Tag Archives: political economy

The Putin Producer Price Inflation

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More evidence of President Joe Biden’s (D) fantasy of a time travel weapon possessed by Russian President Vladimir Putin. This time, the evidence is the Producer Price Index, as published by the US Labor Department and printed by The Wall Street Journal.

The WSJ‘s graph is constructed from data released by Labor. The monthly data in the graph are hard to read, but the WSJ‘s rendition allows mouse-over readings. What those readings illustrate is instructive.

In January 2021, when Biden took office, the year-on-year PPI was 1.6%. By the next month, it had risen to 3%. A year later, January 2022, the PPI had gone to 10.1% year-on-year. In February 2022—Putin didn’t invade Ukraine until the end of that month—the PPI was 10.4%. By May it was 10.8%.

My third-grade arithmetic says that fully 96% of the PPI’s increase had occurred before Putin’s invasion.

Plainly, for Biden’s blame-shifting assertions to be true, he has to be, once again, insisting that Putin’s regime has succeeded in developing time travel and is using it to wage economic war against us while he wages murderously killing war against Ukraine.

Oh, and one more thing. Given the lags inherent in economic forces as they move through a real-world economy, these producer-level data essentially baked in even the consumer inflation outcomes following Putin’s invasion. That shows even more clearly how fantastical Biden’s assertions are.

An Incoherent Biden Diktat

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It’s in the offing. This time, President Joe Biden is threatening to inflict his “emergency powers” on American oil producing companies if they don’t produce more oil.

President Biden may resort to using emergency powers if American oil companies don’t increase output at their refineries, the president told oil CEOs in a series of letters Wednesday.
Biden’s statement blames oil companies for running “historically high profit margins” even as Americans experience surging gas prices.

Never mind that they cannot just turn on the faucet and more oil comes out of the tap. It takes lots of money and quite a bit of time to reopen capped wells, and it takes even more money and lots of time to drill a new, producing well.

But Biden’s administration stands in the way of all of that, even as he threatens his diktat. His administration has already canceled large leases in Alaska. His administration has closed most Federal lands to further exploration, much less drilling. His administration is slow-walking new lease applications. His administration is slow-walking the permits needed actually to explore, and then the permits needed actually to drill, once a lease is approved.

His administration has closed major pipelines and is slow-walking construction of other pipelines so that even were a new well drilled or an existing one uncapped, the producers would have no way to deliver output to a refiner.

Given all of that, and with existing refiners already operating at near capacity, there’s no reason to open/build new refineries—they’d have no additional oil to refine.

Beyond that, there’s the matter of trust. Beyond the time and money it takes to (re)open a well, it takes more time—years—for those costs to be recouped and profit begun to be received from the proceeds of that well. Biden’s administration, though, cannot be trusted not to pull the rug out from under those oil companies and demand wells’ or pipelines’ closure once the current—Biden-created—gas price abates.

And this: oil companies’ “historically high profit margins” exist in part (not entirely) because they’re limited in where they can commit their revenues. They can’t spend them on exploration, drilling, producing, transporting, after all because of those Biden administration policies above.

Biden isn’t alone in this incoherence, though—this is typical of his Progressive-Democrat Cabinet and of the Progressive-Democratic Party politicians who dominate both houses of Congress. Nor is the incoherence limited to oil: there’s the environment and Party’s separate global warming mantra. See, too, our southern border, Party’s immigration “policy,” Biden’s foreign policy, defense attitude, and on and on.

The Putin Inflation

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A short word on President Joe Biden’s (D) allegation wherein he shifts the blame for our high inflation to Russia’s President Vladimir Putin and the latter’s invasion of Ukraine. This graph is from Trading Economics:

May 2022’s year-on-year inflation rate is 8.6%, and it’s been in that range since March 2022. Putin invaded Ukraine on 24 Feb 2022.

The January 2022 year-on-year inflation rate was 7.5%. February’s was 7.9%; Putin’s invasion was too late in the month to have materially affected that month’s rate.

87% of May’s inflation rate was already occurring in January, two months before Putin invaded Ukraine.  By February, that had risen to 92%.

Apparently, according to Biden, time travel is a thing, and it’s a weapon solely in Russia’s arsenal.

Cajoling Producers

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In a Friday Wall Street Journal op-ed centered on the high and rising cost of fuel and the deleterious effect that’s having on our businesses and our economy, Collin Eaton, David Harrison, and Doug Cameron had this remark:

The administration has also tried cajoling US oil companies into increasing production, but few have chosen to do so, instead sticking to leaner budgets urged by investors.

That’s laid off to the maxed out refineries in the US, so there’d be no place to ship increased production, anyway. That’s a player, certainly, but it’s a relatively minor one.

The far more important factor, and it plays to refiners, also is this. Drilling new wells and reopening closed wells each costs lots of money, and it takes years to recoup those costs. It’s the same for the pipelines and other transports used to get the oil and natural gas to refiners, and it’s the same for the refiners.

The Biden administration, though, cannot be trusted not to pull the rug out from under anyone in the oil and gas industry before those costs have been recouped.

There’s no reason, then, for refiners to (re)expand their capacity, even were there product ready for refinement. Biden and his Progressive-Democratic Party syndicate cronies are actively blocking the construction of additional pipelines with which to transport increased production. Biden and his Progressive-Democratic Party syndicate cronies are constantly promising to put the remaining hydrocarbon energy producers—oil and natural gas producers—out of business. This is a plain extension of what Biden’s favorite bud and predecessor ex-President Barack Obama promised to do to the coal producers and largely succeeded in doing.

A Critical Item

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President Joe Biden (D) wants half the new cars sold in the US to be electric, and he wants and 500,000 new charging stations for them, both by 2030. He considers reliable EV charging stations to be critical to getting us switched over to battery cars.

Charging stations are necessary (assuming the switchover itself is necessary; it’s not, but that’s a separate story), but they’re far from sufficient. The important thing here is reliable electricity running to each charging station—electricity from the grid. But that requires hydrocarbon-powered electricity generating plants, and it requires the electric grid, itself barely able to handle current loads—see the rolling blackouts that are routine in California and that have become a risk in Texas—to be upgraded to handle the vastly increased loads imposed by all those battery-powered vehicles, whether charged at the charging stations or in the home garage.

Also necessary, but not sufficient even in concert with the above, is an adequate definition of “fast charging.” If a battery-powered vehicle cannot be charged to the 400-mile range of a full gasoline tank in substantially the same 5 minutes it takes to “charge” that gasoline tank to an internal combustion engine-powered car to a 400-mile range, the battery-powered vehicle will remain impractical.

The true Critical Items, then, are at the origin and near-origin: deregulating domestic oil and natural gas production and deregulated electricity generation so there will be energy to put onto that upgraded grid.