Progressives barking up the “profiteering” tree
Gas prices are up, and among the loudest voices decrying the rise are progressive politicians who are convinced it’s all due to big il companies profiting off Putin’s war against Ukraine.
The usual litany of charges includes “profiteering,” price gouging” and so on. And their prescription for fixing the problem is a case study in economic illiteracy:
Responding to a tweet from MSNBC host Stephanie Ruhle, who asked “what’s going on” with gas prices averaging $4.43 a gallon nationwide, Ocasio-Cortez (D-N.Y.) replied: “Profiteering. And there should be consequences for it.”
Echoing Ocasio-Cortez, fellow “Squad” member Rep. Ilhan Omar (D-Minn.) tweeted that “Big Oil CEOs need to be held accountable for profiteering.”
Last week, Sen. Sheldon Whitehouse (D-R.I.) introduced the Big Oil Windfall Profits Tax to target fossil fuel companies profiteering amid Russian President Vladimir Putin’s invasion of Ukraine. The measure is co-sponsored by Sens. Jeff Merkley (D-Ore.), Elizabeth Warren (D-Mass.), and Bernie Sanders (I-Vt.). Rep. Ro Khanna (D-Calif.) simultaneously introduced a House version.
In a separate tweet Monday, Ocasio-Cortez highlighted a failure by lawmakers to hold fossil fuel companies accountable—especially those who take money from the industry.
Yes, indeed, there are “consequences” for higher prices. Less driving, for one, which leads to demand destruction, and lower prices. There was plenty of demand destruction during the COVID lockdowns, just as their usually is with economic recession.
But no one wants either of those things to occur again, right? Let’s hope so. The other way to reduce prices is to sit back and watch the market self-correct. As one Wall Street firm warned investors:
The geopolitical risk premium attached to oil is mostly driven by market fears and could dissipate if there is a resolution to the Russia-Ukraine conflict. In addition, Iran’s spare oil capacity could provide a supply boost. As such, we continue to have a bearish view on oil. We expect WTI prices to drop to around $75 a barrel over the medium term, with a risk of a deeper correction to $60 a barrel over the long term. The risks to our scenario include a European ban on Russia’s energy exports, self-sanctions from Asia, and a failure to reach a nuclear deal with Iran. These outcomes have been partially priced into oil markets.
As the old investor saying goes: If you want to lose a lot of money, go long on oil.