Understand the basics before complaining
October 6, 2022
To The Eagle:
I’ve heard lots of people complain about and blame the Biden administration on our current inflation situation. The most recent example was Mr. Schreiber’s Eagle article last week about the price of gas.
Gasoline, Natural gas, Brent Crude and West Texas Crude are all commodities that are traded on worldwide markets. These commodity “contracts” are traded on the Chicago Mercantile Exchange by thousands of international players, both buyers and sellers. To assume an American President, whether Biden, Trump, Obama, Bush, etc., can unilaterally control international markets gives them credit for control they simply don’t have. Think “supply and demand,” just like real estate markets.
Presidents can put in short term bandaid fixes to try to keep costs down, like Biden did releasing reserves from our National Petroleum Reserve, or reducing applicable taxes. Basically though, we’re exposed to the influences of world wide economies, currencies, capitalism, and other influences. Saying otherwise is like blaming Biden for the spot price of copper when India and China are willing to pay inflated prices to Australian and South African miners.
In Trump’s first year, he issued almost 2,000 domestic drilling permits. In Biden’s first year, he issued a little over 3,200 of these permits. So why aren’t these increased number of permits being used to produce more crude, to lower the prices refiners pay?
You just have to look no further than comments from Howard Hamm, billionaire founder and CEO of Continental Resources, a huge publicly traded company, for the answer. When specifically asked this, he said (paraphrasing) “why should we drill more when we’re making more money for our shareholders by keeping production limited and banking our permits.” This is essentially the same stance OPEC has taken.
Commodity markets are driven by fear and greed, free enterprise, and capitalism. Trying to otherwise politicize this economic reality is disingenuous and/or misinformed.