Commenting on perhaps the most absurd moment of the Xi-Biden virtual summit, which as we learned last last night, was the US president begging China to release oil from its strategic petroleum reserve (ostensibly because due to opposition by Democrats in the US such as top House Democrat Steny Hoyer, Biden can't do that), Rabobank's Michael Every said that it was "an odd power dynamic when one is a massive energy exporter, and the other a massive energy importer."
Alas, it does not appear that China will rush to comply with Biden's demands, and with gasoline soaring and becoming a major political headache for the Democrats ahead of the midterms...
... Biden, or rather his handlers, are now scrambling to come up with ways to push gas prices lower.
We got the latest lightbulb moment from the administration this morning, when moments ago Biden sent a letter to FTC Chair Lina Khan to call attention to "mounting evidence of anti-consumer behavior by oil and gas companies" alleging that he won't accept "hard-working Americans paying more for gas because of anti-competitive or potentially illegal conduct."
It wasn't clear what if any evidence was "mounting."
“I do not accept hard-working Americans paying more for gas because of anti-competitive or otherwise potentially illegal conduct,” Biden said, claiming that "gasoline prices at the pump remain high, even though oil and gas companies' costs are declining" and
ordered asked the FTC to "consider illegal conduct" which is costing families at the pump, urging the FTC to "immediately" use "all tools" to examine price wrongdoing. No "proof" of any wrongdoing was provided either, although we are confident that Igor Danchenko is busy creating a dossier full of "evidence" to buttress Biden's case.
The letter goes on to suggest that while "prices at the pump correspond to movements in the price of unfinished gasoline, which is the main ingredient in the gas people buy at the gas station. But 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. This unexplained large gap between the price of unfinished gasoline and the average price at the pump is well above the pre-pandemic average."
Meanwhile, Biden goes on, "the largest oil and gas companies in America are generating significant profits off higher energy prices... they have announced plans to engage in billions of dollars of stock buybacks and dividends this year."
Well... here is the answer: prices are set based on input costs and taxes, which have never been higher. Indeed, one should probably advise Biden that in addition to oil costs, taxes make up a substantial portion of the end cost of gasoline...
BIDEN ASKS FTC TO USE ALL TOOLS TO EXAMINE GASOLINE PRICING WRONGDOING…..LOL, $3.42/gal average. Oil price $1.95/gal plus $0.57/gal gasoline taxes that’s almost 75% of your total cost right there Joey— GreekFire23 (@GreekFire23) November 17, 2021
... and one should also show Biden the following chart of wholesale gas prices which may lag retail prices but always converge.
According to Bloomberg, a White House official said the agency could decide to begin an investigation to collect data on how gas companies set prices, as well as data on actual pricing. Biden asked the commission to “further examine what is happening with oil and gas markets, and that you bring all of the commission’s tools to bear if you uncover any wrongdoing.”
Spoiler alert: it won't find any wrongdoing. As for energy companies generating tremendous profits, where was the White House last year when all the energy companies were on the verge of failure when oil collapsed (and in the case of WTI printed negative) forcing them to take on tens of billions in debt just to survive, while gasoline was the cheapest it has been in years? Oh yes, it had everything to do with tumbling oil prices.
Bottom line: this is another purely populist fishing expedition crafted to give the impression that Biden is doing "something" even if in a few weeks the FTC will advise Biden that the biggest reason why gas is so expensive - surging oil prices - has to do with the president's ludicrous "green" agenda, which has crippled investment in "dirty" fossil fuels and shut down cost-cutting pipelines across the country. Or rather it won't, as the truth tends to be frowned upon these days.
As for what is really going on, we doubt anyone will be surprised to learn that this is just Biden latest attempt at scapegoating in a desperate pursuit of finding someone to blame: the Environmental Protection Agency is set to release biofuel quota levels in the coming weeks. A drop in blending requirements could help lower retail prices, but this may be marginal relative to the recent crude-price surge... and would not be at all in keeping with Biden's climate crisis narrative.
And once this latest attempt to deflect responsibility for his admin's "green" policies which have crippled the US energy sector, it's clear what's coming next - 1970s style price controls... which is simply stunning considering that Brent is only at $81. What will Biden do when oil surges to $120 or higher, as so many have warned it will some time in 2022?
price controls in 5... 4... 3....— zerohedge (@zerohedge) November 17, 2021
*BIDEN: GAS PUMP PRICE STILL HIGH DESPITE FALLING COSTS FOR COS.
*BIDEN ASKS FTC TO SCRUTINIZE OIL AND GASOLINE MARKETS
Of course, Biden could just skip this intermediate step and proceed straight to nationalizing those evil companies that make so much money because capitalism.
The full letter is below.