Bidenomics 101

Uncategorized 1 Minute

Source: The Wall Street Journal.

WSJ’s Editorial Board takes Joe Biden to task for a remarkably stupid tweet. The president probably deserves it, but I don’t think he is alone in his misunderstanding about prices and profits.

Many people think of profit as a type of padding. If you can add profit, they imagine, you can subtract it, too. In reality, profit is both income and expense. Once profit has accumulated within a business, the owner must spend it in some way; into his own pockets, perhaps, or to buy equipment, or to hire employees, and so on.

Seeing profit in this way makes Stumble Joe’s demand of gas station owners doubly foolish, because limiting business income must limit business expenses to the same degree. You might just as well demand that gas stations go out of business a little bit.

Published by John Todd Roberts

Published

57 thoughts on “Bidenomics 101”

  1. There is a serious disconnect between what oil companies have to pay for petroleum and what we have to pay for gasoline at the pump.

    This chart in this article shows that Biden is not a dumb as you would like to believe.

    https://www.washingtonpost.com/business/2022/04/11/gasoline-prices-crude-prices/

    For those without WAPO access, the chart shows that starting from the Russian invasion of Ukraine both the cost of a gallon of crude and the price of a gallon of gas shot up. Within weeks the cost of a gallon of crude returned to where it had been, but the price of a gallon of gas stayed elevated. That difference is why oil companies are making huge profits from price increases far above the cost of the product they are selling.

    Liked by 2 people

    Reply

    1. Were WAPO an honest publication, it would use the same time scale for both graphs.

      However what you can see is that about 75% of the increase in the wholesale prices of gasoline occurred before the Ukraine invasion, and that for a very brief period, the profit for the station owners rose to the same level as the tax on fuel.

      The price of crude remains the main factor and it only takes a very small shortfall on largely inflexible short term demand to produce large swings in crude prices.

      Like

      Reply

      1. The graph started at zero for both products on the day of the invasion. It is a graph of the change in price per gallon from that day. There is NOTHING dishonest about it.

        The point is clear. The underlying cost of petroleum, whatever smoke you want to blow about it, is NOT the cause of the current high price at the pump. In 2008 the cost of crude in a gallon of gas was $3.00 and the price of gas was $3.95. In June 2022 the cost of crude in a gallon of gas was $2.50 and the price of gas was $4.25. The difference is explained by greatly increased margins by oil companies and gasoline distributors.

        https://realeconomy.rsmus.com/oil-prices-and-price-gouging-deconstructing-the-price-of-gas/

        Whatever the relationship between the tax on a gallon and the profit on a gallon, it is COMPLETELY irrelevant. I think you know that.

        Liked by 1 person

        Reply

        1. Your own cite explained the Rocket/feather paradox.

          If Biden can call on stressed business owners to cut their profits, states and the Federal government can cut their piece of the action.

          Like

          Reply

          1. “Your own cite explained the Rocket/feather paradox.”

            I thought WAPO was not honest?

            The fact that price gouging always follows a temporary bump in crude prices does not change the fact that price gouging is following this bump in crude. The idea was proposed that Biden is ignorant of the workings of the market. Seems he is well-informed.

            And, as a matter of fact, Biden has proposed a federal gas tax holiday.

            Liked by 1 person

          2. Proposed with no follow-up by his party is just empty pandering.

            That “price gouging” helps regulate the market by dampening surges in demand in response to sudden price drops.

            Price gouging is a political term, not an economic one.

            Like

          3. “Proposed with no follow-up by his party is just empty pandering.”

            You are aware that our own governor has proposed the same thing at the state level in VA, but I don’t hear the kids of complaints as when Biden proposed it at the national level.

            It has also been found that even if the gas tax were to be “holiday-ed”, that doesn’t guarantee the suppliers would have to pass the savings along.

            The OBSECENE profits that oil companies are posting quarterly have the appearance of poor social citizenry. But the 401(k)’s love it. But then again those are not economic drivers.

            As far as drops go, when I got the virus last Tuesday, gas at the corner station was $4.98/gal. This morning it was $4.54. Just an observation.

            Like

          4. “Price gouging is a political term, not an economic one.”

            I will agree with you on that. But the point really is that claims of Biden’s economic ignorance because he tried to jawbone the usual pricing pattern is nonsense. Did his appeals for pricing moderation do any good? Who knows, but prices have backed down since he did it.

            Liked by 1 person

    2. As you can see in the graph, during 2016 to 2020 crude oil prices were between $40-$60. Since 2021, crude quickly started its climb to over $100 a barrel before ukraine and remains there.

      https://www.macrotrends.net/2516/wti-crude-oil-prices-10-year-daily-chart

      As you can see by the chart, during 2016 to 2020, gas prices were abt $2.60. Since 2021, gas quickly shot up to almost $4 a gallon and went further after the Russian embargo. Gas usually lags a rise or fall of crude and has come down some but crude is still WAY higher than 2020.
      https://axlewise.com/cost-of-gas/

      What do these events have in common?

