by Jon Sanders
Director of the Center for Food, Power, and Life, Research Editor, John Locke Foundation
If you thought inflation was bad, CNN would have you think you’ve received a big bonus at the gasoline pumps lately. Key word being lately.
On August 19, CNN reported on a decline in retail gasoline prices from their most recent peak, from $5.02/gallon on June 14 to $3.92/gallon. CNN opted for a handy way to contextualize it: “Next time you stop at a gas station, think of it as a $100-a-month tax cut” (emphasis added). CNN’s math relied on the fact that “the typical U.S. household uses about 90 gallons of gas a month,” multiplied by $1.10.
I wrote about this approach and completed CNN’s incomplete thought for The Daily Caller. I pointed out the value in considering the practical, real-world effects of changes in the price of something, but noted that “A problem with CNN’s analysis is that it treated the peak pump price as people’s static price expectation.”
As I wrote:
Yes, gasoline prices are declining again, but they are still considerably higher than they’ve been in years. With respect to expectations, no doubt many consumers still have in mind gasoline prices not at $5/gallon but somewhere in the range of $2.50/gallon, where they hovered roughly from 2019-20. Nor has Biden given consumers any reason to expect he will relax his ideological opposition to fossil fuels.
At the start of 2021, the national average retail price of gasoline was $2.25/gallon. Why isn’t CNN telling you to “think of it” as a $130-a-month tax hike? That’s 90 gallons, given the current price of $3.70/gallon, which is $1.45/gallon higher. Or telling you back in June, it was like a $250-a-month tax hike?
Paying much higher prices for gas, groceries, and your power bills since 2021 means having to “think of it” as a $225-a-month tax hike.
Choosing the one area where, thanks in large part to policy gimmicks (such as nonemergency releases from the Strategic Petroleum Reserve), prices have actually fallen some in recent weeks, CNN allowed themselves to tell you why low prices for a critical need is important:
Mark Zandi, chief economist for Moody’s Analytics, told CNN, based on the June 14 peak, that “A $1 decrease in gas prices equals about $125 billion a year in savings for U.S. households, or more than $10 billion a month.”
I pointed out, however:
Nevertheless, CNN has not written from the basis of the $1.45 increase in gas prices that U.S. households lost over $15 billion this month.
Other prices are rising, however — for things of critical importance to American families. I wrote:
Consider the cost of groceries, specifically grocery store food. Those prices have increased by 17% since the end of 2020 when the average household was spending about $412 per month. Using CNN-type analysis (in which, counter to the law of demand, consumers don’t cut back on purchases when prices increase), it would amount to an over $70-a-month tax hike.
Or how about another critical household need, electricity? Since January 2021, average residential electricity rates have increased from 12.69 cents/kilowatt-hour (kWh) to 15.42 cents/kWh in June 2022 (a 21.5% increase). If the average household uses 900 kWh of electricity per month, that would mean something like a $25-a-month tax hike.
Paying much higher prices for gas, groceries, and your power bills since 2021 means having to “think of it” as a $225-a-month tax hike. Americans caught in the middle of high inflation while the Biden Administration piles spending boondoggle upon spending boondoggle aren’t likely to view a temporary downturn in gasoline prices as a tax cut this month. At best, they might feel a little less mugged.