanism to cap the price fetched by Russian oil in a bid to tighten the screws on Vladimir Putin’s war machine in Ukraine. But given Moscow’s robust fiscal position, the nation can afford to slash daily crude production by 5 million barrels without excessively damaging the economy, JPMorgan analysts including Natasha Kaneva wrote in a note to clients.

For much of the rest of the world, however, the results could be disastrous. A 3 million-barrel cut to daily supplies would push benchmark London crude prices to $190, while the worst-case scenario of 5 million could mean “stratospheric” $380 crude, the analysts wrote.

“The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports,” the analysts wrote. “It is likely that the government could retaliate by cutting output as a way to inflict pain on the West. The tightness of the global oil market is on Russia’s side. (link)

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Economic Security is National Security, and the Foundation of Economic and National Security is Energy Policy, Biden is a Threat to National Security

Economic security is the foundation of national security.  When the government takes action that destabilizes our economy, every element of national security is put at risk.  We are experiencing that right now as we suffer through Joe Biden’s intentionally flawed energy policy that is destroying the U.S. economy and everyone within it.

“It must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than a new system. For the initiator has the enmity of all who would profit by the preservation of the old institution and merely lukewarm defenders in those who gain by the new ones.”

~ Niccolo Machiavelli

Never has that Machiavelli quote been more apropos than when considering the MAGA movement and the rise of Donald Trump.

Thankfully, we are now in an era when the largest coalition of American voters have awakened to the reality that, to quote the former president: “Economic Security is National Security.”

As we live through the economic mess of a Biden administration hell bent on eroding the middle class of the United States, there are numerous pundits contemplating 2024 Republican presidential candidates other than Donald Trump; consider this group the lukewarm defenders Machiavelli noted.

At the same time the leftist coalition, writ large, are apoplectic about the base of the Republican Party now belonging to Donald Trump.  This group consists of those affluent Wall Street agents and politicians set on retaining the profits derived from decades of institutional objectives.

Institutional Democrats hate Trump, and institutional Republicans are lukewarm, at best, in defending Trump.  Both wings of the DC UniParty fear Trump.  Extreme efforts at control are a reaction to fear.  In this outline, I rise to explain why Donald Trump is the only option for the America First MAGA coalition; and I make my case not on supposition, but on empirical reference points that most should understand.

Everything, is about the economics of it.

If you accept that at its essential core elements the phrase “economic security is national security” is true – meaning the lives of the American citizen, person, worker, individual or family are best when their economic position is secure – then any potential leader for our nation must be able to initiate policies that directly touch the economics of a person’s life, liberty and the pursuit of happiness.  As a result, economic security and economic policy must be the fulcrum of their platform.

Now, look around and ask yourself this question: “What separated Donald J. Trump from the remaining field of 17 GOP candidates in 2016?”   An honest top-line answer would be immigration (border control), and his views on American economic policy.   In essence, what set Donald Trump apart from all other candidates was his view on the U.S. economy, and that was the driving factor behind ‘Make America Great Again’, MAGA.

Now, look around.  Look at every other potential candidate for political office. Is there another person in the field of your political view who comes from the starting point that economic security is national security?

Put aside all other issues and shiny things that may change from moment to moment as the political winds swirl and settle, and ask yourself that question.  Who can deliver MAGA, if not the central person who lives, eats, sleeps and thinks about U.S. economic security from every angle at every second of every hour of every day.  That’s Donald J. Trump.

Trump knows the extremely consequential sequence of BIG things that lead to a structurally strong American economic foundation.

We don’t have to guess at whether Trump can deliver on that policy sequence, we have reference points.

♦ Donald Trump knew that independent U.S. energy policy was a condition for a strong U.S. economy. He also knew there would be negative consequences to allies and partners if the U.S. energy policy was independent.  Trump knew that OPEC nations in general would be negatively impacted, and he knew that Saudi Arabia specifically would be weakened geopolitically.   That is why the very first foreign trip by Donald Trump was to Saudi Arabia and the Gulf States that make up the majority of OPEC.

Look at what President Trump did on that trip.  First, he assured Saudi Arabia that the United States would stand with the Gulf Cooperation Council and Mid-East nations as it pertained to their security.  Trump knew making the largest energy consuming nation independent from foreign oil would be adverse to the economic stability of the Mid-East, and as an outcome, could open a door to destabilization from extremist or ideological groups therein.

