Oil and the Ruler’s Benevolent Omnipotence
One exhibit in the trial of democratic political mythology is the idea that the incumbent president, or chief ruler, is to blame for higher gasoline prices, and the observation that voters believe in their ruler’s benevolent omnipotence. The Financial Times reports (“Rising Petrol Prices Spark New Concern in Washington,” August 6, 2023):
Rising US fuel prices are triggering alarm in Washington just as President Joe Biden steps up his bid for re-election by touting lower inflation and the strength of the US economy. … “The White House is in full-blown panic mode,” said Bob McNally, head of Washington-based consultancy Rapidan Energy Group and a former adviser to president George W Bush. “Any sitting president is threatened when pump prices go up because of the impact on consumer confidence and the president’s approval rating.”
It should be pretty obvious that the president’s power to set world prices is (fortunately) nil. Any influence he can have on them involves the (risky) possibility that he engages in horse trading with other, worse rulers in the world:
The Biden administration has repeatedly called on Riyadh to pump more oil in the past two years, and last year accused the Opec+ cartel of “aligning with Russia” when it launched its current phase of supply cuts.
Politicians’ incentives don’t push them to discourage a belief in their benevolent omnipotence. They have little incentive to explain to their people that, even with OPEC (whose member states control about 36% of the world’s crude oil production), the price of oil is determined on the world market, and that they already have their hands full protecting the individual liberty of their citizens, assuming that this is what they do.
Liberal political economy suggests the following. Free individuals and their free enterprises in a free country would take the world price of oil as it is, and buy low or sell high according to their own interests.
PS: I previously wrote “38%” for OPEC’s share of oil production in the world. That was an old number. The latest estimate is 36.3%, which I have corrected above. Sorry.