By Jeffrey Tucker
Real Clear Markets
There are those who respect economic forces and those who know nothing about them. Sadly, this past week, during the shocking build-up of gas lines around the South and East coasts, where many cities had half the stations run out and the other half with long waits – echoes of the 1970s – the Biden administration revealed itself to be among the deeply ignorant.
The blame for the gas lines falls to a malware hack of Colonial Pipeline, which supplies 45% of the oil and gas to a whole region of the US. That’s the proximate cause. But how could a simple piece of ransomware take down the gas supply and ruin life for so many millions of people? Why such a central point of failure in such an essential system?
It’s a warning for the future. The Biden administration went after the US fossil fuels industry in its first days. It shut down the Keystone Pipeline XL, making 11,000 workers jobless and deliberately throttling US supplies. It’s true that this pipeline does not supply to the South, but there is no question that reducing fossil fuel supply and demand is a huge part of the Biden administration’s agenda.
Biden’s response to the sudden gas shortage – which still continues – was a preposterous display of obfuscation, denial, diversion, and duplicity.
There were three critical moments.
The first was a denial that the problem was a gas shortage. When the news of the mess appeared, Energy Secretary Jennifer Granholm said it straight away: “It’s not that we have a gasoline shortage. It’s that we have this supply crunch.”
Homeland Security advisor Elizabeth Sherwood-Randall also told the press: “Right now there is not a supply shortage.”
In technical terms, a shortage means a market that is underserved at prevailing prices. The obvious evidence of a shortage appears when an available good or service is in demand at existing prices, and yet widely unavailable to willing buyers who had previously counted on its being there.
Last year, we had a shortage of toilet paper in the midst of disease panic. If someone with the Trump administration had corrected that characterization and called it instead a “supply crunch,” CNN would have ridiculed the statement with unrelenting derision.
As it happens, people all over the South and East who were traveling here and there suddenly found themselves desperately scrambling to fill their cars, hopping from place to place, downloading gas apps, and generally panicking due to the shortage. You are trapped in an SUV on the side of the road, hoping that fumes alone will get you to safety.
Seeing the PR mess that had been created by this outright denial, the administration changed course later in the day and said the s-word shortage. Was this a reversal? Oh no, not at all. The White House spokesperson said: “On Monday afternoon we said at this moment there is not a supply shortage that was accurate at this moment” and went on to admit “We are monitoring supply shortages in parts of the Southeast and are evaluating every action the Administration can take.”
The second screwup was to decry and denounce so-called hoarding. Now, think about this. When a government official tells the country not to buy too much of something, what’s going to happen? It’s practically an inevitability that people will go out and get as much as they can before others beat them to it. That the Biden administration didn’t understand this basic law of human nature is stunning.
Let’s say you are very earnest and want to comply. You stay home and do not drive. You only fill up half a tank. You bike instead. What about others? It only leaves the existing supply for those who do not have an interest in compliance. They have lawns to mow, food to deliver, places to go. Not everyone can just decide to stay home – a point we should have learned last year. Without fossil fuels, life itself comes to a grinding halt. These shortages are a version of lockdowns, in effect.
Thus to decry “hoarding” is to advertise its advantages in times of grave shortage.
The third error of the Biden administration was the worst of all. The administration uniformly warned against “gouging,” a word with no precise definition but generally means increasing prices during an emergency shortage.
That is to say, it is an attack on supply and demand: all things equal, reduced supply with the same quantity demanded should lead to higher prices. The higher prices serve as a signal to consumers to conserve. It’s a peaceful path that requires no browbeating or moralizing. People are rational and respond so in light of price changes.
“Do not, I repeat, do not try to take advantage of consumers during this time,” Biden said at the White House. “Nobody should be using this situation for financial gain.”
Is Biden suddenly in charge of every gas station in America? Apparently so. Should the owners operate their businesses to obtain financial loss? Apparently so.
The injunction was echoed by blue-state officials all over, as if they know better than the market what the price should be for gasoline.
Anti-gouging rules in this case are being used as an indirect form of price control. If you are required under force of law not to raise your price, you are faced with a price ceiling. With a supply shortage, you are simply forced to drain what you have to sell to the level of zero, effectively shutting down your business.
Moreover, you discourage the addition of new supplies that might cost extra to deliver because now it is widely advertised that you cannot do anything for “financial gain” even if that leaves drivers and truckers stranded on the side of the road.
The trouble with the Biden administration is not only its dearth of economic knowledge; it is its seeming non-interest in the topic. The “woke” generation of public officials that are swarming all over DC today believe that press conferences, edicts, and force are a viable substitute for the operation of markets.
That way of thinking leads to disaster. The ham-handed response to the gas shortage portends a grim future in the event of a large economic crisis. If that should happen, fasten your seatbelts for a bumpy ride, with or without fossil fuels.
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Source: World Net Daily
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