Looking for someone to blame for high and rising prices at the pump, Sen. Elizabeth Warren (D–Mass.) Big corporations are the familiar antagonist.
An appearance on MSNBC ReidOutWarren claimed that Americans feel a lot worse at the pumps these days because of price gouging on Thursday. In the face of rising inflation, average prices for regular unleaded gasoline in America are now at $3.40. That’s up from around $2.11 last years and much higher than ever since 2014. Warren stated that this was great news for shareholders and oil companies.
Exxon and Chevron have doubled their profit. Joy Reid, Joy’s host, nodded as Warren stated that this was not about inflation. It is price gouging. Warren said that while Republicans may be trying to win political points talking about inflation Warren stated, “Oil companies tell me it’s just another chance to make profit” and they need to be called out.
The pump prices have risen. Why? Why? @Chevron @ExxonMobilEnjoy doubling your profits It’s not about inflation. This is about price gouging for these guys & we need to call them out. pic.twitter.com/kxiQkC2tYa
— Elizabeth Warren (@SenWarren) November 20, 2021
Warren may be right to say that oil companies, which are successful multinational corporations, respond well to changes in the economy and find ways to make a profit. That’s because that is what multinational corporations must do in order to remain successful. This isn’t anything dark or mysterious. Warren might not like it, but oil companies make a profit so you can fill your tank with gasoline.
But the price-gouging assertion is wildly out of date and shows political desperateness. For months, Democrats claimed that dumping trillions of dollars into the economy during the COVID-19 pandemic—in the form of direct payments, expanded unemployment benefits, and other spending—would not trigger inflation. They then claimed that inflation was temporary. It now appears that significant inflation will persist well into the next year. So, a scapegoat needs to be sought.
Warren’s assertion that oil companies are increasing prices to generate more profits doesn’t hold up under scrutiny.
The fact that high prices encourage consumers to spend less money than usual is part of their natural nature. Companies that sell products make money somehow. It’s an incredibly shortsighted perspective that can only be shared by politicians. A business that believes the secret to its success is doubling the prices arbitrarily will soon be out of business. Warren thinks Walmart will be more profitable if they suddenly increase the price for everything. That would result in more profit.
Warren should be able to point out any evidence that this has ever happened, which would help her argument. But she cannot.
Her claim can also be tested in a more practical way. Warren asserts that Exxon and Chevron “doubled” their profits, which should result in a significant boost for shareholders. It would be reasonable to expect a surge in profits at corporates to reflect in stock prices.
Exxon shares traded for $62 per share as of Monday morning. Six months ago, it was trading at…$59.61, according to Google Finance.
Chevron stock is up a bit more over the past six months, but it is still underperforming the market as a whole (the S&P 500 is up more than 12 percent in the past six months):
All those additional profits? I’m sure Warren would answer by claiming that billionaires are hiding the cash under their gold-encrusted mattresses in the Cayman Islands and that’s why the IRS needs the authority to snoop on the bank accounts of Americans earning $600 a year on Etsy—and all that makes about as much sense as blaming inflation on price gouging.
Warren seems like an old man when it comes to blaming others for life’s ills. Warren believes that corporations and billionaires are to blame for everything, from the high cost of college to the inability to afford housing, to current supply chain issues. Just as reliably, she ignores the role that government has played in creating or worsening those problems—by subsidizing student loans, imposing restrictive zoning laws, and implementing trade-limiting rules like tariffs and the Jones Act, for example.
This is also true for gas prices. While government policies already contribute to inflation, Warren was among several Democrats that voted for a carbon tax in the 2020 primaries. It doesn’t matter what benefits a carbon tax may have in curbing climate change. However, higher pump prices are certain.
Warren continues to make the same old arguments about successful business being blamed for failed policies and inflation taking centre stage in political discourse. It’s not hard to believe that she is lying.