President Biden, no economic expert, wants to blame the high rate of inflation on the pandemic created shortages like computer chips stopping cars from being built. While supply chains were altered for a time and some products still have backlogs there are two major reasons that the inflation rate has accelerated to the highest it has been in two generations. Those two reasons are self-inflicted wounds, almost exclusively by Biden policies.
By far the most tangible one is the price of energy. It does not take much to figure out when you see the average price of an oil barrel – 2020 $39.68, 2021 $68.17 and 2022 $84.70. We don’t know where the average price in 2022 will end up for the year, but it is a good bet it will be north of the current figure – above $95.00.
American oil production went from 5,484,000 barrels in 2010 to 11,283,000 in 2020. Some of that growth came at the end of the Obama Administration due to private land fracking, but the figures really soared during the Trump era. Oil production dropped 1.1 million barrels in 2021. Natural gas production went from 22,381,873 million cubic feet in 2010 to 36,202,466 million cubic feet in 2020. Again, it rose during the Obama administration, but accelerated during the Trump era.
Production is predicted to rebound in 2022, but will we continue on our upward trajectory which will bring prices down? The stall that occurred once the Biden Administration took over caused an upward spiral. The Biden government is doing its best to discourage oil and gas production in the United States.
Not only has Biden put a clamp on production here, but he has also discouraged production In Canada through shutting down the Keystone XL pipeline. Biden has thrown his lot in with the environmentalists who believe we can live on solar and wind power, the only clean energy sources they fully endorse. Sure, they accept hydropower — to the extent it does not disturb waterways they want undisturbed, but nuclear which is clean, yet evil in their eyes, is energy source non grata.
What they forget is oil doesn’t just power vehicles and airplanes, it is used in the plastics that touch virtually everything in our lives. The clothing we wear, the glasses on our faces, and the containers that hold the food we eat.
By turning us away from the energy independence that we had created prior to his administration Biden has caused a major element of the inflation that we are burdened with today. Everything is touched by the cost of oil and gas. Certainly, the sign at the corner gas station with ever raising prices is the most visible, but not necessarily the most determinant in the crushing increase in inflation. Just think how much more it costs to ship products from a foreign country or from Minnesota to your grocery shelf.
This is an unforced error of momentous proportions driven by a zealous and naïve political philosophy. The worst part is that the energy sources they dream will replace oil are nowhere near effective since they are dependent on the vagaries of nature. Ask the supporters of the green revolution what it would cost to develop the batteries necessary to store energy for the times the winds don’t blow or the sun goes down. They have no answer because they either don’t know, or they do know, and they are aware the public would turn on them knowing the reality of an estimated few hundred trillion dollars. They can live with 7.5% inflation when they are saving our planet.
The second self-inflicted wound is the disregard of an elemental concept. A grade schooler understands the basics of supply and demand theory. It seems that Biden has found “economic experts” who live in denial that this exists. While the supply of many things is being crushed Biden ramped up demand with his first legislation in March 2021. In December, Trump had signed a bill to inject $1 trillion of made-up money into the economy to stave off the effects of government forced shutdowns.
The reasoned thing would be to let that money be spent and consider how that changed the economic picture. Not when you and your party needed a victory and wanted people more tied to government benefits than the fruits of their own labor. Instead, they passed another $1.9 trillion of handouts with questionable parameters as to why people needed that money.
To evidence their lack of understanding of how ramping up demand by injecting made up money into the economy chasing the same supply, the Biden team is still telling us their disastrous Build Back Better baloney will get passed during 2022. Their desire to pursue their Left-wing government-centric policies seem to be more important than controlling the expanding inflation. Nancy, Chuck and Joe are still trying to tell us the injection of up to $4.9 trillion will tame inflation. This delirious position insults not only us, but themselves.
Have supply chain shortages caused some inflation in the economy, yes. Will it be transitory, probably not. Is it corporate greed as President Biden and his ill-informed idealogue buddy Lizzie Warren like to tell us know – NO. Until the Biden Administration focuses on the ill-conceived policies they have created and adjust, inflation will rage, and their heads will be on the political chopping block.
Let’s see what Biden says in his State of the Union address which is supposedly going to focus on this issue.