Democrats thank President Biden for driving gas prices up, hurting Americans and aiding Putin

Yesterday, I wrote about how “supply shocks” can generate inflation independently of whatever the central bank might be doing to the money supply. A classic example is the “oil shock” of the 1970s where a group of oil-producing states raised prices, cut production, and imposed embargoes on countries, including the United States, which had supported Israel in the Yom Kippur War.

As one of my old undergrad textbooks (Principles of Macroeconomics by N. Gregory Mankiw, 5th edition) explains:

A large increase in the world price of oil is an example of a supply shock. A supply shock is an event that directly affects firms’ costs of production and thus the prices they charge; it shifts the economy’s aggregate supply curve…For example, when an oil price increase raises the cost of producing gasoline, heating oil, tires, and many other products, it reduces the quantity of goods and services supplied at any given price level. As panel (a) of Figure 8 shows, this reduction in supply is represented by the leftward shift in the aggregate-supply curve from AS1 to AS2. Output falls from Y1 to Y2, and the price level rises from P1 to P2.

Clearly, then, supply shocks are not good. So it beggars belief that the Biden administration has just imposed one on the American economy.

As the Washington Examiner reported recently:

The Biden administration is canceling seven Alaskan oil and gas leases issued by the Trump administration, it said Wednesday.

The Department of Interior put the leases, located on 365,000 acres in the Coastal Plain region, on hold in June 2021.

In addition to that:

The DOI also proposes new regulations for the National Petroleum Reserve in Alaska that could limit oil and gas leases in the area. A 60-day comment period will open after it is published in the National Register, the department said.

By restricting supply and raising oil prices, the Biden administration is doing to the American economy what OPEC did to it in the 1970s and what Vladimir Putin threatens to do to it today. In a world where nefarious regimes are using their energy earnings to finance aggression, the Biden Administration is helping them by stamping on American energy production and keeping prices — and those regime’s earnings — high.

True, by now it would be foolish to expect sensible economic policy from this administration. But you may still be surprised to see that Democrats actually applauded President Biden for taking an action that will both harm Americans and strengthen the likes of Vladimir Putin. Nevertheless, that is just what they did:

I won’t offer a punchline. This speaks for itself.