By Paul Krugman / The New York Times
Political speeches are often worth skipping, not conveying much new information. But Donald Trump’s speech last week at the Economic Club of New York was quite newsworthy, in several ways.
His incomprehensible, word-salad response to a question about child care received quite a lot of attention, rightly; I think we can safely say that he has no policy on that issue.
More coherently, Trump made it clearer than ever that he sees 19th-century-style tariffs as the answer to many of our economic problems.
But he had a message beyond tariffs. He also promised to deliver a big reduction in energy prices, especially the price of gasoline; a promise that may well reappear in Tuesday’s debate. I’ll quote some of what he actually said in a little while, but first let’s get some background.
Prices at the pump have been on a roller coaster the past few years. They plunged in early 2020, then recovered; they soared in 2022, then fell back. They’ve been sliding recently, with some analysts predicting the national average may fall below $3 over the next few months.
Are voters aware that gas prices have come back down? You might think that the answer is obvious; after all, gas stations display their prices on big signs on major roads all across America. But you have to wonder. A recent study of TV news coverage found many more mentions of gas prices when they’re high than when they aren’t.
Informally, my inbox is full of Republican messaging that talks as if gas were still $5 a gallon. Polling suggests that while Donald Trump’s perceived advantage on many economic issues has faded, he still has a large lead on gas prices.
And Trump leaned into energy in his New York speech. I’m going to go with my new practice of providing extended quotes, because some readers might not have a good sense of what Trump actually sounds like when talking policy. Here we go:
“I will end Kamala Harris’ anti-energy crusade and implement a policy of energy abundance, energy independence, and even energy dominance. We have more liquid gold under our feet than any other country, including Russia and Saudi Arabia will be using it. My plan will cut energy prices in half or more than that within 12 months of taking office. It will be an economic revival of our country like no one has ever seen before.
“Energy was what caused our problem initially. Energy is going to bring us back. That means we’re going down and getting gasoline below $2 a gallon, bring down the price of everything from electricity rates to groceries, airfares and housing costs. That’s why OPEC and the Arab nations, and we’re very honored to have some of my friends here with us today from that part of the world, but they’re working very hard despite being here, that I not be your president.
“They don’t like me. Meanwhile, Kamala Harris can’t bring down the price of anything because her energy policies are driving up the cost of everything. Everything is up, way up. Starting on Day 1, Harris and Biden opened up the Russian pipeline called Nord Stream 2, which nobody had ever heard of until I got involved and said, what about Nord Stream 2?
“And nobody knew what I was talking about. Largest pipeline in the world, Russian pipeline. But I had it closed. It was shut down.”
That last bit is particularly puzzling. Nord Stream 2 is a natural gas pipeline whose construction began in 2016, despite U.S. opposition, continued through the Trump years and was shut down in 2022 by sabotage.
But never mind. What about the promise of getting gas prices below $2 a gallon?
Well, the main direct cause of wild swings in gasoline prices was huge fluctuations in the price of crude oil, which is refined into gasoline.
Crude prices fell drastically in early 2020, even going negative at points. That’s not a data error: Demand for oil fell off a cliff during the worst of the pandemic, and producers weren’t just unable to find buyers for their oil; they were running out of storage space; so they were willing to pay people to take it away.
This strongly suggests that the ultralow gasoline prices of 2020 weren’t sustainable and that we can’t expect to see such prices again unless the world economy plunges into a depression.
What about the spike in 2022? That was largely caused by Russia’s invasion of Ukraine; Russia is a major oil producer, and at first it seemed as if the war would take a lot of Russian supply off the market. As it turned out, Russia has for the most part found ways to evade Western sanctions, and prices have come back down.
Gasoline prices in 2022 were also temporarily boosted by “snags,” including fires and weather events, that disrupted output at some refineries.
Since then, however, both crude oil and gasoline markets have more or less normalized. And gasoline isn’t especially unaffordable. It’s more or less the same now as it was before the pandemic.
Still, Trump is promising to bring prices way down by ending “Kamala Harris’ anti-energy crusade.” I have to say that this alleged crusade isn’t visible in the data. U.S. crude oil production has been hitting record highs.
Still, Trump says we could be doing much more:
“We re-entered the horribly unfair to the United States. Through them, when they came back, Paris Climate Accord, so unfair to us. We paid trillions of dollars. Other countries pay nothing.
“As soon as he came back, he went back into it. I got us out of it and reduced the area of the federal lands available for drilling by 80 percent. I did that. If I was president, oil production today would be four times higher than it is right now.”
I have no idea what that first paragraph is about. Never mind. Would we really be producing four times as much oil right now if Trump were president, cutting energy prices in half?
It seems unlikely. Trump didn’t explain exactly how he would have accomplished that, but in any case any large fall in oil prices from their current level — less than $70 a barrel — would make drilling unprofitable in major producing regions.
So, bottom line: If Trump wins, will we be going back to the very low gas prices of early 2020? No; not unless we experience a global depression.
This article originally appeared in The New York Times, c.2024.
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