Biden misses mark with call for oil and gas probe - OklahomaMinerals.com
By: John Kemp – Reuters – President Joe Biden’s request for an investigation into anti-competitive behavior in the oil and gas markets may be smart politics in response to rising fuel prices but he failed to present evidence of collusion in this case.
At the heart of President Biden’s complaint is that gasoline prices at the pump remain high, even though oil and gas companies’ costs are declining.
“In the last month, the price of unfinished gasoline is down more than 5 percent while gas prices at the pump are up 3 percent in the same period.
But President Biden’s advisers are conflating different markets and different timescales to make a confused and confusing argument about prices and profitability which fails to provide a compelling rationale for intervention.
There are undoubtedly parts of the oil and gas industry where anti-competitive behavior and attempts to support prices have been common (“Crude volatility: the history and the future of boom-bust oil prices”, McNally, 2017).
The core of President Biden’s argument is an empirical observation that margins between the wholesale cost of unfinished gasoline and the retail cost of fuel at the pump have widened in the last month.
It is true that the gap between retail prices (including taxes) and various measures of wholesale prices has increased in recent weeks (https://tmsnrt.rs/3Cp3HFz).
The volume of gasoline supplied to the domestic market, a proxy for consumption, has recovered to pre-pandemic levels (“Weekly petroleum status report”, EIA, Nov. 17).
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