Tuesday, July 5, 2022

Joe Biden’s Gas-Station Demagoguery

By Kevin D. Williamson

Tuesday, July 05, 2022

 

Some of you may be familiar with the myth of George H. W. Bush and the supermarket scanner — and, since you are National Review readers, you probably know that it is a myth. But allow me to revisit the story.

 

In February 1992, the New York Times published a dishonest story headlined “Bush Encounters the Supermarket, Amazed,” in which the president was purportedly awed by a supermarket checkout scanner. The obvious intention was to paint the president as coddled and out-of-touch — “ducal” is one adjective I remember being applied to him — and it worked: Newspapers and television news shows around the country ran with the story. In reality, Bush hadn’t “encountered” a supermarket at all — he was visiting a business convention for grocers, and listened politely (which he did a lot of, having been raised well) as the makers of the scanner showed off their new technology, which really was advanced at the time: You young’n’s might not believe it, but there was a time when those built-in electronic scales on supermarket scanners were a new thing, and that time was 1992. “Amazing,” Bush said. That was pretty much it.

 

There was a lot of that sort of thing in the George H. W. Bush administration. The media decided that the vice president, former U.S. senator Dan Quayle of Indiana, was a moron, mostly because he had gone to night school to get his law degree instead of Yale. The dishonesty in covering Quayle was remarkable: The vice president once joked that he was looking forward to a trip to Latin America so that he could finally make good use of his high-school Latin, and the newspapers reported the joke as though it were a genuine blunder. That sort of thing. Quayle wasn’t the world’s most gifted politician, it is true, but he was (and, as far as I know, still is) a capable and decent man of the sort we could use more of in government.

 

(Dan and Marilyn Quayle will celebrate their 50th anniversary in November, and I increasingly take such personal milestones as important indicators.)

 

George H. W. Bush was good at a lot of things: He flew bombers over the Pacific in World War II, ran the CIA, served as our chief diplomat in China, etc. I am confident that he would have made a successful groceryman, if that had been his calling.

 

I don’t think Joe Biden could run a 7-Eleven — and not because he has the wrong accent. I worked the 11 p.m.–7 a.m. shift at 7-Eleven for a while, and my accent worked just fine. (The things you see working at a convenience store in those hours!) But you do have to keep an eye on the gasoline pumps.

 

President Biden has been dunning U.S. gas stations to lower their prices in order to help him solve his main immediate political problem. His misunderstanding of how the gasoline business works is something like a nonfiction version of the New York Times’ account of Bush and the checkout scanner: It paints a portrait of a man out of touch.

 

“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. Bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.” Biden’s dopey and feckless press secretary, Karine Jean-Pierre, complained that while oil prices have declined some in the past few weeks, “prices at the pump have barely come down.”

 

Allow me to solve that mystery: Gas stations don’t sell crude oil — they sell gasoline.

 

And, contrary to what the Biden brain trust seems to think, wholesale gasoline prices do not move in lockstep with crude oil prices. And retail gasoline prices do not move in lockstep with wholesale gasoline prices. I don’t get the feeling that President Biden is up to the second on RBOB spot prices. (That’s “Reformulated Feedstock for Oxygenate Blending,” the main ingredient in commercial gasoline.) There’s a whole complex market out there, and the guys who have a “slight Indian accent” are minor players in it.

 

As anybody who has ever sold anything for a living can tell you, you don’t get to set your own margin. The market does that for you. Politicians talk as if — and, in many cases, honestly believe — the way a business works is that a retailer picks some numbers out of the air — 7.5 percent or 10 percent or 22 percent — and simply marks up whatever he pays for his product wholesale by that amount, and that this is how retail prices are set. That is what academic economists call absolute horsepucky.

 

(Try selling newspaper subscriptions in a city in which a quarter — or maybe half — the population can’t really read. It isn’t exactly a name-your-own-price proposition.)

 

The retail gasoline market is one of the most brutally competitive markets in the American retail environment — which is why the businesses that sell consumers gasoline typically do not make very much money from gasoline sales: We call them “gas stations,” but they are really soda, tobacco, and lottery-ticket shops. The sign out front may say “Exxon” or “Texaco,” but the major oil companies generally don’t own the gas stations on which their names appear — this is just a branding thing. There are several big national chains, but the majority of gas stations in the United States are owned and operated by small-time entrepreneurs with only one location — there are some 64,000 such outlets across our fruited plains, and more than 116,000 gasoline retailers in total. That’s one of the signs of a good, competitive market: lots of buyers and lots of sellers.

 

In recent months, the gross margin on gasoline — the spread between wholesale and retail prices — has averaged around 27 cents per gallon. That doesn’t mean that the store owner actually pockets 27 cents every time somebody buys a gallon of gas, because there are clerks to be paid, lights to be kept on, taxes, insurance, etc. — all the ordinary costs of being in business, along with some costs that are particular to the gas-station business. (In Texas, for example, gas-station operators have to pay out-of-pocket for the required state inspections.) Because the wholesale gasoline market is very volatile and because the retail gasoline market is very competitive, the retail margin can fluctuate wildly, and it has recently: We’ve seen a few weeks this summer in which the gross margin has been around 60 cents per gallon — higher than average, but about where they were in the spring of 2020, according to the Lundberg Survey, which characterizes recent margins as “unimpressive.” Lundberg forecasts that retail gasoline prices may drop by ten cents or so in the near future, but probably will not go much lower because of “upstream constraints.” Those constraints include OPEC’s inability to substantially increase output and the hesitation of U.S. drillers to invest in new production while there is a Democratic president and Democratic Congress promising to do their best to put the oil-and-gas business out of business.