      Like

      Reply

      1. The gas market slowed production during the pandemic and have not ramped up production back up to pre-pandemic levels. Since the normalcy is returning to the world, demand has increased. Supply has been kept low so that prices increase. And profits soar. And We, the people, pay the price.

        Liked by 1 person

        Reply

        1. Aside from taxes, gas is getting close to pre-ukraine prices. Rates accelerated when your boy took office almost instantaneously during the height of the pand emic. Some normalcy didn’t return until well after gas prices had already shot up to close to where they are now. Look at the graphs I provided.

          Like

          Reply

          1. Why are you ignoring the production side of the argument? If oil companies ramped up PRODUCTION to pre-pandemic levels, they would still make a metric butt ton of profit and we would be paying less at the pump.

            Until production increases, prices are going to hover.

            Like

    3. RE: “That difference is why oil companies are making huge profits from price increases far above the cost of the product they are selling.”

      That’s a nice mythology. The real question, of course, is are the higher profits justified?

      There are several middlemen between the crude oil producer and the gasoline consumer at the pump. To which one do the bulk of the available profits go? Maybe it is to the ocean shippers, who must recover from recent supply chain shocks. Or maybe it is to the refineries, which haven’t been creating new capacity because they don’t know how much longer they can stay in business because of green energy policies. Or maybe it is the wholesalers who can’t stay in business by clearing inventories below the price they paid for them. Or maybe it is the mom-and-pop gas stations who keep their prices high for a replenishment cycle or two whenever they catch a break in wholesale prices.

      Crude-prices-down-pump-prices-up is a piss poor explanation for the current market.

      Like

      Reply

    1. Biden in particular has never had to earn a living in the private sector, he has always been in government, and his family has become rich through non-competitive crony deals. The whole family has been insulated from the ordered chaos of the free market.

      As a result, he is the leader of the free world but could not manage a Burger King.

      Like

      Reply

          1. Politicians from Ancient Greece forward have provided willfully or not, an edge for family members. Trump might have been the most egregious, for sure, with nepotism and huge favors from Saudi Arabia and China for his kids and their significant others.

            Not saying it is good. And parents have often little control over their adult children.

            I am not familiar about the Iraqi housing deal or if it was illegal, unsavory or business as usual in our wars. Many a wealthy man, Cheney and Haliburton comes to mind immediately, have profited off of our soldiers dying in wars.

            But you hate the current President, so have at it.

            Liked by 2 people

          3. “ David Richter, a Republican congressional
            candidate and former CEO of HillStone International’s parent company, told the New Jersey Globe that James Biden’s company only received a single government contract: a project to build houses in Iraq but which eventually fell through

            The contract was awarded by the Iraqi government, not the U.S. government. And in 2014, the HillStone Iraq deal fell through because of a lack of financing, and the company was forced to concede the contract from its backlog.”

            https://www.politifact.com/factchecks/2020/nov/01/tiktok-posts/no-joe-bidens-brother-didnt-build-cages-along-us-m/

            It sounds like Jim Biden was a Billy Carter style brother.

            Liked by 2 people

          5. Yet only Democrats are corrupt. Hypocrite! You NEVER NEVER NEVER call out obvious corruption when performed by the self-proclaimed conservatives. You tend to refer to it as the normal course of business.

            How can you type the crapola about Biden while ignoring anyone from the right who has done WORSE and still look in the mirror?

            Liked by 1 person

      2. “Biden in particular. . .”

        Lame trash talk as usual.

        Which Presidents in the past 120 years do you think came from the for-profit private sector? I can think of only two. Herbert Hoover who presided over the Great Depression and, of course, Donald Trump who managed to bankrupt virtually every business he ever dabbled in with his inherited fortune.

        Liked by 1 person

        Reply

          1. “Reagan, both Bushs, and yes, Trump.”

            Reagan was a corporate spokesmodel. Period.

            The Bushes were political players from the moment of their birth who traded on their family connections. You know, what you call “corrupt” when a Democrat does it.

            Liked by 1 person

          2. Reagan was an ACTOR. So is my father. Does that mean he would be better for the economy? Bush I was in government service his entire career. Bush II INHERITED his wealth from his grandfather and father and never had to work a day in the public sector. Plus he traded Sammy Sosa to the Cubs.

            Trump is a conman excellance.

            Liked by 1 person

          5. My father also worked at Macy’s, a radio station, a bank (Marketing) and advertising. Still doesn’t mean he would be better or worse than Biden.

            Like

          6. “Reagan held many private sector jobs before becoming successful as ana actor and was a union president”

            Why do you never bother to check the facts? Reagan’s only job before going into entertainment was as a lifeguard while in high school. Trying to spin him as some sort of experienced businessman compared to President Bident is palpable nonsense. And, as a matter of fact, Biden supported himself in the private sector for six years before entering politics.

            Liked by 1 person

          1. You forgetting about Cheney’s involvement in getting that company no-bid contracts?

            Corruption from the right once again being ignored by those who trumpet it when it happens on the right.

