Economic experts are shaking their heads in disbelief: US President Joe Biden has found someone to blame for the inflation crisis. But that’s not an inflationary tax policy or failed energy policy, no, it’s the Americans themselves, specifically those who own and operate gas stations.
Literally, Biden stated on Twitter: “My message to the companies that operate gas stations and set the prices at the pumps is simple: This is a time of war and global danger.” Biden then demands: “Reduce the price at the Pump to reflect the cost of the product you are paying for. And do it now.”
Now the USA is not a socialist country, the President cannot dictate how much petrol stations can charge at the pump. But that’s not what baffles economists so much about the tweet. Rather, it is the false assumptions on which it is based. The Biden administration could have convinced itself of this in just a few minutes of research.
First, more than half of the gas stations are not owned by large corporations, but by families or individuals. A “Shell” logo on the canopy of a gas station does not mean that these oil companies own the gas station! It just means: The gas station owner has signed a contract with this company. Therefore, he now has the right to promote this well-known brand. Incidentally, the same applies to neon signs for coffee types in bars.
Second, these average gas station owners earn just a penny per gallon of gasoline (equivalent to 3.8 liters) sold. So you don’t make huge profits. Over the past five years, retailer gross margins have averaged 10.7 percent of the total price of gasoline, according to NACS. However, most of these profits come from the sale of food, drinks, cigarettes and the like.
“Sales of gasoline in general isn’t very profitable,” reports US magazine The Hustle. On fuel alone, gas stations have an average profit margin of 1.4 percent.
If the petrol station owners would cut their mini-profit from the pure sale of fuel – i.e. sell the fuel at cost price – the petrol prices would still be overpriced, consumers would hardly notice a difference, but the operators of these petrol stations would have even more difficulty making ends meet . Some should probably close.
Biden’s gas station tweet is “either outright misrepresentation or a profound misunderstanding of fundamental market dynamics,” Amazon CEO Jeff Bezos tweeted. Meanwhile, the US Oil and Gas Association recommended that the person who posted the tweet take an undergraduate course in economics — believed to be a White House intern or Biden himself.
The Wall Street Journal also attacked “the President’s economic ignorance”. The National Review had to resolve: “The urge to blame retailers… is ugly and demagogic”. Contrary to what Biden seems to think, “wholesale gasoline prices are not moving in sync with crude oil prices. And retail gasoline prices are not moving in step with wholesale gasoline prices. …Anyone who has ever sold anything for a living can tell you that you can’t set your own profit margin.”
But there was also praise for Biden’s tweet: “Now the US President has finally understood that capitalism is all about exploitation. He didn’t believe that before.” These words come from the spokesman for the Chinese state media.