Joe Biden pours petrol onto flames of battle with business

As Joe Biden follows Trump in putting his thoughts straight onto social media, critics say the White House has no grasp of economics.

Joe Biden delivers remarks on efforts to lower high gas prices in Washington. Picture: AFP.

Over the course of four years, and often outside office hours, America’s business people became accustomed to unpredictable, unsparing and unfavourable tweets from the president. Then Donald Trump left office and such turmoil ended – or so it was thought. Over the Independence Day weekend, the spectre of presidential tweets re-emerged.

On the Saturday of the holiday weekend, a post appeared on President Biden’s social media accounts that further strained his relationship with corporate America. Addressing companies “running gas stations and setting prices at the pump”, he wrote: “Bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.”

For those most frustrated with his administration’s response to the challenges engulfing the world’s largest economy, this was too much to bear. “Ouch,” tweeted Jeff Bezos, the Amazon founder. “Inflation is far too important a problem for the White House to keep making statements like this. It’s either straight ahead misdirection or a deep misunderstanding of basic market dynamics.”

Ouch. Inflation is far too important a problem for the White House to keep making statements like this. It’s either straight ahead misdirection or a deep misunderstanding of basic market dynamics. https://t.co/XgKfEICZpk

— Jeff Bezos (@JeffBezos) July 3, 2022

Owners of petrol stations said they were casualties, not beneficiaries, of high prices on the forecourt. The profits of convenience stores, which sell an estimated 80 per cent of fuel sold nationwide, predominantly rest on customers buying products as well as petrol, rather than petrol sales alone. “Most people don’t know that a retailer makes more selling a 12oz drink than a 12-gallon fill-up,” Jeff Lenard, vice-president of the National Association of Convenience Stores, said. The association says that such spending has fallen in recent months as consumers pare back their spending.

While Biden points the finger at certain corners of the private sector, he knows that historically voters have punished the president when they have been forced to pay more at the pump. The average petrol price eclipsed $5 last month, according to the American Automobile Association, and has since dropped by only 25 cents or so.

Unsurprisingly, Republican politicians say that Biden is responsible, but with the midterm elections only four months away, there is little his officials can do to alleviate the pressure. “The president gets credit when prices go down, gets blamed when prices go up. Neither one is accurate,” Lenard said. “Neither case is attributable to what the president is doing. It is broader than that.”

Petrol station operators, directly responsible for a fraction of what it costs drivers to fill up a tank, have emphasised that there is little they can do, either. As of May, when the average retail price was dollars $4.44 per gallon, the Energy Information Administration estimated that distribution and marketing costs, which include retailers’ profits, accounted for only 5 per cent of the total. Taxes accounted for 11 per cent and refining for 26 per cent.

More than half the cost per gallon was tied directly to wholesale crude oil prices. These soared after Russia invaded Ukraine and have rarely slipped below dollars 100 per barrel since, complicating Biden’s stance on fossil fuels. Having repeatedly pledged to reduce dependence on oil, he has sought to reduce prices by procuring more.

Appeals to producers to boost output have fallen largely on deaf ears. America’s domestic crude production has risen only marginally since the start of the year, from 11.7 million to 12.1 million barrels per day, forcing the president to look elsewhere. He is due this week to visit Saudi Arabia, which previously he has vowed to turn into a “pariah” after the murder in Turkey of Jamal Khashoggi, the Saudi dissident and US-based journalist, and the kingdom’s oil output is on the agenda.

Rather than build bridges with America’s oil majors, Biden has denounced their bumper profits. Last month he said that ExxonMobil had “made more money than God” this year.

Lobbyists have accused his officials of failing to understand the forces at play. The US Oil and Gas Association suggested that the “intern” who wrote the tweet over the holiday weekend “registers for Econ 101”.

Biden’s more confrontational stance towards business is driven by politics rather than economics, according to former White House officials. There is a degree of confidence, though, that this rift will narrow once the outlook has improved.

“The Biden economic team knows that there’s next to nothing behind this idea that a lot of US inflation is [caused by] price-gouging,” Alan Blinder, an economic adviser to President Clinton and a former vice-chairman of the US Federal Reserve, said. “Every economist knows that, certainly including the economists in the Biden administration, and Biden himself, but he is getting pushed by the left of the Democratic Party.” Blinder was optimistic, however, that “as the inflation rate falls – fingers crossed, because it’s not really happening yet – that kind of talk will fall with it”.

In Biden’s home town of Scranton, Pennsylvania, the economic recovery from Covid-19 is said to be cooling as companies grapple with supply chain problems, workforce difficulties and price growth. The impact of such issues is expected to get worse before it gets better.

Bob Durkin, chief executive of Greater Scranton Chamber of Commerce, was “a tad reticent to be overly critical” of Biden, who he said was neither responsible for elevating inflation, nor single-handedly able to bring it down.

“I don’t think that all of his policies, as some others might argue, are anti-business,” he said. But “blaming business for price-gouging without real evidence to that effect, I don’t think that helps the relationship [with business]. That plays more into the short-term political element … The administration, I guess, has to find somebody to blame.”

Fruitful solutions to economic problems are found on the “reasonable middle ground” of the political spectrum, he believed. “I would encourage the president and others to still work towards, from a policy standpoint, that middle road. Neither extreme. Because it’s not going to work from the extremes.”

The Times