economic illiteracy or shameless demagoguery?
For Joe Biden, the buck stops with small independent business owners trying to make ends meet.
Over the holiday weekend, the president slammed gas stations for the purported sin of not passing along declining oil prices to motorists.
Biden took to Twitter to urge “the companies running gas stations and setting prices at the pump” to heed his message: “Bring down the price you are charging at the pump to reflect the cost you’re paying for the product.”
Yes, sir, whatever you say, Mr. President!
The US Oil and Gas Association mockingly recommended that the intern who sent the tweet should sign up for Econ 101, but it’s worse than that. Biden has hit the gas stations before on the same grounds. It’s hard to know where the economic illiteracy ends and the shameless demagoguery begins. Regardless, it’s another indication that the president’s approach on inflation is to cast about for scapegoats and villains, no matter how implausible.
So-called jaw-boning, or stern rhetoric directed at industries to get them to bend to the presidential will, is nothing new. The most famous example is from John F. Kennedy, who blasted US Steel for raising prices in the early 1960s. JFK’s tack was questionable, but at least he was targeting an enormously influential industry that had breached an agreement to hold the line on prices brokered by his administration.
Biden, by contrast, is going after the proverbial Liberty Gas Station and Uni-Mart down on Route 134 started by an immigrant couple hoping to send their children to college for the first time. These small-time entrepreneurs have done nothing wrong except remain in business at a time when the president’s anti-oil-and-gas policy has backfired spectacularly.
As the business newsletter The Hustle explains, the majority of owners operate a single gas station, either as a branded location of a big famous company or on their own. Given that there are more than 100,000 gas stations in the United States, many clustered at the same busy intersections in direct competition with one another, a proprietor hardly has monopoly power to determine prices.
Indeed, when Biden says gas stations set prices, he’s technically correct in the sense that they post the prices on their iconic signs down to 9/10ths of a cent. They aren’t doing it arbitrarily, though. They all know that if they set a price not justified by broader market forces, customers will simply drive down the street to another, more reasonably priced station.
Selling gas usually isn’t the most lucrative part of the business, either. Gas stations make a very small margin on fuel, with the cost of crude and refining, along with transport and taxes, accounting for almost all of the price at the pump. Stations earn a much higher margin on their sales of drinks and foodstuffs. Biden would be on more solid ground urging gas stations to cut consumers a break on the price of soda and Doritos.
Biden maintains that the stations should reduce gas prices since it’s a time of “war and global peril.” This appeal might make sense if Biden were browbeating gas stations located in Ukraine or Russia. But the United States is not at war, and business owners are under no obligation to sell their product at cost or below because Russian President Vladimir Putin is trying to dismember Ukraine.
Counterintuitively, gas stations tend to be more profitable when prices are declining rather than rising, so they are unlikely simply as a business matter to be engaged in the pricing conspiracy that Biden alleges.
Although the president considers them worthy of a good kicking, gas stations aren’t a growth proposition. The number of stations has markedly declined in recent decades, and the rise of electric cars is putting more pressure on the business model.
At least they are actually doing their job in difficult circumstances. The same can’t be said of President Biden.