            Selective history is not history at all.

            Liked by 1 person

          2. In times of war, it is common for the companies who have the ability to get the job done to get expedited contracts.

            Haliburton is one of the premier logistics companies, able to move big stuff quickly. Who else would you get the bids from?

            Like

          4. You have military experience. In times of crisis, was it not common practice to rely on those companies that had served well in the past?

            Like

          5. Halliburton, under Cheney, did business with Iran at a time when Iran was sanctioned as the enemy.

            It was done through various shady corporate shields.

            The most honest President and First Family we have had in decades was Obama, and you hated him too.

            But you loved the last president despite being the most corrupt, double-dealing, childish and packing his administration with his kids. Kids who have profited immensely on Dad’s soiled name.

            But that is ok and your prerogative. Just admit that corruption is no problem if it is done by your approved folks. Simple enough.

            Liked by 2 people

          6. Corruption is always a problem but that wasn’t my beef with Obama, it was his hatred for this country. and desire to change it into a European socialist slum.

            Like

          7. Don, Obama loved this country and you are lying. You have been radicalized in the last year and I am sorry to see that happen.

            IMO

            Liked by 2 people

          12. “A few weeks? How long did it take to put out the oilfield fires and restore the fields to production?”

            Don’t you know how to use Google? Or do you think nobody else does?

            “The companies responsible for extinguishing the fires initially were Bechtel, Red Adair Company (now sold to Global Industries of Louisiana), Boots and Coots, and Wild Well Control. Safety Boss was the fourth company to arrive but ended up extinguishing and capping the most wells of any other company: 180 of the 600. Other companies including Cudd Well/Pressure Control, Neal Adams Firefighters, and Kuwait Wild Well Killers were also contracted.”

            https://en.wikipedia.org/wiki/Kuwaiti_oil_fires

            Haliburton had almost no role in fighting the oil well fires that I can find. Its business was building bases (60 of them) and feeding the troops. Work for which it has no special expertise and for which there are many possible suppliers. But, but, but Hunter Biden!

            Liked by 1 person

          13. How do you think the well killers stuff go there.

            Haliburton is an infrastructure and logistics company, and there are few others who can do it on the global scale it can. And of course, those few competitors were fully engaged as well.

            Like

          14. “my beef with Obama” “European socialist slum”

            Your supposed beef is nonsense. Do we have Medicare-for-all? Uh, no. We got the Heritage Foundation / Mitt Romney healthcare reform plan. Was there a single piece of significant gun legislation on his watch? Were any industries nationalized? Did Obama bail out banks or bail out people who could not pay their mortgages? Some fucking socialist!

            When it comes to President Obama you are always full of shit. For some reason. Your actual beef with Obama was made crystal clear to all but yourself with your frequently accusing him of “arrogance” and your defending of Birtherism as a legitimate political tactic.

            Have you ever even been to Europe? I have. Dozens of times. I lived there for many years. You display amazing ignorance when you refer to those countries as “slums.”

            Liked by 1 person

          15. Obama was saved by the same thing that saved Clinton and may save Biden.

            They pushed too far too soon and lost control of Congress before they went too far.

            Like

  3. WSJ notes to shift from private service station “gas station” to mega convenience stores “gas stations”. This has been going on for decades. WAWA can sell gas at a loss if they sell a few million dollars per year or more in high profit sandwiches and snacks.

    There was a local Shell service station I used on Monticello Ave. in the 70’s. He folded because Shell demanded he sell a volume of gas he could not possibly achieve.

    If crude prices have dropped, why are retail gas stations still charging $4.50 and up, particularly if competition is now fierce as people search for the best prices.

    It has to be the wholesale gasoline prices which are held artificially high by energy companies. There are no shortages, lines or rationing.

    (Plus Tidewater has pricier gas in the summers due to smog alleviation formulas.)

    Blame the President, it is what we do when the economy rattles a bit. But the Keystone pipeline is not the issue. (Nor other long term projects which are obviously not affecting current supply, or we would see long gas lines.)

    IMHANEO

    Liked by 2 people

    Reply

    1. RE: “It has to be the wholesale gasoline prices which are held artificially high by energy companies.”

      It could be something else. For example, it could be due to a shortage of refinery capacity, or an increase in the cost of diesel fuel for delivery trucks, or vendors all along the supply chain may be stashing profits away to prepare for a rainy day, given how antagonistic the current administration is toward the oil industry.

      Like

      Reply

      1. Could be. But I look at no lines,no rationing and high prices at the pump. For a year now?

        And yet crude prices have dropped for months.

        Liked by 2 people

        Reply

      2. RE: “But I look at no lines,no rationing and high prices at the pump. For a year now?”

        Depending on what you are willing to ignore, you can find the villain you want wherever you want to find him. I would at least advise against making Joe Biden’s mistake of assuming that profits somehow are optional.

        Like

        Reply

Leave a comment