Take away top-line economic revenue from Saudi et al, and the leaders of those oil economies have a more difficult time remaining stable and controlling unrest and extremism.  Generations of Arab citizens know nothing other than the trickle down benefits of oil exports.  President Trump knew this, and he approached our need for energy independence by first assuring the Arab states of his commitment to their stability and safety.

President Trump delivered to those states a list of approved arms and defense agreements during that trip.  In essence, what he was doing was putting the promise of security into actual delivery of tools to retain that security.  Actions speak louder than words.  President Trump also promised to work diligently on peace in the region; a real substantive and genuine peace that would provide security in the big picture.

Over the course of the next few years, Trump delivered on that set of promises with the Abraham Accords.   Yes, economic security as national security applies to our allies as well as ourselves.  Again, actions speak louder than words.

With the U.S. energy independence program in place, President Trump then moved in sequence to the next big thing.

♦ Donald Trump moved to face the challenge of China.   A major shift in U.S. policy that is likely considered the biggest geopolitical shift in the last 75 years.  Trump strategically began with Trade Authority 302 national security Steel and Aluminum tariffs at 25% and 10% not only toward China but targeted globally.

The entire multinational system was stunned at the bold step with tariffs.   But remember, before Trump went to Saudi Arabia, he held a meeting with Chairman Xi Jinping in Mar-a-Lago.  The global trade world was shocked by the tariff announcement, but I’ll bet you a doughnut Chairman Xi was not.

That February 2017 meeting, only one month after his inauguration, was President Trump graciously informing Chairman Xi, in the polite manner that respectful business people do, that a new era in the U.S-China relationship was about to begin.  New trade agreements, new terms and conditions were to be expected in the future.  The tariff announcement hit Wall Street hard, but not Beijing – who knew it was likely.

U.S. financial pundits proclaimed the sky was surely falling.  These tariffs would cause prices to skyrocket, the global order of all things around trade was under attack by Trump.  They waxed and shouted about supply chains being complicated and intertwined amid the modern manufacturing era that was too complex for President Trump to understand with such a heavy handed tariff hammer.   Remember all of that?  Remember how cars were going to cost thousands more, and beer kegs would forever be lost because the orange man had just triggered steel and aluminum tariffs?

Did any of that happen?  No. Of course it didn’t. Actually, the opposite was true and no one could even fathom it.  Communist China first responded by subsidizing all of their industries targeted by the tariffs with free energy and raw materials, etc.  China triggered an immediate reaction to lower their own prices to offset tariffs.  Beijing did not want the heavy industries and factories to start back up again in the U.S, so they reacted with measures to negate the tariff impact.

China’s economy started to feel the pressure and panda was not happy.  Eventually, as the tariffs expanded beyond Steel and Aluminum to other specific segments and categories, China devalued their currency to lower costs even further for U.S. importers.  The net result was something no one could have imagined.  With lower prices, and increased dollar strength, we began importing all Chinese products at cheaper rates than before the tariffs were triggered.  Yes, we began importing deflation.  No one saw that coming…. but Trump did.

While all that initial U.S-China trade shock was taking place, Donald Trump took his next foreign trip to… wait for it…. Southeast Asia.

Just like in the example of the trip to Saudi Arabia, economically-minded Trump told partners and leaders in the export producing countries of Japan, Malaysia, South Korea, Vietnam, Philippines, Singapore, Thailand and ASEAN nations to prepare for additional business and new trade agreements with the U.S., as factories inside China might start to decouple.   Look at how they responded, they did exactly what Trump said would be in their best interests.

To seriously gather the focus of this SE Asia group, President Trump started direct talks with North Korea and Chairman Kim Jong-un for peace and regional stability.  It’s easy to forget just how stunning this was at the time, but generations of people in Asia were jaw-agape at the U.S. President confronting China, engaging with North Korea, and opening his arms to new trade deals with ASEAN partners.

On the world stage of geopolitics and global trade, any one of these moves would be a monumental legacy initiative all by itself.  But together, simultaneously, you can see how the entire continent physically stopped midstride and stood staring at this, this man, this American President, who was just about to step across the Demilitarized Zone in North Korea and shake hands with Chairman Kim…. and, wait for it…. they are smiling.

