Notwithstanding the thunderous self-applause from Donald Trump about the gasoline purportedly being sold for $3.479 at twenty-five “Freedom Fuel” retailers in Pennsylvania and New Jersey, at a time when the national average price is about $3.88, one truth remains eternal: There are no free lunches.
The White House claims “The administration is not involved in the company, nor has the administration given the company any funding. There is no other entity or person subsidizing the lower gasoline costs. [The retailers] are simply reducing their margin to make prices at the pump more affordable for drivers in Philadelphia and New Jersey.”
Oh, please. Distribution and marketing costs — the latter include the cost of operating a retail station — are about eight percent of retail gasoline prices, or about 31 cents per gallon, a good deal less than the 40-cent discount at the Freedom Fuel stations. Unless their burritos and other offerings command far higher prices than those sold at competitors — a rather dubious hypothesis — it is far from clear how the Freedom Fuel retailers can afford to do this. Accordingly, the “reducing their margin” explanation is typical Trump administration balderdash.
How is this politicization of the gasoline market — very small scale now but likely to metastasize in the future — being financed? No one has been able to find out, but it certainly is possible that the Trump administration has offered the Freedom Fuel system some sort of policy favor; after all, the federal Leviathan is vast in its reach. The twenty-five retailers apparently are part of the “Freedom Fuel Network LLC” registered in Delaware on June 23, the ownership of which is highly obscure. So any regulatory or other issues it might have now or prospectively before some federal agency also are difficult to discern.
There are other public records showing that the five Freedom Fuel stations in New Jersey are owned by a Chicago-based real-estate portfolio group. Does it have business before the federal government? Who knows? They are not telling us, and neither is the Trump administration, a condition not conducive to an increase in public confidence in the neutrality of policymaking, hardly a trivial consideration in these times.
Most or all of the Freedom Fuel retail locations are located close to competitors. It is impossible that identical products in close proximity can have substantially different prices; and there is some evidence that the Freedom Fuel prices are rising, which may explain why there seem not to be reports of long lines at the Freedom Fuel locations. Another possibility is that their snacks and other non-fuel offerings really are more expensive, so that the Freedom Fuel gasoline/snacks bundle, which may be what many consumers actually care about, is no cheaper than that offered by competitors.
What is not speculative is the hugely adverse longer-run impact of this latest Trump self-aggrandizement. Prospective investment in retail fuel-sales businesses just became riskier — federal politicians now are putting their thumbs on the retail competition scale — with obvious upward future pressure on prices.
As with Trump’s government investments in a broad array of private companies, the Freedom Fuel system is another precedent expanding the politicization of the American system of private enterprise, one that will loosen greatly the constraints on a future left-wing administration. The philosophical and practical arguments against resource allocation by government are substantially more difficult to defend politically now that a Republican administration is playing a similar game, without pushback from the GOP members of Congress.
That freedom will be the inexorable loser is the larger tragedy of Trump’s single-minded pursuit of deals rather than the defense of principles. And Trump’s conceit that consumers in the aggregate will benefit from the Freedom Fuel gambit is infinitely myopic: More politics means a reduction in the productivity of resource use, a smaller economy, and consumers made poorer. The only winners will be the rent-seeking interests working the system, the politicians, and the bureaucracy. Happy travels.
