“As prices have increased faster than at any other point in four decades, lawmakers have scrambled for explanations. In recent months, some Democrats have landed on a new culprit: price gouging.
The idea is that big companies have seized on inflation to jack up prices more than necessary. The White House has backed the claim, and congressional Democrats have introduced bills that target price gouging. Proponents of the theory have a catchy term for it: “greedflation.”
For Democrats, it is a convenient explanation as inflation turns voters against President Biden. It lets Democrats deflect blame from their pandemic relief bill, the American Rescue Plan, which experts say helped increase prices. And it lets them recast inflation as the fault of monopolistic corporations — which progressives have long railed against.
Not all progressives are on board. Jason Furman, an economist who served under Barack Obama, told me that greed was not an important factor in the rise of inflation. He described the focus on price gouging as a distraction from the real causes and solutions.”
But the White House and other lawmakers are taking the theory seriously. So in today’s newsletter, I want to look at the arguments for and against the idea that greedflation is driving higher prices.
SOURCE: German Lopez, New York Times 6-14-22 Try and read the entire article. Inflation and Price Gouging
The government (both state and feds) make more off a gallon of gas than the oil companies. Whose greedflation is it?
How ironic. I click through to read the article about greedflation and am confronted with a paywall. Coincidence?
“He (Furman) described the focus on price gouging as a distraction from the real causes and solutions.”
New York Times;
“You do not need price gouging to explain inflation, and there are other, more widely accepted explanations, Furman said.
Covid disrupted supply chains globally. Russia’s invasion of Ukraine caused another wave of disruptions, particularly in food and energy.* The stimulus bills left people with a lot of extra cash, and many Americans spent it.** That prompted too much demand for too little supply, so prices increased.”
*“Putin’s Price Hike”
**”Americans spent it”…
That’s what stimulus means. Create jobs, grow businesses, etc. It’s like Rubik’s Cube, solve one side and it “unsolves” two others. You can’t have everything.
Half the lies they tell aren’t the truth anyway.
Make a positive difference in someone’s life today. Bill Mitchell ________________________________
Article behind a pay wall so I did not read it.
However, I did read President Biden’s letter to the oil companies. I have a unique perspective as my son is a chemical engineer who lost his job when they shut his California refinery in 2020 to convert to using bio fuels in order to meet EPA mandates and to obtain California targeted energy credits. That refinery is still off line.
Here’s an excerpt from the lead editorial from today’s WSJ:
What do you know? President Biden has suddenly discovered that a refinery shortage is driving up fuel prices. Naturally, he’s blaming refiners, even as his Administration doubles down on the policies that created the shortage.
At least he’s finally noticed the dearth of refining capacity to process crude,… The U.S. has lost about one million barrels a day of refining capacity in the pandemic.
A major culprit is U.S. government policy. Some older refineries have closed because companies couldn’t justify spending on upgrades as government forces a shift from fossil fuels. …
The EPA recently published its final renewable fuel standards for this year, which the American Fuel and Petrochemical Manufacturers called “unachievable.” … Yet refiners this year will be required to blend 10% more biofuel. This means refiners will again hit the so-called “blend wall” of how much ethanol and biodiesel can technically be processed into the nation’s fuel supply. …
Refiners must purchase regulatory credits to comply with the mandates. Increasing credit prices have driven some small, independent refineries out of business. Small refineries can seek a temporary exemption …(but) the EPA just denied 69 waiver requests.
Some large refiners such as Marathon Petroleum and Phillips 66 have sought to comply with biofuel mandates by converting refineries to produce renewable diesel from vegetable oil. This also lets them cash in on a $1 a gallon federal tax credit and regulatory credits under California’s low-carbon fuel standard that some other states are copying.
S&P Global Platts estimates that renewable diesel in California fetched a $3.70 a gallon premium over regular diesel in the early weeks of 2022 owing to tax and regulatory credits. This biofuel profit premium is driving the sort of capital misallocation that the World Bank noted last week in a report on economic growth and inflation.
Chevron CEO Mike Wirth said recently that refineries are shutting down or being repurposed for renewable fuels because “the stated policy of the U.S. government is to reduce demand for the products that refiners produce.” When companies are told that demand for their product will become obsolete, it’s no surprise that they don’t invest in supply.
Mr. Biden demands that refiners propose “concrete ideas” to immediately increase capacity. How about his Administration stop trying to put them out of business?
Bottom line, some folks are taking advantage of the supply issues. But ignoring what caused the supply issues, leaving those in place, or worse, embracing them and suggesting we can all buy an EV, makes no sense. As of November 2021, the average price of an electric car hovered around $56,000, up nearly 6.2% from the year before, according to data from Kelley Blue Book.
And ignoring the massive oil company losses in 2020 doesn’t do any good – ExxonMobil reported a loss of $22.4B in 2020.
Just a dearth of leadership from this Administration. Just listen to them – “”There’s a lot going on right now but the idea we’re going to be able to click a switch, bring down the cost of gasoline, is not likely in the near term. Nor is it with regard to food,” not much we can do about gas prices and food prices…” President Biden. or “I do expect inflation to remain high although I very much hope that it will be coming down now.” Wishful thinking from Janet Yellen.
If you ignore the actual causes and blame “Putin’s Price Hike”, you aren’t even trying, you’re actually encouraging continued, ever higher gas prices and inflation. Idiots all.