√ Energy security triggered and friends in Mid-East supported.

√ Mid-East peace initiatives triggered.

√ A return of heavy industry and manufacturing security triggered.

√ A confrontation of Chinese economic influence triggered.

√ Stability between South Korea and North Korea, triggered.

√ New trade deals and economic partnerships with Japan and South Korea, triggered.

And then, as if that was not enough… just as multinational investment groups started realizing they needed to change their outlooks and drop the decades long view of the U.S. as a “service driven economy”… just as they realized they needed to start investing domestically inside the United States for their own growth and financial security… as if all that wasn’t enough… President Trump kicks off an entirely new trade deal and renegotiated standard for all North American trade via NAFTA.

We don’t have to guess at whether Donald Trump can put together a program to ensure Economic Security is National Security.  We don’t have to guess at whether Donald Trump can deliver on economic policy.  We don’t have guess if Trump’s policy platform, proposals and initiatives would be successful.  We have the experience of it.  We have the results of it.  We have felt the success of it.

We also don’t need to guess at who is the best candidate to lead Making America Great Again, we already know who that is.

There is no other 2024 Presidential Candidate, who I am aware of, who could possibly achieve what Donald John Trump has achieved, or who could even fathom contemplating how to achieve a quarter of what President Trump achieved.

Governor Ron DeSantis has a lot of really good skills and policies on the domestic front unique to his position in Florida; however, it is not a slight toward him to point out he has never expressed any larger economic proposal that would give any confidence in a national economic policy.

Look at the sum total of it, and there’s so much more that could be outlined to what Donald Trump achieved and could yet still achieve, it’s not even a close question.

And that my friends is exactly why Donald Trump is under relentless attack from both wings of the UniParty in DC.  Additionally, it is clear the Wall Street Republicans are trying to position Ron DeSantis as an alternative to another Trump term.  Look carefully at the current advocates for DeSantis, Nikki Haley and/or Kristi Noem, and you will note every one of those early voices are attached to favorable Wall Street politics and multinational corporate advocacy.

Look at what Donald J. Trump was able to achieve while he was under constant political attack.  Just imagine what Trump 2.0 would deliver.

They, the leftist Democrats and Wall Street Republicans, are yet again absolutely petrified of that.

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Watch: AG Dana Nessel Calls on Biden to Shut Down Michigan Pipeline amid Soaring Gas Prices

Watch: AG Dana Nessel Calls on Biden to Shut Down Michigan Pipeline amid Soaring Gas Prices

Michigan Attorney General Dana Nessel (D) wants the Biden administration to intervene in the dispute over the state’s Line 5 oil pipeline and shut it down because keeping the pipeline open could result in an oil spill, Nessel says.

Nessel told the Royal Oak Area Democratic Club during its March monthly meeting that the Department of Transportation, led by Secretary Pete Buttigieg, has jurisdiction over federal pipeline regulations and could therefore use its authority to close Line 5, according to a video of Nessel’s remarks to the club, which the conservative group Michigan Rising first provided to Breitbart News.

Nessel said, “I do wish that the Biden administration would be even a fraction as vocal about the importance of shutting down Line 5 as Justin Trudeau and his government have been about, you know, maintaining a pipeline that has outlasted its lifespan by, you know, two times.”

Watch:

[embedded content]

The Line 5 pipeline, which has operated for more than 60 years, runs from Superior, Wisconsin, to Sarnia, Canada. For a small stretch in Michigan’s Straits of Mackinac, which connects two of the Great Lakes, the pipeline separates into two pipelines, which sit at the bottom of the water.

Nessel contended that if Line 5 were shut down, “We know that the impact on gas prices in the state of Michigan would be incredibly minimal.” Nessel added that “the thing that would affect gas prices,” which are currently at record highs, is a rupture in the pipeline that results in what she said would be a multibillion-dollar cleanup response.

Nessel and Gov. Gretchen Whitmer (D) sued to shut down Line 5 in 2020, but Enbridge, the company that owns the pipeline, has fought back with its own legal arguments, according to the Engineering News-Record. The magazine detailed that Enbridge has proposed a solution to create a tunnel for the Straits of Mackinac portion of Line 5 to remove the threat of oil spillage into the Great Lakes.