 

In fact, gas-station owners are not always particularly happy to see high gasoline prices. As the Association for Convenience and Fuel Retailing puts it, “The pattern of retail profitability is the opposite of what most consumers think. Due to the volatility in the wholesale price of gasoline and the competitive structure of the market, fuels retailers typically see profitability decrease as prices rise, and increase when prices fall.” That is at times also true, though less dramatically so, for the upstream business: Producers and refiners worry about “demand backlash,” which is what happens when prices get high enough and stay high enough to actually change consumer behavior, with expensive fuel suddenly making it look more attractive to shell out for a Tesla, to use mass transit, or to spend summer vacations at home rather than driving or flying to some distant destination.

 

The urge to blame retailers for the results of inflationary fiscal policies — and destructive energy policies — in Washington is ugly, demagogic, and, given Biden’s creepy history, maybe even a little bit racist. It is also more than a little bit galling to hear people filling up their Escalades bitching about the supposed greed of a guy who traveled 8,000 miles to work 90 hours a week in a thankless, often unpleasant job for which he is likely to earn a hell of a lot less money than a high-school vice principal in a country full of comfortable people where apparently no native has the grit or the energy to operate a Kwik-E-Mart franchise.

 

Coffee at Starbucks is about $64 a gallon, and I don’t hear anybody bellyaching about that.

 

If you want to know what makes America great, get to know some of the people who run our gas stations, and hear their extraordinary stories. (And maybe try the saag.) And if you want to know why fuel prices are what they are, maybe ask somebody in the business. I have, on a couple of occasions, and the conversations have been interesting.

 

We have beaucoup oil and gas here in the United States. We need refineries set up to change that petroleum into useful fuels and more pipelines to get that fuel from where the refineries are to where the people are. This can be done in an economically and environmentally responsible way. Getting it done will not be fast or easy, but what needs to be done isn’t exactly mysterious.

 

Democrats want to put the oil-and-gas industry out of business and have said so, and the industry believes them. I know — I talk to these guys, and they don’t know if they are going to have businesses a few years down the road. They remind me of farmers who advise their own children not to go into the family business. They are hesitant to invest and to make long-term plans.

 

And these are the results you get.

 

On a Related Note . . .

 

I am not exactly a full-fledged climate cultist and hope never to be one, but I am more open to more assertive climate policy than many of my fellow conservatives are. The main political problem with climate reform isn’t right-wing obstruction of intelligent climate policy but climate-cultist obstruction of intelligent climate policy. Replacing the world’s coal-fired electricity generation with gas-powered generation would constitute a large and meaningful improvement, while implementing nuclear power on a large scale would constitute a radical improvement — it would as a practical matter solve the climate issue as far as electricity is concerned, and electricity touches everything from the emissions footprint of operating buildings to the electrified part of the transportation sector. The case against nuclear power is not environmental or economic but aesthetic, tribal, and superstitious.

 

Those are the first steps that should be taken. If instead you want the first steps to be maximally symbolic, maximally painful, and minimally effective, then you’d start by squeezing the petroleum fuel supply for ordinary consumers in the affluent world — which is what many of the so-called Green New Dealers propose to do. A relatively modest but nonetheless painful spike in gasoline prices has made the filling station the center of American political life for the moment, and it is the No. 1 issue in many communities. Politicians running for offices that have little or nothing to do with fuel prices or energy policies report that they are asked about gasoline prices more than they are about the issues relevant to the positions they seek. If you look at where we are now — at the sense of crisis that today attends gasoline prices — then you can get a pretty good idea of what the politics of the Green New Deal are going to look like in practice. Gasoline at $30 a gallon will help countries hit their emissions targets — if those governments survive long enough to see their policies come to full fruition, which they probably won’t.

 

The United States has a lot of petroleum. We also have the world’s best engineers and nuclear scientists, the world’s best environmental scientists, and the world’s best electric-car company. If we can’t make this work, it’s not for lack of resources.

 

 

In Closing

 

A final Independence Day thought: Margaret Thatcher famously said, “Being powerful is like being a lady. If you have to tell people you are, you aren’t.” I think the same holds true of many things: I’m skeptical of people who habitually describe themselves as “intellectuals,” and people with bumper-stickers or social-media profiles advertising their kindness and compassion are almost without exception the most vicious, petty, and cruel people you will ever meet. (Imagine a Birkenstock sandal stamping on a human face — forever.) There are among us a great many people who have the word “patriot” on their business cards and their Facebook profiles, and they want to sell you things — sometimes products bearing the “Patriot” label. If you have to tell people what a great patriot you are eleven times a day, then maybe — just maybe, hear me out! — maybe you’re just another guy selling cell-phone service plans. Nothing wrong with being a salesman — some of my best friends and all that — but maybe leave Patrick Henry out of it.

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