Last week President Biden asserted in rather eye-opening fashion that he "grew up in a family where the price at the pump was felt in the kitchen.” Except that President Biden didn’t grow up in a family burdened by gasoline price spikes, and not just because he’s long overstated the humble circumstances he emerged from.
Biden didn’t endure food shortages related to pricey gasoline simply because he was born in 1942. When Biden was growing up, the price of gasoline was flat. And it was cheap. Please see the charts at the bottom of this piece if you doubt me.
While gasoline is abnormally expensive now, these spikes never happened during Biden’s childhood, and as the charts make clear, they weren’t a factor for the President until he was in his early thirties, at which point he was on the verge of winning a seat in the U.S. Senate. What Biden claims about his childhood is false. Simple as that.
Too bad no one’s called him on it. And not just because politicians should have their fibs exposed. Pundits should hold Biden accountable for uttering a blatant falsehood simply because doing so would be a “teachable moment” extraordinaire.
That’s the case because there’s a very clear reason why there were never gasoline spikes during Biden’s childhood, and also why they’ve become the norm since the President entered his thirties. And no, OPEC is not the reason.
As the first chart makes clear, OPEC’s power over the price of oil is well overstated. OPEC came into existence in 1960, but as Chart 1 makes plain, the price of oil remained flat throughout that decade. If you’re still skeptical, as in if you still think OPEC powerful, just move your finger along the chart to the 1980s and 1990s. Oil collapsed in those decades. Were OPEC countries feeling generous after being stingy in the 1970s, and did they coincidentally become stingy again in the 2000s and beyond? No, and no.
Let’s talk about what really happened. The simple truth is that before the 1970s, commodity markets were quite dormant, or non-existent. With commodity prices so flat, what was there to trade? Why the lack of volatility? The answer is simple. The dollar up until August 15, 1971 was clearly defined as 1/35th of a gold ounce, and with the dollar stable, so were the commodities priced in dollars. Biden never felt “the price at the pump in the kitchen” growing up simply because a soaring price at the pump never factored in his childhood.
Which is why his flamboyant mis-statement is such a worthy teachable moment. Gasoline used to be nominally cheap precisely because the dollar had a stable definition. Since then, gasoline has bounced around wildly much as oil has. With the dollar’s price no longer stable, and with the dollar having suffered bouts of weakness at times, it’s at times been the case that our dollars haven’t stretched as far as they once did. In other words, the severing of the dollar’s link to gold in 1971 was the inflationary outbreak that Americans endured in the “Me Decade,” and the dollar’s instability since then has explained gasoline’s volatility over the last 51 years. It’s really very basic.
At this point many readers may be wondering why no one’s calling Biden out on a blatant rewrite of his childhood. Actually, the quietude is fairly easy to understand. For the Democrats, they’re not going to criticize one of their own. As for the Republicans, for them to call out Biden for gasoline price fibs is for them to open themselves up to criticism about a much greater spike in the price of gasoline under a Republican in George W. Bush. Seemingly forgotten is that in the 1980s and 1990s there were times when the price of a barrel of oil fetched $12. Yes, it’s true. Presidents Reagan and Clinton both largely pursued “strong dollar” policies. Gasoline was cheap under both. Then the Bush Treasury oddly turned tail on the currency policies that had been so successful in the ‘80s and ‘90s, only for oil to go skyward. One supposes this is the source of GOP quietude at the moment.
After which, dollar-price stability that was long embraced by both political Parties has sadly taken on a low-rent quality in modern times. Economists who near-monolithically believe growth causes inflation, who believe government spending is a stimulant, and who believe the maiming, killing and wealth destruction that was WWII lifted our economy out its 1930s slumber, also believe stable money the stuff of knuckle-draggers. The view here is that they’re incorrect, but that’s another column.
For now, let’s keep the focus on oil and gas. The harsh truth for President Biden is that when he was growing up there was no correlation between price at the pump and food on the table simply because the price at the pump was never a factor. Don’t trust me? Look at the charts. They expose the President as nonchalant with the truth, and they expose both Parties as clueless to the why behind pricey gasoline that is surely being “felt in the kitchen” for those not in politics.
Average annual OPEC crude oil price from 1960 to 2022
Crude Oil Prices from 1861