Nessel’s comments come after President Joe Biden began his presidency by declaring in no uncertain terms a “climate crisis,” halting new oil and natural gas leases on public lands and revoking a critical permit for the Keystone XL pipeline project. Environmentalists applauded the pipeline project death blow at the time, claiming the pipeline would have moved “dirty energy” from Canada to the U.S. The same groups have continued to push for Line 5 to see a similar fate.

Nessel echoed to the local Democrat club the same messaging as the Biden administration as she advocated for ending Line 5, saying, “The Trudeau administration has been very vocal about wanting to make sure that that they can provide as much, you know, dirty oil to Canadian citizens as possible, because that’s who Line 5 benefits, not us here in Michigan.”

She added, “It benefits the Canadians.”

The Associated Press

An above-ground section of Enbridge’s Line 5 at the Mackinaw City, MI, pump station is photographed in October 2016. (AP Photo/John Flesher, File)

Enbridge counters, however, that “Line 5 supplies 65% of propane demand in the Upper Peninsula, and 55% of Michigan’s statewide propane needs.”

In terms of costs, one study, conducted by the Consumer Energy Alliance, found that “overall, the [Line 5] closure could increase regional fuel prices by 9.5% to 11.7%, if the fallout from prior disruptions to refineries due to natural disasters is any indication,” according to the Detroit News.

The outlet noted the National Wildlife Federation disputed that study, claiming, “it was not grounded in fact.”

Brendan Williams, president of the fuel supplier PBF Energy, told Breitbart News last May that closing the pipeline “would be devastating for the region” and noted that the amount of crude oil moving through Line 5 is “the equivalent of 40 percent of the crude capacity of regional refiners.”

The White House said in November that a study was underway to explore the impacts of shutting down Line 5.

Write to Ashley Oliver at aoliver@breitbart.com. Follow her on Twitter at @asholiver.

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Gas Prices Go Parabolic, National Average Jumps to $3.84 as U.S. Oil Jumps Above $115 a Barrel

Gas Prices Go Parabolic, National Average Jumps to $3.84 as U.S. Oil Jumps Above $115 a Barrel

Gasoline prices accelerated at a stunning pace on Friday, jumping more than 11 cents from the day before.

On Friday, the national average gas price jumped to $3.837. That is as much as they rose in the entire week through Thursday, when they rose to $3.72 from $3.62 a week before. A week ago, gas prices were $3.572, so Friday’s gas price is 7.4 percent higher over the week.

Gasoline prices, which move up when oil prices climb, are up 12 percent compared with a month ago and 39.7 percent compared with a year ago.

“An increase in gas demand, alongside a reduction in total supply, is contributing to price increases, but increasing oil prices continue to play a leading role in pushing prices higher. Pump prices will likely continue to rise as crude prices continue to climb,” AAA said in a recent analysis.

The price of WTI crude, the best measure of petroleum produced in the U.S., was at $115.54 a barrel on Friday, up from $92.17 a week ago and $76.08 at the start of this year.

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Fact-Check: Biden Says Gas Companies Are Overcharging Americans at the Pump

Fact-Check: Biden Says Gas Companies Are Overcharging Americans at the Pump

CLAIM: Joe Biden on Tuesday claimed, without evidence, that gas companies are overcharging Americans at the pump by not passing on cost savings from lower wholesale gas prices to prices at the pump.

VERDICT: False. 

Gas prices are not abnormally high relative to either wholesale gasoline prices or crude oil prices. In fact, the ratios of wholesale gas prices to retail prices and that crude oil to retail gas prices are both currently below their ten-year averages.  That indicates that consumers at the gas pump are paying around what would be expected given the price of oil or the wholesale price of gasoline.

On Tuesday, the White House announced that the U.S. would release 50 million barrels of oil from the Strategic Petroleum Reserve in an ploy to bring down the price of gas. The immediate market response was a jump in the price of gas by 3.3 percent to over $82 a barrel.

Biden also claimed, falsely, that Americans were being overcharged by gasoline companies that were not passing on cheaper wholesale prices.

