Is Biden right about the oil business gouging Americans?
The President doesn’t appear to know anything about how the private economy works.
By The Editorial Board, WSJ
Updated July 4, 2022 1:15 pm ET
Business leaders have chalked up President Biden’s attacks on oil companies to political cynicism, but maybe they’re too generous. His tweet over the weekend ordering gas stations to lower prices betrayed a willful ignorance about the private economy.
“My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril,” Mr. Biden tweeted Saturday. “Bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.” Had Donald Trump issued such a command as President, the left would have cried “authoritarian.”
It’s embarrassing for the leader of the free world to sound like he’s channeling Hugo Chávez. A Chinese state media flack praised Mr. Biden’s tweet: “Now US President finally realized that capitalism is all about exploitation. He didn’t believe this before.” Or maybe he did, and nobody wanted to believe it.
You’d think that the President’s Ivy League-educated economic advisers would have informed him that large refiners own fewer than 5% of all gas stations in America. More than 60% are operated by an individual or family that owns a single store, and the rest are independently owned chains or grocery stores that sell fuel. Many license brands from refiners.
Refiners largely exited the retail business in the 2000s because of thin profit margins. The Energy Information Administration says distribution and marketing made up about 5% of the price of gasoline in May, or about 22 cents a gallon. This covers the cost of freight, labor, utilities, real estate and credit-card fees (which can average more than 10 cents a gallon).
Most gas stations make a few cents a gallon in profit and stay in business mainly by selling food and cigarettes. The National Association of Convenience Stores says its members are struggling amid high gas prices because customers are making fewer stops and buying less.
More than a quarter of gas stations have closed since the 1990s because they couldn’t make the economics work. If retailers were to sell fuel at cost, most would go out of business. Perhaps those owned by large refiners would survive, but they’d be accused of predatory pricing by Mr. Biden’s antitrust cops.
The President’s economic ignorance isn’t a one-off. In recent months he has accused oil and gas companies of price gouging and demanded that they increase production even while his Administration threatens to put them out of business. Mr. Biden doesn’t understand that businesses make long-term decisions based on demand expectations and policy signals. Jeff Bezos called the President’s weekend tweet “either straight ahead misdirection or a deep misunderstanding of basic market dynamics.” They aren’t mutually exclusive.
Asked about the tweet on Fox News Sunday, National Security Council spokesman John Kirby said that “anybody that knows President Biden knows he’s plain spoken and he tells exactly what he’s thinking in terms that everybody can understand,” adding that “we obviously take great exception of the idea that this is somehow misdirection.”
That isn’t reassuring.