Eric Herr: Supply and demand still work as intended

To The Daily Sun,

The lesson to learn from spiraling gas prices highlighted in Mr. Steve Earle’s letter, published on Dec. 8, is that supply and demand still work. President Joe Biden’s actions and company management’s decision to kill planning for the Keystone Pipeline Extension in June didn’t affect the supply of gasoline this year or last since there is a long time lag between planning, construction, and supply effects. But he is correct more broadly that Biden’s actions had an effect on gasoline prices. The Biden administration with the support of Congress and the Fed have continued to stimulate our COVID-19 economy with fiscal and monetary stimulus. One of the effects is that we’ve started to travel by air and car again, pushing the demand for petroleum distillates up sharply. Supply-side effects in gasoline markets always take time, to pump oil, transport it to refineries, and then on to fueling stations. Under the Biden administration, federal leases and permits for oil drilling have risen to meet the demand, but that too will take time to wind its way through the supply chain. Gasoline prices have long been volatile because supply-side adjustments are slower than swings in demand. Today is not different. The gasoline price swings of the last year have to do with the nature of gasoline supply and demand, not Mr. Earle’s allegations on energy policy.

Eric Herr

Hill