The price of gasoline in the wholesale market has fallen by about 10 percent over the last few weeks. But the price at the pump has not budged a penny. In other words, gas supply companies are paying less and making a lot more. And they do not seem to be passing that on to consumers at the pump. In fact, if the gap between wholesale and retail gas prices was in line with past averages, Americans would be paying at least twenty-five cents less per gallon right now, as I speak. Instead, companies are pocketing the difference as profit. That’s unacceptable. And that’s why I’ve asked the Federal Trade Commission to consider whether illegal and potentially anticompetitive behavior in the oil and gas industry is causing higher prices for consumers. So we can assure the American people are paying a fair price for their gasoline.

Historically, of course, there tends to be some lag between wholesale prices and prices at the pump, what economists sometimes call passthrough delays. “Gas stations tend to raise retail prices gradually in response to increasing wholesale prices. Similarly, gasoline prices at the pump typically decline at a slower rate over time in response to falling wholesale prices,” the Department of Labor explains in a 2015 article on the subject.

When prices are falling, this can mean that gasoline station margins widen. But the opposite is true when prices are climbing: this can squeeze margins.

“This delay in passing along wholesale price changes to consumers typically results in lower margins during periods of rising crude oil prices and higher margins during periods of declining crude oil prices. The price of crude oil is volatile, and significant price changes take time to work their way through the refining and distribution sectors before reaching consumers,” writes the Department of Labor.

It is also true that price declines tend to be passed through more slowly than price increases. Exactly why this is so remains a matter of debate.

Let’s go to the Department of Labor again for the competing explanations.

One explanation from the Association for Convenience and Fuel Retailing is that wholesale prices, local competition, and consumer behavior contribute to this behavior. The pass-through delays caused by the time it takes to refine and distribute product provides retailers with an added layer of protection from short-term price shocks. In addition, price-conscious consumers and local competition may lead to retailers adjusting retail prices gradually to avoid price shocks to consumers. Under this gradual price assumption, retailers receive smaller margins when wholesale costs increase and larger margins when wholesale costs decline. With this pricing approach, retailers can recoup lost profits from prior wholesale price advances by delaying retail price declines during periods of falling crude oil prices.

The second position, commonly referred to as the “rockets and feathers” phenomenon, was noted recently by researchers at the St. Louis Federal Reserve Bank. This theory argues that wholesale price delays and imperfect local competition largely contribute to the difference in pass-through speed during crude oil price increases and declines. Rising crude oil prices quickly push up wholesale gasoline prices, and as a result, retailers rapidly increase their prices to preserve their narrow margins and maintain profits. This direct pass-through of wholesale price increases results in a rapid rise in the retail prices consumers pay for gasoline. The speed of the increase is compared to that of rockets lifting off. Conversely, during periods of declining crude oil prices, some retailers can hold on to higher margins due to limited local competition and therefore have less incentive to pass along lower prices to consumers. This slow pass-through of price declines is compared to feathers drifting slowly to the ground.

Importantly, this is a persistent phenomenon and it is caused by local competitive conditions. Under the rockets and feathers approach, which most closely resembles President Biden’s perspective, gas station operators will be able to keep prices higher in areas where they face less competition. So, contrary to Biden, this isn’t a question of “gas supply companies” engaging in illegal or anticompetitive behavior.

If something unusual or illegal were happening now, this would show up in the ratio of wholesale prices to prices at the pump. But as the following chart indicates, there is no big change here. In fact, current prices at the pump are 1.28 times the wholesale price, slightly below the 10 year average of 1.34 times.

(That big spike in 2020 came from the crash of wholesale prices that took a short while to get passed on to consumers.)

What about prices at the pump compared with crude oil? Here also the current ratio of 24.48 to one is slightly below the long-term average of 24.98 to one.  In other words, a gallon of gasoline typically costs around 25 cents for $10 of the price of a barrel of oil and now it costs a bit less than that. Here’s the chart (and, again, you can see the crash associated with the pandemic).

In short, what’s happening now in gasoline prices looks normal given what we are seeing in global oil prices. The problem is likely not illegal or anticompetitive behavior by gas stations but the inflation loosed upon the global markets by the combination of profligate government spending, accommodative monetary policy, and anti-fossil fuel politics of the Biden administration.

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