Dems’ favorite inflation talking point just got debunked in epic fashion

Thomas Catenacci, DCNF

The Federal Reserve Bank of Dallas rebutted a popular claim from Democrats that fuel prices are surging as a result of price gouging by oil companies.

Alleged price gouging from Big Oil companies is not among the number of factors causing record high gasoline prices nationwide, senior Dallas Fed economists Garrett Golding and Lutz Kilian wrote in a blog post Tuesday. While it is true crude oil prices have declined at various points over the last several months while fuel prices remained high, gasoline costs aren’t often set by oil drillers and are affected by other expenses like rent and credit card fees, they argued.

“Gas station operators set retail prices based on their expected acquisition cost for the next delivery of fuel from the local distributor, federal and state tax rates, and a markup that covers operating expenses, such as rent, delivery charges and credit card fees,” the Fed officials wrote.

“Since only 1 percent of service stations in the U.S. are owned by companies that also produce oil, U.S. oil producers are in no position to control retail gasoline prices,” they continued.

Democrats, though, have repeatedly blamed Big Oil for the high gasoline prices, arguing that the companies are exploiting the Ukraine crisis to pad their profits. House Speaker Nancy Pelosi said Thursday that the House would vote next week on the Consumer Fuel Price Gouging Prevention Act introduced by Democratic Reps. Kim Schrier and Katie Porter on May 6.

“While families are struggling to pay higher prices at the pump, oil and gas companies are recording record profits,” Pelosi told reporters.

Golding and Kilian added that Big Oil companies account for just 17% of U.S. crude oil production and about half of the supply consumed by American consumers. Gas prices are also dependent on domestic refining capacity, regional distribution capabilities and local conditions where retailers purchase supply.

“The elevated retail gasoline prices must be attributed to events in the U.S. retail gasoline market beyond the control of oil producers,” they continued. “Moreover, the asymmetry of the response of retail gasoline prices need not be evidence of price gouging.”

“One potential explanation is that station operators are recapturing margins lost during the upswing, when gas stations were initially slow to increase pump prices,” the officials wrote. “The reluctance to lower retail prices also likely reflects concerns that oil prices—and, hence, wholesale gasoline prices—may quickly rebound, eating into station profit margins.”

Global and U.S. crude oil indices have been extremely volatile in the aftermath of Russia’s invasion of Ukraine which disrupted energy markets across the world. The U.S. WTI index, which hit $106.55 per barrel Thursday, has surged to nearly $130 a barrel and fallen below $93 a barrel over the last two months.

Meanwhile, gasoline prices fell slightly in April before ticking up again in early May, Energy Information Administration data showed. The average pump price hit $4.42 per gallon, an all-time record, on Thursday, according to AAA data.

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Kapos
Kapos
2 days ago

Add to that the FACT that the fuel in the underground tanks at the service stations is priced at the THEN purchase price while oil prices drop, the tank full of fuel is at the PREVIOUS higher price – that’s the reason for the delay in price decreases when we see oil prices drop!

Robert DeStefano
Robert DeStefano
3 days ago

I hope the voters aren’t so stupid they believe Biden. Biden said in the debate he will shut down fossil fuel and to surge the boarder. Just look who’s getting baby formula. Illegals are and Americans can’t feed their babies. But democrats are fibe with late term abortions.

Last edited 3 days ago by Bobby De
Miffed52
Miffed52
3 days ago

‘Big Oil’ is not the problem. The problem is this Leftist Administration.

DrBarbara
DrBarbara
2 days ago
Reply to  Miffed52

So, I’m not “allowed to vote on this comment,” for some reason unbeknownst to me, so count this as my up-vote.

Todd Nelson
Todd Nelson
3 days ago

The federal government makes more per gallon than do the oil companies. That is where the price gouging comes from. FJB

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