Swamponomics: Joe Biden Tells OPEC to Drill, Baby, Drill

More Barrels In a Hurry

During the 2020 presidential debate, President Joe Biden promised to transition the United States away from crude oil. In the first few months of his administration, he tried to make good on that pledge, putting the kibosh on the Keystone XL pipeline, halting new oil and gas leases on federal lands, and returning the U.S. to the Paris Accord. But his new strategy appears to produce a barrel of hypocrisy.

Recently, the national average for a gallon of gasoline surged to $3.186, up approximately 45% from the same time a year ago. This is potentially hurting the economic recovery as higher energy prices increase the cost of a wide variety of goods and services. The White House is trying to alleviate the situation by turning to the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, for help.

Administration officials have met with the OPEC de facto leader, Saudi Arabia, in addition to representatives from the United Arab Emirates and other OPEC+ members. They are encouraging the cartel to boost its production, arguing that its latest decision to increase output by 400,000 barrels per day (bpd) on a monthly basis starting this month and extending into next year is "simply not enough" during a "critical movement in the global recovery." OPEC is turning on the taps again now that prices are firmly above $60 per barrel, and international demand is coming back online.  In a statement to CNBC, National Security Advisor Jake Sullivan said: "We are engaging with relevant OPEC+ members on the importance of competitive markets in setting prices. Competitive energy markets will ensure reliable and stable energy supplies, and OPEC+ must do more to support the recovery." Another senior White House official told the business news network that the administration wants "to use whatever tools that it has to help address the cost of gas, to help bring those prices down."

In recent years, the U.S. had become energy independent and a net exporter, no longer relying on Middle Eastern countries to power the nation. But, after appeasing the radical left base in the Democratic Party by firing multiple salvos at the energy sector, Washington is, once again, depending on OPEC, albeit in a different capacity. Essentially, Biden is seeking a bailout from crude producers to curtail soaring inflation while neglecting fossil fuel emissions and climate change.

Stock Up on Bread and Corn

The U.S. Department of Agriculture published its latest World Agricultural Supply and Demand Estimates (WASDE) report, concluding that corn yields are falling, soybean stockpiles are tightening, and global wheat inventories are slumping at a five-year low. This sent agricultural commodity prices higher, lifting the Bloomberg Grains Index up 1%. Put simply: Get ready for higher grocery store prices.

Tyson Foods revealed that it plans to hike prices for the next few months. In the second quarter, the food producer increased the average price for pork by 39.93%, beef by 11.6%, and chicken by 15.6%. It noted that ballooning raw material and labor costs are forcing the company to keep up with inflation. Supermarkets are adapting, too. And, according to market analysts, this could be the new normal due to rising gasoline prices and Chinese imports, Midwest crop damage, supply chain disruptions, and logistical challenges. This means budget-conscious shoppers might need to opt for generic brand products, avoid impulse buys, and downsize their protein portions.

Ain't life grand in Biden's America? Build back better ostensibly includes soaring food inflation.

The Consumer Bear

Are U.S. consumers confident about the economic recovery? With inflation worries, lockdown talk, variant hysteria, and debt explosions, nobody can blame the consumer for becoming bearish in the post-pandemic economy. The University of Michigan released its Consumer Sentiment index, reporting that the survey headline declined from 81.2 in July to 70.0 in August, the lowest reading since April 2020. Consumer expectations also plunged from 79 to 65.2. Inflation forecasts also remained elevated.

Consumer reactions to market prices on real estate purchases, automobiles, and durable goods were the most negative in the university's long history of surveys. The monthly survey further discovered that inflation's effects on household budgets expanded in August and ostensibly affected retirees, adults with only a high school diploma, and families with incomes in the bottom third. The institution noted in regards to the latest numbers:

"Aversion to higher prices caused consumers to judge buying conditions negatively: favorable ratings fell to just 30% for homes, 31% for vehicles, and 43% for household durables—all were the lowest since the 1980 recessions. This distaste was greatest among households with incomes in the top third, who represent over half of all consumer purchases. Importantly, price hikes by sellers need to be confirmed by buyers before those hikes enter into the various inflation gauges."

Will this lead to the U.S. government offering a fourth stimulus check? All of the latest trends, as well as efforts by Democratic policymakers, add to the growing likelihood that the Biden administration could soon set the wheels in motion on one more income-support payment. That is if inflation continues to jump heading into 2022. Calling Federal Reserve Chair Jerome Powell... Crank up the printing press!

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Read more from Andrew Moran.