In an appearance Sunday morning on ABC's This Week, New York Democratic Senator Chuck Schumer teased his party's economic plan which will be unveiled Monday.
One hopes, probably in vain, that it incorporates an understanding of basic economics. Schumer betrayed the fact that he has little to no such understanding when he declared that "gas prices are sticky," and that when the "price for oil goes up on the markets ... it never goes down."
This Week host George Stephanopolous was to so interested in pushing Schumer about "single-payer" health care, aka a full government takeover of health care, that he didn't even notice (or pretended not to).
Schumer made his obviously wrong contentions as he teased several ideas that would either seriously harm the economy and American workers and citizens, including a national $15 minimum wage, or are seriously misguided, like "going after the drug companies," whatever that means. (Wanton aggressiveness such as this would likely lead to drug companies choosing to move their research operations overseas and pulling many of their products out of the U.S. market.)
Here is the highly incoherent Schumer snippet relating to gas and oil prices:
Transcript:
The old Adam Smith idea of competition? It’s gone. People hate it when their cable bills go up, their airline fees. They know that gas prices are sticky — you know, when the domestic price goes, uh, when the, uh, price for oil goes up on the markets, it goes right up but it never goes down. How the heck did we let Exxon and Mobil merge? And that was Democrats.
As noted earlier, host Stephanopoulos didn't call out Schumer's obvious errors. A couple of minutes later he was badgering the Senator about the party's plan, saying that "Some may wonder ... if it's bold enough, and that New York's junior senator Kirsten Gillibrand was calling for "single-payer health care."
Getting back to Schumer's comments, Exxon and Mobil completed their merger in November 1999. This year, Forbes ranked the long-combined company as the "world's biggest oil and gas company" based on its market value, which is barely higher than runner-up Royal Dutch Shell, even though the latter's reported revenues are 19 percent higher. (Forbes had a 2016 list which listed two Russian companies as larger than ExxonMobil, Shell, and everybody else based on production.)
Here's a graph obtained from GasBuddy.com's charting tool showing how un-sticky gas prices have been during the past 10 years, all during Schumer's alleged end of competition:
On an inflation-adjusted basis through September 2016, the average barrel price of oil, which Schumer claimed "never goes down," was about one-third of the 2008 average, and 61 percent lower than the 2014 average:
The evidence that the Exxon-Mobil merger hurt the competitiveness in energy markets, and therefore that it was a failure to properly enforce antitrust law, doesn't exist.
If a Republican made statements as ignorant as Schumer's, the ridicule in the establishment press would be endless. Politifact would have already set up a fact check on such a ridiculous claim; as of when this post was prepared, that web site's home page and its Schumer fact-check history indicated that it had not done one.
The press, always on the lookout, has already made an attempt to ridicule a Republican over gas prices and basic economics.
It happened two weeks ago with Energy Secretary Rick Perry. The attempted hit occurred at CNN. As might be expected, given that network's penchant for fake news, it was a spectacular failure:
Touting coal, Perry confuses supply and demand Energy Secretary Rick Perry confused the relationship between the fundamental forces in an economy while extolling the Trump administration's embrace of the coal industry, economists said."Here's a little economics lesson: supply and demand. You put the supply out there and the demand will follow," he said Thursday, according to Standard & Poor's Taylor Kuykendall.
Reporter Eugene Scott found an economist to push back, claiming that "Supply does not automatically create its own demand." Well of course it's not "automatically" true everywhere. But concerning heavily-used worldwide commodities like coal or oil, Perry is absolutely right.
If coal or oil companies produce more, supply obviously increases. Energy products are relatively inelastic goods, meaning that their prices need to rise or drop fairly steeply to influence demand. Nevertheless, demand will increase, or "follow," if prices go down and stay down for a long enough time.
One Perry critic, Democratic Congressman Ted Lieu of California criticized Perry by tweeting that "If you put lots of 35mm film out there, will demand follow? NO. That's not how capitalism works. Stop lying to coal workers."
The person lying was Lieu. Coal is not obsolete like 35mm film. Worldwide demand for coal continues to grow, despite all the politically correct climate change happy talk. Even if the U.S. were to outlaw coal consumption, many coal producers here, depending on geography and logistics, would still have expanded opportunities to export it, as they are doing now at an increasing level.
But Ted Lieu's understanding of capitalism, free markets and basic economics is on a par with Chuck Schumer's ignorant demonstration Sunday: barely if at all present.
Cross-posted at BizzyBlog.com.
