Wednesday, July 5, 2017

What did Donald Trump do today?

He claimed that gas prices were "the lowest in the U.S. in over ten years!"

They are not. Gas prices have been lower several times in the last ten years--including most of 2016.

That said, Trump's humblebrag on gas prices is revealing about his understanding of how the market works. As a petroleum derivative, gas prices tend to be higher during periods of economic growth, when there is more demand for oil. What's more, presidents have virtually no direct control over gas prices: even tapping the Strategic Petroleum Reserve would only nudge prices down on a short-term basis. International production quotas and refinery capacity are what really determine gas prices.

That, and the federal gasoline tax, which Trump wants to raise.

How is this a problem?

  • There is really no excuse for a president getting a basic economic fact like this wrong.
  • It's bad if a president--especially one who thinks of himself as a businessman--doesn't understand how critical markets work.
  • A president's tax policy goals generally shouldn't contradict his inflation policy goals.