Biden's Short-termism Not Surprising
President Biden’s attack on oil refiners illustrates why efficient government economic planning is impossible, including and perhaps especially in a democratic regime. Except if he is a saint or if he is restrained by strong moral principles and a binding political philosophy, a democratic ruler focuses on the next election—or, at best, on the next few elections, but that amounts to the same for a gerontocrat. He would typically risk the future of his country if not of the planet if necessary to win the next election.
Biden’s immediate political interest is that his party controls Congress after the mid-terms and allows him to exercise more power. He rightly fears that the voters, many of whom think that the president is omniscient and omnipotent, will punish him for the high fuel prices due to a war launched by his Russian counterpart.
The Financial Times reports (“Joe Biden Tells US Oil Refiners Rising Profits ‘Not Acceptable’ as War Rages,” June 15, 2022):
US president Joe Biden on Wednesday took aim at refiners for not producing more petrol, saying their rising profit margins “at a time of war” were “not acceptable”.
In letters sent to seven oil companies including ExxonMobil, BP, Shell and Valero, Biden called for “immediate actions” to supply more fuel, and said the administration was prepared to use “all reasonable and appropriate” tools to help increase supply in the near term.”
Use the Defense Production Act? Decree price controls that would generate shortages and socialist waiting lines? Ask the army to take over gasoline production?
The only way private oil companies can find it profitable to increase production is if the price they get and their profits rise in the short term. In the long term, of course, their excess profits will be competed away on a free market. If they fear that their temporary excess profits will be expropriated, they will never increase production, neither today nor at the next emergency; or they will do it out of fear of “their” government, but don’t expect much efficiency from coercion.
President Biden’s letter to refiners does a bit more than reveal his economic ignorance and the impossibility of democratic economic planning. It is also cartoonish:
“I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office,” Biden wrote in his letters.
It is not clear what Biden is blaming his predecessor for. What is clear is what he wants to do: both to reduce oil production in the long term, a kernel of the Democratic environmentalist wishes, and to increase it in the short term when his political interest requires it. Like his predecessor, he is willing to say anything, however incoherent, to promote his political interests.