Paul Krugman / Translation by iPress
Nobel laureate in economics Paul Krugman argues that on the eve of the midterm elections, Republicans risk paying a political price for the corruption scandals surrounding Donald Trump and the sharp rise in energy prices. He particularly highlights the increase in gasoline and diesel prices, linking it primarily to Trump’s war against Iran and the disruption of oil and petroleum product supplies from the Persian Gulf. According to the author, the main beneficiaries of this situation are the oil and gas companies, while ordinary Americans effectively finance this redistribution through higher fuel costs. The key takeaway of the text: Trump’s rhetoric about “populism” increasingly fails to align with the impacts of his economic policies on average consumers.
If Republicans suffer as crushing a defeat next Tuesday as current polls suggest, there will be two main reasons. The first is Trump’s extensive corruption, which seems to finally be emerging as a significant issue in the election campaign, second only to the cost of living. The second is the rapid rise in energy prices, which not only significantly fuels overall inflation but is also particularly striking, as the big numbers are displayed on panels in front of every gas station in the country.
The situation is extremely ironic, as Trump’s promises to sharply reduce prices were one of the key themes of his 2024 campaign. And these promises were quite specific: he mentioned figures and stated he would halve energy prices within 12 months.
Unfortunately for Trump and the Republicans, the opposite happened: gasoline, and especially diesel, sharply increased in price—mainly due to Trump’s disastrous war with Iran.
One indicator of energy prices that I find useful is the average price of the products processed from one barrel of oil: typically about two-thirds of a barrel of gasoline and one-third of a barrel of diesel fuel. I focus on petroleum products rather than crude oil because it is these, not crude, that people use as fuel. Their prices have increased for two reasons: crude oil became more expensive and the so-called crack spread—the difference between the price of oil and its refined products—rose sharply.
Here’s what happened to the prices of petroleum products:
Now prices have roughly returned to the peak levels of Biden’s times and significantly exceed those at the time of Trump’s inauguration. Moreover, Biden did not cause the temporary price spike: the main cause was supply chain disruptions following the COVID-19 pandemic. Instead, Trump is almost entirely responsible for the current high prices: the war he decided to start disrupted supplies from the Persian Gulf of both crude oil and – primarily – petroleum products from the Persian Gulf. (Ukraine’s strikes on Russian refineries also contribute to rising prices, but the Ukrainians are just doing what they must, while Trump, who effectively supports Russia, has no grounds to complain about it).
The Trump-induced spike in energy prices is extremely costly to American consumers. The US consumes about 7.5 billion barrels of petroleum products annually. As shown in the chart above, Trump’s war has increased their price by about $75 per barrel. Therefore, on an annual basis, this war costs American consumers about $560 billion – a significant amount even for a $30 trillion economy.
But Trump says he doesn’t care:
“The American oil and gas business is making hundreds of billions of dollars. I don’t care, I’ll just say it – we are making insane money”.
The obvious response here is: who is “we”, white man?
Yes, oil and gas companies are indeed making huge money off the consequences of the Iran disaster, and oil company stocks have sharply soared. But ordinary Americans, who don’t hold large shares in oil companies, see no benefit from this – particularly workers forced to spend more on commuting and farmers needing diesel fuel for tractors.
So, when Trump says: “We are making insane money”, it actually means his policy is annually taking more than half a trillion dollars from the pockets of ordinary Americans and transferring this money to the oil industry (which directed 88 percent of its contributions to the 2024 election campaigns to Republicans). Some might consider this bad, but, according to Trump himself, he “doesn’t care”.
Remind me again why Trump is called a “populist”?
